IEEE rejoins mainstream of standard-setting world as it undoes key elements of 2015 patent policy that encouraged hold-out by unwilling licensees: major defeat for Apple and its allies

Rationality and pragmatism have prevailed, and unity--within the universe of standard-setting organizations--has been restored. The IEEE Standards Association Board of Governors (IEEE SA BOG) just announced an update to its patent policy, which will formally enter into force on New Year's Day.

These are the key take-aways:

• The highly controversial elements the IEEE added to that patent policy in 2015 and which favored hold-out by unwilling licensees among implementers of WiFi (IEEE 802.11) and other IEEE standards have effectively been stricken (or, at a minimum, thoroughly diluted to the extent they no longer mean anything). Those issues include access to injunctive relief, the royalty base (proponents of the Smallest Salable Patent-Practicing Unit (SSPPU) often pointed to the IEEE policy), and what type of behavior ina licensing negotiation constitutes (un)willingness.

• Simply put, the IEEE's patent policy is now much more like ETSI's: right holders are not restricted (in terms of the royalties or remedies they demand) beyond the applicable case law.

• Ten years ago, I reported on an IEEE amicus brief that said standardization bodies should take "no direct role in patent enforcement." With today's amendments to the 2015 policy--which essentially repeal the 2015 amendments--IEEE is back to where it was before.

• IEEE's announcement also resolves a conflict that had arisen because of some major patent holders ( including, but not necessarily limited to, Ericsson, GE, Huawei (notably, a large-scale WiFi implementer as well), InterDigital, LG, Nokia, Orange, Panasonic, and Qualcomm (in alphabetical order)) participating in the standard-setting process under the old policy, declining to provide letters of assurance (LOAs) under the 2015 policy: in case of doubt, the least restrictive (on patent holders) policy now applies.

• That LOA divergence even jeopardized the ANSI certification of newly developed IEEE standards as I mentioned in the post I just linked to. The revised policy brings IEEE back into the ANSI fold as far as I can see. That's obviously up to ANSI to decide--I'm just voicing my own opinion.

• At the same time, IEEE has--again, just in my opinion--avoided running into problems with the International Organization for Standardization (ISO) (see this LinkedIn article by NY-based attorney David Cohen).

• In my ">May 2022 post on the IEEE situation I mentioned that Apple and some of its allies were lobbying hard to prevent from happening what has now been formally announced. Let's hope that Apple recognizes this defeat and doesn't resort to ever more astroturfing, which is simply annoying in the SEP context and adds insult to injury with respect to App Store issues.

• I applaud IEEE for drawing the necessary conclusions from the fact that no other major standard-setting body (I don't even know about a minor one, but I can't claim to know them all) ever followed suit and modeled its own patent policy after the 2015 IEEE policy.

• There is a parallel here between what IEEE has decided to do and what the Biden Administration did a few months ago, i.e., that the DOJ, USPTO, and NIST decided neither to adopt a new SEP policy statement nor to reinstate the Obama-era one. No more outlier positions. Just neutrality--and deference to the courts of law.

• This is a major success not only for SEP holders interested in fair compensation and reasonably strong enforcement, but also for former Antitrust Assistant Attorney General Makan Delrahim, who put pressure on IEEE. He's now in private practice (Latham & Watkins, a firm that oddly counts Apple among its most important clients, if it isn't even Latham's most important client), but his approach to the old IEEE policy has been vindicated today. I didn't always agree with him to put it mildly, but he does deserve credit. I previously mentioned a significant, equally SEP-related, post-term achievement of his last year (the Fifth Circuit's dismissal of HTC's appeal against Ericsson).

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Apple and other WiFi implementers pressuring IEEE not to abandon its 2015 patent policy--but serious impact of negative Letters of Assurance can't be denied

Early last week, largely the same Apple-led crowd that is behind the "Save Our Standards" campaign (whose deceptive lobbying I've recently called out) sent a letter to Sophia Muirhead, the General Counsel of the Institute of Electrical and Electronics Engineers (IEEE). I'm in possession of that six-page PDF, which is dated May 3 and entitled Industry and Public Interest Support for Maintaining 2015 IEEE-SA Bylaw Updates. It's a pressure group effort ahead of a (fairly confidential) meeting of the IEEE-SA's Standards Board; the letter was allegedly authored by outside counsel for Apple; and from what I heard, it's more or less unprecedented for industry players to lobby the IEEE in that fashion.

