David Kappos Reflects on the Developing Landscape for SEPs at IPWatchdog’s SEP2020

“Nine firms in 3G/ 4G made over 10,000 contributions that were responsible for 80% of the contributions, when there are literally hundreds and hundreds of firms taking advantage of the standards. That’s not to say anyone’s a bad guy or a good guy, but just to add, facts matter. I hope we’re rediscovering that right now, and these are facts that we all need to be aware of.”

On day one of IPWatchdog’s SEP2020, keynote speaker David Kappos told IPWatchdog President and CEO Gene Quinn that the IP community should not panic about what a Biden administration might mean for standard essential patents (SEPs), or IP more broadly. “I have reason to believe we could see a positive continuation of what we’ve seen in recent years,” Kappos said.

“President-Elect Biden comes from a background where he under[stands] IP. I worked with him on IP issues under the first Obama administration and he demonstrated an appreciation for the balance that involves intellectual property. He comes from a state – Delaware – that means business about IP, with a strong specialty chemicals industry in that state, and a strong patent jurisprudence.”

Additionally, Biden would have people like Senator Chris Coons (D-DE), who has been “an extremely strong advocate for strong intellectual property,” around him, Kappos said. “I have a tremendous faith in [Coons] as a force for making sure we continue going in the right direction,” Kappos added.

Kappos was addressing Quinn’s question about the fate of protection for SEPs under a new presidential administration, considering all of the positive changes people like Assistant Attorney General of the Antitrust Division of the U.S. Department of Justice (DOJ) General Makan Delrahim have made for SEPs under the present administration. Kappos focused his keynote remarks – titled “On a Roll: The Developing Appreciation for the Intrepid Resolve and Towering Contributions of SEP Innovators” – on the changing landscape of IP protection for SEPs in recent years, which has improved in part due to decisions made by Delrahim, who Kappos explained took SEP policy from a “Retro Jefferson” to a “New Madison” approach (terms coined by Delrahim in 2018 remarks).

While the Retro-Jefferson Approach to SEP policy taught that patent “hold up” – in which SEP owners allegedly charge unreasonable, non-FRAND licensing fees for standard-essential technology ­– was a key underlying concern and that regulators need to curb patentee power, the New Madison Approach teaches that hold-out  – in which potential licensors collude to hold out for cheaper licensing terms – is a far bigger problem than hold-up and, in any case, that hold-up should not be governed by antitrust law, but by contract law.

Kappos has spent years researching the data on SEPs, and said the reason hold-out is a bigger problem comes down to simple math. “There are many, many, many more implementers than innovators in standard setting, and that plays out in the data,” Kappos explained.

He continued: “Nine firms in 3G/ 4G made over 10,000 contributions that were responsible for 80% of the contributions, when there are literally hundreds and hundreds of firms taking advantage of the standards. That’s not to say anyone’s a bad guy or a good guy, but just to add, facts matter. I hope we’re rediscovering that right now, and these are facts that we all need to be aware of.”

One of the pillars of Delrahim’s New Madison Approach was the “welcome new” Joint Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (“2019 Joint Policy Statement”) issued by the DOJ, the United States Patent and Trademark Office (USPTO) and the National Institute of Standards and Technology (NIST), which replaced the 2013 Joint Policy Statement­­—a document Kappos was heavily involved in creating. “You learn things in five to six years, and what we learned was that the things we thought were problems in 2012, when the former policy was devised, were not problems,” Kappos explained.

At last year’s IPWatchdog Patent Master’s Symposium: “Standard Essential Patents: Striking a Balance Between Competition and Innovation,” Kappos elaborated on that point, recalling that he signed off on the 2013 Joint Policy Statement, felt it was thoughtfully and heavily negotiated and edited, a good document and a compromised agreement, but said that he stepped back after Delrahim’s announcement in 2018 that he planned to withdraw from the Statement, and reconsidered his view. “I was defending the IP system given everything we knew at the time,” Kappos said. “I didn’t think the guidelines were anti-innovation; I thought they were balanced. But in stepping back, I realized—between 2013 and 2019 we’ve learned a lot. Multiple empirical studies have shown us that the phenomena on which we based the guidelines — hold-up and royalty stacking — aren’t occurring. There is no evidence of our predictions.”

Importantly, said Kappos, the new Policy Statement reasserts the primacy and opportunity of patent holders to obtain injunctive relief, along the lines of the situation in other countries, such as Germany and China.

Despite Kappos’ admiration for Delrahim’s efforts over the last few years to improve the SEP landscape, he remains optimistic that a new administration will continue the trend. Kappos told Quinn and SEP2020 attendees that he has been involved in “input” to the transition team suggesting that the new administration “convene what one might call a Blue Ribbon Commission on a national innovation strategy, along the lines of the commission that led to the formation of the Federal Circuit and Hatch-Waxman Act.”

The commission would aim to provide balanced innovation incentives and would ideally be chaired by the vice president or secretary of commerce, with CEO input from companies of all sizes and all sectors of the innovation economy. “I personally think that would be a great step; it’s time for our country to have a cohesive national innovation strategy,” Kappos added.

Listen to Kappos’ full remarks by registering for free here, and join IPWatchdog on November 17 for day two of SEP2020.




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One comment so far.

  • [Avatar for Valuationguy]
    November 11, 2020 08:11 am

    Far be it from me to point out that Biden owes MORE political capital to Google for its $billion plus in election support (in terms of actively biasing of search results and active censoring in this election) than even Obama did….yet Obama in essence rented the PTO to Google (and BigTech) during his admin by putting Google personnel in charge there.

    Combine that with Biden’s history of backroom deals….and you’re going to have a hard time convincing any non-Big Tech inventors and investors that Biden’s connections with Delaware portend a continuation of the normalization of patents started under Iancu.

    Gene knows Kappos as a person much better than I do…but I have an extremely hard time believing that Kappos is serious about these statements….as it strikes me as more of a rearguard action to prevent inventors and investors from ramping up their Congressional lobbying efforts to FORCE normalization of patent rights (not that I see that having much real effect unless we have major surprise shifts in makeup of the Judicial committee of the House in January).