recent DISCUSSION

• arebentisch says:

  @simcoe: Right, it is beyond the scope of current reform proposals. The limitations which usually apply to the SSO to enforce patent rules do not apply to the EU. So if there are legal certainty problems of licensing, a legislator is in a position to resolve them. The IPR rules are always at the heart of ICT standards debates. Not here. In a policy context you get into the more or less annoying “RAND v RF”, “mandatory v. voluntary” trench debates while simple & pragmatic reform steps are not discussed.@Lindblom “Otherwise the risk of governments adopting outdated standards could be imminent.” — True, but when the lobby raises such concerns…; “Standards” in the EU sense are relevant for the EU, while market players follow consortia. The licensing conditions of consortia and disclosure requirements are generally more procurement friendly than what the EU requires for its “standards”. You will hardly find a consortial spec that will not pass the new performance based criteria list from the whitepaper. These requirements are 100% baseless. ESOs will defend their privileged access or become obsolete.
• Mattias Ganslandt says:

  Question is if we can expect DG comp to give any similar guidance (on ex ante negotiations)? It still raises the concern of foreclosure and price coordination.
• Timothy Simcoe says:

  >> Should ex ante negotiations be endorsed (pros and cons)?

  As I see it, the question is whether ex ante negotiations should be *allowed*, since many SSOs claim reluctance to go down that path because of antitrust fears. So far, the US DOJ has said “yes” while reserving the right to object to the specifics on a case-by-case basis. I think this is the right policy.

  I do not think an “endorsement” of ex ante negotiations should privilege that particular policy. The White Paper’ s position that different IPR policies will work well at different SSOs strikes a good balance.

  >> What exactly is the problem with FRAND if stakeholders agree to these conditions?

  I would argue that the FR part of FRAND is no different from the lack of a commitment. (A more cynical take is that the purpose of FR is absolve the SSO of antitrust liability in any ex post litigation over licensing.) But by asking parties to commit to the FR principle — rather than something more explicit — SSOs are inviting the courts to provide a definition, and so get involved in ex post price determination. I think that is a bad idea.

  Finally, I disagree withe the 99% comment, since IPR is not an issue for many standards. The relevant statistic would be how well FRAND works *conditional* on the existence of essential IPRs.
• admin says:

  There seems to be considerable disagreement about IP licensing. This raises two questions:
  1. What exactly is the problem with FRAND if stakeholders agree to license on these conditions?
  2. Should ex ante negotations generally be endorsed (pros and cons)?
• Timothy Simcoe says:

  In addition to the road blocks mentioned by Anne, the entire “market” for intellectual property does not generate any publicly verifiable information about prices.

  It is my understanding that most agreements are subject to confidentiality, and that they often implicate IP that is unrelated to standards (e.g. as part of a broader cross-licensing deal). Without knowledge of what others are paying, how can we decide whether a given price is “fair and reasonable.”

  One aspect of the ex ante policy that may be undervalued is that it makes some information about prices public.
• Timothy Simcoe says:

  I don’t think fora and consortia would object to having ESOs reference their standards. But I do think they will hesitate to let the more formal SDOs influence their own agenda.
• Anne Layne-Farrar says:

  Many firms do choose explicit ex ante licensing — it is my understanding from participants in various standard setting organizations that these contracts are negotiated regularly.

  But there are some road blocks. Firms may be reluctant to negotiate until the direction of a standard is more clear. Licensing less pivotal technologies may be postponed due to time constraints, and so on.

  Nonetheless, it strikes me that standard setting organizations can and should encourage ex ante bilateral negotiations. For instance, just as firms pledge FRAND now, members — both IPR holders and implementers — could also pledge to negotiate licenses in good faith with as many parties as practicable before the standard is implemented.
• Anne Layne-Farrar says:

  Just a quick note on non-assertion covenants. The Japanese Fair Trade Commission just instigated a case against a firm for concluding non-asserts, claimining they were an abuse of dominance and anticompetitive. Just goes to show you that no matter what the agreement is, someone will object to it!
• Mattias Ganslandt says:

  An important question remains: Why do firms voluntarily choose (F)RAND licensing rather than more specific and well-defined licensing ex ante? Perhaps they are not as reluctant to litigate as one would think…
• Niklas Lindblom says:

  There is an implication that you have doubts regarding industry fora and consortia’s willingness to cooperate with ESOs. Do you think that there would be any reluctance, and in that case, why?
  //Niklas
• Timothy Simcoe says:

  Hello everyone,

  Let me respond to your comments in turn.

