Home Articles The impact of standard-essential patents on technology products

The impact of standard-essential patents on technology products

technological products

Author (Gian-Lluís Ribechini Creus – Industrial Engineer)

The concept of "standard essential patent licences" is known to a minority, and yet in most of the electronic products that we buy, a part of their price is used to pay for these licenses. Some licenses that previously should have been negotiated by the manufacturers and marketers of these electronic products with the owners of those patents.

Although not all manufacturers decide to negotiate these licenses, and this can have consequences for their businesses such as these recent cases:

  • May 19, 2022. The Munich Regional Court No. 1 issues a permanent injunction prohibiting the Ford company from manufacturing and selling its internet-connected vehicle models throughout Germany. This as a result of a complaint from the Japanese company Panasonic for infringement of an essential patent of the 4G standard. In this precautionary measure, it was also obliged to withdraw and destroy all vehicles that were in dealerships throughout Germany, to facilitate the accounting of sales to calculate the amount of the claim for damages, and that in case of appeal Ford He had to deposit a bond of 227 million euros.
  • July 5, 2022. The Second Civil Chamber of the Mannheim Regional Court grants the Finnish company Nokia a cease and desist order against the mobile company OPPO for infringement of standard-essential patents in 4G and 5G, which as a The result means that OPPO (and its subsidiary OnePlus) is prohibited from selling its products in Germany.
  • July 11, 2022. The 43rd Circuit Court of Bogotá orders the prohibition of the sale of iPhone and iPad models that use 5G technology in Colombia for infringement of essential standard patents of the Swedish company Ericsson. This means that the new iPhone 14 cannot be sold on the date this article was written and that the Colombian version of the Apple website can read: “Apple is temporarily unable to offer devices with 5G technology in Colombia due to an order by a Colombian court, a decision that Apple is appealing.”. Although on November 15 an appeal court lifted the injunction allowing Apple to continue selling its products pending the outcome of the pending trial.

In Spain, an example of the relevance of standard-essential patents can be found at the Mobile World Congress (MWC) where, within the framework of the “On-call service protocol and rapid action for the MWC” of the Mercantile Courts of Barcelona and Alicante, known as IP Fast Protocol, most of the preventive documents that are presented by companies that want to exhibit at the MWC refer to the use of standard essential patents.

What is a "standard essential patent"?

A standard essential patent (SEP) is a patent that claims an invention that must be used in order for a technology standard to function. In other words, without applying what is explained in the patent, the technology cannot work. When standard-essential patents are declared for a technology, its owners should license it under the so-called FRAND conditions (acronym in English for Fair, Reasonable and Non-Discriminatory), that is, Fair, Reasonable and Non-Discriminatory. These terms should allow anyone who negotiates them to be able to use this technology in their products without being sued for patent infringement.

Apart from 4G/5G, other examples of technologies where there are essential standard patents are: Bluetooth, the HDMI connector, MPEG2 video image compression software, Wi-Fi (802.11) or USB ports. These examples allow us to visualize that any sector in which technological standards are used may have its products affected.

One of the problems that occurs in the management of standard-essential patents is that there are many owners of this type of patent and that there are also many manufacturers who want (or do not want) to negotiate the licences. To solve this problem, there is the figure of the "manager of intellectual property assets grouped into portfolios of patents on technological standards", which is known as the patent pool. The consortium of at least two organizations that agree to cross-license patents related to a particular technology.

The success story of the Avanci patent pool.

Within the world of patent pools, Avanci was born in 2016. This platform begins with the participation of several companies that hold essential standard patents, including Nokia, Ericsson and Qualcomm. Thus, initially Avanci was presented with the aim of licensing the essential standard patents in wireless communications (2G, 3G and 4G) to manufacturers of connected vehicles. With a license system in which all models would pay the same without differentiating whether they were high, medium or low-end. At the beginning of his journey, there were doubts that this business model would work, both from other patent holders and from most manufacturers. The "doubts" of some manufacturers gave rise to various judicial situations similar to those cited at the beginning of the article.

Today the success of Avanci's business model is unquestionable. On the manufacturers' side, more than 80 car brands have signed license agreements (representing more than 100 million connected vehicles); among these brands we can find the General Motors group, the Vokswagen group, the BMV group or the Ford group (the latter a few weeks after the aforementioned Munich injunction). And during the month of September Stellantis, Honda, Nissan and Toyota signed agreements. And on the side of patent owners, 52 organizations are already part of it, among which are: Panasonic, Philips, ZTE, TIM, Hewlett Packard or China Mobile. One thing to consider is that since the beginning of September, Avanci has raised the cost of a license per vehicle by 33%, going from $15 to $20. And Avanci's next steps are aimed at managing 5G licenses for connected vehicles.

