Showing posts with label ITU. Show all posts
Showing posts with label ITU. Show all posts

Friday, October 18, 2013

ITC starts first FRAND-related public interest consultation since Presidential veto of iPhone ban

In early August, the Obama Administration vetoed an ITC exclusion order relating to older iPhones and iPads on public interest grounds and indicated that it expects the U.S. trade agency to carefully consider the public interest before ordering import bans over FRAND-pledged standard-essential patents (SEPs). But there are still various SEP cases pending before the ITC, and patent holders have already made different suggestions as to how the U.S. trade agency could justify SEP-based exclusion orders in a post-veto world.

Two SEP investigations have reached the stage of a Commission review (the Commission being the six-member decision-making body at the top of the ITC) since the Presidential veto. On September 4, the Commission decided to conduct a full review of a preliminary ruling clearing Nokia, Huawei and ZTE of violation of various InterDigital patents. But in its review notice it stated that it "is not interested in receiving written submissions that address the form of remedy and bonding, if any, or the public interest at this time". This means that if InterDigital obtains a reversal of any non-liability finding, a second round of submissions will have to be requested to address FRAND-related public interest issues.

The fact that the ITC does not request FRAND-related submissions right away on a "just in case" basis could mean that the probability of a liability finding in InterDigital's favor is not too high. But it could also be due to the fact that there are so many liability-related questions to be analyzed in that investigation that the trade agency would need more time anyway if any FRAND questions later became outcome-determinative.

With a view to ITC complaints by the likes of InterDigital I'd like to highlight an opinion piece recently published by the Wall Street Journal, authored by a former ITC commissioner who says the agency "has drifted from its original mission" and has become the "International Trolling Commission". The debate over the ITC's role is part of a wider patent reform discussion in the U.S., and the ITC's jurisdiction over complaints by patent troll as well as its jurisdiction over SEP cases will remain controversial until abolished.

Yesterday the ITC decided to conduct another full review of an investigation involving FRAND issues. That investigation of an LSI/Agere complaint against Funai and Realtek was of interest to a very few people in the world until a federal judge in the Northern District of California ordered a preliminary injunction barring complainants from enforcing an exclusion over over a SEP should they win one against Realtek.

In the LSI/Agere case, the Administrative Law Judge did not find (in a preliminary ruling) Realtek to infringe a SEP, but the ITC's review notice does raise FRAND-relate public interest questions right away. All of the Commission's public interest questions are about FRAND, with a particular focus on negotiations between the parties:

  1. Please discuss and cite any record evidence of the allegedly [F]RAND-encumbered nature of the declared standard essential '663, '958, and '867 patents. With regard to the '958 patent and the '867 patent, what specific contract rights and/or obligations exist between the patentee and the applicable standard-setting organization, i.e., the Institute of Electrical and Electronic Engineers, Inc. (IEEE)? With regard to the '663 patent, what specific contract rights and/or obligations exist between the patentee and the applicable standard-setting organization, i.e., the International Telecommunication Union (ITU)?

  2. Please summarize the history to date of negotiations between LSI and Funai and between LSI and Realtek concerning any potential license to the '663, the '958, and the '867 patents, either alone, in conjunction with each other and/or the '087 patent, and/or in conjunction with non-asserted patents. Please provide copies of, or cite to their location in the record evidence, all offers and communications related to the negotiations including any offer or counteroffer made by Funai and Realtek.

  3. Please summarize all licenses to the '663, the '958, and the '867 patents granted by LSI to any entity including evidence of the value of each patent if such patent was licensed as part of a patent portfolio. Please provide copies of, or cite to their location in the record evidence, all agreements wherein LSI grants any entity a license to these patents. Please also provide a comparison of the offers made to Funai and/or Realtek with offers made to these other entities.

  4. If applicable, please discuss the industry practice for licensing patents involving technologies similar to the technologies in the '663, the '958, and the '867 patents individually or as part of a patent portfolio.

  5. Please identify the forums in which you have sought and/or obtained a determination of a [F]RAND rate for the '663, the '958, and the '867 patents. LSI, Funai and Realtek are each requested to submit specific licensing terms for the '663, the '958, and the '867 patents that each believes are reasoanble and non-discriminatory.

  6. Please discuss and cite any record evidence of any party attempting to gain undue leverage, or constructively refusing to negotiate a license, with respect to the '663, the '958, and the '867 patents. Please specify how that evidence is relevant to whether section 337 remedies with respec to such patents would be detrimental to competitive conditions in the U.S. economy and other statutory public interest factor.

The fifth question is the most interesting one in this particular case because it relates to the proceedings in Judge Whyte's court in Northern California.

The ITC's questions are broad and general. All that can be said at this stage is that the ITC wants to look at these questions in detail, including reasonable royalty rates, an area in which it doesn't have much expertise (if any). I interpret this FRAND questionnaire as an attempt by the ITC to encourage SEP holders to pursue import bans despite the recent veto. Even though it's now going to be harder than before to win a SEP-based exclusion order from the ITC and to actually enforce it, the ITC portrays these FRAND issues as highly case-specific, which is a way of creating legal uncertainty that could result in settlements. And such uncertainty is, in and of itself, not in the public interest.

