Licensing consensus sorely needed amid global SEP/FRAND developments – and some in the field think there might be a way through

Licensing consensus sorely needed amid global SEP/FRAND developments – and some in the field think there might be a way through

SEPs are essential to enhanced connectivity, the IoT and the Fourth Industrial Revolution, yet the industry as a whole lacks consensus. Experts on the front line, featured in this year’s IAM Strategy 300 Global Leaders, report on the most dramatic shifts occurring around the world and how to best gear up for these, as well as offering possible pathways towards  the consensus that is so desperately needed.

Bracing for the future on a global scale

Patent pools must adapt

Patent pools continue to proliferate and must build on the developing culture of acceptance in order to weather future regulatory storms, insist representatives from Access Advance. “The market continues almost universally to accept pools as an efficient and convenient tool for licensing, specifically FRAND licensing of SEPs,” they say. However, two key trends that they are noticing are the “desire from the market for early clarity around licensing terms for a new promulgated codec” and “pool consolidation and the desire for more efficient multi-codec licences”. They are hopeful that this could lead to a structure that fairly balances the interests and concerns of both patent holders and implementers.

Indeed, while patent pools have built a robust reputation over time – built on “principles, expectations, trust, balance and fair dealing of mutual benefit” according to MPEG LA’s Larry Horn – FRAND pools are still a relatively new concept that is “strange to a licensing industry once shrouded in mystery”. Their future availability will be determined by the market. “If transparency and fair dealing are lost, patent pools are at risk of being lost too,” Horn warns. “While there are new calls for regulation to propose a solution in aimless search of a problem, the response from patent pools must be to continue conducting themselves [by] adhering to the underlying principles of mass market availability and acceptance.”

Change on the horizon for the Asia-Pacific region

India’s size, along with its substantial consumer base and growing economy, makes it an attractive market for SEP holders. The judiciary’s experience in complex cases and the country’s strong understanding of tech standards contribute to its position as a key litigation venue for global SEP licensing disputes. However, Manisha Singh of LexOrbis has concerns that the country faces challenges in “enforcing IP judgments and obtaining effective remedies, procedural delays caused by court congestion and case backlog, uncertainties about some aspects of SEP/FRAND jurisprudence and difficulties navigating different legal systems”. Adapting to this constantly evolving landscape will be paramount for India to cement itself as a key litigation venue.

Similarly, Shogo Matsunaga of Sonderhoff & Einsel expresses misgivings about the state of the landscape in Japan. Unfortunately, not enough court cases on SEP/FRAND issues have been handed down “since Apple v Samsung”, which landed in 2014, and this decision “was significantly different from the trends seen in European countries […] where the accumulation and harmonisation of court rulings is still progressing”. As a result, “domestic IoT implementers negotiate in a manner that challenges the rules that are being formed globally”, which is creating injunction and business risks.

This lack of harmonisation indicates that change is sorely needed in Japan. As a litigator, Matsunaga is “striving to obtain judgments in Japan that show good-faith negotiation rules and ensure the predictability of the parties”. He is also writing articles that aim to change the current domestic landscape and stresses that in order to achieve this goal, it is “essential” that IP department employees and company management are aware of the current issues and risks. “To this end, I continue to submit articles, mainly to management, and I believe that this will eventually be useful to companies in altering the landscape.”

From the front line in China, Guanyang Yao of Liu Shen & Associates reports that SEP cases in the automotive sector have become a hotspot for the industry and judicial system, while some NPEs from the audio space are also asserting their patent rights in China. While no high-profile judgments were issued in 2022, “several SEP cases are still in the process, such as Datang v Samsung, OPPO v Interdigital, CCC v Oppo, VoiceAge EVS v Nokia, Oppo v Nokia and Vivo v Nokia”; IP professionals in the country wait with bated breath for the outcomes of these cases to see what impact they might have.