It looks like some folks are panicking, though a little over a year ago they had reason to celebrate: the Biden DOJ silently downgraded a letter that the Trump DOJ (specifically, then-Assistant Attorney General for the Antitrust Division, Makan Delrahim) had sent to IEEE, urging it to undo significant parts of its 2015 policy change favoring implementers. As I noted at the end of the post I just linked to, the wrangling over IEEE's standard-essential patent (SEP) policy was sure to continue. Mr. Delrahim is now a Latham & Watkins partner (oddly, a firm frequently used by Apple), so he's no longer in a position to push IEEE in the direction he outlined while in public office. But IEEE still has a problem on its hands that no one with an interest in a functioning standard-setting system can responsibly ignore or convincingly explain away.

We'd be having a totally different conversation now if the following sentence from the first paragraph of Apple et al.'s letter were true:

"The IEEE-SA’s Patent Policy is and remains the model for standard setting organization (SSO) IPR policies, particularly following the 2015 update to the patent policy."

The letter says "IEEE-SA distinguished itself positively" in 2015. Now, if SSOs like ETSI had gone in a similar direction, Apple et al. would be in a position to make that claim of IEEE's 2015 policy being and remaining "the model for [SSO] IPR policies." But the reality--certainly a sad one from the implementers' perspective--is that seven years on, IEEE is still an outlier among SSOs. That may simply be due to the fact that other SSOs are more consensus-driven than IEEE, where a majority can just brush aside objections no matter their merit.

Neither does the last sentence of the first paragraph withstand scrutiny once one looks at the broader picture:

"By almost any measure, standardization work at IEEE has thrived in the wake of these updates."

Via a footnote, that sentence refers to a 2018 IPlytics report (PDF) that says "contributions to IEEE standards and technical work within IEEE working groups have only increased since the updated patent policy was approved." But as standards grow more complex, the number of contributions are on the rise--and more than anything, that conclusion reflects a disconnect:

A number of major wireless SEP holders and innovators (including, but not necessarily limited to, Ericsson, GE, Huawei (notably, a large-scale WiFi implementer as well), InterDigital, LG, Nokia, Orange, Panasonic, and Qualcomm (in alphabetical order)) have declined to provide Letters of Assurance ("LOAs") that would force them to adhere to the IEEE's 2015 policy. Some if not all of them clarified that they remained willing to abide by the prior policy (which was more similar to what is still found in the cellular standards space). But a refusal to be bound by the new policy is deemed a "negative LOA," regardless of a contributor's stance on a superseded version of that policy.

The disconnect here is that there wasn't a major disruption on the technical side (though Professor Ron Katznelson, a member and past Chair of the IEEE's U.S. IP committee, did identify some negative impact in his paper The IEEE controversial policy on Standard Essential Patents -- the empirical record since adoption) despite those negative LOAs. That approach is not sustainable. Sooner or later, an SSO runs into a serious problem if a significant part of all technical contributions isn't subject to positive LOAs.

We're talking about a legal issue, a licensing problem--not just a political one that may simply be solved by an Administration overriding its predecessor's policies.

Unlike in politics, where a majority vote is often the answer, that won't work here either. Apple et al.'s letter stresses that there are far more companies favoring implementer-friendly policies than a proposal to revert to the previous one. That means nothing. Seriously, there are more people out there buying bread than owning or working at bakeries, yet customers can't just set the terms on which they want the supply side of the market to do business with them. The fact that there are so many implementers makes successful standards valuable. It doesn't devalue them. And even if a vast majority of SEP holders preferred a policy (typically because they are net licensees), in the end implementers need a license to all the SEPs, not just some or most of them.

WiFi 6 is the first generation of IEEE 802.11 to have been affected by negative LOAs. WiFi 7, which is now in the works, will be the first one to have been developed with some companies having submitted negative LOAs at the outset.

Those negative LOAs--coupled with the continuation of standards development as if nothing had changed--are a ticking time bomb. Arguably, it has detonated in some places already. IEEE ran into problems with the American National Standards Institute (ANSI) finding itself unable to approve as national U.S. standards those IEEE standards that were clearly impacted by negative LOAs. The International Organization for Standardization (ISO) has similar problems according to a JDSupra article and a LinkedIn article (both by the same author, David Cohen)). It's not a question of whether those organizations like IEEE's patent policy: it's all about the fact that there are negative LOAs in place, normally a no-go in standard-setting, for good reason.

The current situation is a mess. Contrary to what Apple et al.'s letter claims (asking this rhetorical question: "Why would IEEE-SA want to return to a world in which the cost of implementing IEEE-SA standards like 802.11 was uncertain, inevitably discouraging adoption?", negative LOAs are anything but a path to legal certainty. That is not a question of whether or not one would like to bring down SEP royalties. Apple et al.'s letter fails to present a solution as it only advocates perpetuating the problem. With Apple's annual litigation budget in the billions of dollars, that may be workable. For the technology industry at large it is not.

