Patents in Telecoms and the Internet of Things

7 & 8 November 2019University of Tokyo

2

An Alternative Model of Patent Pooling

Roberto Dini

Tokyo, 8 November 2019

3

NO POOL PATENT POOLhigh number of transactions limited number of transactions

PATENT POOLS FOR AN INDUSTRY-WIDE BALANCE

4

Patent pools, joint licensing programs and other forms of IP aggregation have significant pro-competitive effects, including:

• Defining FRAND licensing terms and conditions in a context where both licensors and licensees are present;

• Avoiding royalties stacking by establishing a single royalty rate thereby reducing the likelihood of litigation;

• Providing more certainty and predictability to the market with regards to IP costs, especially when the SSO fosters the creation of a pool;

• Reducing transaction and administrative costs.

PATENT POOLS FOR AN INDUSTRY-WIDE BALANCE

5

“With a world market estimated at being 11.4 billion euro in 2009, mobile TV offers Europe the possibility of combining its strengths in the mobile communications sector with the wealth and differences that characterize the European audiovisual sector.I am prepared to give strong support to European standardised solutions, such as DVB-H, on the condition that they provide certainty about technology licensing terms and conditions. Without this certainty and predictability, it will be impossible to invest with confidence in new innovative technologies. Industry should therefore foster work in this direction.”

PATENT POOLS FOR AN INDUSTRY-WIDE BALANCE

Viviane Reding Former Telecommunications

European Commissioner

Please have also a look to this article:Fostering by Standards Bodies of the Formation of Patent Poolsby Carter Eltzroth, Legal Director of the DVB Project

6

THE LTE (4G) CASEWHAT COULD HAVE BEEN AND WHAT WAS REALLY

In April 2008, the Next Generation Mobile Networks (NGMN) Alliance affirmed that:

“a reasonable maximum aggregate royalty level for [all] LTE essential IPR in handsets is a single-digit percentage of the sales price”

(i.e., <10%)

7

• 10 companies disclosed royalty rates for their LTE patents

Nokia 1,50% * ALU 2,00%

NSN 0,80% Nortel 1,00%

Ericsson 1,50% Huawei 1,50%

Qualcomm 3,25% ZTE 1,00%

Motorola 2,25% Vodafone 0,00%

• The sum of the royalty rates announced by those 10 companies as a single group is 14.8% (a 2-digit figure).

• Considering that potentially there could be as many as 50 parties, the aggregated value of royalties could reach easily 3 digits.

* 2% for multi standard

LTE ROYALTY RATE ANNOUNCEMENTSWHAT COULD HAVE BEEN AND WHAT WAS REALLY

8

LTE ROYALTY LEVELNO PATENT POOL

2.00% 1.50% 1.50% 2.25% 1.50% 1.00% 0.80%

3.25%

0.00%1.00%

0%

5%

10%

15%

20%

25%

30%

35%

ALU

Erics

son

Huawei

Motor

olaNok

ia

Norte

lNSN

Qualco

mm

Voda

fone ZT

EP.

O.1P.

O.2 ...