  Anne, I believe that the current system is based on “ND” licensing. This implies no refusal to deal, no exclusivity, and perhaps no threat of injunction (although it would be nice to have some explicit guidance from SSOs on that last point). I *do not* think we should drop this!

  However, no one knows what the “(F)R” in (F)RAND really means. I do not think that adding FR to FRAND helps to solve the hold-up problem at all! Rather, it provides grounds for ex post litigation over licensing terms when firms adopted a standard in full knowledge that the patents existed. It also invites the courts to try and come up with a definition of FR.

  My comment was meant to be provocative — after all who could object to the idea of “fair and reasonable” pricing!? However, I think that the way to get there is by placing more emphasis on the actual process of disclosure and ex ante license negotiations, rather than continuing to insist that prices be FR after the fact.

  Mattias, I don’t think that vague licensing commitments have any additional value if there is a clear obligation to disclose.

  Who could object to the idea that licensing practices should be “fair and reasonable”?

  Arebentisch, I agree that my “logical next step” comment was a bit glib. Brevity won out over precision! I like your creative proposals of have model licenses, and would add that non-assertion covenants are another interesting tool in this area. However, I worry that proposals to weaken the rights of “non-practicing entities” will get abused.

  Thanks to all for taking the time to react to my initial post.

  Tim Simcoe

  I think I agree with your basic points.
• admin says:

  Tim, It would be interesting to hear your comments to Peter Brown´s comment that an SDO can have multiple (OASIS has four) IP modes and leave it ot technical committes to opt for one alternative. See http://www.talkstandards.com/?p=1387&cpage=1#comment-47
• Niklas Lindblom says:

  It is certainly an important point that public procurement, if used properly, can be used to affect markets and prevent failure. In order to ensure that the public can benefit fully from a new technology it is important that the procurement process works swiftly. Otherwise the risk of governments adopting outdated standards could be imminent. Therefore, I believe that the problem with the Commission’s suggestion cannot fully be attributed to the fact that fora and consortia developed standards would be allowed in legislation. Rather it is in my opinion the procurement process which should be reviewed. I agree that evaluating a standard thoroughly before its adoption should always be a prerequisite in public procurement; but I would further extend this to all procurement processes, regardless of who developed the standard.
• arebentisch says:

  As a general remark I would recommend you to abstain from whistling a “standard tune”. …”it does not take the logical next step to suggest that SSOs should abandon the idea of “fair and reasonable” licensing unless they can find a working definition of those principles.”The difference between a regulatory decision of the EU and rule setting of SSOs is that the EU can define rules and provide legal confidence. Another “soft law” proposal is the EU sponsored development of model licenses for self-selection which are legally secure and reviewed in all 27 jurisdictions. Private law is not harmonised (nor will it get harmonised) but still markets need more legal confidence in licensing. The European Union can use its legislative powers to define a numerus clausus principle to patent enforcement by non-praticing entities to protect standards from later “submarine attacks” or provide regulatory confidence. SSOs cannot solve these problems and depends on voluntary action, the EU can define such rules.
• Mattias Ganslandt says:

  Perhaps the most important challenge for the holder of an essential patent is to avoid the potentially huge “hold-up” problem that may arise ex-post. Licensing commitments ex ante, regardless of vagueness, may mitigate this problem. Unilateral declarations by IP holders may not suffice. A “contractual obligation” through the IPR policy by an SDO can possibly be the solution. Wouldn´t you say FRAND/RAND is preferable in this respect (if compared to no commtiment)? /Mattias
• Anne Layne-Farrar says:

  Tim, I think you may not be giving RAND/FRAND the credit they are due. Yes, “fair” and “reasonable” are incredibly vague words that no one has yet provided a workable (legal) definition for. That said, at a minimum RAND/FRAND preclude outright refusals to license and exclusive licensing, both of which are perfectly allowable for patent holders outside of standards. Until we have something better to replace this commitment, I think it’s rash to drop them.