IEEE rejoins mainstream of standard-setting world as it undoes key elements of 2015 patent policy that encouraged hold-out by unwilling licensees: major defeat for Apple and its allies

Rationality and pragmatism have prevailed, and unity--within the universe of standard-setting organizations--has been restored. The IEEE Standards Association Board of Governors (IEEE SA BOG) just announced an update to its patent policy, which will formally enter into force on New Year's Day.

These are the key take-aways:

• The highly controversial elements the IEEE added to that patent policy in 2015 and which favored hold-out by unwilling licensees among implementers of WiFi (IEEE 802.11) and other IEEE standards have effectively been stricken (or, at a minimum, thoroughly diluted to the extent they no longer mean anything). Those issues include access to injunctive relief, the royalty base (proponents of the Smallest Salable Patent-Practicing Unit (SSPPU) often pointed to the IEEE policy), and what type of behavior ina licensing negotiation constitutes (un)willingness.

• Simply put, the IEEE's patent policy is now much more like ETSI's: right holders are not restricted (in terms of the royalties or remedies they demand) beyond the applicable case law.

• Ten years ago, I reported on an IEEE amicus brief that said standardization bodies should take "no direct role in patent enforcement." With today's amendments to the 2015 policy--which essentially repeal the 2015 amendments--IEEE is back to where it was before.

• IEEE's announcement also resolves a conflict that had arisen because of some major patent holders ( including, but not necessarily limited to, Ericsson, GE, Huawei (notably, a large-scale WiFi implementer as well), InterDigital, LG, Nokia, Orange, Panasonic, and Qualcomm (in alphabetical order)) participating in the standard-setting process under the old policy, declining to provide letters of assurance (LOAs) under the 2015 policy: in case of doubt, the least restrictive (on patent holders) policy now applies.

• That LOA divergence even jeopardized the ANSI certification of newly developed IEEE standards as I mentioned in the post I just linked to. The revised policy brings IEEE back into the ANSI fold as far as I can see. That's obviously up to ANSI to decide--I'm just voicing my own opinion.

• At the same time, IEEE has--again, just in my opinion--avoided running into problems with the International Organization for Standardization (ISO) (see this LinkedIn article by NY-based attorney David Cohen).

• In my ">May 2022 post on the IEEE situation I mentioned that Apple and some of its allies were lobbying hard to prevent from happening what has now been formally announced. Let's hope that Apple recognizes this defeat and doesn't resort to ever more astroturfing, which is simply annoying in the SEP context and adds insult to injury with respect to App Store issues.

• I applaud IEEE for drawing the necessary conclusions from the fact that no other major standard-setting body (I don't even know about a minor one, but I can't claim to know them all) ever followed suit and modeled its own patent policy after the 2015 IEEE policy.

• There is a parallel here between what IEEE has decided to do and what the Biden Administration did a few months ago, i.e., that the DOJ, USPTO, and NIST decided neither to adopt a new SEP policy statement nor to reinstate the Obama-era one. No more outlier positions. Just neutrality--and deference to the courts of law.

• This is a major success not only for SEP holders interested in fair compensation and reasonably strong enforcement, but also for former Antitrust Assistant Attorney General Makan Delrahim, who put pressure on IEEE. He's now in private practice (Latham & Watkins, a firm that oddly counts Apple among its most important clients, if it isn't even Latham's most important client), but his approach to the old IEEE policy has been vindicated today. I didn't always agree with him to put it mildly, but he does deserve credit. I previously mentioned a significant, equally SEP-related, post-term achievement of his last year (the Fifth Circuit's dismissal of HTC's appeal against Ericsson).

