Monday, June 15, 2020

Without transparency in patent ownership, the Avanci pool borders on a scam operation that harms the IoT industry

Avanci isn't the first patent pool to employ a great deal of spin-doctoring, but its homepage is particularly "rich." Take the "Enabling the IoT" headline (that's one of the pages in its "Marketplace" section): baseband chipset makers undoubtedly enable the IoT, as do makers of connectivity modules that contain such chips and additional components, but Avanci refuses to grant them exhaustive patent licenses--which is an impediment (rather than conducive) to the further development and widespread adoption of IoT technologies

No less absurd is the claim that Avanci's pricing (leaving the question of component-level licensing aside for a moment) is fair, reasonable, and non-discriminatory (FRAND). Those of us following the Nokia v. Daimler litigation series know that Nokia makes a clearly supra-FRAND royalty demand (several times what Nokia gets per smartphone) and argues that it gets a similar amount as its share of Avanci's royalty income.

By far the most insane claim on Avanci's website is, however, the part where they talk about the "goal of bringing [...] transparency and predictability to the [licensing] process." Give me a break. On that whole damn website there's no such thing as a list of the patents you can license through Avanci. Nor do they publish their licensing terms. By contrast, there are patent pools such as this one (MPEG LA's AVC/H.264 pool) that do both: they publish their license agreements (including the fees), and they provide a patent list. The length of such a list is no excuse: they could upload a PDF that contains them all and/or provide access via a database query interface. Avanci's claim to be transparent is, sadly, an insult to human intelligence. That website is the epitome of intransparency. It couldn't realistically be any less informative.

Abusers like Avanci (and its worst members in that regard) give patent pools a bad name. I'd like to highlight two new academic papers in this context. First, Orrick Herrington &, Sutcliffe's John J. "Jay" Jurata and Emily Luken discuss the desirable and (in an increasing number of cases) undesirable effects of standard-essential patent pools in Glory Days: Do the Anticompetitive Risks of Standards-Essential Patent Pools Outweigh Their Procompetitive Benefits? That paper flags some very relevant concerns.

Second, with respect to the specific issue of transparency, three University of Bordeaux researchers just published a paper on Non-practicing entities and transparency in patent ownership in Europe that was funded by a lobbying group whose largest member, Google, neither practiced nor promoted transparency in patent ownership in the early to mid 2010s. They even made threats based on patents they claimed to hold but declined to disclose. Then, Google is nowadays also a member of the Fair Standards Alliance, though its then-subsidiary Motorola Mobility was one of a very few companies ever to be held liable for FRAND abuse (by the United States District Court for the Western District of Washington, affirmed by the Ninth Circuit). In a world in which we usually see the opposite trend (with ever more companies resorting to aggressive patent monetization after losing out in the marketplace), such defectors from the dark side are a welcome exception.

The paper on (the lack of) transparency raises the issue of patents being transferred in the middle of licensing negotiations without notice to a licensee. That's a serious issue, and one that Avanci badly needs to address.

If you negotiate an Avanci license today and sign a contract tomorrow, you may find yourself on the receiving end of litigation involving patents that you thought were part of your Avanci package until you found out that those patents were transferred without you having any way of knowing.

Some of Avanci's most important contributors engage in the ignominious practice of "privateering" (letting trolls assert parts of their portfolios on their behalf, with so-called patent "transfer" agreements often just reducing the patent assertion entity to a service provider and agency while the original patent holder is the main beneficiary in commercial terms).

So far, the victims of privateering were mostly smartphone makers like Apple. But while we're on the subject of the Internet of Things that Avanci falsely pretends to promote, it's worth noting that the IoT sector is increasingly impacted by privateering-style patent infringement suits.

Panasonic--an Avanci contributor--gave a bunch of LTE-related SEPs to a troll named Swirlate IP, which has brought five U.S. patent infringement complaints against the IoT industry over former Panasonic patents that the industry at large might have been led to believe were part of the Avanci pool:

A second Panasonic privateer, Nitetek, is suing ChargePoint in the Northern District of California.

Avanci offers a license to a portfolio of portfolios, but how many of those patents are "phantom patents" that have in reality already been assigned to trolls, which effectively results in double-dipping?

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