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DOJ downgrades Delrahim letter to IEEE on standard-essential patents: inter-agency rapprochement with FTC on SEP enforcement?

The language of diplomacy and other governmental communications is very nuanced, like the British Queen's spokespersons saying she's "not amused" when she's actually outraged. The Antitrust Division of the United States Department of Justice ("DOJ-ATR") has taken this concept to a higher level. In what could be described as a digital form of body language, the Biden Administration's DOJ has unequivocally dissociated itself from the Trump Administration's position on standard-essential patent (SEP) enforcement without saying or writing a single word: just by relegating a link to a document (with the PDF remaining in the same place as before) to a long list of links that is, for the most part, merely an archive. Parts of that archive are little more than the dustbin of DOJ-ATR history.

Look at it this way: if a colleague of yours had a picture of her sweetheart on his desk, but all of a sudden decided to put it into a dark storage room, wouldn't that tell you something?

On September 10, 2020, less than two months before the election Donald Trump lost, Qualcomm-aligned Antitrust Assistant Attorney General Makan Delrahim tried to use his remaining time in office--he was going to leave anyway, and he knew what the polls said--tried to deal one final blow to net licensees of SEPs. He supplemented, updated, and appended the DOJ-ATR's 2015 Business Review Letter (BRL) to the Institute of Electrical and Electronics Engineers (IEEE). An IEEE standard all of us use in our everyday lives is WiFi (IEEE 802.11). IEEE has been a strategically important forum at the forefront of how standard-setting organizations could set more specific rules governing SEP enforcement than, for example, ETSI, whose FRAND pledges (which must be interpreted under French law wherever in the world they are enforced) come with a lack of clarity that is fully intended (though some interpretations are still clearly less reasonable than others).

Mr. Delrahim's BRL 2.0 was meant to make the IEEE change course by giving companies like Qualcomm--which in all fairness is a tremendous WiFi innovator--ammunition for IEEE-internal discussions. Qualcomm executives publicly predicted on various occasions that the IEEE was going to make its rules more patentee-friendly under pressure from the federal government. Last month, MLex's Khushita Vasant reported on a recent clash between Qualcomm, Apple, Huawei, and other companies at an IEEE patent policy meeting. It was a clash between the progressives like Apple--who wanted to continue on the path of setting implementer-friendly rules--and those seeking a revision, led by Qualcomm.

What I mentioned at the start of this post obviously doesn't apply to the Trump Administration. Mr. Delrahim's letter to IEEE suggested that the Obama Administration's 2015 BRL to IEEE had been misinterpreted. But Mr. Delrahim also disparaged his predecessor's work by claiming that "[t]he Department's assessment in 2015 of the 'direction' of U.S. law interpreting FRAND commitments on royalty rates and damages assessments was not well-supported and has not proven accurate."

In late March, I was wondering whether the DOJ and the FTC would continue to fundamentally disagree on the application of antitrust law to SEP abuse, given that the FTC didn't seek a Supreme Court review of the Ninth Circuit's FTC v. Qualcomm ruling and mentioned its coordination with the DOJ. But that was just a question, not speculation. Also, the Solicitor General would have had to represent the FTC before the Supreme court, not DOJ-ATR.

Apparently, the Biden Administration is inclined to undo at least some of Mr. Delrahim's SEP policy initiatives. The full extent will become clearer with time. But it's already certain that change has come to DOJ-ATR.

Currently, DOJ-ATR is being run by Acting Assistant Attorney General Richard Powers. Just like we've recently seen quadruple-antisuit injunctions, which I abbreviate as A4SIs and others as AAAASIs, Mr. Powers has a quadruple-A title: he's the Antitrust Acting Assistant Attorney General. What an alphabet soup.

Mr. Powers could have done his own "update" to the 2020 Delrahim letter. That update could simply have stated that the 2020 letter was an aberration, and the 2015 letter was in full force and effect again. But doing so would have required a communication style closer to that of the Trump Administration.

That's where the hierarchical structure of the DOJ-ATR website came in handy. There's one section where one can find the currently valid BRLs. From that one, Mr. Delrahim's letter has been silently removed. His letter to the Avanci patent pool is still there, and it remains to be seen what--if anything--will change in that context. But the 2020 IEEE letter is no longer there. The 2015 BRL to IEEE can still be found on that page. That makes it the one that currently counts.

The original and now-restored BRL tends to strengthen those favoring component-level SEP licensing.