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Wednesday, October 10, 2012

UN agency's roundtable on wireless patent litigation reflects deep divisions in industry

Today the International Telecommunication Union (ITU), a UN agency that co-developed (for one example) the H.264 video codec standard, is holding a "patent roundtable" to discuss the implications of widespread patent litigation in the wireless devices industry. Three months ago I blogged about the announcement of this roundtable.

You can find some stakeholders' positions in their contributions published on this page. This morning I had the opportunity to follow over the Internet the first two of four sessions. I won't have access to the afternoon sessions. In my reporting on the morning talks, I am bound by the Chatham House Rule, so I can quote only without identifying speakers. This restrictive rule was unnecessary since none of the speakers voiced any positions on which his organization wouldn't have been on the record before. (I hereby waive my rights to anonymity under the Chatham rule with respect to the fact that one speaker mentioned me on a slide when he used a quote freely adapted from a recent blog post on Samsung having been a "good citizen" of the standard-setting universe).

While Chatham makes it difficult to cover the event in a comprehensive and useful way, I do wish to share some general observations here. Clearly, the industry is deeply divided over the issue of SEP enforcement. Against this background, it speaks to the ITU's influence that it managed to bring players like Apple on the FRAND-friendly side and the opponents of reasonably meaningful interpretations of FRAND pledges, above all (though not exclusively) Google's Motorola Mobility, together for a day. Attendees also include competition regulators and patent offices from different continents.

The two key issues are injunctive relief over SEPs and the question of an appropriate royalty base. Regulators are genuinely concerned, and they are taking action and slowly but surely stepping up the pressure. Today's New York Times reports on "widening scrutiny" of Google's use of Motorola's SEPs by the Federal Trade Commission of the United States. The European Commission has three SEP abuse investigations going (one involving Samsung, two involving Motorola Mobility). South Korea's Fair Trade Commission is investigating its local hero, Samsung. While these investigations are in progress, regulators are reluctant to take definitive positions on some of the key issues. And it became clear today that they still hope that the companies involved will strike agreements that render antitrust penalties unnecessary. Finally, there are organizations defending the interests of the patent system who on the one hand realize that the current SEP mess is a threat to the credibility of the IP regime as a whole (even though SEPs are only a minority of all patents) but on the other hand don't want to weaken the enforceability of patents if they can avoid it.

The two key issues I mentioned above -- injunctive relief and royalty base -- are pretty binary in nature. While a "no injunction" policy could have limited exceptions, such as the enforcement of injunctions after a company refuses to pay a court-determined royalty rate or the pursuit of import bans if infringing goods originate from unidentifiable sources, there's no way that any serious improvement over the status quo can be achieved as long as there's a huge loophole of arguing that injunctions must be available against those who are not "willing licensees". None of the speakers said that injunctions based on SEPs should be available under all circumstances -- there would be no support for that proposition. Still, certain stakeholders wish to use their SEPs not only for rent-seeking but even more so to extort cross-licenses involving non-standard-essential patents, and in order to have this opportunity (to the detriment of competition and innovation), they argue that they should be allowed to be a little bit pregnant.

The fact that some notorious abusers get support for their cause from companies that are actually pretty reasonable in their SEP enforcement doesn't change anything about the need to bar bad-faith players from engaging in hold-up. You can't set rules coming from the assumption that everyone will adhere to them in reasonable ways. The rules must have teeth because sooner or later someone will breach them. And the only way in which hold-up, which one regulator accurately defined as seeking compensation in excess of a FRAND rate at the threat of an injunction, can be effectively prevented is to remove the threat of an injunction except under clearly identifiable circumstances. The only solution to the hold-up problem is a very high degree of legal certainty. Unspecified distinctions between the willing and the unwilling just aren't helpful at all.

When watching or reporting on an event like today, it's always important to think about important stakeholders who did not attend. For example, no consumer organization spoke out, at least not during the part I had access to. And there are presumably many companies in the industry who are concerned about the hold-up problem but stayed away from today's meeting because they decide to spend more time on problems they face today than on an issue that could cause even bigger problems tomorrow. This is not the ITU's fault: the event was as open and inclusive as it could be. But I believe there's a silent majority of stakeholders who oppose injunctive relief over FRAND-pledged SEPs, yet don't have as much of a motivation, and in some cases may simply lack the resources, to voice their positions the way certain FRAND abusers and rent-seekers do. As a result, the number of speakers taking a particular position at a given event isn't necessarily representative.

With regulators hoping that industry will work it all out (though they'll act if that hope fades), standard-setting organizations seeing a rift within their membership and the patent system being torn between concerns over the reputation of the system and the enforceability of the intellectual property rights it grants every day, litigation continues unabatedly, requiring the courts to resolve the pending and steadily-progressing disputes with the means at their disposal.