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Apple and other WiFi implementers pressuring IEEE not to abandon its 2015 patent policy--but serious impact of negative Letters of Assurance can't be denied

Early last week, largely the same Apple-led crowd that is behind the "Save Our Standards" campaign (whose deceptive lobbying I've recently called out) sent a letter to Sophia Muirhead, the General Counsel of the Institute of Electrical and Electronics Engineers (IEEE). I'm in possession of that six-page PDF, which is dated May 3 and entitled Industry and Public Interest Support for Maintaining 2015 IEEE-SA Bylaw Updates. It's a pressure group effort ahead of a (fairly confidential) meeting of the IEEE-SA's Standards Board; the letter was allegedly authored by outside counsel for Apple; and from what I heard, it's more or less unprecedented for industry players to lobby the IEEE in that fashion.

It looks like some folks are panicking, though a little over a year ago they had reason to celebrate: the Biden DOJ silently downgraded a letter that the Trump DOJ (specifically, then-Assistant Attorney General for the Antitrust Division, Makan Delrahim) had sent to IEEE, urging it to undo significant parts of its 2015 policy change favoring implementers. As I noted at the end of the post I just linked to, the wrangling over IEEE's standard-essential patent (SEP) policy was sure to continue. Mr. Delrahim is now a Latham & Watkins partner (oddly, a firm frequently used by Apple), so he's no longer in a position to push IEEE in the direction he outlined while in public office. But IEEE still has a problem on its hands that no one with an interest in a functioning standard-setting system can responsibly ignore or convincingly explain away.

We'd be having a totally different conversation now if the following sentence from the first paragraph of Apple et al.'s letter were true:

"The IEEE-SA’s Patent Policy is and remains the model for standard setting organization (SSO) IPR policies, particularly following the 2015 update to the patent policy."

The letter says "IEEE-SA distinguished itself positively" in 2015. Now, if SSOs like ETSI had gone in a similar direction, Apple et al. would be in a position to make that claim of IEEE's 2015 policy being and remaining "the model for [SSO] IPR policies." But the reality--certainly a sad one from the implementers' perspective--is that seven years on, IEEE is still an outlier among SSOs. That may simply be due to the fact that other SSOs are more consensus-driven than IEEE, where a majority can just brush aside objections no matter their merit.

Neither does the last sentence of the first paragraph withstand scrutiny once one looks at the broader picture:

"By almost any measure, standardization work at IEEE has thrived in the wake of these updates."

Via a footnote, that sentence refers to a 2018 IPlytics report (PDF) that says "contributions to IEEE standards and technical work within IEEE working groups have only increased since the updated patent policy was approved." But as standards grow more complex, the number of contributions are on the rise--and more than anything, that conclusion reflects a disconnect:

A number of major wireless SEP holders and innovators (including, but not necessarily limited to, Ericsson, GE, Huawei (notably, a large-scale WiFi implementer as well), InterDigital, LG, Nokia, Orange, Panasonic, and Qualcomm (in alphabetical order)) have declined to provide Letters of Assurance ("LOAs") that would force them to adhere to the IEEE's 2015 policy. Some if not all of them clarified that they remained willing to abide by the prior policy (which was more similar to what is still found in the cellular standards space). But a refusal to be bound by the new policy is deemed a "negative LOA," regardless of a contributor's stance on a superseded version of that policy.

The disconnect here is that there wasn't a major disruption on the technical side (though Professor Ron Katznelson, a member and past Chair of the IEEE's U.S. IP committee, did identify some negative impact in his paper The IEEE controversial policy on Standard Essential Patents -- the empirical record since adoption) despite those negative LOAs. That approach is not sustainable. Sooner or later, an SSO runs into a serious problem if a significant part of all technical contributions isn't subject to positive LOAs.

We're talking about a legal issue, a licensing problem--not just a political one that may simply be solved by an Administration overriding its predecessor's policies.

Unlike in politics, where a majority vote is often the answer, that won't work here either. Apple et al.'s letter stresses that there are far more companies favoring implementer-friendly policies than a proposal to revert to the previous one. That means nothing. Seriously, there are more people out there buying bread than owning or working at bakeries, yet customers can't just set the terms on which they want the supply side of the market to do business with them. The fact that there are so many implementers makes successful standards valuable. It doesn't devalue them. And even if a vast majority of SEP holders preferred a policy (typically because they are net licensees), in the end implementers need a license to all the SEPs, not just some or most of them.