The Delrahim letter to IEEE is now on the page listing "comments to state and other organizations". That page is hidden deep down in the hierarchical structure of the DOJ-ATR website. The dark storage room I mentioned further above.

This move has been clearly interpreted by the tech industry. Cisco's Senior Director, Antitrust and Competition, Gil Ohana, replied to a tweet of mine that this marked the "end of an error":

The end of an error.

— Gil Ohana (@Gilohana) April 15, 2021

A nice wordplay. Few people in California would refer to the Trump years as an "era" not only because #45's reelection bid failed but also for substantive reasons.

But let's also be realistic that there'll be a lof of wrangling over SEP issue now. The downgrade of the Delrahim letter to IEEE is a significant first step.

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Macomm Delrahim makes strides toward antitrust action against IEEE over its standard-essential patent policy: updated Business Review Letter

Emboldened by a Ninth Circuit panel's decision to overturn a district court's FTC v. Qualcomm antitrust ruling, Antitrust Assistant Attorney General Makan Delrahim--whom I call "Macomm" because he's a former and presumably future Qualcomm lawyer who has been unabatedly promoting Qualcomm's SEP enforcement agenda in his current office--updated (DOJ press release; supplemental letter (PDF)) the Justice Department's 2015 Business Review Letter to the Institute of Electrical and Electronics Engineers (IEEE) with respect to the DOJ's take on the IEEE's patent policy.

For ten years this blog has tried to provide original content, so rather than provide duplicative commentary, let me just point you to Professor Thomas Cotter's analysis (note the four items he specifically criticizes, "all of which are (in [Professor Cotter's] view) much more of an overstatement than the overstatement [AAAG Delrahim] claims to be correcting") and a 2018 paper by Professor Jorge Contreras on the way Mr. Delrahim changed the DOJ's focus in this context.

I'd just like to add a few thoughts and my opinion to the last two sentences of Professor Cotter's Comparative Patent Remedies blog post

"I would have thought that someone who believes in free markets would conclude that, if a private entity [here, the IEEE] adopts a policy that turns out badly [here, the IEEE patent policy that AAAG Delrahim claims unfairly disadvantages patent holders], that entity should have to suffer the consequences [here, the effects of discouraging innvotators from contributing to industry standards], rather than needing the guiding hand of the Antitrust Division to save it from itself."

The above sentence--to which I added various explanations as I didn't quote the passages leading to it--is a diplomatic way of telling Mr. Delrahim that he--a Republican president's appointee--isn't being a good Republican in the IEEE context...

Unfortunately, conservative talk radio hosts wouldn't ever discuss a topic as esoteric as SEP enforcement. At least a few academics and bloggers do.

"Or could this be a not-to[o]-subtle hint that, if Donald Trump wins re-election, IEEE could find itself in the agency's cross-hairs?"

I'll answer this question, which looks like a rhetorical one anyway: YES, that's what it is all about, in two ways:

• When reading the supplemental letter, I noticed multiple suggestions that the IEEE revise its patent policy to the effect of giving SEP holders more leverage in an enforcement situation and, as a result, in negotiations.

  I doubt that the IEEE will do so in the coming months. We're not even two months away from Election Day, after which Mr. Delrahim's days in office may be numbered.

  Mr. Delrahim presumably doesn't even expect its letter to persuade the IEEE. He just wants to be able to say, at the time of taking enforcement action, that he gave the IEEE one last chance to avoid an investigation. PR and politics are particularly important when doing something very controversial--and even more so, when doing something highly controversial against an extremely well-respected organization. Mr. Delrahim knows that when he announces the investigation he's preparing for, many of America's most innovative companies will side with the IEEE.

• The only outcome of an IEEE investigation led by Mr. Delrahim would be a holding that the IEEE's patent policy is "anticompetitive" in the sense of limiting SEP holders' ability to aggressively enforce their rights. The DOJ would have to sue the IEEE, and the previous Business Review Letter would have complicated any litigation. In court, the DOJ could have made the same argument as in its supplemental letter: the IEEE allegedly misrepresented the 2015 BRL as an "endorsement" of its patent policy. Regardless of whether an agency's decision not to take action against something is accurately called an "endorsement" (a question on which even reasonable people could fail to agree), the retraction of the 2015 letter is simply a necessary step with a view to what Mr. Delrahim undoubtedly has in mind.

If President Trump does it again, Mr. Delrahim will likely stay on, and then the IEEE knows what's going to happen, but fortunately the courts will decide.

