Presented by: For:

© ETSI 2018August 29, 2018

The views expressed are personal to the speaker and do not necessarily represent those of ETSI

“The efforts of SDOs to improve SEPs governance”

Christian Loyau International Symposium on Standard Essential Patent 2018 -Organized by Chinese Academy of International Trade and Economic Cooperation, MOFCOM ChofnIntellectual Property Research Institute

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Agenda

I. Presentation of ETSI

II. Governance of ETSI

III. Should a better SEPs governance not start with more accuracy ?

IV. ETSI and FRAND

V. Standardization, patenting, licensing and disputes are international

Court decisions are national

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Presentation of ETSI

ADD SECTION NAME

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ETSI

ETSI is a non profit organization submitted to French lawsLocated in Sophia Antipolis

Produces standards in support of European Union legislation, e.g.- Radio- e-ID - e-Signatures- Security- Accessibility

Produces globally applicable standards

Contributes to ICT radio frequency requirements to the European co-ordination process

EC and EFTA are Counsellors of ETSI

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Membership

• Over 850 organizations from 68 countries on 5 continents

• Manufacturers, network operators, service and content providers, national administrations, ministries, universities, research bodies, consultancies, user organizations

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3 European Standardization Organizations (I)

3 Standardization Development Organizations recognized by the EC Regulation (EU) No 1025/2012 called European Standardization Organizations ESO:

ETSI : responsible for producing globally-applicable standards for information and communications technology (ICT) including fixed, mobile, radio, converged, broadcast, and internet technologies.

CEN : responsible for producing standards for various types of products, materials, services, and processes including air and space, chemicals, construction and more.

CENELEC : responsible for producing standards in the electro-technical engineering field.

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3 European Standardization Organizations (II)

A harmonized standard is a European standard developed by a recognized European Standards Organization: CEN, CENELEC, or ETSI.

It is created following a request from the European Commission to one of these organizations.

Manufacturers, other economic operators, or conformity assessment bodies can use harmonized standards to demonstrate that products, services, or processes comply with relevant EU legislation (New Legislative Framework).

The use of these standards remains voluntary.

Manufacturers, other economic operators, or conformity assessment bodies are free to choose another technical solution to demonstrate compliance with the mandatory legal requirements

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Similarities & differences

Vie

nn

a,1

99

1

(>3

0%

)

Fran

kfu

rt,

20

16

(>7

5%

)

National standards bodies

Businesses, Industry federations

Industry (80%)Public sector, users, R&D… (20%)

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The 3GPP Eco-system

ITU-R/T

Reference to 3GPP specs

SDO Partners govern the project & transpose 3GPP

specs locally

Cross referenceDirectRequirements

JapanEU Korea China North America

3GPP Market Partners

Terminal certification based on 3GPP specs

India

5G Projects

Requirements via

Member contributions

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3GPP participation

• ~400 Companies from 39 Countries

• 50.000 delegate days per year• 40.000 documents per year• 1.200 specs per Release• New Release every ~18 months

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Governance of ETSI

ADD SECTION NAME

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ETSI Governance

GENERAL ASSEMBLY

BOARD

FinanceCommittee

IPR SpecialCommittee

OCG

Technical Committees Projects

Special Committees

Partnership Projects

IndustrySpecification

Groups

Operation Co-ordination Group

Intellectual Property Rights

EMTEL, SAGE,User Group

3GPP, oneM2M

At all levels, consensus is the preferred way –majority of 71%

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ETSI Governance : Top down structure

Statutes

Rules of Procedure (including the Annexes)

Guidelines for the implementation of Annex 2 of the RoP*

Powers & Functions delegated to the board

Financial Regulations

T&C of the Finance Committee

Guide on IPRs

Guide on Antitrust Compliance

Board working procedures

T&Cs of the OCG

Guidelines on titles

Technical Working Procedures

Information Policy

ETSI Drafting

rules

GA Specially Convened Meeting (SCM)**

GA Ordinary Meeting

Board

Director-General

* Annex 2Contributions to the ETSI budget

** GA SCMChange of Statutes & RoPs

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Communication from the Commission of 29.11.2017 on Transparency

