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Broadbased IoT industry support for CWA2 set of standard-essential patent (SEP) licensing guidelines and best practices

At times, courts are asked to clarify what FRAND (fair, reasonable and non-discriminatory) means for standard-essential patent (SEP) licensing terms. The two most fruitful U.S. cases in this regard have been Microsoft v. Motorola (Judge James L. Robart, Western District of Washington) and FTC v. Qualcomm (Judge Lucy H. Koh, Northern District of California). In the EU, Huawei v. ZTE proved reasonably helpful, though definitely not at a level with the aforementioned U.S. cases.

But besides litigation, policy initiatives as well as efforts by standardization bodies can and do provide orientation. In the U.S., the IEEE has become a particularly important discussion forum, and the arguably most important European guideline-development effort, a workshop under the umbrella of European standard-setting organizations CEN and CENELEC with support from Germany’s DIN, has just concluded with the publication of a 51-page “CEN Workshop Agreement” on the “Core Principles and Approaches for Licensing of Standard-Essential Patents” after more than a year of discussions. The official dcoument number is “CWA 95000.” The shorter name is “CWA2.” Why the number 2? Because there’s another set of recommendations by another group of companies, and it advocates pretty much the opposite approach, but it has considerably less support from industry than CWA2.

This is an important time for the publication of such proposed guidelines for different reasons. The industry is transitioning to 5G, and in an Internet of Things world, ever more–and an ever greater diversity of–devices will implement wireless industry standards. Also, a new EU Commission will be appointed this year, and the incoming Commission will have to address SEP licensing principles in different fields of policy-making as well as in competition enforcement.

The Fair Standards Alliance issued a press release on CWA2 this morning. The FSA partnered with ACT | The App Association. ACT already pointed to CWA2 yesterday evening in an amicus brief supporting the FTC against Qualcomm’s motion for an enforcement stay. FSA and ACT teamed up with the leading German standard-development body, Deutsches Institut für Normung (DIN), and DIN served as the secretariat for this workshop.

All in all, 56 organizations have already expressed their support for the document, even including some who were not involved in the process but agree with the conclusions. Europe’s largest automotive association, ACEA, and IP2Innovate, an industry group whose membership significantly overlaps with that of the FSA and which promotes reasonable patent enforcement policies (unlike the FSA, without focusing on SEPs), also agree with the CWA2 guide. Here are some of the household names among the companies listed in the CWA2 document: Apple, BMW, Cisco, Deutsche Telekom, Renault, Honda, Juniper, Volkswagen, Daimler, Ford, Hitachi, HP, Lenovo, and Toyota. If your company or other organization would also like to throw its weight behind the CWA2 guide, please get in touch with the FSA.

The supporters of CWA2 own and generate many patents, and some of them have actively enforced their intellectual property rights. In other words, they’re the opposite of “infringers.” But they do understand both sides of the licensing equation, and that’s why the recommendations made in the CWA2 document appear reasonably balanced. They don’t seek to devalue SEPs, or to enable “holdout” (the act of refusing for an extended period of time to take a license). At the same time, the CWA2 guide promotes principles that greatly reduce the risk of patent holdup (the following summary is consistent with my terminology on this blog, not always identical to the terms used in the CWA2 document):

  1. access to injunctions only as a last resort

  2. availability of licenses to all comers including chipset makers

  3. FRAND valuation based on technical contribution at time of standard-setting, without capturing post-standardization increases in value or collecting percentages of components beyond the smallest salable patent-practicing unit (SSPPU)

  4. separate availability of SEP license on FRAND terms without tying this to a license to non-SEPs

  5. no overbroad NDAs that would complicate an implementer’s evaluation of assertions of essentiality or infringement in the negotiation process

  6. no circumvention of FRAND licensing obligations through tranfers (“privateering”); if SEPs are transferred, implementers shouldn’t be worse off

Obviously, some patent holders with a particularly strong interest in aggressive monetization don’t want any of the above. That’s why there’s also “CWA1” as I mentioned before. The FSA and ACT expressed their disagreement with the CWA1 approach in an open letter earlier this year. While that letter apparently didn’t have the desired effect of creating more balance, it shouldn’t be too hard for policy makers (such as the incoming EU Commission) to figure out which of the two sets of recommendations is conducive (CWA2), and which one is detrimental (CWA1), to innovation and competition. That’s easy to tell based not only content but also by simply looking at the backers:

  • CWA2 already has 56 backers, including some of the most significant technology companies in the worldand especially in Europe, versus the 17 organizations behind CWA1.

  • While CWA2’s supporters have a rather reasonable track record in patent enforcement, almost a third of CWA1’s backers have been on the receiving end of antitrust complaints or antitrust lawsuits: Qualcomm (around the globe), Dolby (see this blog post by a Korean IP law firm), Ericsson (in China), Nokia, and InterDigital, which I sometimes refer to as “InterDigitroll” (they were investigated in China and sued in the U.S.).

Thanks to CWA2, there now is a comprehensive proposal for a FRAND licensing framework on the table that has the support of many large players from the automotive and information and communications technology industries. That document will be referenced on many occasions going forward, in Europe and beyond.

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