Dr. Michael Fröhlich Rechtsanwalt

The ETSI IPR Policy Navigating the interface between Standards and Patents (the views expressed are personal views of the author and do not necessarily represent those of his past and/or present employer)

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

Dr. Michael Fröhlich Rechtsanwalt

TABLE OF CONTENT I.

Introduction

II.

Main characteristics of the ETSI IPR Policy

III.

ETSI’s reaction to a changing environment

IV.

A.

Predictability and transparency of royalty costs

B.

Further improvement of disclosure of essential IPRs and FRAND-commitment

Conclusion

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

2

Dr. Michael Fröhlich Rechtsanwalt

TABLE OF CONTENT I.

Introduction

II.

Main characteristics of the ETSI IPR Policy

III.

ETSI’s reaction to a changing environment

IV.

A.

Predictability and transparency of royalty costs

B.

Further improvement of disclosure of essential IPRs and FRAND-commitment

Conclusion

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

3

Dr. Michael Fröhlich Rechtsanwalt

INTRODUCTION 

ETSI = European Telecommunications Standards Institute   



recognised European Standardisation Body (Directive 98/34/EC) >650 member companies from more than 51 countries Home of GSM, UMTS, DECT, TETRA

ETSI IPR Policy tried and trusted over the years 

is promoting broad participation by balancing the interests of all stakeholders    

 



IPR owner: right to fully benefit from its IPR third parties: rights to make and sell interoperating products public use: not to lock users into specific technology platforms SDO: avoid wasting effort on the elaboration of a Deliverable which could subsequently be blocked by an essential IPR

is a reference for many SDO IPR Policies worldwide is generally well working

But, nothing is as constant as change 

ETSI IPR Policy facing a rapidly changing and more complex enviroment   

increase of essential patents and patent owners complementary technologies and higher functinoality leading to increased cumulative fees different understanding of the meanings of FRAND (e.g. unreasonable licensors asking for excessive royalties, discriminatory licensing practice of IPR owner), resulting in an increase of litigation

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

4

Dr. Michael Fröhlich Rechtsanwalt

TABLE OF CONTENT I.

Introduction

II.

Main characteristics of the ETSI IPR Policy

III.

ETSI’s reaction to a changing environment

IV.

A.

Predictability and transparency of royalty costs

B.

Further improvement of disclosure of essential IPRs and FRAND-commitment

Conclusion

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

5

Dr. Michael Fröhlich Rechtsanwalt

MAIN CHARACTERISTICS 

No technical reservation for the inclusion of IPRs in standards



Early identification and disclosure of essential IPRs



Ensuring the future applicability of the standards in full respect of the rights of the IPR owner by requesting FRAND licensing declaration



Holders of essential IPRs are entitled (but not required) to make voluntary, unilateral, public ex-ante disclosures of licensing terms



No involvement of ETSI in any commercial discussion on IPR matters (i.e. terms and conditions of the licenses to be determined by the parties of the agreement)

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

6

Dr. Michael Fröhlich Rechtsanwalt

TABLE OF CONTENT I.

Introduction

II.

Main characteristics of the ETSI IPR Policy

III.

ETSI’s reaction to a changing environment

IV.

A.

Predictability and transparency of royalty costs

B.

Further improvement of disclosure of essential IPRs and FRAND-commitment

Conclusion

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

7

Dr. Michael Fröhlich Rechtsanwalt

EX-ANTE DISCLOSURE = mechanism about submitting anticipated licensing terms for a given standard draft before the contribution is locked-in as a standard 

Ex ante disclosures of licensing terms is not to be confused with the ex-ante disclosure of essential IPR or the ex-ante FRAND-commitment



Can bring pro-competitive benefits subject to appropriate safeguards Europe:

USA:

- EC Guidelines on TTBE - EC Press Release (12 December 2005) - EC letters to ETSI (09.12.2005 and 21.06.2006) - Articles = Piesiewicz, Schellingerhout, IPRs in standard setting, EC Competition Policy, Newsletter 3/2007 = Madero, Banasevic, Standards and Market Power, Global Competition Policy, 05/2008 - Speeches = Competition Commissioner Kroes, Open Forum Europe Breakfast Seminar, Brussels, 10.06.2008 = Madero, EC-Workshop on IPR in ICT standardisation, Brussels, 19.11.2008 Tokyo, 9 December 2008