“The Commission:

- calls on SDOs to urgently ensure that their databases comply with the main quality features described above and will co-operate with SDOs to facilitate this process;

- calls on SDOs to transform the current declaration system into a tool providing more up-to-date and precise information on SEPs and will co-operate with SDOs in order to facilitate that process;

- considers that declared SEPs should be subject to reliable scrutiny of their essentiality for a standard, and will launch a pilot project for SEPs in selected technologies with a view to facilitating the introduction of an appropriate scrutiny mechanism.”

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Should a better SEPs governance not start with more accuracy ?

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ETSI IPR Policy - SEP

ETSI IPR policy ; annex 6 of the Rules of Procedures – 2 definitions of the Policy

IPR ; “shall mean any intellectual property right conferred by statute law including applications therefore other than trademarks. For the avoidance of doubt rights relating to get up, confidential information, trade secrets or the like are excluded from the definition of IPR.”

Essential; “as applied to IPR means that it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally available at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or operate EQUIPMENT or METHODS which comply with a STANDARD without infringing that IPR. For the avoidance of doubt in exceptional cases where a STANDARD can only be implemented by technical solutions, all of which are infringements of IPRs, all such IPRs shall be considered ESSENTIAL.”

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Declaration of SEP

Article 4.1 of the ETSI IPR policy

4.1 “Subject to Clause 4.2 below, each MEMBER shall use its reasonable endeavours, in particular during the development of a STANDARD or TECHNICAL SPECIFICATION where it participates, to inform ETSI of ESSENTIAL IPRs in a timely fashion. In particular, a MEMBER submitting a technical proposal for a STANDARD or TECHNICAL SPECIFICATION shall, on a bona fide basis, draw the attention of ETSI to any of that MEMBER's IPR which might be ESSENTIAL if that proposal is adopted.”

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IPR Information Statement Annex

STANDARD, TECHNICAL SPECIFICATION orETSI Work Item

ProprietorApplication

No.Publication

No.

Patent/Application Title

Country of registration

FURTHER INFORMATIONOther members of this PATENT FAMILY, if any

Project or Standard

name

Work Item orStandar

d No.

Illustrative Specific part

of the standard

(e.g. section)

Version* (V.X.X.X)

Application No.

Publication No.Country of registration

e.g. UMTSETSI TS 125

2156.1.1.2 V.3.5.0 Abcd EP 1131972

Scheduling of slotted-mode related measurements

EPC contracting states

AU 12740/00 AustraliaCN 99813100.8 China P.R.

FI 108270 FinlandJP 11-318161 JapanUS 6532226 USA

Not mandatory but freely used * normalized version when used

Mandatory Not mandatory but rarely used Not mandatory but used

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Current Status of the ETSI IPR database (I)

2011 2012 2013 2014 2015 2016 2017 2018(07/18)

Number of declarations 141 145 181 199 142 136 244 144

Number of Patent Families

2620 2687 2125 2399 2033 2088 5578 3891

Distribution of declarations/patent families over time (absolute and aggregate)

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Current Status of the ETSI IPR database (II)

Number of ISLD Declarations and disclosures where the couple patent number, standard number is complete

Declarations Disclosures

Total 1332 35139

Complete (filter applied) 34402

Rate 98 %

Number of ISLD Declarations where the patent number, standard number is complete and at least one reference is provided in the field “Illustrative specific part”

Declarations Disclosures

Total 1332 35139

Complete (filter applied) 8860

Rate 25 %

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What could be done ?

What ETSI could do

Patent application : Declared patent application may not be the same as the published patent

Reasonable endeavors : Can imply to more than less declarations – over declaration issue

Timely fashion : Tricky concept – at the start ? at the end ?