WiFi 6 is the first generation of IEEE 802.11 to have been affected by negative LOAs. WiFi 7, which is now in the works, will be the first one to have been developed with some companies having submitted negative LOAs at the outset.

Those negative LOAs--coupled with the continuation of standards development as if nothing had changed--are a ticking time bomb. Arguably, it has detonated in some places already. IEEE ran into problems with the American National Standards Institute (ANSI) finding itself unable to approve as national U.S. standards those IEEE standards that were clearly impacted by negative LOAs. The International Organization for Standardization (ISO) has similar problems according to a JDSupra article and a LinkedIn article (both by the same author, David Cohen)). It's not a question of whether those organizations like IEEE's patent policy: it's all about the fact that there are negative LOAs in place, normally a no-go in standard-setting, for good reason.

The current situation is a mess. Contrary to what Apple et al.'s letter claims (asking this rhetorical question: "Why would IEEE-SA want to return to a world in which the cost of implementing IEEE-SA standards like 802.11 was uncertain, inevitably discouraging adoption?", negative LOAs are anything but a path to legal certainty. That is not a question of whether or not one would like to bring down SEP royalties. Apple et al.'s letter fails to present a solution as it only advocates perpetuating the problem. With Apple's annual litigation budget in the billions of dollars, that may be workable. For the technology industry at large it is not.

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Qualcomm says FTC motion aims to "radically reshape [standard-essential patent] licensing in the cellular industry"

The two most important motions for summary judgment that Qualcomm is facing at present (and one might even say has ever faced in its history) are the Federal Trade Commission's motion to hold that Qualcomm itself committed to extending standard-essential patent licenses to rival chipset makers such as Intel (a motion that has drawn broadbased support from industry) and a motion by Apple and four contract manufacturers to end Qualcomm's double-dipping practice (selling chipsets and additionally collecting patent license fees). This post is about Qualcomm's opposition in the Northern District of California to the former, but I'd also like to mention that Qualcomm is trying to duck the latter by means of a motion to dismiss all declaratory judgment claims relating to Qualcomm patents from the Apple (and contract manufacturers) v. Qualcomm case in the Southern District of California. When it turned out that its adversaries were going to insist on an adjudication of their patent exhaustion defense, Qualcomm requested expedited briefing, which Judge Gonzalo Curiel denied. The opposition brief to Qualcomm's attempt to chicken out is due by the end of next week.

Back to San Jose. Qualcomm's opposition to the FTC motion is underwhelming. It's unlikely that Judge Lucy Koh will agree with Qualcomm's positions on the core issues; at the most--and even that part is doubtful--the judge might find that some evidence needs to be discussed at trial.

Here's the opposition brief, and below the document I'll explain why I still believe the FTC motion is perfectly meritorious:

18-09-24 Qualcomm Oppositio... by on Scribd

In the first paragraph, Qualcomm acknowledges the importance of the issue the FTC motion is about:

"Under the guise of seeking merely to 'streamline the trial' [...], the FTC's Motion for Partial Summary Judgment requests a ruling that would radically reshape licensing in the cellular industry, not just for Qualcomm but for all cellular SEP holders that made FRAND commitments to ATIS or TIA. The FTC contends that those SEP holders have a clear and unambiguous contractual obligation to grant licenses to manufacture and sell modem chips."

Still on the first page, Qualcomm's brief accused the FTC of attempting "a complete reimagining of the industry."

Qualcomm points to the field-of-use limitation found in standard-essential patent (SEP) licensing commitments. The idea is that you can request a FRAND license only for the purpose of implementing the relevant standard. The reason is simply that one could otherwise request a license in order to use patents in a competing standard, or for non-compliant products. But Qualcomm claims that only "complete devices" can implement cellular standards. Qualcomm more or less concedes (or at least does not deny with specificity) that some SEP claims may be practiced by baseband chips. However, it argues that other components of a mobile device are also required. Examples that Qualcomm mentions in its discussion of standard-setting documents include "antennae" and "power-control chips."

