Transcript Rilanciare la ricerca scientifica e tecnologica in Italia

Standardization, Intellectual
Property Rights and the
Evolution of the Information
Industry in Europe
Avv. Massimiliano Granieri
Head, Intellectual Property & Technology Transfer
Intellectual Property and
Antitrust Issues in Standard
Setting Organizations
INTERMEDIATE REPORT
Fondazione Bordoni
Città,
luogo, data
Rome, July 29, 2003
WHY STANDARDS
 A way to ensure backward and forward interoperability
and compatibility among different levels of a de-verticalized
market
At least at the very beginning scarce attention to IPRs, the reason being that many
SSOs were partecipated by national monopolists with no need to defend a market (the
case for CCITT, then ETSI).
GSM case: ~ 1200 relevant patents, ~ 50 essential, ~ 10 holders
UMTS case: above 2000 relevant patents, 200 essential, more than 40 holders
As a consequence of liberalization and vertical disintegration of the industry new
entrants pose more attention on IPRs and proprietary standards become crucial to the
industry.
 Vertical interconnection externalities are common to many
ICT industries (TLC, computing, video broadcasting)
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
1
DEFINING STANDARDS
Definition:
“technical or quality requirements with which current or
future products, production processes or methods may
comply” (§ 159, EU Guidelines for the application of art.
81 to horizontal cooperation agreements)
A standard is a piece of valuable information related to
a specific, de-verticalized market, as a condition for the
entry into the market
Nature of impure public good (market failure and
economics of information considerations)
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
2
POSSIBLE METHODS TO ENSURE
COMPATIBILITY THROUGH STANDARDS
A. DE FACTO STANDARDS
B. DE JURE STANDARDS
1. Standards set up by public, governmental bodies:
NIST, ANSI, ETSI etc.
2. Standards set up by private voluntary organizations
(voluntary consensus standards): Standard setting
organizations (SSOs) as consortia or alliances
3. Interoperability ensured by open architectures (e.g.,
open source software)
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
3
VIRTUES AND VICES OF STANDARD SETTING
PROCESSES
BY GOVERNMENTAL BODIES
VICES
- Bureaucracy and slow response to market change
- Durability of standards even when ill-conceived
VIRTUES
- No antitrust concerns
- Public regulation and control allowed
BY PRIVATE SSOs
VICES
- Consumption of time and resources (public good nature)
- Transaction and coordination costs
- Possibility of collusion
- Possibility of predatory and exclusionary practices (winner takes
all nature of the market)
VIRTUES
- Higher quality
- Quicker response to market’s needs and change
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
4
HISTORY OF STANDARD SETTING PROCESS
IN THE US
1. ANSI sets the standards or recognizes SSOs
After American Society of Mechanical Engineer vs. Hydrolevel
[456 U.S. 556 (1982)], ANSI imposes RAND licensing and duty to
disclose to SSOs members
2. SSOs starts to develop to make up defects and vices
of public standard setting processes
Pay-to-play participation in alliances and consortia. Same criteria
as above apply for membership. Anticipatory standardization
matters
3. SSOs and their participants are put under antitrust
scrutiny and new legislation is passed to ensure a
more favorable antitrust treatment.
Rome,
Fondaziopne
Bordoni
July 29, 2003
Standard Development Organization Advancement Act of 2003
(H.R. 1086)
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Speaker
Avv. M. Granieri
5
STANDARD SETTING ORGANIZATIONS AND
MARKET PROPERTIES
Main characteristics of markets dominated by
standards:
•
Oligopolies (or tendency to monopoly)
•
Winner-takes-all nature. Competition is for the market,
not in the market (full value is appropriate by the winner,
not only his marginal contribution)
•
Network externalities and tipping effects are relevant and
can affect the competitive process
•
Markets evolve rapidly and technologies become
obsolete, although backwards compatibility can protect
the entrenched standard-setter raising switching costs
for consumers (unless leapfrogging product comes up)
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
6
STANDARD SETTING ORGANIZATIONS AND
INTELLECTUAL PROPERTY ISSUES
1. Determining essential patents to enter an SSO

Need for impartial determination of essentiality
2. Avoiding ‘submarine’ and ‘torpedo’ patents




Need for timely and complete disclosure
Duty to disclose as condition of membership
Duty to license
Consider breach of contract
3. Dealing with ‘ghost’ patents

Same treatment as above
4. Defining royalties policies (RF, RAND, FRAND etc.)



