A “Single Market for Intellectual Property Rights” in a Global world of standards and competition policies

The IPR Strategy recognizes explicitly that IPRs create a host of ways for innovators to extract value and reward, and that each is valid. It recognizes that businesses should not be hampered in finding new models to value their IPR. Most strikingly for the standards world, the Communication expressly recognizes in the context of standardization that licensing is an important part of it and that “many European companies nowadays generate a large part of their revenue through licensing of their IP portfolios (page 5)”. The IPR strategy only refers to standardization once, at page 5, and it is interesting that the text looks only at the importance of IP licensing regimes (and by implication the success of the current FRAND patent policy underlying the global standards world), not only in fostering take up for standards, but in incentivizing repeat contributions to allow the standards to evolve. However, as relates the text’s reference to ‘diligent management of IPR’, the management of IPR should be based on commercial decisions, not state involvement (as occurs in copyright). The GSM patent pool model is not necessarily capable of replication.  The success of UMTS, also referred to in the Communication is based on an open licensing model.  It is up to the owners of IPR to decide how best to manage their IPR, and if they are considering joining a standards organizations that standards organization’s IPR rules are clear and balanced so that potential members can make decisions about participation.

Keith Mallinson’s blog in IP Finance 11 May 2011 notes:  However, in the vast majority of cases, the (F)RAND regime and bilateral licensing agreements have enabled the successful deployment and rapid growth of standards-based products and systems. Some notable examples of such successful deployments include the GSM (with four billion users) and WCDMA (with approximately one billion subscribers expected by yearend) wireless telecommunication networks. The flourishing market for mobile phones, which have transformed our business and daily lives, is evidence of the success of the economic incentives created by the IP system and the market-driven FRAND framework for licensing standards-essential IPR

Page 7 notes, “Care should be taken to ensure the right balance between protection of rights and access, i.e. to develop “fair regimes rewarding and incentivizing inventors and creators, whilst ensuring the circulation and dissemination of goods and services, the exercise of other fundamental rights and the promotion and preservation of cultural and linguistic diversity.”  In the standards world we use the term balance to denote the importance of including within the standards discussions the diversity of materially interested parties in the work. The term ‘balance’ is used differently in the Communication; but it is not clear what is meant. Does it suggest reform of the existing balance struck in the patent laws (or merely the copyright rules, as the Communication details further)? The patent laws relate, for good reason to ‘rewarding and incentivizing inventors and creators’. But they do not primarily relate to ‘circulation and dissemination’. If businesses invest now, under the belief that their innovations can be protected under the patent laws, to find that what they had understood to be the legal framework will be changed ex post, this will affect legal and commercial certainty.  The tone of the document, as relates to patents, is inconsistent with this issue of ‘balance’, which has already been struck by the patent laws (disclosure for protection & exclusive use). Nor should we ignore the reference to the balance taking into account the ‘exercise of other fundamental rights and the promotion and preservation of cultural and linguistic diversity’.

Finally, with respect to IP and Competition policy, the Communication states at page 4:  “Strong protection and enforcement of IPR should be accompanied by rigorous application of competition rules in order to prevent the abuse of IPR which can hamper innovation or exclude new entrants, and especially SMEs, from markets”.  But does not the legitimate exercise of IP rights allow for the exclusion of new entrants if the IP holder so wish? Exclusion from the market is precisely what IP does (when the market is defined as the market for the protected technology).  Does this statement mean that antitrust will be used to soften the legitimate exercise of IP rights? Does this sentence in the Communication suggest that EU competition rules will trump intellectual property protection and that competition law will be used to define what IPRs can be legitimately enjoyed? This would seem to be rather revolutionary.