WIPO-KIPO-KIPA IP Panorama Business School, October 6 to 10, 2008

IP Strategies in Standards Setting

Tomoko Miyamoto Senior Counsellor, Patent Law Section World Intellectual Property Organization (WIPO) 1

Patents and standards

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Patents Exclusive rights Standards Wide implementation From the business perspective, the objective is: NOT blocking competitors out BUT making profits

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Patents and Standards Common policy objectives

Patents Standards

• • • Encourage investment in innovation (R&D) Disclosure of technological information Dissemination of technology

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Patents and Standards Business strategies

Patents Standards • • • Characteristics of patents (intangible assets) non-rivalry in consumption scalability in use inverse value development Standardization is one of the “patent exploitation processes” to realize a supranormal return 4

Standards

• • • • Positive effects: encourage innovation economies of scale facilitate commerce and trade reduce transaction costs network externalities: value raises with the size of network • • • Potential risks: discourage innovation locked-in effect and switching cost reduced choice market concentration 5

Competition Aspects

Innovation/Competition (after standards adoption) Innovation/Competition (before standards adoption)

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Patents and standards ex. ICT industry

Characteristics • Interoperability • Network externality • Cumulative technology • To “communicate”, standards are necessary • Many patents involved • Many patent holders involved Not an “exclusivity” model Everybody needs to use everybody else’s patents 7

Patents and Standards Potential conflicts

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Standard

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Essential patents

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Licensing royalties Standard implementers Wide implementation of standards - Legitimate exploitation of patents 8

Patents and Standards Potential conflicts

• Patent hold-up – A patent holder claims his rights after the standard has been widely implemented (essential patents: no alternative technology) » Unreasonable licensing terms and conditions » Unreasonably high royalty  Locked-in/ Opportunity costs • Patent thicket – Transaction costs to negotiate licenses with multiple patent holders – Cumulative royalties 9

Policy Challenges

Find a balance between: • the rights of the patent owners to enforce the patents • the ability of third parties to make and sell interoperable products • the public interest not to lock users in specific technology platforms, or not to force consumers to bear all the negative consequences Fair and competitive environments for the current industry driven standardization process 10

IPR Policies of Standard Setting Organizations (SSOs) • • • Self-regulating mechanism to improve transparency and accessibility to patented technology Assist participants to take an informed decision “Common Patent Policy for ITU-T/ITU-R/ISO/IEC” (1) Encourage early disclosure of essential patents applications during the standardization process – no patent search required and patent (2) Licensing commitment – Reasonable and non-discriminatory (RAND) terms – Royalty Free (RF) terms Some SSOs publish patent statements and licensing commitments on their web sites 11

IPR Policies of Standard Setting Organizations (SSOs) • SSOs not involved in verifying patents and assessing the compliance with the licensing commitment – Licensing negotiations outside the SSOs • • • • • Practical and flexible solution for each SSO Binding effect to non-participants?

Competition law concerns? (ex-ante disclosure of licensing terms) Finding max. number of essential patents = patent search  risk triple damage in the US?

Licensing commitment made by a previous owner bounds a new owner? 12

Patent pools

• Address the issue of cumulative royalty • Access to patented technology in reasonable and non-discriminatory manner • A single, standard license for the pooled patents to licensees who are not members of the pool – Lower than accumulated royalties – Includes patents to be added in the pool in the future – Lower transaction costs • Licensing fees allocated among members of the pool • Not all essential patents may be in the pool (voluntary participation) • Competition concerns: market power of the pool; complementary/substitute technology; essentiality of patents; grant back; involvement of independent experts 13

Mechanisms in the patent system

• Limitations to the right in order to strike a balance with public interests – Research exemptions • Prevent abuse of right – Compulsory licenses • Need to ensure the quality of patents granted by national/regional patent offices – Prior art effect of technical information disclosed during the standard setting • Patent registry: up-to-date legal status information 14

Settlement of disputes

• Patent related litigation can be expensive Alternative dispute settlement mechanism • WIPO Arbitration and Mediation Center – Intellectual property disputes – A single procedure – Party autonomy and confidentiality – Save costs and time ex. “essentiality” of a patent disclosed; validity of the essential patents; compliance with the licensing policy (RAND terms); “reasonable endeavor”/”best efforts” to disclose; compliance with patent pool licensing terms and conditions; allocation of royalty among pool members… 15

Thank you

t [email protected]

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