In the other scenario, Mr. Delrahim could theoretically do what the outgoing Democratic majority of the Federal Trade Commission did in the last days of the Obama Administration by filing an action against Qualcomm. However, the difference is that an FTC action may continue (as one could see in the Qualcomm case) even after a presidential transition, while the DOJ would be 100% under the control of the new party in power. That's why such an investigation or litigation might be short-lived.

The updated BRL is disconcerting at any rate.

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ITC starts first FRAND-related public interest consultation since Presidential veto of iPhone ban

In early August, the Obama Administration vetoed an ITC exclusion order relating to older iPhones and iPads on public interest grounds and indicated that it expects the U.S. trade agency to carefully consider the public interest before ordering import bans over FRAND-pledged standard-essential patents (SEPs). But there are still various SEP cases pending before the ITC, and patent holders have already made different suggestions as to how the U.S. trade agency could justify SEP-based exclusion orders in a post-veto world.

Two SEP investigations have reached the stage of a Commission review (the Commission being the six-member decision-making body at the top of the ITC) since the Presidential veto. On September 4, the Commission decided to conduct a full review of a preliminary ruling clearing Nokia, Huawei and ZTE of violation of various InterDigital patents. But in its review notice it stated that it "is not interested in receiving written submissions that address the form of remedy and bonding, if any, or the public interest at this time". This means that if InterDigital obtains a reversal of any non-liability finding, a second round of submissions will have to be requested to address FRAND-related public interest issues.

The fact that the ITC does not request FRAND-related submissions right away on a "just in case" basis could mean that the probability of a liability finding in InterDigital's favor is not too high. But it could also be due to the fact that there are so many liability-related questions to be analyzed in that investigation that the trade agency would need more time anyway if any FRAND questions later became outcome-determinative.

With a view to ITC complaints by the likes of InterDigital I'd like to highlight an opinion piece recently published by the Wall Street Journal, authored by a former ITC commissioner who says the agency "has drifted from its original mission" and has become the "International Trolling Commission". The debate over the ITC's role is part of a wider patent reform discussion in the U.S., and the ITC's jurisdiction over complaints by patent troll as well as its jurisdiction over SEP cases will remain controversial until abolished.

Yesterday the ITC decided to conduct another full review of an investigation involving FRAND issues. That investigation of an LSI/Agere complaint against Funai and Realtek was of interest to a very few people in the world until a federal judge in the Northern District of California ordered a preliminary injunction barring complainants from enforcing an exclusion over over a SEP should they win one against Realtek.

In the LSI/Agere case, the Administrative Law Judge did not find (in a preliminary ruling) Realtek to infringe a SEP, but the ITC's review notice does raise FRAND-relate public interest questions right away. All of the Commission's public interest questions are about FRAND, with a particular focus on negotiations between the parties:

1. Please discuss and cite any record evidence of the allegedly [F]RAND-encumbered nature of the declared standard essential '663, '958, and '867 patents. With regard to the '958 patent and the '867 patent, what specific contract rights and/or obligations exist between the patentee and the applicable standard-setting organization, i.e., the Institute of Electrical and Electronic Engineers, Inc. (IEEE)? With regard to the '663 patent, what specific contract rights and/or obligations exist between the patentee and the applicable standard-setting organization, i.e., the International Telecommunication Union (ITU)?

2. Please summarize the history to date of negotiations between LSI and Funai and between LSI and Realtek concerning any potential license to the '663, the '958, and the '867 patents, either alone, in conjunction with each other and/or the '087 patent, and/or in conjunction with non-asserted patents. Please provide copies of, or cite to their location in the record evidence, all offers and communications related to the negotiations including any offer or counteroffer made by Funai and Realtek.

3. Please summarize all licenses to the '663, the '958, and the '867 patents granted by LSI to any entity including evidence of the value of each patent if such patent was licensed as part of a patent portfolio. Please provide copies of, or cite to their location in the record evidence, all agreements wherein LSI grants any entity a license to these patents. Please also provide a comparison of the offers made to Funai and/or Realtek with offers made to these other entities.

4. If applicable, please discuss the industry practice for licensing patents involving technologies similar to the technologies in the '663, the '958, and the '867 patents individually or as part of a patent portfolio.

5. Please identify the forums in which you have sought and/or obtained a determination of a [F]RAND rate for the '663, the '958, and the '867 patents. LSI, Funai and Realtek are each requested to submit specific licensing terms for the '663, the '958, and the '867 patents that each believes are reasoanble and non-discriminatory.

6. Please discuss and cite any record evidence of any party attempting to gain undue leverage, or constructively refusing to negotiate a license, with respect to the '663, the '958, and the '867 patents. Please specify how that evidence is relevant to whether section 337 remedies with respec to such patents would be detrimental to competitive conditions in the U.S. economy and other statutory public interest factor.

