Fifty six organizations from a diverse range of industries, up and down the innovation value chain, are pleased to announce today the publication of a set of guidelines on the licensing of standard essential patents (SEPs) which will help support the rollout of the internet of things (IoT) in Europe and elsewhere.
The guide, entitled ‘Core Principles and Approaches for SEP Licensing’, has been developed within the framework of a European Standards Organizations CEN and CENELEC Workshop Agreement (CWA) with support of the Deutsches Institut für Normung (DIN).
The guide, also known as ‘CWA2’, includes a set of six principles outlined below that companies, courts and other stakeholders are invited to consider when assessing whether SEP licensing terms are Fair, Reasonable and Non-Discriminatory (FRAND).
The ACT | The App Association and the Fair Standards Alliance (FSA) worked with DIN to steer the CWA2 to conclusion, and all parties hope that this guide will help avert the litigation and antitrust problems already experienced over the past decade in the smartphone sector, and more recently in the automotive sector.
The advent of 5G networks in Europe means that the number of devices and applications requiring connectivity offered by technologies that utilize technical interoperability standards will increase dramatically in the coming years.
Participants and supporters of the CWA2 include organisations of all sizes, from all over the world, and across a wide range of industries including automotive, broadcasting, telecom, technology and others. Europe’s largest automobile manufacturers association, ACEA, and industry group IP2Innovate, also expressed their support for the principles in the CWA2 guide.
“We are extremely pleased that so many industry players have come together in a spirit of compromise and created such a useful document,” said Robert Pocknell, Chairman of the FSA Board. He added: “We trust that companies involved in the development and sale of products in 5G and the IoT will find the CWA informative and useful and we hope that it will become an important reference document for all companies involved in the licensing of SEPs. Creating this CWA has been a tremendous amount of work and we would like to thank all of the companies and people involved, including CEN/CENELEC and DIN”.
“The FRAND promise lies at the heart of the SEP licensing process. Abusive SEP licensing practices will make it harder for small businesses to innovate in the IoT, ultimately slowing down adoption of the new technologies in Europe in both the consumer and business-to-business contexts,” said Mike Sax, Founder and Chairperson of ACT | The App Association.
While stakeholders, including signatories to the CWA, always remain free to conduct SEP licensing negotiations as they determine on a case-by-case basis, the CWA provides six core principles that can help to foster a FRAND outcome:
- Injunctions: A FRAND SEP holder must not threaten, seek or enforce an injunction (or similar de facto exclusion processes) except in exceptional circumstances and only where FRAND compensation cannot be addressed via adjudication, e.g. lack of jurisdiction or bankruptcy. Parties should seek to negotiate FRAND terms without any unfair “hold up” leverage associated with injunctions or other de facto market exclusion processes.
- License availability: A FRAND license should be made available to anybody that wants one to implement the relevant standard. Refusing to license some implementers is the antithesis of the FRAND promise. In many cases, upstream licensing can create significant efficiencies that benefit the patent holder, the licensee and the industry.
- Court FRAND methodologies: SEPs should be valued based on their own technical merits and scope, not based on downstream values or uses. In many cases this will involve focusing on the smallest component that directly or indirectly infringes the SEP, not the end product incorporating additional technologies. As noted by the European Commission, SEP valuations “should not include any element resulting from the decision to include the technology in the standard.” Moreover, “[i]n defining a FRAND value, parties need to take account of a reasonable aggregate rate for the standard.”
- Patent bundling: While in some cases parties may mutually and voluntarily agree to a portfolio license (even including some patents subject to disagreements), no party should withhold a FRAND license to patents that are agreed to be essential based on disagreements regarding other patents within a portfolio. This approach can allow parties to identify areas of agreement within a patent portfolio despite other areas of disagreement. For patents that are not agreed upon, no party should be forced to take a portfolio license, and if there is a dispute over some patents, a SEP holder must meet its burdens of proof on the merits (e.g., to establish that the alleged SEP is infringed and requires payment, and to establish the FRAND rate).
- NDAs and fairness: Neither party to a FRAND negotiation should seek to force the other party into overbroad secrecy arrangements. Some information, such as patent lists, claim charts identifying relevant products, FRAND licensing terms, aspects of prior licensing history and the like are important to the evaluation of potential FRAND terms, and public availability of those materials can support the public interest in consistent and fair application of FRAND. A patent holder should not seek to exploit its information advantage regarding the patents or prior licenses to interfere with the potential licensee’s ability to effectively negotiate.
- Patent transfers: FRAND obligations remain undisturbed despite patent transfers, and patent sales transactions should include express language to that effect. Patent transfers likewise should not alter value sought or obtained for particular patents. Where SEP portfolios are broken up, the total royalties charged for the broken-up parts (and the remaining part of the portfolio) should not exceed the royalties that would have been found to be FRAND had the portfolio been retained by a single owner, or that were charged by the original owner. And patent transfers should not be used to defeat a potential licensee’s royalty “offset” or similar reciprocity rights.
Fair Standards Alliance:
Evelina Kurgonaite: + 32 479 830 413, firstname.lastname@example.org
ACT | The App Association
Paul Meller: +32 497 322 966, email@example.com