Wednesday, November 20, 2019

Short summary of November 12, 2019 Brussels conference on Component-Level SEP Licensing

This is the final part of a post-conference "trilogy." After publishing the slide decks used by seven panelists and an abstract of one presentation and reporting on the patent injunctions panel (with a particular focus on the German reform project) (where I just added the German-language version of Maurits Dolmans's slides), I'll now summarize the component-level licensing panels.

It's normally easier to report and comment on other people's conferences. What makes it equally easy in this case is simply that all the feedback I received was extremely favorable on the bottom line. There was one panel where maybe things appeared a bit repetitive during the last third or quarter to parts of the audience, but that was the only criticism I heard.

It was part of the plan to kick off the day in a way that would energize everyone. With Pat Treacy (Bristows), Paul Lugard (BakerBotts), Jay Jurata (Orrick, Herrington & Sutcliffe) and Professor Christian Donle (Preu Bohlig & Partner) I had four great lawyers--well-respected in the legal community including some of their adversaries--whom I was able to ask a few questions on component-level licensing and the royalty base. Like all other lawyers who spoke at my conference, they didn't express the views of any particular client (nor did Mrs. Treacy speak for the England & Wales High Court, on which she serves as a Deputy Judge).

The first question to them was about component makers' entitlement to a SEP license on FRAND terms under the antitrust laws. Mr. Jurata and Professor Donle explained their conclusion that it's necessary for competition to work. In those opening statements, Professor Donle made the funniest remark of the day when he said that SEPs are like railroad station toilets--not that nice, but you need to use them.

Mrs. Treacy and Mr. Lugard didn't rule out categorically that there might be circumstances under which there could be an antitrust case, but spoke out against the notion of a bright-line rule. Mrs. Treacy said that as a competition lawyer she'd like the idea of competition law being able to solve all of the world's problems, but doesn't view it that way. What she said came down to saying that an antitrust injury would need to be proven in a particular case, and otherwise contract law (FRAND declarations) might be the answer in some additional cases. Mr. Lugard used different terms to express a view that was materially consistent with this: to him, too, it's a case-by-case question. Mr. Lugard stressed the deference afforded to intellectual property rights in an antitrust context.

After the first round of statements, there appeared to be a sharp divide between Mrs. Treacy and Mr. Lugard on one side of the table (their seats hadn't been pre-assigned) and Mr. Jurata and Professor Donle on the other side. But as we went back and forth, it turned out they weren't worlds apart. All four panelists were extremely constructive, and I had the impression that one statement by Mr. Jurata--who in his introduction noted that his clients included licensors as well as licensees--was key to starting the partial "rapprochement".

The second panel addressed a fundamental question: access to licenses under contract laws. PacTechLaw's Dave Djavaherian made an initial presentation (with slides) before asking Professor Philippe Stoffel-Munck from Universite Paris I - Panthéon Sorbonne and Marc Hansen (Latham & Watkins) questions. Professor Stoffel-Munck explained contract interpretation principles under French law, which sounded familiar to California-based Mr. Djavaherian because they make universal sense. There was consensus on that panel that component makers are entitled to licenses under the ETSI FRAND declaration. (Needless to say some parties have presented expert testimony to the contrary in U.S. cases.)

The "experiences from the field" session with three medium-sized companies on the panel and Cisco's Ief Daems as the moderator addressed the issue of SEP licensing from an angle that should (and hopefully will) matter to policy makers. Metin Taskin (AirTies), Svein-Egil Nielsen (Nordic Semiconductor) and Rasmus Søby Dupont (Kamstrup) shared with us how difficult it is for companies their size to deal with patent licensing issues--and how much better things would be if all SEP holders licensed chipset makers.

One of them gave an example of 200 patents a troll wanted to license to them on the basis of those patents having been declared to be essential to the WiFi standard--but the company so approached could easily rule out for 180 (90%) of them that they were WiFi-essential. The claims were simply not closely related to the specification of the WiFi standard.

I wish someone could conduct a research project on the difficulties facing such companies in patent licensing. Apparently a lot of funding goes into efforts to get companies like that to file more patents of their own. But the unreasonable burden placed on them impedes innovation.

Professor Joachim Henkel (Technical University of Munich) presented the economics perspective on patent licensing in the IoT business. The advantages that component-level licensing offers over device-level licensing in his view are that royalties are directly tied to the implementation quality of patented technology (example: high-end vs. mid-tier or low-end baseband chip), the lower transaction cost, the fact that startups and small-volume device makers (which would include the panelists I just mentioned, though AirTies has sold tens of millions of devices and still struggles to deal with patent issues), and that all tiers of the supply chain are then licensed consistently.

In the second half of the conference, Mr. Jurata provided a quick overview of the FTC v. Qualcomm ruling by Judge Lucy H. Koh and the next procedural steps, followed by presentations by Eric Stasik (licensing practitioner's perspective on the fallout from that decision) and the Secretary-General of the Fair Standards Alliance, Evelina Kurgonaite, who applied EU statutes and case law to the facts in FTC v. Qualcomm based on Judge Koh's findings of fact and conclusions of law.

Mr. Stasik made it clear that he's not a lawyer, but he has extensive licensing experience (as a former Ericsson licensing director and, more recently, a consultant and expert witness). He's not of the opinion that component-level licensing is the answer, and he basically made the case against the case against Qualcomm. Mr. Stasik is a gifted speaker, and everyone could see his strong background in technology, standards, and licensing.

Mrs. Kurgonaite demonstrated that she's a competition lawyer, but also an articulate exponent of her organization's interpretation of FRAND. Assuming that the facts underlying an EU competition case would be the same as in FTC v. Qualcomm, Mrs. Kurgonaite concluded that such behavior would also be deemed anticompetitive in Europe.

At some point Mrs. Kurgonaite made reference to something Mr. Stasik had said before (and disagreed), but then came a point when Mr. Stasik agreed with her on an important part of her analysis, prompting Mr. Jurata to say: "Who says we can't find consensus."

It had been my goal to bring together panelists representing a diversity of views. What complicated that effort is the fact that companies who just don't want to engage in component-level licensing turned me down when I invited themn. But we still had some lively debate (not on each panel, but on multiple occasions).

Intel's director of IP policy in the EU, Dr. Rebekka Porath, moderated a panel on some antitrust complaints over component-level licensing. Professor Rafal Sikorski (Adam Mickiewicz University) gave an overview that went back to the first antitrust cases in the U.S. about 100 years ago were (F)RAND was established as a principle. His cross-jurisdictional knowledge is impressive, and since SEP cases are generally not litigated in Poland for practical reasons, he's neutral, though it appeared to me that his views on FRAND weren't far from my own. After Professor Sikorski's presentation, I filled in for Kent Baker of u-blox, who wasn't able to travel that week, to give a quick overview of the Continental v. Avanci et al. case pending in the Northern District of California. (As we were running behind schedule, I requested to hold a vote, but there was a lot of interest in that part, too, and maybe that's because Continental is also among the five companies who complained to the European Commission's Directorate-General for Competition over Nokia's refusal to license component makers.)

Thereafter, the bonus session on access to injunctive relief (which I covered a couple of days ago) took place.

I wish to thank once again all moderators and panelists, and a wonderful audience.

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