P.O.n

RESU

LT

% o

f ha

ndse

t se

lling

pri

ce

+

cumulative

9

LTE ROYALTY LEVEL2 PATENT POOLS AND OUTSIDE PATENT OWNERS

0%

5%

10%

15%

20%

25%

30%

35%

% o

f ha

ndse

t se

lling

pri

ce

+cumulative

P. P.

1

P.P. 2

P.O. 1

P.O. 2

P.O. 3

P.O. n

RESU

LT

10

0%

5%

10%

15%

20%

25%

30%

35%

% o

f ha

ndse

t se

lling

pri

ce

+

LTE ROYALTY LEVEL1 PATENT POOL AND OUTSIDE PATENT OWNERS

cumulative

P.P. 1

P.O. 1

P.O. 2

P.O. n

RESU

LT

11

LTE ROYALTY LEVELIDEAL SCENARIO

0%

5%

10%

15%

20%

25%

30%

35%

% o

f ha

ndse

t se

lling

pri

ce

=

Pate

nt

Pool

RESU

LT

12

Patent Families

n. 7 patent owner 25

n. 8 patent owner 45

n. 9 patent owner 52

n. 10 patent owner 48

Total 250

Patent Families

n. 1 patent owner 13

n. 2 patent owner 7

n. 3 patent owner 12

n. 4 patent owner 20

n. 5 patent owner 13

n. 6 patent owner 15

Lice

nsor

onl

yLi

cens

or/e

e

Patent points analysis

WHY THE ROYALTY IS FRAND INSIDE A POOL?A PRATICAL EXAMPLE

13

Patent Owner N°7 (licensor/licensee)controls 25 SEP families

Patent Owner N° 7 is also an implementer

RESULT? Patent Owner N°7

has to pay0,9$

to other POsinside the pool

WHY THE ROYALTY IS FRAND INSIDE A POOL?A PRACTICAL EXAMPLE

1$ royalty rate requested by the pool

Earnings by the Patent Owner’s n°7: 0,1 $25 patent points/250 tot patent points

14

What if the royalty change? Other exemples

Royalty Rate 0,5$ 5$ 10$ 15$

Revenues from the pool 0,05$ 0,5$ 1$ 1,5$

Costs for the receivedlicense 0,45$ 4,5$ 9$ 13,5$

25 patent points / 250 total patent points = 0,1

Patent Owner N°7 (licensor/licensee)25 SEP families

The fact that a licensor - who is also a licensee for the technology licensed by the pool -accepts to pay to the other pool members a royalty rate that is closed to the full royalty

requested by the pool is the evidence that the level of royalty is acceptable by the market and therefore FRAND!

WHY THE ROYALTY IS FRAND INSIDE A POOL?A PRACTICAL EXAMPLE

10%

90%

15

• For facilitating the formation of patent pools when a certain technology is standardized, the Regulatory Authorities could push companies and entities, that submit to the standardization proceedings patented technologies, to submit to SSOs not only the known FRAND declaration, but also a commitment to put the patents covering a certain part of the standard in a patent pool licensing activity.

• In the case the above is not considered possible, the Regulatory Authorities should at least support SSOs to encourage (e.g. through economical/fiscal incentives) Patent Owners to meet under the supervision of an independent patent facilitator to set royalty rates, make them public, and quickly start the pool.

PARTECIPATION IN PATENT POOLS COULD BECOME MANDATORY

16

EUROPEAN COMMISSION - Brussels, 29.11.2017COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEESetting out the EU approach to Standard Essential Patents

Footnote 34: “For instance, the creation of pools may be encouraged by means of measures such as strengthening the relationship between SDOs and pools, providing incentives to participation and making universities and SMEs more aware of the advantages of becoming a licensor in a pool.”

PARTECIPATION IN PATENT POOLS SHOULD BECOME MANDATORY

17

PATENT POOLS & PATENT AGGREGATORS

The creation of licensee aggregators may be encouraged by means of measures such as strengthening the relationship between these two

different types of pools, and providing incentives to participation to both the aggregation efforts.

18

AGGREGATOR OF INNOVATIVE SEPs

AGGREGATOR OF WILLING LICENSEESone single transaction

NEW FORMS OF INTERMEDIATION FOR EFFICIENT LICENSING TRANSACTIONS

19

A LOOK TO THE FUTURE

Sorry for this idea that deprives the judges of interesting (but complicated) work and attorneys at law of their fees, but something very close to

this model could be helpful to find a final solution to all the problems related to SEP patents.

Missing piece

20

q Who should decide FRAND terms when parties cannot agree?

q The internet of things I – Cars

q Competition and Policy Towards Standard Setting

q The application of Huawei vs. ZTE in practice

q FRAND Determination Methodologies I _ Comparables

q FRAND Determination Methodologies II Top Down and Bottom Up

q The Internet of Things II – Everything Else

q The Telecoms Ecosystem

q Patent pooling

q Essentiality and the Meaning of Discrimination

IN CONCLUSION…PATENT POOL IS THE ANSWER!

21

For any additional information, please contact

roberto@dini.com www.sisvel.com

THANKS FOR THE ATTENTION

22