There's no question that you need an antenna and electricity for mobile telephony. But that doesn't mean the mobile baseband chip--or "modem chip" in accordance with Qualcomm's brief--doesn't implement the standard simply because it's the central and decisive component. It's the mastermind (a term that is key to the analysis of an alleged "divided infringement" of a method claim and fits here, too). Once the importance of the mastermind component is downplayed, the ultimate consequence may be that not even a device infringes since electricity must be provided by a utility, which in turn needs some energy source somewhere.

In a 2014 case, GPNE Corp. v. Apple, Judge Koh herself held "as a matter of law that in [that] case, the baseband processor [was] the proper smallest salable patent-practicing unit." And in Judge Koh's court, a 2012 jury sided with Apple against Samsung on patent exhaustion, based on Samsung's license to Qualcomm and Apple's use of Qualcomm chips in certain products at issue back then. The same happened to Samsung in the Netherlands and France (where I attended a preliminary injunction hearing in 2011).

It's actually a cornerstone of Qualcomm's business model to position itself as a SEP clearinghouse. That's why Qualcomm's brief now seeks to resolve the inconsistency between what courts have found as a result of Qualcomm's licensing practices and what Qualcomm is claiming--and must claim--at this stage in its opposition to the FTC motion:

"Although Qualcomm has obtained inbound cross-licenses to the cellular SEPs of its licensees, those were to ensure that its licensees cannot sign a license for rights under Qualcomm's patents and then opportunistically assert their own patents against Qualcomm."

If Qualcomm's chips didn't implement those stnadards, how could other SEP holders "assert their own patents against Qualcomm" by suing device makers? Qualcomm then points to its practice of neither licensing nor suing rival chipset makers, but that doesn't mean anything. Just like Ericsson--the first company Qualcomm is pointing to in its opposition brief--Qualcomm simply does this for leverage. Almost five years ago I wrote about Ericsson's fairly honest concession of the whole rationale behind going after device makers, not chipset makers.

With regard to the ATIS and TIA FRAND promises at issue, Qualcomm claims that their non-discrimination requirements merely "prohibit an SEP holder from charging one licensee a 1% royalty while (all other terms being equal) charging a similarly situated licensee a 5% royalty." However, not extending a license at all--no matter the royalty rate--is the most extreme form of discrimination.

Qualcomm argues the ATIS and TIA FRAND declarations don't say what they say because those American standard-setting bodies must have patent licensing policies consistent with those of ANSI. The reason why this doesn't convince me at all is simple: Qualcomm signed those declarations and is bound to them regardless of whatever principles and obligations may govern the inter-association relationship between ATIS and TIA on one side and ANSI on the other side. If Qualcomm feels ATIS and/or TIA are out of compliance with ANSI's rules, it can ask ANSI to investigate and take whatever action as a result, but it doesn't alter the language of Qualcomm's declarations. Also, if the horse is out of the barn, that's it: even if ANSI didn't and doesn't require ATIS and TIA to ensure that all comers, including rival chipset makers, receive a FRAND license to certain SEPs, it doesn't mean ATIS and TIA couldn't do so, and all that the likes of Intel need is one valid and enforceable contractual basis. ANSI's policies don't say that it's against its policies to license chipset makers.

Qualcomm furthermore argues that the FTC's concession that the ETSI FRAND declaration can't be interpreted without considering evidence suggests the same applies to the ATIS and TIA declarations. But what makes the key difference here is that the ETSI declaration is under foreign (here, French) law. A Qualcomm expert report on ETSI is attach to the opposition brief as Exhibit 35. The PDF shown further above contains all public exhibits, such as this one.

Getting back to the question of whether baseband chips implemenet cellular standards: they do because they control the transport-layer communication between mobile devices and base stations. Qualcomm has its reasons (as do Ericsson and others) why it prefers not to license or sue chipset makers, but if it wanted to sue them, it could do so, and I believe it wouldn't even need to resort to indirect-infringement theories.

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