For a long time, standard-setting has been extremely consensus-oriented, with decisions usually being reached unanimously even after heated debates over the right way forward. But the stakes are too high this time around. This is about the rules under which some of the most deep-pocketed companies in history are fighting for market share in a rapidly-converging high-tech industry, in which hardware, software and services of different kinds are all part of one market as opposed to separate industries. A company like Apple can't allow others to abuse SEPs in order to force Apple to relinquish its crown jewels in the form of comprehensive cross-license agreements involving SEPs and non-SEPs on terms that don't meet Apple's strategic needs. At the same time, Google wants to get away with Android's proven wide-ranging infringement of third-party rights, and it either wants to get so much leverage out of Motorola's SEPs that it can solve the problem through a cross-license on favorable terms or it wants to at least create a situation in which non-SEPs are subjected to pretty much the same enforcement restrictions as SEPs. Either way, Google could neutralize Apple's patents. They can meet at a dozen roundtables and still won't agree. Those are just two of the companies involved, but their diametrically-opposed strategic interests show that even the most skilled dealmakers wouldn't be able to broker an agreement.

Consensus won't resolve this fundamental conflict. All of these companies just do what they believe is best for their shareholders. The courts and the regulators have to apply the law with a view to overarching policy goals. It wouldn't make sense to base any decisions on one's vision for the smartphone industry -- standards are relevant beyond this one field. One of the speakers told the story of how sun time had to be replaced with standardized time in order to have reliable railroad schedules. The following was not said by the aforementioned speaker, but just imagine for a moment what would have happened if the owners of essential patents had been able to prevent their rivals from measuring, communicating and processing standardized time. With such non-smartphone standardization issues in mind, it's not hard to see that the positions advocated by Apple in a letter to ETSI last year and indirectly endorsed by Judge Posner this year are, for overarching reasons, in the public interest, regardless of whether one agrees with Apple's enforcement of non-standard-essential patents against its Android rivals.

Even if it's impossible to find common ground, meetings like today's ITU roundtable serve various useful purposes. The quality of the presentations I saw was really high. But a roundtable is not a substitute for the court decisions that will have to come down in the months and years ahead, or for decisive regulatory action. While I was watching the debate, I was thinking that some of the participants may recycle parts of today's manuscripts and slide decks further down the road if, for example, the European Commission conducts hearings on some of the pending SEP antitrust cases. If it gets to that point, a decision in favor of one position or another will come down. There were no winners or losers today because they all contributed to a timely, well-organized and informative event. In a way, today's winner was the ITU.

[Update] At the press conference it was explained that a working group is going to have a number of informal meetings ("they can meet as often as they need") over the next 12 months or so to develop proposals. The contentious nature of SEP injunctions and the "R" in FRAND was confirmed, but the ITU considers itself uniquely positioned, thanks to its vast experience in resolving global issues, to provide a forum in which a constructive exchange of thoughts may lead to a compromise. That said, I still believe that judicial and regulatory decisions will be needed. [/Update]

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Monday, July 9, 2012

UN agency ITU to hold high-level talks on standard-essential patent litigation in October

On Friday (July 6, 2012), the International Telecommunication Union (ITU), which is the United Nations specialized agency for information and communication technologies, announced that it "will host a high-level roundtable discussion between standards organizations, key industry players and government officials at ITU headquarters in Geneva, on 10 October 2012".

The ITU is well aware of what's going on in the industry and says that "[t]he ITU Patent Roundtable will address the worldwide surge in patent litigation and the growing lack of adherence to standards bodies' existing patent policies." The specific topics to be addressed "include potential improvements to existing policy frameworks, entitlement to injunctive reliefs, and definitions of what constitutes a royalty base". While I haven't said much so far about potential improvements to policy frameworks (since my focus has recently been almost entirely on litigation monitoring), the issues of injunctive relief over standard-essential patents and of an appropriate royalty base have come up here on numerous occasions. Five months ago I published an Apple letter to ETSI (the European Telecommunications Standards Institute) and commented on the issues Apple raised inthat letter. They are pretty much the same ones that the ITU is going to discuss with stakeholders.

You can find the full text of the ITU's press release here. Below the announcement and the contact data of the ITU's press department, you can find a selection of quotes that the ITU provided to the press along with its announcement. I was proud to be asked to contribute one as well. The organizations quoted by the ITU are literally from all over the world.

The ITU has previously been mentioned on this blog in connection with the H.264 video codec standard, one of the standards at issue in ongoing FRAND patent litigation that Google subsidiary Motorola Mobility is pursuing in the United States and Germany. The FRAND pledge by Motorola that is at issue in those H.264 disputes was actually made to the ITU.

The BBC, Computerworld and the IDG News Service, and many other media, have already reported on this ITU initiative. In addition, I wanted to promote it here because I count many industry stakeholders among my esteemed readers.

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