Essentiality : Review of declared SEPs before publication of the standard

Illustrative part: Link between the claim of the SEP and the section of the standard

What other could do

Essentiality : Voluntary essentiality check by independent organization

Invalidity : Information provided by courts - European patent straightforward -National patent more difficult

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ETSI & FRAND

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Communication from the Commission of 29.11.2017 on General Principles for FRAND Licensing terms for SEPS“In view of current developments, the Commission considers that SEP licencing should be based on the basis of the following principles:

- There is no one-size-fit-all solution on what FRAND is: what can be considered fair and reasonable can differ from sector to sector and over time. Efficiency considerations, reasonable licence fee expectations on both sides, the facilitation of the uptake by implementers to promote wide diffusion of the standard should be taken into account.

- Determining a FRAND value should require taking into account the present value added of the patented technology. That value should be irrespective of the market success of the product which is unrelated to the value of the patented technology.

- In defining a FRAND value, parties need to take account of a reasonable aggregate rate for the standard.

- The non-discrimination element of FRAND indicates that right holders cannot discriminate between implementers that are 'similarly situated'.

- For products with a global circulation, SEP licences granted on a worldwide basis may contribute to a more efficient approach and therefore can be compatible with FRAND.

The Commission calls on SDOs and SEP holders to develop effective solutions to facilitate the licensing of a large number of implementers in the IoT environment (especially SMEs), via patent pools or other licensing platforms, while offering sufficient transparency and predictability….”

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Fair Reasonable And Non Discriminatory

• Patent protection & open standardization serve innovation but can be conflicting

• No priority can be given to any of the principles of either system

• Therefore ETSI is eager to maintain the balance

• FRAND purpose : 1) incentivize and include top technologies with a fair RoI and

2) make innovation open and attractive with a large dissemination based on fair access conditions

• Freedom to contribute by the members + FRAND license commitment => business neutrality of ETSI

• No involvement of ETSI in commercial discussions between members => no contractual definition of FRAND in the IPR policy

• Courts begin to define FRAND but no harmonized decisions

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Patent pools

• Agreement between two or more patent owners to license one or more of their patents to one another or to third parties

• Positive effects on competition and innovation. By sharing IPRs /SEPs, patent owners may develop new products and reduce their transaction costs and give easier access to implementers.

• Negative effects cartel risk ; patent pools may provide an opportunity for a possible anti-competitive behavior: like any cooperation among competitors, they involve an inherent risk of collusive behavior.

• From an SDO prospective ; (serious) essentiality check is/should done by the patent pool

• From an implementer prospective ; single license contract for a bundle of patents “one-stop shopping”

• From a patent owner prospective ; cost reducing effect and higher transparency

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Standardization, patenting, licensing and disputes are international – Court decisions are national

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Communication from the Commission of 29.11.2017

“3.4. ALTERNATIVE DISPUTE RESOLUTION

The Commission takes the view that alternative dispute resolution (ADR) mechanisms such as mediation and arbitration can offer swifter and less costly dispute resolution. While there can be no obligation for parties to use ADR, the Commission believes that the potential benefits of this tool are currently underexploited.

Recourse to ADR is often hampered by unpredictability and criticised for lack of transparency of previous decisions. The success of such mechanisms depends not only on appropriate procedures, but also on the quality of experts. When it enters into operation, the Unified Patent Court should provide a dedicated arbitration and mediation centre benefitting from a pool of specialised judges, thus ensuring high quality and efficient proceedings, coherent practice and limited scope for forum shopping. As announced in its November 2016 strategy on IP for SMEs, the Commission is, together with the EUIPO, mapping IP mediation and arbitration tools with the view to facilitating the further roll-out of IP mediation and arbitration services, for SMEs in particular.

The Commission considers that the outcomes of disputes should also be included in SDOs' databases as mentioned in the chapter on transparency.”

