27 May 2020. Fair Standards Alliance welcomes a forward-looking guide of Japanese Ministry of Economy, Trade and Industry on licensing of standard essential patents.
In May 2020, the Ministry of Economy, Trade and Industry (METI) published its “Guide to Fair Value Calculation of Standard Essential Patents for Multi-Component Products” and its English translation.
Fair Standards Alliance (FSA) welcomes the extensive research METI has conducted on valuation of standard essential patents (SEPs), underlying its policy recommendations that are key to ensuring continued investments in research and innovation, in particular, in the area of the IoT, in Japan and beyond.
As pointed out by METI, “[w]hile IoT is spreading across various industries and will bring benefits to people’s lives, the increasing risk of licensing negotiations on SEPs will not only make it difficult to invest in IoT and harm both SEP holders and implementers, but also may hinder economic and social development”.
Indeed, the broad FSA membership ranging from automotive, broadcasting, networking, smart energy solutions, mobile telephony to manufacturing of personal computers clearly indicates that businesses from different sectors share these concerns.
In the guide, METI highlights three important “principles for calculating the fair value of SEP[s] for multi-component products”:
- “The parties to a licensing agreement should be decided based on the concept of “license to all”;
- “A ‘Top down’ approach which determines the appropriate rate by calculating the ratio of contribution by all SEPs to the standard can avoid this “Royalty Stacking” problem”; and
- “Royalty should be calculated based on the portion to which the SEP technology contributes (contribution ratio) in the value of the main product that implements the SEP technology”.
FSA strongly agrees with METI’s conclusions. FSA has advocated for a long time that the commitment SEP holders voluntarily make to license their SEPs on fair, reasonable and non-discriminatory (FRAND) basis precludes them from unilaterally determining that licenses can only be available at the end-device level.
See full statement here.