What is the situation in Spain regarding essential standard patents?

If we take a look at the situation in Spain we can find that:

  • If we search the website of the European Telecommunications Standards Institute (ETSI), the organization where telecommunications standards are developed and essential patents are declared, we will find that there are 15.473 standards in which 74.097 patent families are declared (the same family, or part, may affect various standards) owned by 362 organizations. Among all of them there is only one Spanish, Telefonica, with two declared families.
  • If we go to the website of the European Patent Agency (EPO) and do a search for patents (essential and non-essential) where the term "5G" appears in its title, we obtain a result of 17.220 patents of which there are only 24 patents in those that a Spanish organization is registered as the owner.

What positions are taking place in terms of operating rules?

Another aspect that must be considered is the one related to the positions of public administrations and regulatory bodies with respect to standard-essential patents. Thus we have that:

  • In June 2019, the European regulatory committees CEN and CENELEC published two documents, the CWA 95000:2019 “Basic principles and approaches to the licensing of standard essential patents” and CWA 17431:2019 “Principles and guidance for the licensing of standard essential patents in 5G and the Internet of Things (IoT), including the Industrial Internet”. These documents describe some principles and guidelines for the granting of standard essential patent licenses and the application of the FRAND conditions. As well as exposing a series of recommendations and elements to be taken into account by potential license acquirers.
  • In November 2020, the European Commission published a “Action Plan on Intellectual and Industrial Property"The document of said plan sets out the position of the Commission tending to promote initiatives that reduce friction and litigation between patent owners and users of technologies, as well as the creation of an independent system of "essentiality control" . In order to provide legal content, a process has been initiated for the development of a European Regulation regarding essential standard patents.
  • In July 2022, the Japan Patent Office (JPO) published a revised "Guide for Licensing Negotiations Involving Standard Essential Patents." With this document, the JPO intends to improve transparency and predictability, facilitate negotiations, and help prevent or quickly resolve disputes related to the licensing of standard essential patents.
  • In September 2022, the Institute of Electrical and Electronic Engineers (IEEE) in the United States announced a change to its intellectual property rights policy regarding standard-essential patents effective January 1, 2023. , and will be relevant for determining the license cost of said patents.

What can we expect?

I do not doubt that the success that the Avanci model has achieved will be repeated in many of the other technologies where standard essential patents exist. In other words, we will have consortiums that manage the licenses for the technologies used in industry 4.0, in connected mobility, in home automation, in the Internet of Things, in Smart Cities, in electric batteries, in renewable energies. , etc.

As examples of this vision I want to cite the cases of:

  • Sisvel is a business group of Italian origin founded in 1982 that is currently developing and managing various patent pools. Thus, in July of this year, I launched a patent pool on Wi-Fi 6 technology. Today it is made up of the following patent owners: Huawei, Mediatek, Philips, Panasonic, SK Telecom and Wilus. A new license payment system called the Licensing Incentive Framework for Technologies (LIFT) has been developed for this patent pool.

In November Sisvel launched what it calls the "Cellular IoT Patent Pool" which already has twenty organizations that own patents, among which are: Ericsson, Mitsubishi, NTT, Sony or Telefonica. This patent pool is focused on LTE-M and NB-IoT technologies.

  • MPEG LA is a consortium that acts as a patent pool for different technological standards such as MPEG-4 Visual, ATSC 3.0, and QI Wireless charging. A consortium that is promoting a patent pool for EV Charging charging stations. The following have already joined this patent pool as owners: General Electric Hybrid Technologies, Mitsubishi, Robert Bosch, Siemens and Sun.

What would be convenient to do?

Companies that develop, manufacture and market technological products should have implemented, within the scope of Technical Compliance, a risk assessment system for the technologies that they incorporate into their products. A system establishing which of these technologies are subject to standard-essential patents and which products are affected. With this information, they should know which are the different patent pools that have positioned themselves in these technologies to determine, based on the criteria that each one of them has defined in their license policy, if their products should have these licenses in order to be able to commercialize them without problems.

Certainly there is the option of not doing anything because we consider that it is not for us, but if one day we receive a request for patent infringement we could not excuse ourselves that we were not warned. In addition, I would like to remind you that in the field of "Responsibility of legal persons", which is described in article 31 bis of the Penal Code, the catalog of crimes includes those "Relating to intellectual and industrial property"; Specifically, the one that affects patents is Article 273.

Finally, as a conclusion, the three questions that a company should ask themselves are:

  • Which technologies of my products are affected by standard essential patents?
  • In which of them do I have to reach a license agreement?
  • If I have affected products, what license costs will I have that could affect their selling price?
Previous articleNew WIKA isolation valve for the process industry
next articleInnovations in passive components for power densification