ADR

• Mediation

Senior executive to bepresent

Single proceeding withdetermined law/Intl.

Expertise of arbitrators + Experts

Possibility to seekcourt orderedinjunction

Inter partes decisionabout validity and/or of SEPs

Limited appeal => quick result

Final and enforceabledecision(New York convention)

Proceedings & awardconfidential

• Arbitration

TRIAL

Patent owner

Self declaring SEPs to ETSI => irrevocable

commitment to FRAND licensing

Implementer

Dispute about SEPs portfolio and/or its

value and/or FRAND T&Cs

SEPs portfolio available for

license to practice the

standard

Successful negotiations

=>

FRAND agreement

Injunctive relief/Damages

Portfolio/Validity/Essentiality of SEPs ?

Forum shopping

Full disclosure of evidence to the parties

Appeal

Duration

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Different options chosen by Courts

• Patent vs. Patent portfolio

• Single rate vs. range of rates

• Top-down approach (determination of the aggregate royalty that should be paid for all SEPs covering a particular standard, and then allocation of an appropriate portion of the total to the asserted SEPs) vs. bottom-up approach (assess the value of asserted SEPs in isolation by using comparable license agreements)

• Royalty base (Entire Market Value Rule vs. Smallest Salable Patent Practicing Unit )

• Patent counting vs. individual valuation

• Ex ante (SEP royalties should only reflect the value before the standard is widely adopted in the market) vs. ex post

• TCL vs. Ericsson – Unwired Planet vs. Huawei

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Thank you for your attention

Christian Loyau

christian.loyau@etsi.org

M:+33(0)698692042

“The worst form of inequality is to try to make unequal things equal.“

Aristotle

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Improvement of SEP governance- some legal views

Irrevocability of the FRAND undertaking and change of circumstances related to improvement of the governance of SEP

Would the improvement of governance of SEPs by a change of the IPR policy creates a situation that provides for the unenforceability of a FRAND commitment due to fundamentally changed circumstances ?

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“rebus sic stantibus”

In business relations when a supervening change of circumstances impacts the parties to a contract although the performance does not become impossible, it may be difficult . The considerations on which consent were originally based may fall away.

SEP holders take an irrevocable undertaking to grant irrevocable licences on FRAND T&Cs under a specific and defined IPR policyThere is no caveat clause “rebus sic stantibus” (“things standing thus”) in the IPR policy which contractually commits the IPR holder.

Would a substantial change of the previous specific and well defined IPR policy which has not been adopted by consensus, be considered as a change of circumstances that would have led the IPR holder to not take such irrevocable commitment ? In other words could the IPR holder evoke article 1195 of the French civil Code if the improvement of SEP governance overthrows the economy of the contract ?

Article 1195 provides that if a change in circumstances which could not have been predicted at the time the contract was entered into renders performance of the contract excessively onerous for a contractual party who had not assumed such risk, such party may request its counterparty to renegotiate the contract. The requesting party must continue to perform its obligations during the renegotiation. In the event of refusal of the other party to renegotiate or in the event that the renegotiation is not successful, the parties may agree to terminate the contract on the date and on the conditions determined by the parties, or mutually request thejudge to adapt the contract. Without an agreement within a reasonable time period, the judge may, at the request of a party, revise the contract or terminate it. Because the article expressly states that it does not apply to a party who has assumed the relevant risk, it is likely that parties to French law contracts will henceforth include language specifically stating that risk of “hardship”.

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Improvement of SEP governance

What could be improvement for some could be detrimental for others and vice versa.

Therefore only consensus * by all members has to be achieved for any change in the governance of SEP modifying the IPR policy as it would be similar to a contractual amendment.

* Consensus as defined in ETSI and ISO: General agreement, characterized by the absence of sustained opposition to substantial issues by any important part of the concerned interest and by a process that involves seeking to take into account the views of all parties concerned and to reconcile any conflicting arguments