On 6 December 2022, ACT | The App Association held an online event titled Standard-Essential Patents: FRAND Commitments, Competition Law, and Jurisdictional Battles. This event explored the challenges and opportunities for internet of things (IoT) innovators in the UK, related to standardised technologies and the global licensing of standard-essential patents (SEPs).
Opening Comments
Stephen Tulip, UK membership & engagement manager at the App Association, highlighted how standardised technologies used by small companies in the UK are leading to real-world innovations, using the examples of Blue Maestro, Manulytica, and WM5G. Mr Tulip explained how the gradual reneging of SEP holders on fair, reasonable and non-discriminatory (FRAND) licensing commitments has created confusion and enabled anti-competitive behaviours, to the detriment of innovators. In this environment, the App Association continues to advocate for a balanced SEP licensing framework that both fairly rewards the innovators who contributed to the standard and allows small companies like our members to use standards efficiently.
Jamie Lewis, Head of Standard Essential Patents, IP and Competition and Regulation at the UK Intellectual Property Office (IPO)
In his keynote speech, Mr Lewis gave an overview of the IPO’s ongoing work on the SEP ecosystem in the UK. Mr Lewis stated that the IPO’s recent call for views on SEPs is part of the UK’s ambition to be a leader in science and technology and attract investment into the country to boost innovation and competitiveness.
The IPO received a broad range of responses to its call for views on SEPs, painting a complex picture of the SEP ecosystem. While most respondents agreed on the importance of SEPs as a driver of innovation, Mr Lewis said there were also contradicting opinions on how to achieve the following goals:
- Finding the right balance between incenting innovation and protecting consumers
- Balancing between competition and market function, including addressing scenarios of hold-up and hold-out, and where in the value chain licensing should happen
- Ensuring transparency and decreasing the asymmetry of information between negotiating parties
- Reconciling the diverse views on the use of injunctions
- Accommodating various views on SEP litigation, including that litigation is too costly, plus feedback on specific cases including Unwired Planet vs. Huawei
As a next step, the IPO will continue business engagement and work with international partners to find consensus on whether the UK government needs to intervene in SEP issues. Mr Lewis ended with a quote from the IPO chief executive, ‘SMEs make up 99 per cent of UK businesses, and intellectual property is essential to their—and UK—growth and prosperity’.
Panel discussion
Mr Steven Baldwin – Partner at Kirkland & Ellis LLP
‘Confusion, ambiguity, divergent views over the use of injunctions, and the inefficient cost of litigation’, are some of the common phrases Mr Baldwin hears when discussing SEPs, signalling a general feeling that some legislation in this area could be useful.
Concerning legislative developments, Mr Baldwin explained that forum shopping exists because of interesting court decisions in certain jurisdictions. The UK Unwired Planet case created the UK’s position on global licensing, and China has followed suit. Ongoing cases in France could establish France’s right to also demand global licences. Grey areas with forum shopping exist because courts haven’t yet grappled with the consequences of two regions reaching different conclusions on the same case.
Two other cases that Mr Baldwin deems worth watching are Lenovo v. Interdigital and Optis v. Apple, which both tackle important questions around SEP/FRAND principles and competition law.
Ms Annsley Ward – Counsel from WilmerHale
Ms Ward welcomed the IPO’s work in trying to reconcile the different views in the SEP ecosystem, as courts have been filling the void that the lack of a SEP policy framework has created. The decisions these courts are making determine the cost of doing business in the UK to a certain extent, and businesses need to consider decisions on FRAND rates, the likeliness of injunctions, global licences, and more. A policy discussion around achieving a balance between SEP holder compensation and preventing a barrier for new market entrants, especially SMEs, is necessary and timely, Ms Ward said.
The issue with court cases determining SEP policy is that they only examine the specifics of the cases in front of them, but the results apply to everyone. Ms Ward explained that setting a SEP policy requires looking at the wider ecosystem, rather than just the large companies that show up to court. The current system incents to sue first and ask questions later when it should prioritise negotiation over litigation.
Other regions have more developed SEP policy thinking on the types of businesses they want to incentivise, and the UK can increase business certainty by developing its own SEP policy. In doing so, Ms Ward said, the IPO should look at the whole ecosystem with a strategic view to ensure its policy works for companies of all sizes and generates long-term prosperity.
Professor Renato Nazzini – Director of the Centre of Construction Law and Dispute Resolution at Kings College London
Prof Nazzini pointed out that whichever view you take on the Unwired Planet case and the UK’s jurisdiction to set terms of global licences, most people would agree that the current system is dysfunctional. This dysfunction, Prof Nazzini explained, is why a law is needed that strikes the right balance between rewarding investment in innovation and ensuring that technology is as widely available as possible at a reasonable price.
FRAND commitments are designed to limit the market power of SEP holders, and Prof Nazzini believes the Unwired Planet decision shifts the balance of power towards SEP holders, increasing their leverage. One of the main arguments of Unwired Planet was that litigating FRAND in every jurisdiction is not feasible. If now several national courts decide they have global reach, Prof Nazzini explained, we will arrive back at region-by-region decisions and forum shopping. This situation could occur because the rest of the world will not automatically agree with the UK’s global reach.
Speaking on whether the threat of injunction is reasonable when a global licence is refused, Prof Nazzini noted that the threat of injunction drives the negotiations away from the value of the technology and towards the risk of implementers being excluded from a market. So, implementers are negotiating against a much bigger risk, which can inflate prices because the stakes are higher. Regarding anti-suit injunctions, the settlement has more to do with the litigation costs and costs of injunctions, rather than the value of technology, Prof Nazzini explained.
Conclusion
Our speakers demonstrated that while there is uncertainty and complexity in the SEP licensing space, the UK has an opportunity to lead on this issue. More remains to be done to balance the SEP ecosystem to ease market access for new entrants. The App Association will continue to advocate for a balanced and fair SEP licensing system, and we will keep our members informed of new developments.