Preventing hold up problems in negotiations
Allowing price regulation
Limiting damages to FRAND royalties
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
7
STANDARD SETTING ORGANIZATIONS AND
INTELLECTUAL PROPERTY ISSUES (cont’d)
5. Relying on homogeneous private IPRs policies and
strategies within companies
6. Relying on homogeneous laws among countries (the
case for software)
7. Remedies



Prevent dominant firm to enforce essential, submarine IPRs
Adopt compulsory licensing under special circumstances
Limit license by default only to SSOs member who actively contributed
technology
Rome,
Fondaziopne
Bordoni
July 29, 2003
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Speaker
Avv. M. Granieri
8
STANDARD SETTING ORGANIZATIONS AND
ANTITRUST ISSUES
THREE LEVEL OF ANALYSIS
1. SSOs members
Incumbents with significant market power can abuse their dominant
position by discriminating or denying licenses and/or set high prices.
Make a distinction b/w close and open SSOs
2. Firms interested in becoming SSOs members
Newcomers can apply for membership and act opportunistically
concealing patents which are essential to the standard. At the same
time, they can be discriminated and prevented from entering the
market (with regard to so called open SSOs)
3. Firms only interested in getting a license to use the
standard technology
They can only be discriminated, charged high prices prevented from
entering the market (with regard to open SSOs)
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
9
STANDARD SETTING ORGANIZATIONS AND
ANTITRUST ISSUES (cont’d)
Behaviors relevant to antitrust analysis
•Individual
Abuse of dominant position/Attempt of
monopolization. Abuse (or patent misuse) if
enforcement of patent rights is sought after a
standard has been set
•Collective
Group boycott, concerted refusal to deal, abuse of
joint dominant position
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
10
WIRELESS COMMUNICATIONS SYSTEMS AT A
GLANCE
1G (analog transmission technology)
WIRELESS
VOICE
TELEPHONY
2G (digital technology): 9.6 kbps
GENERATIONS
3G: (digital technology) 144 kbps /
2Mbps
WIRELESS
VOICE
TELEPHONY AND
DATA
TRANSMISSION
3G RADIO INTERFACE APPROVED BY ITU
1.
IMT-Multicarrier (IMT-MC)
CDMA 2000
2.
IMT-Direct Spread (IMT-DS)
Wideband-CDMA
3.
IMT-Time Code (IMT-TC)
TD-CDMA
4.
IMT-Single Carrier (IMT-SC
UWC-136 or TDMA-EDGE
5.
IMT-Frequency Time (IMT-FT)
DECT (digital enhanced cordless
telecommunications)
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
11
THE CHAIN VALUE FOR 3G MOBILE TLC
INDUSTRY
Content
provider
Value-added
service
provider
Service
network
provider
Access
network
provider
AREA OF INTEROPERABILITY
Rome,
Fondaziopne
Bordoni
July 29, 2003
End users
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Speaker
Avv. M. Granieri
12
IPRs AND ANTITRUST ISSUES IN SSOs FOR
THIRD GENERATION WIRELESS SYSTEMS
THE CASE FOR THE 3G PATENTS PLATFORM
Business Context
Business Segment
Patent Problem
Solution
New Paradigm
Third generation (3G) wireless
systems (2002 - 2018)
Proliferation of companies claiming
ownership of patents making
cumulative
royalties excessive
Industry defined 3G Patent
Platform
Flexible collective licensing arrangement
suitable for complex patent
arrangements,
and multiple standards and
technologies
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
13
IMPACT ON THE INDUSTRY COST OF A PATENT
PLATFORM FOR THIRD GENERATION WIRELESS
SYSTEMS
•
•
Quantification of the “platform effect” (reducing the
total royalty bill for the industry): The IPRS cost is
an important element of the overall equipment cost,
and has a major influence on profitability.
The “equipment cost model” comprises several key
elements (It applies to all products, including
terminals, base stations, network controllers, and
test equipment)
TOTAL
EQUIPMENT
COST
“Platform effect”
R&D
(internal or
external)
+
Production bill
(materials,
manufacture,
sub-contracting,
assembly and test)
+
IPR costs
(royalties paid
and collected)
+
Mark-up
(profit)
Rome,
Fondaziopne
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July 29, 2003
Market pressure
to reduce prices
Continuing commercial effort to reduce all costs,
including IPR costs (i.e., royalties paid).
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Speaker
Avv. M. Granieri
14
STRUCTURE OF THE 3G PATENT PLATFORM
• Structured with completely independent platforms.
Each radio interface technology is operated by its
own Platform Company (“PlatformCo”: see next slide),
and that PlatformCo is governed solely by the
licensors (excluding pure licensees). (This organizational
structure was required as a prerequisite to DOJ approval)
• A common services company, 3G Patents, provides
to all of the PlatformCos, the following services (see
next slide):
 patent evaluation and certification
 promotion and education about the 3G patent
platform concept
 market research and analysis to seek additional
royalty revenue sources for the 3G business
chain
 industry discussion forum for IPR issues relating
to 3G
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Rome,
Fondaziopne
Bordoni
July 29, 2003
Speaker
Avv. M. Granieri
15
STRUCTURE OF THE 3G PATENT PLATFORM
(cont’d)
PlatformCOs (5, in principle)
W-CDMA
TD-CDMA
UWC-136
CDMA 2000
DECT
Common services
3G Patents Ltd
Membership is open
and voluntary to all
Interested players,
e.g.
manufacturers,
operators,
patent law firms,
patent
attorneys, and
industry bodies.
Rome,
Fondaziopne
Bordoni
July 29, 2003
Membership open to owners of certified “essential” patents, that is,
licensors of a specific technology (but excludes pure licensees)
Standardization, Intellectual Property Rights and the Evolution of the Information Industry in Europe – © Torino Wireless 2003
Speaker
Avv. M. Granieri
16