Patents in Telecoms and the Internet of Things 7 & 8 November 2019 University of Tokyo
An Alternative Model of Patent Pooling Roberto Dini Tokyo, 8 November 2019 2
PATENT POOLS FOR AN INDUSTRY-WIDE BALANCE NO POOL PATENT POOL high number of transactions limited number of transactions 3
PATENT POOLS FOR AN INDUSTRY-WIDE BALANCE Patent pools, joint licensing programs and other forms of IP aggregation have significant pro-competitive effects, including: Defining FRAND licensing terms and conditions in a context where • both licensors and licensees are present ; Avoiding royalties stacking by establishing a single royalty rate • thereby reducing the likelihood of litigation; Providing more certainty and predictability to the market with • regards to IP costs, especially when the SSO fosters the creation of a pool; Reducing transaction and administrative costs. • 4
PATENT POOLS FOR AN INDUSTRY-WIDE BALANCE “ With a world market estimated at being 11.4 billion euro in 2009, mobile TV offers Europe the possibility of combining its strengths in the mobile communications sector with the wealth and differences that characterize the European audiovisual sector. I am prepared to give strong support to European standardised solution s, such as DVB-H , on the condition that they provide certainty about technology licensing terms and conditions. Without this certainty and predictability, it will be impossible to invest with confidence in new innovative technologies. Industry should therefore foster work in this Viviane Reding direction . ” Former Telecommunications European Commissioner Please have also a look to this article: Fostering by Standards Bodies of the Formation of Patent Pools by Carter Eltzroth, Legal Director of the DVB Project 5
THE LTE (4G) CASE WHAT COULD HAVE BEEN AND WHAT WAS REALLY In April 2008, the Next Generation Mobile Networks (NGMN) Alliance affirmed that: “a reasonable maximum aggregate royalty level for [all] LTE essential IPR in handsets is a single-digit percentage of the sales price” (i.e., <10%) 6
LTE ROYALTY RATE ANNOUNCEMENTS WHAT COULD HAVE BEEN AND WHAT WAS REALLY 10 companies disclosed royalty rates for their LTE patents • Nokia 1,50% * ALU 2,00% NSN 0,80% Nortel 1,00% Ericsson 1,50% Huawei 1,50% Qualcomm 3,25% ZTE 1,00% Motorola 2,25% Vodafone 0,00% * 2% for multi standard • The sum of the royalty rates announced by those 10 companies as a single group is 14.8% (a 2-digit figure). • Considering that potentially there could be as many as 50 parties, the aggregated value of royalties could reach easily 3 digits. 7
LTE ROYALTY LEVEL NO PATENT POOL 35% cumulative 30% % of handset selling price 25% 20% 15% + 10% 5% 3.25% 2.00% 1.50% 1.50% 2.25% 1.50% 1.00% 0.80% 0.00% 1.00% 0% ALU Ericsson Huawei Motorola Nokia Nortel NSN Qualcomm Vodafone ZTE P.O.1 P.O.2 ... P.O.n RESULT 8
LTE ROYALTY LEVEL 2 PATENT POOLS AND OUTSIDE PATENT OWNERS 35% % of handset selling price 30% 25% 20% cumulative + 15% 10% 5% 0% P.O. 2 P.O. 3 P.O. n P.O. 1 RESULT P. P. 1 P.P. 2 9
LTE ROYALTY LEVEL 1 PATENT POOL AND OUTSIDE PATENT OWNERS 35% % of handset selling price 30% 25% 20% cumulative + 15% 10% 5% 0% P.O. n P.O. 2 P.O. 1 P.P. 1 RESULT 10
LTE ROYALTY LEVEL IDEAL SCENARIO 35% % of handset selling price 30% 25% 20% 15% = 10% 5% 0% Patent RESULT Pool 11
WHY THE ROYALTY IS FRAND INSIDE A POOL? A PRATICAL EXAMPLE Patent Families Patent points analysis n. 1 patent owner 13 Licensor only n. 2 patent owner 7 n. 3 patent owner 12 n. 4 patent owner 20 n. 5 patent owner 13 n. 6 patent owner 15 Patent Families n. 7 patent owner 25 Licensor/ee n. 8 patent owner 45 n. 9 patent owner 52 n. 10 patent owner 48 Total 250 12
