Last week, on Dec. 20, the Institute of Electrical and Electronics Engineers, Inc. (IEEE) filed an amicus brief (not supporting any side) in the appeals to the Federal Circuit from the jury award and RAND rulings by Judge Leonard Davis in E.D. Tex. concerning three of Ericsson’s 802.11 Wi-Fi patents. Our August post discussed the pre-appeal status of the case and Judge Davis’ approach to RAND that diverged somewhat from Judge Robart’s RAND decision in the Microsoft v. Motorola case (also currently on appeal — but not yet sure where).
The IEEE’s 25-page amicus brief provides a good overview of its standard-setting process (pages 4-11) and intellectual property rights (IPR) policies (pages 12-16) with links to additional sources from its website. IEEE has one of the more advanced IPR policies for a standard setting organization (SSO) and is worth reading for those not familiar with IEEE’s process and IPR policies. Of course, do so with the understanding that this represents IEEE’s approach and, as IEEE explains, “[e]ach SDO [a.k.a. SSO] is governed by its own distinct set of rules and policies.”
The IEEE also makes several policy statements regarding standard essential patent (SEP) hot-topics.
Patent Hold-Up. IEEE considers patent commitments, like its Letters of Assurance (LOAs), as the vehicle for “protect[ing] implementers of a standard against patent hold-up.” IEEE adopts a sunk-costs/switching costs definition of patent hold-up from the 2007 U.S. Dept. of Justice and U.S. Federal Trade Commision report, stating:
Hold-up can be defined as the ability of the owner of patented technology to extract higher royalties “after its technology has been chosen by the SSO as a standard and others have incurred sunk costs which effectively increase the relative cost of switching to an alternative standard.”
IEEE notes that the RAND commitment (reasonable and non-discriminatory licensing terms) addresses patent holdup, but the term “reasonable … is inhereintly vague, and the ability of patent commitments to protect against hold-up is thus imperfect.” That vagueness may lead to litigation. IEEE raises the potential that the vagueness “can lead to higher royalty payments”, but does not provide any quantifying data (note that in this case Judge Davis ruled there was no evidence of “actual hold-up or royalty stacking”). Further, IEEE explained that it seeks to remain neutral and “does not involve itself in license negotiations between implementers and patent-holders and does not make determinations of whether a particular royalty rate (or other license terms and conditions) is or is not reasonable.”
Irrevocable Committment/Binding on Successors. IEEE stresses that “[a] patent commitment must be durable for the standards development process to function” and, thus, IEEE rules require a patent commitment to be “irrevocable once submitted and accepted.” Otherwise, “the reneging patent-holder would be able to extract monopoly profits from all implementers.” For similar reasons, the commitment should survive transfer of patent ownership because “[f]rom the perspective of [SSOs] and would-be implementers of the standard, what matters is not the identity of the patent-holder, but the continuing validity of the commitment after transfer.” Otherwise, “‘[p]atent laundering’ would confer on the successor the ability to extract supra-competitive royalties.”
Implementers Enforce Commitments. IEEE stresses that allowing implementers to enforce patent commitments made to SSOs “is critical” to ensure compliance with the commitment and provide remedy for its breach — such implementer rights “ought to be unquestionable.” IEEE deems this is important because SSOs may avoid a direct role in enforcing patent commitments where (1) SSOs want to avoid enforcement action costs, (2) technical knowledge about the standard and essentiality resides in SSO’s members and not the SSO itself, and (3) SSO enforcement would diminish the SSO’s ability “to remain a neutral forum.”