JPO’s initiatives Commissioner Akira Matsunaga November 7th 2019
Table of Contents 1. Background 2. JPO’s Initiatives (1) Guide to Licensing Negotiations Involving Standard Essential Patents (SEPs) (2) “ Hantei ” Advisory -Opinion System to Judge the Standard Essentiality of Patents 3. Open Questions 1
1. Background 2 . JPO’s Initiatives (1) Guide to Licensing Negotiations Involving Standard Essential Patents (SEPs) (2) “ Hantei ” Advisory -Opinion System to Judge the Standard Essentiality of Patents 3. Open Questions 2
Imminent Issue on SEPs: Changes in Licensing Negotiations In the Past In IoT Era Disputes/Negotiations among Disputes/Negotiations parties from different business among ICT companies Telecomm company Telecom company vs vs Company Telecom company in other business Cross-licensing Suppliers Possible Difficult Perspectives on licensing rates Significantly different Almost consistent Perspectives on Essentiality Difficult for licensees to Can be easily evaluated evaluate by parties 3
Disputes over SEPs Arising in Numerous Countries Major Lawsuits and Administrative Actions Concerning SEPs U.S. U.K. Federal Trade Commission v. Qualcomm Unwired Planet v. Huawei Continental Automotive v. Avanci et al. China Conversant Wireless Licensing v. Huawei Core Wireless Licensing v. Apple National Development and Reform EU Commission (NDRC) v. Qualcomm CSIRO v. Cisco Iwncomm v. Sony European Commission v. Qualcomm Apple v. Qualcomm Huawei v. Samsung Huawei v. ZTE HTC v. Ericsson Japan Germany Japan Fair Trade Commission (JFTC) v. Qualcomm Nokia v. Daimler Apple v. Samsung Sisvel v. Haier Disputes Arising among Different business Continental Automotive v. Avanci et al case (U.S. District Court in California in 2019) Nokia v. Daimler case (Germany, Regional Court in 2019) Source: Made by the JPO based on “the SEP Guide”, “Research Report on Actual State of How Disputes over SEPs Were Being Resolved”, and various news reports. 4
JPO’s Initiatives to Deal with SEP Issues Background The environment surrounding SEPs is undergoing a great change as the wider use of the IoT. The range of parties involved in licensing negotiations has been expanding to companies in various business. Issues to Be Solved Perspectives on reasonable licensing rates are different in licensing negotiations between telecommunications business and other business. It is difficult to resolve disputes through cross-licensing. When disputes are arising among parties from different business in decisions on whether or not patents at issue are based on the essential standards, the parties may fail to reach an agreement. JPO’s Initiatives “Guide to Licensing Negotiations involving Standard Essential” “ Hantei on SEPs” 5
1. Background 2 . JPO’s Initiatives (1) Guide to Licensing Negotiations Involving Standard Essential Patents (SEPs) (2 ) “ Hantei ” Advisory -Opinion System to Judge the Standard Essentiality of Patents 3. Open Questions 6
Overview of the Guide I. Purposes of the Guide Aiming to ・ Enhance transparency and predictability ・ Facilitate negotiations between rights holders and implementers ・ Help prevent or quickly resolve disputes concerning SEPs Not Recipes (Not legally binding, Not intended to be prescriptive) II. Licensing Negotiation Methods III. Royalty Calculation Methods A. Good Faith A. Reasonable Royalties Desirable acts How to determine the royalty basis Specific examples of actions in bad faith How to determine royalty rates B. Efficiency B. Non-discriminatory Royalties Factors in terms of enhancing the Is a use-based license discriminatory? efficiency of licensing negotiations Who in the supply chain should be the C. Other Factors main entity? Methods for paying royalties 7
Overview of the Guide I. Purposes of the Guide Aiming to ・ Enhance transparency and predictability ・ Facilitate negotiations between rights holders and implementers ・ Help prevent or quickly resolve disputes concerning SEPs Based on the framework Not Recipes (Not legally binding, Not intended to be prescriptive) suggested by the ECJ II. Licensing Negotiation Methods III. Royalty Calculation Methods A. Good Faith A. Reasonable Royalties Desirable acts How to determine the royalty basis Specific examples of actions in bad faith How to determine royalty rates B. Efficiency B. Non-discriminatory Royalties Factors in terms of enhancing the Is a use-based license discriminatory? efficiency of licensing negotiations Who in the supply chain should be the C. Other Factors main entity? Methods for paying royalties 8
Stages in Licensing Negotiations and Good Faith Negotiations Based on the framework suggested by the European Court of Justice (Huawei v. ZTE case, 2015) , the Guide summarizes factors that parties should consider at each stage in the negotiation process. Stages in Licensing Negotiations SEP Right Holder’s Argument • Implementers unreasonably have Implementer Right Holder delayed negotiations • Implementers refuse to conclude any confidentiality agreement. 1. Offer 2. Express licensing willingness to negotiations obtain a license 3. Offer End-Product Manufacturer’s Argument 4. Present FRAND terms Counteroffers • Rights holders do not provide any claim on FRAND charts. terms • Rights holders do not provide any claim charts to the implementers. Lawsuits or ADRs 9
Overview of the Guide I. Purposes of the Guide Aiming to ・ Enhance transparency and predictability ・ Facilitate negotiations between rights holders and implementers ・ Help prevent or quickly resolve disputes concerning SEPs Further discussions are needed Not Recipes (Not legally binding, Not intended to be prescriptive) II. Licensing Negotiation Methods III. Royalty Calculation Methods A. Good Faith A. Reasonable Royalties Desirable acts How to determine the royalty basis Specific examples of actions in bad faith How to determine royalty rates B. Efficiency B. Non-discriminatory Royalties Factors in terms of enhancing the Is a use-based license discriminatory? efficiency of licensing negotiations Who in the supply chain should be the C. Other Factors main entity? Methods for paying royalties 10
Parties to Negotiate in Supply Chain • The Guide organizes factors to be considered, such as who in the supply chain, for example, either end-product manufacturers or parts manufacturers, should be the main entity in concluding any licensing agreements . Implementer to become a party in negotiation SEP Right Holder’s Argument Supply Chain • Access for all Offer licensing negotiation End-Product Right Holder Manufacturer Patent Indemnification Components Agreement (e.g. TCU) Offer licensing negotiation Supplier 1 End-Product Manufacturer’s Argument Patent • License to all Components Indemnification (e.g. module) Agreement Supplier 2 11
Royalty Base: EMV and SSPPU The Guide organizes factors to be considered in determining the basis for calculating royalties, i.e., the prices of individual parts or prices of completed end-products. Relation between Contribution of SEP and Royalty Base SEP Right Holder’s Argument End Entire Market Value (EMV) products Approach Telematics Control Unit (TCU) Communi- cation Modules End-Product Manufacturer’s Argument Chips Smallest Salable Patent Practicing Unit (SSPPU) Essential part of SEP Approach technology 12
1. Background 2. JPO’s Initiatives (1) Guide to Licensing Negotiations Involving Standard Essential Patents (SEPs) (2 ) “ Hantei ” Advisory -Opinion System to Judge the Standard Essentiality of Patents 3. Open Questions 13
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