Richard Lloyd

In February the standards setting organization the IEEE announced a number of significant changes to its patent policy – the terms which govern the licensing of a range of standard essential patents, particularly in the Wi-Fi space. Those changes have proved controversial to say the least with Qualcomm disclosing soon after the IEEE’s announcement that it would not be making licensing commitments under the new policy. And now, in a letter to the IEEE, InterDigital has also announced that it will not be following the new policy. 

In a piece written exclusively for IAM, InterDigital CEO and President Bill Merritt has laid bare the reasons behind his company’s decision in a move that raises serious questions over the IEEE’s ability to put its new policy into effect. Merritt’s article below is simply a must-read for anyone in the licensing community.

This week, our company sent an open letter to the Institute of Electrical and Electronics Engineers, better known as the IEEE and even better known as the standards-setting organization that brings us Wi-Fi. In that letter, we advise them that we don’t agree with their new patent policy, and that in the future our company won’t be submitting IEEE’s form Letters of Assurance (LOAs) under the new policy but rather  will provide appropriate alternative licensing assurances on a case-by-case basis. I wanted to explain to you – technology people, like us – why we’ve chosen to do that, and what it means.

I know many of you might feel like patents and patent policies have nothing to do with technology. Nothing could be further from the truth. Our company has almost 200 engineers focused on very advanced technology, and our efforts are often matched and in some cases exceeded by our peers in the space like Qualcomm, Ericsson, Nokia, Alcatel-Lucent, Huawei and others. That’s a lot of engineers, working on very advanced standards technology.

Why do these companies do it? Why do we pay to conduct research, whiteboard out advanced algorithms, fly people around the world so they can collaborate on, or argue over, mathematical formulae or interference mitigation schemes, for the benefit of everyone in the industry whether they do research or not? Simple: because, if you’re successful at it, you make money doing it. Not crazy money – there are a lot of bogus figures out there. And nothing that changes the cost category of a device, or makes a profitable company unprofitable.  In fact, because the research is shared across the industry, the research process lowers the costs of devices by allowing the companies to effectively share that R&D expense.

One of those technologies that has advanced rapidly based on this system is Wi-Fi, or IEEE 802.11. As you technologists know, the Wi-Fi we have today is nothing like what first came out. Since 1997, standards research and innovation has driven speeds from 2MB/s to almost 2GB/s – a 1000-fold increase – and massively extended the range of applications. These improvements aren’t specific to any device, and no one had to wait in line to buy it. It is standards-based improvement, and comes built into any Wi-Fi device you purchase.

Here’s where patents come in. When an organization does something to improve the standard, they have to commit to negotiate licenses for any patents they have on that technology on reasonable, non-discriminatory terms.  What exactly was reasonable and how royalties were to be calculated was left to individual negotiations, which occurred without fanfare for 20 years. That system worked very well and the performance of Wi-Fi grew by leaps and bounds.

This year, the IEEE voted to change its patent licensing policy. Rather than leave it to the parties to decide how royalties would be calculated, the IEEE endorses a calculation based on the value of the chip inside the device, even if many other aspects of the device benefit from or use the contributed technology.  This move could slash revenues for standards developers. They also want to make it pretty near impossible to stop someone from shipping products even if they refuse to pay a license – and that refusal will become more commonplace if there are limited means to enforce patents.

So in a nutshell, they don’t want developers to be paid much, and they’ve also made it as hard as possible for them to get paid at all. It’s all very one-sided, and so was the process that led to the decision.   A handful of manufacturers of devices – that’s right, the people who would pay for the use of the technology – essentially co-opted the IEEE patent committee, and got support from people at the Department of Justice who’ve never worked in this industry and are basing their thinking on economic theory rather than real-world practices. There were closed-door meetings involving a select few participants, and principles of due process, openness, and consensus were disregarded.

After the decision, Qualcomm stated that they would reconsider how they participate in IEEE standards development – they’ll continue to do research, and contribute it, but make other licensing commitments. This week, we’ve announced something very similar, in a letter you can read here. In a nutshell, we advised the IEEE that our company objects to their entirely new policy on patents and, going forward, on a case-by-case basis, will provide alternative licensing assurances to those specified in the 2015 policy.

The situation is difficult for us, because we have a long and valued history with IEEE. One of our engineers is an IEEE Fellow, a very high honor, as is a current member of our Board of Directors. Our former Chief Scientist, Brian Kiernan, was honored with a lifetime achievement award by the IEEE, ironically for “outstanding skills and diplomacy, team facilitation and joint achievement, in the promotion of computer standards where individual aspirations, corporate competition, and organizational rivalry could otherwise be counter to society's benefit.”

It is likely that other companies will soon follow suit in objecting to the new IEEE patent policy.  The result is frankly a mess.  Contributions will now likely be made under a myriad of licensing assurances, perhaps very different from one another.  And what was once an evaluation of technical merit for proposals becomes a Rubik’s cube analysis as engineers may now have to weigh technological advantage against licensing terms and their factors.  In fact, when one working group in 802.11 met a couple of weeks ago, they were forced to seek further guidance from IEEE on the patent mess. I’m sure they would prefer to simply evaluate contributions that could be beneficial to the evolution of Wi-Fi – now the process has been thrown into a state of uncertainty.

When developers were afforded a fair return on their innovations, the system worked.  When you start to tilt the playing field in favor of implementers, as IEEE has done, the market will collapse.  Already, we are beginning to see the first signs.  No one will tell me that panels of engineers who can’t evaluate new technology contributions, solely on their merits, because of a patent mess, is a way to advance technology for humanity.