Yao is optimistic about the future of the SEP/FRAND landscape in China, as many patent pools including Avanci and AA have “attracted Chinese companies as members, which shows the that the strength of Chinese businesses’ SEP portfolios has been accepted by patent pools and highlights a change in attitude from Chinese companies when it comes to pools.”

Controversy continues in Europe

Debates around the EU Commission’s draft SEP proposal continue to swirl, with no end in sight. Although the proposal continues to be met with significant reservations, for Heinz Goddar of Boehmert & Boehmert, it meets his more or less “unrestricted approval”. “I like the provision introducing an SEP register that shows to which standard certain patents belong as real SEPs,” he offers. “Further, an essentiality test and a FRAND-determination arbitration procedure are necessary before SEPs can be enforced by injunctive requests in patent infringement courts.”

“Certain parts of the draft regulation have become quite controversial,” Taraneh Maghamé of Maghamé IP admits. “I believe that the long-term goal of the proposed regulation is to benefit all stakeholders.” She insists that “more collaboration among stakeholders” should be encouraged in order to reach a consensus on SEP licensing.

One thing is for sure – change is likely coming and stakeholders on all sides would do well to prepare. HGF is poised to advise clients – particularly licensees – on how to enforce their patents through the new system, should it come into force. “With the new official SEP register proposed to be at the EUIPO, we are advising our clients on how to ensure that registered patents can prove themselves to be essential.” They are also helping clients understand how to quickly navigate the proposed new system to “prevent any further delay to licence negotiations and royalty payments”. Crucially, they are providing critical advice on how to deal with “the artificial and premature cap on aggregate royalties for implementations of a standard, as there is a risk that this may be open to abuse”.

For Peters IP Consultancy’s Ruud Peters, the proposal was not a shock. “In all its communications since 2017, the European Commission made it clear that it wanted to increase SEP transparency.” He feels that arguing about the need for a draft regulation and whether it introduces unproven concepts or increases cost and uncertainty is simply an “uphill battle”. Instead, Peters asserts that it is “better to constructively seek to improve the draft regulation so that it better balances the interests of SEP licensors and implementers”.

How to build consensus

There is little doubt that SEP/FRAND is still a hot topic in the IP world and industry consensus is sadly lacking. Richard Buttrick of RBIP insists that “renewing and re-establishing consensus around FRAND licensing is critical for the future of global standardisation”. He maintains that this should start with industry leaders renewing a dialogue – in private and in public – that shows a willingness to engage in the pursuit of consensus. “Building consensus starts with a conversation, even if the trigger is a disagreement,” he says, pointing out that this discussion does not need to immediately involve proposing solutions. “When building consensus, solutions best emerge as a product of dialogue.” It is crucial to listen to differing and divergent points of view and understand what drives those views, as this will help to create the foundations of consensus. Building on that understanding will lead to shared solutions.

“Industry leaders can make a major contribution by establishing a forum that can be a focal point for conversation,” Buttrick adds. “Indeed, an issue with global FRAND licensing is that existing national and regional forums are not well suited for the coming debate.” He stresses that a new forum is vitally necessary and industry leaders should endeavour to establish this.

Patent pools – one possible path out of the woods?

Developing industry consensus around FRAND licensing, especially amid global developments, is a nuanced issue. Although Vectis’s Giustino de Sanctis describes the discussion around licensing as “a game of cat and mouse” between patent owners and implementers, he suggests that there might be a light at the end of a long tunnel. In a very technological and connected world, he finds patent pools to be “an excellent answer to patent licensing complexities”. Access Advance is similarly confident that the “viability of patent pools to address competition and fairness concerns over SEP licensing” will continue. With their growing popularity and the trust that has been built around them, it is hoped that the desire for consensus will be a uniting force, and that gradually some models are emerging that could provide a potential solution that benefits everyone involved.

IAM Strategy 300 Global Leaders 2024 is IAM’s annual opportunity to showcase the world’s leading IP luminaries who offer their insight into the industry’s most pressing topics and is available to read here.

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