- DoJ/FTC Report on Antitrust enforcement and IPRs (April 2007) Business Review Letters - Business Review Letters = DoJ Business Review Letter to VITA (30.10.2006) = DoJ Business Review Letter to IEEE (30.04.2007) - Speeches = FTC Director Bureau of Competition, Joseph J. Simons, AIPLA, 15.05.03 = FTC Chair, Deborah Majoras, Stanford University, 23.09.05

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

8

Dr. Michael Fröhlich Rechtsanwalt

EX-ANTE DISCLOSURE (cont‘d) 



Benefits 

may enable competition on the basis of technology and price before the standard is approved



may foster the creation of a fair market price



may avoid the possibility of ex-post monopoly pricing once lock-in has occurred



may permit quick market entrance after standard is adopted

Costs 



antitrust risk 

discussions as to the terms including price, costs, limitations or other negotiations can be very sensitive



group discussions of disclosed licensing terms may lead to group boycott conduct, buyer cartell behaviours or other anti-competitive conduct

additional overhead, i.e. may cause delay in standardisation while members are considering terms

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

9

Dr. Michael Fröhlich Rechtsanwalt

EX-ANTE DISCLOSURE (cont‘d) 

How are ex ante disclosures working in ETSI: 





Ex ante disclosure is fully voluntary; i.e. 

no obligation to disclose licensing terms of essential IPRs



lack of disclosure is not creating any implications



FRAND licensing declaration is sufficient for the inclusion of an IPR into a standard



Disclosure of licensing terms is left to the usual free market mechanisms

Appropriate safeguards 

New ETSI Antitrust Guidelines



ETSI is not involved to a large extent in the disclosure of licensing terms



No discussion/negotiation of specific licensing terms within ETSI



ETSI is not responsible for determining whether the licensing terms disclosed ex ante are FRAND

But, since implementation no ex-ante disclosure has been notified to ETSI

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

10

Dr. Michael Fröhlich Rechtsanwalt

OTHER PROPOSALS IN DISCUSSION 

Patent Pools 

Can produce pro-competitive effects, subject to some safeguards 



But:   



Pool management is seperate and independent from the SDO Full benefits only, if all IPR owners are joining the pool Reduced control of own patents may be a disincentive to join

Alternative Dispute Resolution Mechanism 

Can be used to   



perform patent landscaping evaluate essentiality determine FRAND licence terms

But:   



Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements (Para. 210f.)

Arbitration is expensive Members of SDO should be free in their decision to either use existing legal system or appropriate institutional arrangements Additional overhead to standardisation process

Clarificarion of FRAND 

Including principles of “Aggregated Reasonable Terms” (ART) and “Proportionality” into FRAND  



ART = unilateral articulation of what cumulative rate might be; aiming to ensure that the aggregate of the terms are objectively commercially reasonable Proportionality = reflects respective technology contribution

No consensus when discussed in 2006  put “on hold” for longer term consideration

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

11

Dr. Michael Fröhlich Rechtsanwalt

TABLE OF CONTENT I.

Introduction

II.

Main characteristics of the ETSI IPR Policy

III.

ETSI’s reaction to a changing environment

IV.

A.

Predictability and transparency of royalty costs

B.

Further improvement of disclosure of essential IPRs and FRAND-commitment

Conclusion

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

12

Dr. Michael Fröhlich Rechtsanwalt

PATENT FAMILIES = a group of patent filings that claim the same priority(ies) of a specific filing; or more broadly: all the patents and patent applications resulting from a specific patent application 

Need has been identified to modify/clarify ETSI procedures and guidelines to better address information on patent families



Ambiguity in the IPR Policy 

unclear whether obligation to disclose is requiring the identification of all essential IPRs (i.e. including all members of a patent family) or if disclosure of an essential IPR is sufficient (i.e. one family member)



implication for FRAND vague



notion of the term “Patent Family” unclear

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

13

Dr. Michael Fröhlich Rechtsanwalt

PATENT FAMILIES (cont‘d) 

Disclosure 





Obligation is met with the disclosure of one member of a patent family. Disclosure of other patent members is voluntary

FRAND-commitment 

Presumption that a FRAND licensing declaration with regard to one disclosed member of a patent family extents to all existing and future members of that patent family