WHY THE ROYALTY IS FRAND INSIDE A POOL? A PRACTICAL EXAMPLE Patent Owner N°7 (licensor/licensee) controls 25 SEP families 1$ royalty rate requested by the pool RESULT? Earnings by the Patent Owner’s n°7: 0,1 $ Patent Owner N°7 25 patent points/250 tot patent points has to pay Patent Owner N° 7 is also an implementer 0,9$ to other POs inside the pool 13
WHY THE ROYALTY IS FRAND INSIDE A POOL? A PRACTICAL EXAMPLE What if the royalty change? Other exemples Patent Owner N°7 (licensor/licensee) 25 SEP families 25 patent points / 250 total patent points = 0,1 Royalty Rate 0,5$ 5$ 10$ 15$ Revenues from the pool 0,05$ 0,5$ 1$ 1,5$ 10% Costs for the received license 90% 0,45$ 4,5$ 9$ 13,5$ The fact that a licensor - who is also a licensee for the technology licensed by the pool - accepts to pay to the other pool members a royalty rate that is closed to the full royalty requested by the pool is the evidence that the level of royalty is acceptable by the market and therefore FRAND! 14
PARTECIPATION IN PATENT POOLS COULD BECOME MANDATORY • For facilitating the formation of patent pools when a certain technology is standardized, the Regulatory Authorities could push companies and entities, that submit to the standardization proceedings patented technologies, to submit to SSOs not only the known FRAND declaration, but also a commitment to put the patents covering a certain part of the standard in a patent pool licensing activity. • In the case the above is not considered possible, the Regulatory Authorities should at least support SSOs to encourage (e.g. through economical/fiscal incentives) Patent Owners to meet under the supervision of an independent patent facilitator to set royalty rates, make them public, and quickly start the pool. 15
PARTECIPATION IN PATENT POOLS SHOULD BECOME MANDATORY EUROPEAN COMMISSION - Brussels, 29.11.2017 COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT , THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Setting out the EU approach to Standard Essential Patents Footnote 34 : “ For instance, the creation of pools may be encouraged by means of measures such as strengthening the relationship between SDOs and pools, providing incentives to participation and making universities and SMEs more aware of the advantages of becoming a licensor in a pool.” 16
PATENT POOLS & PATENT AGGREGATORS The creation of licensee aggregators may be encouraged by means of measures such as strengthening the relationship between these two different types of pools, and providing incentives to participation to both the aggregation efforts. 17
NEW FORMS OF INTERMEDIATION FOR EFFICIENT LICENSING TRANSACTIONS AGGREGATOR OF AGGREGATOR OF WILLING LICENSEES INNOVATIVE SEPs one single transaction 18
A LOOK TO THE FUTURE Sorry for this idea that deprives the judges of interesting (but complicated) work and attorneys at law of their fees, but something very close to this model could be helpful to find a final solution to all the problems related to SEP patents. Missing piece 19
IN CONCLUSION… PATENT POOL IS THE ANSWER! Who should decide FRAND terms when parties cannot agree? q The internet of things I – Cars q Competition and Policy Towards Standard Setting q The application of Huawei vs. ZTE in practice q FRAND Determination Methodologies I _ Comparables q FRAND Determination Methodologies II Top Down and Bottom Up q The Internet of Things II – Everything Else q The Telecoms Ecosystem q q Patent pooling Essentiality and the Meaning of Discrimination q 20
THANKS FOR THE ATTENTION For any additional information, please contact roberto@dini.com www.sisvel.com 21
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