Sunday, November 27, 2022

ASTROTURFING: Where was Charles River Associates' economic expertise when Apple funded their paper criticizing 5G patent ownership studies? Where was CRA's common sense?

Charles River Associates (CRA) is a high-profile all-things-to-all-people economic research firm. According to CRA's website, the organization's clients include 78% of the Fortune 100. In order to maximize their profits and keep 800+ consultants from 50+ countries busy, they have to work for a diversity of clients and on a multitude of issues. They can't always be right, nor can they always be wrong. It depends. I've agreed and disagreed with what I've seen from them on issues I'm interested in, and I've found them to be on the right (procompetitive) and at times on the wrong (anticompetitive) side of history--but never would I have doubted that they are good at what they do.

Policy makers, regulatory authorities, and judges are smart enough to know that the C in CRA doesn't mean "charitable." Journalists will understand that, too. But an organization like that needs to maintain a certain minimum standard to preserve its credibility. Credibility has (at least) two aspects in this context:

  • economic competence


  • compliance.

CRA must now correct the disclosure on its November 8, 2022 paper on 5G standard-essential patent (SEP) ownership--A critical review of 5G SEP studies--to make it perfectly clear that it was overwhelmingly (if not entirely) funded by Apple or remove the document from its website. Anything less would be disappointing to say the least.

Apple obviously has an interest in devaluing SEPs and doubting the value of the 5G SEP portfolios of companies with which it has not yet agreed on license terms, just like CRA has an obvious interest in serving the world's richest corporation, even if it means going against consumer interests such as in a recent French antitrust case, where CRA not only disclosed but even boasted with its work for Apple.

Also, it's not generally a bad idea to call into question the reliability (as evidence) of certain patent ownership studies. CRA's paper looks at studies by various organizations, including some that were created by IPlytics--the same IPlytics that I criticized for not listing Huawei among the top 10 narrowband IoT SEP owners in 2020 though in 2022 the company (credibly and finally) was ranked first. But CRA's paper appears somewhat selective to serve Apple's interests.

When Apple--in the midst of litigation as well as policy debates around the globe--pays CRA for a paper on 5G SEP ownership, they should say so. But they didn't. This screenshot--a part of the title page--shows the problem (click on the image to enlarge):

ACT. That's the Apple astroturfing operation that Bloomberg exposed in September--two months before CRA published that 5G paper (and given how thin that paper is, it's actually possible that the Bloomberg article even appeared before CRA started working on that 5G paper).

How can Charles River VP John Hayes and his associates Assaf Zimring and Ben Ladabaum ever have had the slightest reason to believe that 5,000 small app developers and IoT startups were funding their work?

Didn't they do any background check, such as with Google, to get an idea of what ACT is all about?

Two members of European Commission EVP Margrethe Vestager's cabinet met with ACT shortly before the Bloomberg story. CRA, however, had every opportunity to know that this was an Apple-funded paper. Maybe Apple even discussed the topic with them. Apple is a client of theirs, and may be paying CRA more than any other client these days. But let's give them the benefit of the doubt and view this in the light most favorably to CRA. Let's assume that ACT introduced themselves as an organization representing 5,000 small app developers and IoT startups. Wouldn't an expensive economic advocacy firm like CRA--whose clients include 78% of the Fortune 100--reasonably ask itself whether those little guys really have the wherewithal to afford their services? It would take very simple math--even simpler than what's in that paper: they could just have divided their fees by the official (and unproven, but that's another story) number of ACT members, and they could have figured that small companies wouldn't pay membership dues to an organization like ACT that would pay even just for that CRA study, let alone ACT's overall operating costs of approximately $10 million a year.

If John Hayes, Assaf Zimring, and Ben Ladabaum believe they understand 5G patent economics so well that they must publish a paper to educate the world about the subject, shouldn't they also know that small app developers simply don't have problems with SEP licensing or assertions?

Where was CRA's common sense here? Where was their economic expertise? What plausibility tests did they perform? Again, all of this is based on the assumption that Apple wasn't actually talking directly to them about this study, but that ACT introduced themselves as an organization claiming to represent 5,000 small app developers and IoT startups.

CRA and those three economists can do better than that. That's why they should correct the paper and disclose Apple as their actual client--or pull the paper altogether.