Standard Setting Organizations (SSO) are organizations for developing, coordinating, promulgating, revising, amending, reissuing and interpreting standards or, in simpler terms, developing global standards for a broad range of industries. There is a large number of SSOs that are quite active at present. Prominent among these SSOs is the Institute of Electrical and Electronics Engineers (IEEE). ASME, the ASTM international and the W3C are the other key players in this arena. Members of the SSOs hold Standard Essential Patents (SEP) for implementing the standards developed in a technology. These members tend to license the SEPs to different organizations or companies on the basis of a policy that is Fair, Reasonable and Non-Discriminatory (FRAND) for gaining monetary benefits and royalties. But of late the SSOs and the standards developed by them have taken the center stage during litigation procedures between corporate powerhouses. Some of the cases worth mentioning would be the Microsoft versus Motorola, the Apple versus Motorola, the Ericsson versus D-Link etc. In all these cases the IEEE Wi-Fi standard has played a prominent role. As a matter of fact, the FRAND commitments are cited 10 times more often now than it was being cited 10 years back.
IPR experts and observers have long been pushing for a clarification from the SSOs on the issue of their patent policy. And finally, on February 8th 2015 the board of directors of the Institute of Electrical and Electronics Engineers (IEEE) voted to approve a set of amendments to the organization’s patent policy. The IEEE provides a link here to the current draft of the proposed IPR policy. On a first time read, many would find the IEEE policy change contrary to the US law for determining royalty rates and providing injunctive relief for SEPs. Some of the key points of the IEEE amendments are:
- The compensation for the usage of an essential patent claim is considered based on the value of the relevant functionality of the Smallest Saleable Compliant Implementation that practices the essential patent claim.
- The submitter will make available a license for Essential Patent Claims to an unrestricted number of applicants on a worldwide basis without compensation or under reasonable rates, with other reasonable terms and conditions that are demonstrably free of any unfair discrimination.
- The submitter of an accepted Letter of Assurance who has committed to make available a license for one or more essential patent claims agrees that it shall neither seek nor seek to enforce a Prohibitive order based on Essential Patent Claims in a jurisdiction.
- Reciprocal licensing shall mean that the submitter of an LOA has conditioned its granting of a license for its Essential Patent Claims upon the Applicant’s agreement to grant a license to the submitter with reasonable rates and other reasonable licensing terms and conditions.
The amendments to the IEEE patent policy point out the fact that SEP holders are not allowed to seek injunctions against licensees. Further, by asking to consider the value of the smallest salable unit, the IEEE patent policy amendments considerably reduces the royalty value the Standard Essential Patent holders were to receive in return for their SEP(s). A setback, which is more than likely to happen, will be an increase in litigation cases. Why term it a setback? Because the real deal was to reduce litigations. At the end of the day, it is a field day for licensees, as they don’t face the threat of an injunction. And disappointing for the SEP holder, as the SEP’s monetary value is decreasing.
A point worth mentioning would be that denying access of SEPs to firms dampens any chance whatsoever the firm has for competing in a market where consumers are more often attracted to products that are standardized. Also, regulating the access of SEPs to firms by a third party would tend to reduce the quality of standards in times to come. Similar was the expectation from the IEEE patent policy amendment of 2007 when nearly all the foremost IPR experts had predicted the amendments to be a complete disaster. But nothing of that sort happened. And when we look at the present amendments, of course there are short comings but at least the IEEE has given a much awaited and needed clarification on the FRAND policy it implements.
Perzeus Abhas is a Patent Engineer at IP Astra