Wednesday, January 18, 2023

LESI panel on WiFi 6 patents makes clear that hold-out won't be profitable strategy, infringement litigation will hopefully be very limited but may prove necessary

The funniest exchange I've ever seen at an IP conference occurred today at the Licensing Executives Society International (LESI) Thought Leadership Program. The first panel--about WiFi standard-essential patents (SEPs)--was moderated by Huawei's IP chief Zhiyong (Alan) Fan, who was joined by Sisvel president Mattia Fogliacco, Panasonic's Kaoru Takagahara, Jako Eleveld from Philips, and Jim Sam Kwak of licensing firm Wilus. The organizer was LESI Executive Director Dana Robert Colarulli.

After Sisvel's Mr. Fogliacco discussed his company's experience in the WiFi patent licensing space and touted its efforts to make sure that the WiFi 6 licensing program launched last summer would be well received by the market, Huawei's Mr. Fan credited Mr. Fogliacco for having been "so good in front of licensors" like Huawei when arguing for a palatable royalty rate that "[Mr. Fogliacco] would be an expert in holding out."

That one made people laugh, and the notion of Sisvel engaging in hold-out is hilarious indeed. Hold-out is the last thing the pool administrator and licensing firm is known to promote. Much to the contrary, it's hard to think of anyone who would have made a greater contribution to the fight against hold-out: the two Sisvel v. Haier cases decided by the Federal Court of Justice of Germany, which clarified the application of the European Court of Justice guidance in Huawei v. ZTE with respect to what characterizes an unwilling licensee, have arguably done more than any other patent dispute to discourage SEP hold-out.

What the post I already linked to further above already reported on was a key topic of discussion at today's webinar: LIFT (Licensing Incentive Framework for Technologies. As Mr. Fogliacco explained today, LIFT was designed to reduce the time to adoption and the need for enforcement. He says people should to the right thing anyway and take a license, but LIFT is meant to reassure them that it won't put them at a competitive disadvantage to be paying royalties while others aren't. Large parts of the royalty payments are deferred in time, meaning that at the early stage, licensees pay only a fraction of the normal rate until their competitors also sign up.

The other panelists agreed that LIFT was a good idea and a valid approach. For example, Panasonic's Mrs. Takagahara called LIFT's design "well-thought-out".

She likes the idea that LIFT makes it a smart business choice for implementers "to take a license as early a possible" as the more efficient as opposed to costlier choice.

Mr. Fan noted that if one company pays royalties earlier than its competitors, then it's disadvantaged because of higher costs (in that regard, Mr. Fogliacco stressed the need to "establish and maintain a level playing field"). LIFT is the mechanism in Sisvel's WiFi 6 pool--of which Huawei is the largest licensor--to address this issue. And given that there are thousands of potential licensees in this space, Mr. Fan believes in the transactional efficiencies of the pool approach.

Mr. Fogliacco noted that Sisvel reinvests some of the licensing income "to make liensing more efficient." Mrs. Takagahara said Panasonic wants to make the world a better place with WiFi. Mr. Fogliacco stated his company's mission, on top of everything else, of creating opportunities for companies to actually monetize their patents who couldn't do it on their own, such as companies that are spun off from universities.

The panelists all agreed that "litigation is a last resort" (as Mrs. Takagahara put it). But they all made it clear that it may have to happen, though hopefully only in a few outlier cases. Mr. Fogliacco said that if there are "clear signs of hold-out in the market", Sisvel as a pool administrator will have to recommend enforcement. Given that he believes his pool's structure is very reasonable, he deems it even more necessary to enforce against "bad citizen" implementers if need be. And he noted taht Sisvel is known to enforce if it has to.

Mr. Eleveld from Philips said that they were not so naive as to believe that no hold-out would occur, though obviously they hope that there will only have to be very little infringement litigation.

There's a carrot--the LIFT program that encourages taking a license early on--but also a stick. I'll keep an eye on interesting WiFi SEP enforcement actions and will report on them if and when I spot them.