The fifth question is the most interesting one in this particular case because it relates to the proceedings in Judge Whyte's court in Northern California.

The ITC's questions are broad and general. All that can be said at this stage is that the ITC wants to look at these questions in detail, including reasonable royalty rates, an area in which it doesn't have much expertise (if any). I interpret this FRAND questionnaire as an attempt by the ITC to encourage SEP holders to pursue import bans despite the recent veto. Even though it's now going to be harder than before to win a SEP-based exclusion order from the ITC and to actually enforce it, the ITC portrays these FRAND issues as highly case-specific, which is a way of creating legal uncertainty that could result in settlements. And such uncertainty is, in and of itself, not in the public interest.

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Lawmakers, regulators, standardization bodies address abuse of standard-essential patents

In June 2012, European Commission Vice President Joaquín Almunia said that, in addition to regulatory efforts to counter the abuse of FRAND-pledged standard-essential patents (SEPs), courts and standard-setting organizations (SSOs) also need to contribute to solutions. More than a year later, there is indeed momentum on multiple fronts behind efforts to hold companies to their FRAND promises and to ensure that industry can rely on FRAND pledges. This post is an update on positive developments in politics, antitrust enforcement and standardization.

Chairman Goodlatte's draft patent bill contains SEP-specific pleading requirement

Earlier this week the Chairman of the Judiciary Committee of the United States House of Representatives, Bob Goodlate (R-Va.), released his second patent reform discussion draft. Unsurprsingly, there are lobby groups for whose purposes the bill doesn't go far enough.

Patently-O published the proposal. On page 5 of that document, starting on line 9, there's a proposal for an additional pleading requirement (the Goodlatte draft proposes a number of new requirements) concerning SEPs:

"(10) [Identify] [f]or each patent[-in-suit], whether such patent is subject to any licensing term or pricing commitments through any agency or standard-setting body."

While this requirement per se doesn't prevent abuse and is, at first sight, nonjudgmental, I still consider it helpful. If this was ultimately adopted, it would presumably be the first time that the patent law of any country in the world recognizes the fact that SEPs raise specific issues in enforcement. It doesn't say what those issues are; it doesn't say how to deal with them. But the existence of a pleading requirement would, in and of itself, support the position that SEPs are a special category of patents from an enforcement point of view.

At the recent Federal Circuit hearing in the "Posner appeal", Apple's lead counsel, Orrick's Joshua Rosenkranz, told the appeals court that pple and Motorola "occupy completely opposite ends": on the one hand, there are the "distinctive" patented features with which Apple "revolutionized" wireless devices and Apple's "exclusivity"-centric approach of not licensing those patents "in general" to anyone, much less competitors, and on the other hand, Motorola's patents-in-suit, which relate to standards and which it promised to "license universally to everyone". While this distinction is accurate and appropriate, it's based on contract law, antitrust rules, business logic and principles of innovation policy, but statutory patent law does not make or recognize this distinction at present. If Chairman Goodlatte's proposal was adopted, then there would also be at least a strong indication in statutory patent law that SEPs must be treated differently from non-SEPs.

SEP-specific questions raised by FTC inquiry into patent troll industry

Three months ago I already expressed skepticism concerning the FTC's Section 6(b) investigation of patent assertion entities (PAEs). So far there's no indication, much less evidence, that there are actually antitrust issues in that area. Not all bad stuff that happens in business is a violation of antitrust laws.

This week the FTC formally launched its inquiry and published a request for public comment on proposed information requests to PAEs. For the reason I gave in the previous section, I like the fact that special attention is given to SEP assertions. On page 4 of the document, the term "Standard-Setting Organization" (or "SSO") is defined as "any organization, group, joint venture or consortia that develops standards for the design, performance or other characteristics of products or technologies". On page 5, subsection o specifies SEP-specific information on PAE patents that the FTC plans to request:

o. whether the Patent (or any claims therein) is subject to a licensing commitment made to a Standard-Setting Organization and specify:

(1) all Standard-Setting Organizations to which a licensing commitment has been made;

(2) all standards to which such a licensing commitment applies;

(3) the Person(s) who made the licensing commitment;

(4) the date(s) on which the licensing commitment was made;

(5) all encumbrances, including, but not limited to, all commitments to license the Patent or any of its claims on reasonable and non-discriminatory (RAND), fair, reasonable, and non-discriminatory (FRAND), or royalty-free (RF) terms[.]

