Competition, Intellectual Property and Standard Setting

OECD Competition Policy Roundtable - 17 December 2014

Antoine Dore

Senior Legal Officer

International Telecommunication Union

Overview of Discussion

Why are policy makers

interested in ICT standardization?

The ICT standardization

landscape

A closer look at ITU’s patent

policy

Specific issues with standards

and patents

Uptake in Mobile Communications • 7.1 billion mobile subscriptions by end of 2014

• More than 50% in APAC (3.47 B); then Africa (880 M) and LATAM (720 M) • No. of mobile subscriptions = world’s population, but digital divide still

exists as no. of subscribers (4.6 B) is lower than no. of subscriptions (7.1 B)

• 9.5 billion mobile subscriptions by 2020

• 90% of world pop. over 6 years old will have mobile phone by 2020

• Global mobile penetration reached 95% in 2014

Source: Ericsson Mobility Report – June 2014

Driving Factors in Mobile Growth

• 4G and soon 5G

• Social media

• News

• Advertising

• YouTube, Netflix, Hulu

• ITU-T’s H.264 / H.265 video codecs

• 80% of Internet video traffic compressed / decompressed using these standards

• Bigger screens

• Higher resolutions

New Devices

Better Techno-

logy

Faster Network Speeds

More (Video) Content

Flip Side of the Coin: Decline of Fixed Telephony

• Decline in fixed telephony in all regions of world in 2014, and especially in developing countries

• Fixed-telephone penetration will drop to 1.1 billion subscriptions by end 2014 (lower than at turn of 21st century)

28 Billion “Things” Connected by 2020

• ICT devices present everywhere

• 5 key “connected” sectors: • Wearables (e.g.,

health and fitness devices)

• Cars

• Homes

• Cities

• Industries

Many Standards – Many Standards Bodies

ITU develops voice and video standards

3GPP develops standards for the radiocommunication between the

mobile phone and the network

IEEE develops Wi-Fi standards IETF develops internet protocols

such as TCP/IP and HTTP

Smartphone

Different standards bodies and their resulting standards

Standards-setting entity Produces Examples

Single companies ‘Proprietary specifications’. Standards that evolve from a specific

company or vendor.

Formal standards-developing organizations

(SDOs)

‘Open standards’ (which can become ‘de

jure standards’ if their implementation is

mandated by law).

ITU, ISO, IEC, ETSI, various national

standards bodies, etc.

Forums and consortia (quasi-formal SDOs) Typically, open standards, but may produce

closed standards, depending on the

organization in question.

IETF, Broadband Forum, W3C, Bluetooth

consortium, OASIS, etc.

Possible advantages and disadvantages of standards

Possible advantages

•Encourage innovation and competition

•More suppliers; lower risk for one-supplier dominated

markets

•Lower switching costs

•Easier evaluation of offerings

•Facilitate interoperability - easier combination of products or

services

•Easier interchangeability of products or services

• Increase cost efficiency

Possible disadvantages

•Transfer power to participants in the standardization process

•Less diversity between technical approaches, particularly early

in product life cycle

•Biased to large vendors

•Biased to large purchasers

•Protect markets by obstructing their access

•Hamper competition through a reluctance to adopt new or

improved standards

Examples of patent statements per standard

Standard Number of patent statements

2G +7’400

3G +16’000

4G +3’800

H.264 +1’600

Wi-Fi +400

A closer look at ITU’s patent policy

Early disclose of SEPs

Whom?

When?

What?

How?

Specific issues with patents in standards

Non-discrimination

• The non-discriminatory prong of the RAND commitment prohibits discrimination.

• Certain companies have taken the position that providing “access” to the standard via licenses to one level of the supply chain is permissible whereas other companies object to this type of selective licensing practice.

Meaning of reasonable in RAND

• The first prong of the RAND commitment requires an SEP holder to license on reasonable terms and conditions

• The meaning of reasonable is not defined in most RAND-based patent policies

• Possible principles and guideposts

• Separating the value of the patented technology from the value of standardization

• Royalty stacking and aggregate reasonable royalties

• Royalty base

Availability of injunctive reliefs for RAND-encumbered SEPs

• National laws provides the framework to determine when injunctive relief is an appropriate remedy for patent infringement.

• Certain stakeholders believe that injunctive relief for RAND-encumbered SEPs are never appropriate and may lead to patent hold-ups.

• Other stakeholders argue that the threat of injunction is necessary to provide incentives for negotiations and avoid reverse hold-ups.