Wednesday, June 7, 2023

Sisvel announces standard-essential patent license agreement with Microsoft covering 5G-capable Surface devices: first (known) 'blue chip' licensee of new program

Patent pool administrator and licensing firm Sisvel just issued a press release announcing that Microsoft "has entered into a patent license agreement for the Sisvel 5G Multimode (5G MM) Program."

I wrote about that standard-essential patent (SEP) pool in December, noting that the 5G royalty rates are actually lower than past published rates (4G program), which I said should make the offer more palatable to licensees. It's clearly a good sign that Sisvel announces the first big-name licensee of that pool within about six months of the creation of that particular licensing program.

Some of Microsoft's Surface devices (which are tablet-notebook hybrids) come with 5G connectivity. For instance, the technical specifications of the Surface Pro 9 state the following:

5G-NR NSA (mmWave): Release 15 DL 64 QAM up to 4.2 Gbps 4xDL CA (400MHz), 2x2 MIMO

5G-NR NSA (mmWave): Release 15 UL 64 QAM, 2xUL CA (200MHz), 2x2 MIMO

5G-NR NSA (mmWave) Bands: n257, n260, n261

What makes this so meaningful for Sisvel is that Microsoft--while obviously not one of the largest makers of devices with cellular connectivity--is one of the most sophisticated licensors and licensees. I'm saying so because I've seen them enforce and defend against patents. While I've disclosed a working relationship with the company, it is entirely unrelated to SEP matters. I only learned about this license deal as a result of Sisvel's announcement.

Sisvel's 5G MultiMode licensing program manager, Donald Chan, is quoted in the press release as expressing his belief that this agreement with Microsoft "not only confirms [Sisvel's] license offer to be fair and reasonable, but also underlines the merits of the patent portfolio of [Sisvel's] partners."

The terms of the agreement were obviously not announced, but that statement in the press release combined with the fact that the published terms on the website are still the same as in December suggests that the deal validates the pool's standard terms. The short period of time between the creation of that pool and today's announcement indicates smooth negotiations. Microsoft wouldn't have taken the license if they didn't believe that other 5G device makers would reach the same conclusion on whether the terms are FRAND.

Looking beyond this particular pool, I consider today's Sisvel-Microsoft announcement significant with a view to the legislative process in the European Union concerning SEPs: the proposed EU SEP Regulation. There are various issues with that one, including an inconsistency I discussed this week, and it's hard to understand why the European Commission's stance on patent pools turned a bit negative. The license agreement announced today is actually a pretty good (and representative) example of how pools can create transactional efficiencies: the alternative would have been for Microsoft to work out bilateral agreements with more than a dozen patent holders. They could have done that here. The contributors to this pool remain free to enter into direct license agreements. But if the terms make sense, it's more efficient for an implementer to opt for a one-stop solution. I highlighted verb "to opt" because it's optional.

I frankly found it surprising that the Commission did not fix a misrepresentation of Sisvel's history (the clearly incorrect claim that Sisvel was originally in some unspecified product business, which actually never existed) between the leaked late-March draft and the final version of the impact assessment. But that's just an oddity.

The SEP licensing progress can be improved, and pools can contribute in their way. The proposed EU SEP Regulation would just impose costs and onerous disclosure requirements on SEP holders and pools as if those on the licensor side of the negotiating table were responsible for all of the problems. If there were no SEP holders, there would be no licenses and no litigation. Then, if there were no patents in the first place, there would be no SEP holders. And if there were no patent offices, there would be no patents. The ultimate solution would be to have no inventors and no standards. Oh wait. Maybe we're going too far now? Just a little bit?

It's hard to see why the proposed EU SEP Regulation imposes so many requirements on pools. That Sisvel 5G Multimode pool actually does provide a lot of transparency. It essentially meets the envisioned requirements, except that they can only disclose licensees when they are authorized to do so. Microsoft apparently had no problem with it, but other licensees don't allow such announcements.

Like in any business, there are outliers. There are also some outlier pools. But by and large the system works pretty well, and today's announcement supports that view.