I don't like at all what certain non-practicing entities are doing with FRAND-pledged SEPs. For example, I'm a long-standing critic of certain aspects of InterDigital's demands and enforcement strategies.

But SEP-wielding NPEs ultimately just want to get paid. Some of them demand way too much money, and they seek unfair leverage to force others to accede to their demands. Still, they are sincere in their desire to conclude a license deal. That's more than operating companies that act as SEP trolls can say. Those make purely prohibitive demands for a SEP license because their real objective is a comprehensive cross-licensing involving non-SEPs. In my view, that should be a higher antitrust enforcement priority than SEP-owning NPEs.

The European Commission is focused on abusive conduct by large players, though I wouldn't be surprised to see EU investigations of certain SEP-holding NPEs at some point as well. An antitrust hearing in the EU investigation of Google's (Motorola Mobility's) SEP assertions against Apple in Germany will, according to what I was told on Twitter, be held on Monday, September 30. I did a fair amount of work in Brussels over many years and have some good contacts there. I'll try to find out more about this.

On Friday Vice President Almunia gave a speech at Fordham's Competition Law Institute Annual Conference in New York and mentioned that "Samsung has sent [the Commission] a set of commitments seeking to address [its] concerns" and announced a market test: "We will formally market test these proposed commitments with other market participants in the coming weeks." (That's what the Commission has to do unless it settles cases without formal remedies.)

Proposed IEEE Standards Board Bylaws would provide far greater clarity than previous SSO FRAND policies and pledges

The IEEE (Institute of Electrical and Electronics Engineers) told the Federal Circuit last year that courts should not rely on standards bodies to "take a direct role in enforcing patent commitments". But SSOs can play a role in preventing abuse relating to future standards, and the IEEE appears to be making a very serious effort in that regard.

This webpage contains to links to an August 2013 IEEE-SA Standards Board Bylaws draft and to comments from key companies involved with the process (two different documents; the difference is just in the sorting order, not in the content). Under the U.S. eBay standard, it would be extremely difficult to obtain injunctions if the following sentence (lines 126-128 of the draft bylaws) was adopted:

"A Submitter of an Accepted [Letter of Assurance] who has committed to license Essential Patent Claims on reasonable terms and conditions that are demonstrably free of any unfair discrimination has implicitly acknowledged that a royalty is sufficient compensation for a license to use those Essential Patent Claims."

This is a rather clear way of putting the debate over "(in)adequacy of monetary relief" to rest with respect to future IEEE standards. I discussed this less than two weeks ago in connection with Commissioner Wright's antitrust-minimalist position on SEP-related matters. In my view, the adequacy of monetary relief can be determined the way Judge Posner did even without FRAND pledges containing an explicit admission to that effect. But the clearer, the better (obviously, it could be stated even more clearly than the IEEE draft proposes).

For a round-up post like this there's far too much in the draft bylaws and in the comments for me to cover comprehensively right here and now. The draft bylaws would limit the pursuit of injunctive relief to only certain circumstances (which could be defined more narrowly, but at least there isn't the vague notion of an "(un)willing licensee").

The document containing comments from industry players (with many of the usual suspects being particularly active) is worth reading. Maybe I'll do a separate post on the IEEE debate at some point.

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Senators are concerned about abuse of standard-essential patents, looking past iPhone 4 import ban

I just watched the live webcast of today's hearing of the Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Judiciary Committee of the United States Senate on "Standard Essential Patent [SEP] Disputes and Antitrust Law". Here's a quick, first reaction:

There's profound concern, and some kind of legislative action may very well be taken, but things take time. In practical terms it's obvious that legislation can only change the framework for future cases and won't affect the import ban Samsung won from the ITC against certain older iPhones and iPads, which will take effect in a few days unless vetoed or stayed. That said, some of the testimony urged action, with only Qualcomm (who sent an incredibly smart, gifted and charming speaker who did his best to downplay the issue) arguing that FRAND works well except for problems at the margins that inevitably arise when competitors go to court, and there was apparently also a consensus among subcommittee members that there are indeed serious issues deserving attention. Whether these early-stage developments on Capitol Hill will influence the U.S. government's decision on whether to veto the ITC import ban is another question but they might.

