Efforts by two leading Efforts by two leading standards-setting organizationsstandards-setting organizations

to clarify the effect of a F/RAND licensing to clarify the effect of a F/RAND licensing commitment in connection with commitment in connection with

Standard-Essential Patents (“SEPs”) Standard-Essential Patents (“SEPs”)

Call to Action by Competition AuthoritiesCall to Action by Competition AuthoritiesE.g., European Commission Vice President Almunia (head of DG Competition):

“Indeed, standardised technology is the basis for the IT industry to function. Different devices can exchange information and work with each other only thanks to commonly agreed standards. To build a smartphone one needs thousands of standard-essential patents. The holders of these patents have considerable market power and can effectively hold-up the entire industry with the threat of banning competitors' products from the market through injunctions for patent infringements. By threatening to use injunctions, these companies can also make demands that their commercial partners would not accept under normal circumstances. For example, fearing exclusion from the market, companies might be forced to share valuable patented inventions with a competitor or pay excessive royalties which are then passed on to consumers.”

Competition authorities address “hold-up” after the fact – so DG Competition, US DOJ, and US FTC are calling for leading standards organizations to address these concerns up-front by clarifying the effect of a F/RAND licensing commitment in their IPR Policies

Two Standards-Setting Organizations (SSOs) Two Standards-Setting Organizations (SSOs) Undertake to Review SEP IssuesUndertake to Review SEP Issues

ETSI (the European Telecommunications Standards ETSI (the European Telecommunications Standards Institute)Institute)

One of the three official European Standards OrganizationsOne of the three official European Standards OrganizationsDecisions primarily taken based on a consensus of its Decisions primarily taken based on a consensus of its membersmembersHome of Home of UMTS/3GSEPs issues referred to its IPR Special Committee for reviewSEPs issues referred to its IPR Special Committee for review

ITU-T (the telecommunications arm of the International ITU-T (the telecommunications arm of the International Telecommunication Union)Telecommunication Union)

Treaty-based, under the United NationsTreaty-based, under the United NationsHome of H.264Home of H.264Patent Roundtable event (Patent Roundtable event (http://www.itu.int/en/ITU-T/Workshops-and-Seminars/patent/Pages/default.aspx))SEPs issues referred to the IPR Ad Hoc Group (advisory to the SEPs issues referred to the IPR Ad Hoc Group (advisory to the TSB Director – head of the ITU-T) TSB Director – head of the ITU-T)

Discussions at ETSIDiscussions at ETSIClarification or no clarification?Clarification or no clarification?Four issues:Four issues:

Injunctive reliefInjunctive reliefSafe harbor for implementers?Safe harbor for implementers?Capable of objective determination?Capable of objective determination?

F/RAND compensationF/RAND compensationValue of the patent before it was included in a Value of the patent before it was included in a standard?standard?Royalties based on smallest component Royalties based on smallest component implementing the standard or the end product price?implementing the standard or the end product price?

ReciprocityReciprocitySEPs for SEPs?SEPs for SEPs?Non-SEPs for SEPs?Non-SEPs for SEPs?

Transfer of a F/RAND-encumbered SEPTransfer of a F/RAND-encumbered SEP

Discussions at the ITU-TDiscussions at the ITU-TIssues under review that are similar to Issues under review that are similar to discussions at ETSI:discussions at ETSI:

Injunctive reliefInjunctive reliefF/RAND compensationF/RAND compensation

Different from ETSI:Different from ETSI:There There willwill be clarifications on these two issues be clarifications on these two issues

Announced by the TSB Director at the conclusion of Announced by the TSB Director at the conclusion of the Roundtable eventthe Roundtable event

Reciprocity already is defined at the ITU-TReciprocity already is defined at the ITU-TSEPs for SEPs in the same standardSEPs for SEPs in the same standard

Transfer of F/RAND-encumbered SEPs already is Transfer of F/RAND-encumbered SEPs already is addressed in terms of binding successors-in-addressed in terms of binding successors-in-interest interest