There will be more reason to use patent portfolios aggressively

  • In the face of legislative and court developments in the United States, patent owners will change how they enforce rights
  • Standard setting will become more important in diverse industries
  • Patent counsel will need to become more comfortable dealing with competition law

The patent enforcement paradigm is set to change in the next few years. The era of hardball licensing, led by NPEs, is already declining thanks to the hostility of the US courts and new opportunities to invalidate patents. Greater transparency over patent ownership and transactions (discussed in more detail in our report on patent service providers) also tips the scales against patent owners. And, as we have seen above, ownership of patents is set to be distributed much more widely, particularly with new patent owners emerging from China.

That is not to argue that patent rights will cease to be valuable assets. On the contrary – as one in-house counsel comments: “If you are sitting on patent portfolios, there will be more reason to use them aggressively.” What will change is that patent owners will need to be more skilful and more subtle in how they use those rights, looking at opportunities within and beyond their industries and above all how patent rights complement the business objectives. “Seldom do IP departments know company business strategy or have documents from executive meetings,” says one former in-house counsel. That will have to change.

With many of tomorrow’s technologies being interoperable and connected, one key lesson is that standards are set to play a bigger role in many different industries. We have already seen the complexities that have arisen through 3G, 4G and now 5G telecoms patent licensing, and similar challenges await other industries. “Standard setting is no longer dominated by a few players – that’s a massive change and will have a direct impact on the licensing business,” says one in-house counsel. The licensing of SEPs will also be increasingly influenced by policy and competition issues. In the past year, the European Commission and the JPO have both published detailed guidance on the licensing of SEPs and there will surely be further pointers from these and other agencies in the coming years. Meanwhile, courts will continue to develop jurisprudence on questions such as what constitutes a FRAND offer, when is an injunction appropriate and even what a reasonable royalty is. So far, answers have largely come from Europe (eg, in the Huawei v ZTE and Unwired Planet cases) and the United States. In future, expect more contributions from courts in China, India and potentially other jurisdictions.

Faced with an increasingly complex patent landscape, copious licensing and cross-licensing and developing rules on standards, patent owners and implementers will need to be more creative in how they approach patent licensing. This could see a resurgence of patent pools (see case study on Avanci). Patent ownership will be much more of a mixed economy, comprising assets that are proprietary, licensed and open source: in October 2018, for example, Microsoft joined the Open Innovation Network and completed its acquisition of the open source repository GitHub.

All of these developments will bring competition issues and patent counsel will have to become more comfortable negotiating antitrust law, or at least working closely with their antitrust colleagues. Whether over SEPs or blockbuster drugs, patent and competition/public policy arguments increasingly go together. As one in-house pharma counsel puts it: “We never used to worry about antitrust. But competition authorities have become more severe and originators are much more sensitive now.” Talk of illegal payments, investigations and dawn raids can do a lot to focus minds.

Case study: Avanci

Patent pools such as MP3 have been around for a long time. But in 2016 a new business emerged: Avanci is a platform to license wireless technology patents. Launched with patents from Ericsson, InterDigital, KPN, Qualcomm and ZTE, it has now grown to include 20 patent owners, with the latest being Nokia. It has so far announced one licensee, BMW.

Avanci guarantees to license the 2G, 3G and 4G patents of its members for one flat rate, which will never increase – and with the addition of Nokia to the platform, it is thought to control well over 50% of SEPs covering those technologies. It has not yet announced rates for 5G patents. Its promise is to deliver fair royalties to patent owners, which are saved the effort of enforcing their patents, and wide-ranging licences to implementers, which are spared worries about being sued.

The Avanci model has attracted most interest in the automobile industry, where car manufacturers have few or no wireless patents and need access to telecoms technology to enable connected and autonomous vehicles. But Avanci’s model applies equally to other industries dependent on the Internet of Things.

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