I've spent a lot of time on FRAND issues (mostly, but not exclusively, in connection with SEPs, and when I hear people talk about it, I look for certain indicators of an understanding of the key issue -- indicators of whether they "get it" or are confused (like the majority of the ITC) by some of the propaganda relating to "reverse hold-up", or "holdout". I liked most of what I heard at today's hearing. When the chairwoman of the subcommittee, Sen. Amy Klobuchar (D.-Minn.), basically explained that standard-setting itself raises an antitrust issue -- she referred to "competitors deciding what technology becomes part of a standard" -- and explained the difference between pre-standard-setting competition and post-standard-setting lock-in, I immediately saw that there's tremendous awareness for the issue of SEP abuse. A witness from the FTC, the agency's chief IP counsel Suzanne Munck, and Intel's Sr. VP and General Counsel Douglas Melamed also emphasized this. They're obviously experts. But if politicians who deal with a multitude of political issues are aware of the core of the SEP abuse problem, then that's a really good sign.

Intel's Mr. Melamed said that SEP abuse is a tax on industry and innovation and noted that SEPs themselves are often insignificant except for their inclusion in a standard, which gives their owners leverage. As a litigation watcher I share this view. The inventive contribution made by the average SEP is typically so limited that the same patent would have very little, if any, commercial value as a non-SEP because it would be so easy to work around (often in superior ways) if there wasn't a standard that prescribed the use of a particular technique, ruling out all alternatives regardless of their technological merit. The Motorola SEPs at issue in the Microsoft v. Motorola FRAND contract dispute may be of exceptionally low value, but I was also underwhelmed by the other SEPs I've seen so far in the ongoing smartphone disputes. Intel also noted that most of the declared-SEPs asserted against it so far weren't actually found essential in litigation, an experience shared by Apple and others.

While I'm not enthusiastic in all respects about the FTC's just-finalized consent order and decree in the Google (Motorola) SEP case, which is useful in some ways and a missed opportunity in some other ways, I support pretty much everything that its chief IP counsel Mrs. Munck said at today's hearing. She, too, agreed that there is an issue that must be dealt with, and her testimony included a ringing endorsement of Judge Posner's position, relating to the eBay v. MercExchange standard, that a patent holder who makes a FRAND pledge will have a hard time showing that monetary compensation is inadequate and an injunction is needed. She explained the fundamental difference between the usual situation in patent law, which is a law set up for exclusive use, and a situation in which someone is willing to license broadly. Mrs. Munck said she was part of the team that submitted an amicus brief in support of Judge Posner's ruling. That appeal will be heard by the Federal Circuit on September 11, 2013.

It's clear that lawmakers and regulators would like standard-setting organizations to solve the problem so they don't have to do it themselves, but Intel explained that SSOs need a consensus (especially if they want to change FRAND licensing rules with expect to standards that were set years ago) and certain patent holders with an agenda to use SEPs aggressively make it impossible to reach that consensus.

The only thing I found really annoying at today's hearing were certain attempts to distract from the SEP issue by claiming that there are more fundamental issues, such as patent quality. I don't mean to suggest that everyone who raised those broader issues at today's hearing had an agenda to distract, but distraction was certainly the effect. Dr. John Kulick, a Siemens employee speaking only in his capacity as the chair of the IEEE's Standards Association Board, stressed the need for patent quality. Higher patent quality would obviously mean fewer patents and presumably fewer assertions of declared-SEPs of low quality. But SEP hold-up is unacceptable and pernicious regardless of quality. I'm all for patent quality and have criticized the quality of patents of all sorts (SEPs and non-SEPs alike) on many occasions, but I don't think SEP hold-up is closely related to that other issue (no matter how important it is in its own right). Qualcomm alleged that others conflated SEPs with issues relating more generally to litigation and accurately noted that the vast majority of patents-in-suit in the ongoing smartphone-related patent cases are non-SEPs. That's true if you count the number of patents asserted; it's not true in terms of the damage they can do or could have done. I very much agree with the FTC that even if FRAND works well most of the time and litigation is less prevalent than licensing, we "still need a means to determine what happens in a FRAND dispute". (As for Qualcomm's claim that there isn't that much litigation, Intel made a strong point by noting that the mere threat of SEP-based injunctions often results in settlements and license agreements on supra-FRAND terms.)

Toward the end of the hearing Senator Chuck Schumer (D-N.Y.) wanted to promote his legislative proposal in the patent trolls context, making it difficult for the witness to answer his off-topic question. Sen. Schumer talked about a start-up that has allegedly gone out of business because of patent assertions and about entrepreneurs who are concerned, but I'm not aware of a single case in which a patent troll by any definition (broad or narrow) has asserted a SEP against a start-up (if anyone knows of such a case, please do let me know).

There were very few references to the Samsung-Apple situation and the impending ITC import ban. Today's hearing was more of a high-level discussion of the issue. I don't know whether there's some activity behind the scenes, but given the concern of certain senators about the problem of SEP abuse, it's certainly possible that lawmakers have talked to the White House about the Samsung-Apple case.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

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