IPR holders have a possibility to specify upfront (i.e. at the time the FRAND licensing declaration is made) which members of the patent family are excluded from the FRAND-commitment

Patent family 

The term “patent family” has now been clearly defined in the ETSI IPR Policy as all the documents having at least one priority in common, including the priority document(s) themselves

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

14

Dr. Michael Fröhlich Rechtsanwalt

RELIABILITY OF FRAND-COMMITMENT 



Irrevocability of a given FRAND-commitment 

Continued availability of FRAND licensing declarations is key



FRAND-commitment fails to serve purpose if it can be revoked at a later point

Repudiation of a predecessor’s FRAND-commitment 

Continuity of a FRAND-commitment when a patent is transferred underpins a robust standards system



Transfer of an IPR should not be used to circumvent a FRAND-commitment



Member which assigns or transfers ownership of an essential IPR has an obligation to exercise reasonable efforts to notify the assignee or transferee of any FRAND-commitment it has made to ETSI

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

15

Dr. Michael Fröhlich Rechtsanwalt

COLABORATION WITH PTOs 

New technological developments are not only discussed within SDOs, but are in parallel also subject to patent applications



Cooperation between PTOs and SDOs is a win-win situation





PTOs can increase the quality of granted patents



SDOs reduces risk of IPR problems linked to unduly granted patents



Resolution GSC-12/23 (IPR WG) on the cooperation with PTOs

ETSI and the EPO have established close cooperation over the past years 

ETSI granted free access to all its working documents and draft specifications



Documentation rules that lead to a better searchability are being developed 



To allow better examination documentation needs to contain information on bibliographic data such as effective publication date, working group, date and place of meeting, author or editor

ETSI IPR Database being linked to the esp@cenet-Database of the EPO  

Powerful enhancement with information on patent documents all over the world Possibility to check the up-to-dateness of entries

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

16

Dr. Michael Fröhlich Rechtsanwalt

OTHER 

ETSI IPR Database      



analysis and improvement of the data model of the ETSI IPR Database so that Patent Families are stored only once in the ETSI IPR Database and members of a patent family uniquely identified IPR declarations of ETSI members and updates to be scanned and stored in the database as pdffiles history concept where every change is documented and traceable complete database to be provided for download supporting definition of private search criteria link to the public register of the EPO to be provided to allow for an on-line check of the up-todateness of declared IPRs

ETSI IPR Declaration forms    

increase of cases where the wording of the forms has been modified by declarants amendments affect legal certainty as they are suitable to hamper the reliability of the FRANDcommitment format of the forms has been improved and language has been aligned with the language of the ETSI IPR Policy use of the forms is now mandatory and the only acceptable way to make declarations to ETSI

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

17

Dr. Michael Fröhlich Rechtsanwalt

TABLE OF CONTENT I.

Introduction

II.

Main characteristics of the ETSI IPR Policy

III.

ETSI’s reaction to a changing environment

IV.

A.

Predictability and transparency of royalty costs

B.

Further improvement of disclosure of essential IPRs and FRAND-commitment

Conclusion

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

18

Dr. Michael Fröhlich Rechtsanwalt

CONCLUSION 

ETSI IPR Policy is a key element for the success of ETSI’s globally-applicable standards



Strenghts of ETSI IPR Policy: 

Fair balancing of interests forstering broad participation  

Enabling the development of high-quality standards ensuring broad access to state-of-the-art technologies Lowering the risk of integration of third-party technology



Maintaining the focus on technical work and not adressing commercial issues in SDO is lowering risk to miss time-to-market  ETSI IPR Policy is of sufficient breadth to solve the bigger part of the problems already at the onset, whilst recognizing that self-regulation by nature has its limits and will never fully replace regulation 

Potential weakness of ETSI IPR Policy : 

Ex-ante FRAND-commitment still remains to be mainly clarified ex-post in bilateral negotiation, while market could prefer ex-ante clarification of FRAND

 The principles of ETSI IPR Policy are undisputed and well working. Further improvements are being continously discussed and amendments carefully considered Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems

19

Dr. Michael Fröhlich Rechtsanwalt

Thank you for listening

Tokyo, 9 December 2008

International Symposium on Standards Strategy and Intellectual Property - The Role of Patent Policies and Pools in Standardization Activities and Ways to Cope with Hold-Up Problems