Posts in Licensing

On April 27, a pair of legal measures were advanced within the European Union that promise to greatly impact the state of technological commercialization within Europe for both standardized and artificial intelligence (AI) technologies. While political leaders in the EU maintain that either proposal addresses consumer safety and competition concerns, multiple commentators have pointed out issues that could slow the rate of technological commercialization to the detriment of Europeans across the continent.

The European Union is reportedly considering sweeping new regulations for the licensing and litigation of standard essential patents (SEPs), which make fair-minded observers wonder whether any sane adults are in charge at the European Commission (EC). The EU’s proposed new regulatory regime is scheduled to be released on April 26 by the Directorate for the Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) of the European Commission (EC). And recently leaked drafts suggest that proposal will contain sweeping new regulations that will effectively put an end to the licensing and litigation of SEPs as it exists today.

There are often situations where a company has come into contact with intellectual property that it cannot allow to spread to a product in development. One example is a joint development project between two companies where the IP for the jointly developed product cannot seep into other products but where each company must develop products that interface with the jointly developed one. This situation can occur when groups create standards that involve IP from various sources.

In late March, news broke that the European Commission was drafting sweeping regulations on the licensing of standard essential patents (SEPs). Commentators predict the draft will be released in late April and, although this is an early draft that will likely evolve, below we offer the following initial observations. In its current form, the new regulatory framework would encourage increased transparency in SEP licensing through several new policies and procedures. In particular, the regulations would establish a “competence center” at the European Union Intellectual Property Office (EUIPO) to act as a sort of clearinghouse for SEP issues (both technical and economic). The EUIPO does not currently have patent expertise; EP patents are the purview of the European Patent Office (EPO), which is separate from the European Union and includes non-EU members.

Just when you think you have enough things to worry about, you stumble  upon  one more. In its wisdom, Congress enacted a “Medicare Drug Price Negotiation Plan” as part of the Inflation Reduction Act. The program kicks in by imposing “maximum fair prices” for drugs as determined by the Centers for Medicare & Medicaid Services (CMS). In setting these prices, Congress included such factors as the R&D costs for each drug and whether they have been recovered and the current cost of producing and distributing the drug in question. But it was the third criteria which caught my eye—“Prior Federal financial support for novel therapeutic discovery and development with respect to the drug.”

The European Union is considering a new regulatory regime for the licensing and litigation of standard essential patents (SEPs) that will destabilize the global telecommunications market. This proposed regulatory regime is unbalanced in favoring implementers over innovators, and thus it threatens to hamstring the explosive technological and economic growth in this vital sector of the modern innovation economy. Although the EU has finally awoken to the competitive and geopolitical threat posed by China, this regulatory proposal undermines efforts by the EU and the United States to sustain their global technological leadership.

The simplest facts are sometimes the most difficult to comprehend. Patent suits are not as pervasive as they are portrayed in the media or by defendants. Remarkably few are filed relative to the number of patents that are active. The necessity to litigate patent disputes to get the attention of potential infringers and hold a meaningful licensing discussion has likely increased the total number of suits filed. If it has, it has not had much of an impact on the net total. This suggests that many patent holders who should be suing are not.

In commercial contracts, especially with foreign entities, it is very common to agree on arbitration as a dispute resolution method. A typical arbitration agreement specifies arbitrable matters, arbitration institution, place of arbitration, and arbitration rules. In crafting an arbitration agreement, especially when the arbitration clause is embedded in the main body, contracting parties normally write into the contract the applicable law and dispute resolution authority for the main contract, but rarely do the same for the arbitration agreement itself in addition to the main contract. In general, if a dispute involves issues surrounding the validity (or arbitrability) of an arbitration clause, whereas the arbitration agreement does not provide anything about arbitrability, two questions may come up in practice: (1) what is the applicable law on resolving the arbitrability issue? (2) who has jurisdiction over the arbitrability issue – a court or an arbitration institution?

Perhaps after their favorite theory was blown apart again, as it has been every time it’s been trotted out over the past 20 years, the critics of the Bayh-Dole Act learned a painful lesson. Their carefully constructed thesis that the law contains a hidden provision allowing the government to set prices on successfully commercialized products has been summarily rejected by every Democratic or Republican Administration which has considered it. They say the definition of insanity is doing the same thing repeatedly while expecting a different result. But that didn’t keep the proponents from refiling the same petition which was rejected three times in the Obama-Biden Administration. So once again, the National Institutes of Health (NIH) denied the request that it should “march-in” under the law against the prostate cancer drug, Xtandi, because critics felt it is not “reasonably priced.” Apparently, the petitioners thought that the fourth time would be the charm. Now they know better. And this time, NIH included a subtle, but fatal blow to attempts to go down this path again.

Standard-documentation from online sources maintained by standard setting organizations (SSOs) is usually an important source of relevant prior art. Such prior art can include technical specifications, technical reports, change requests, liasioning statements, work item descriptions, study documents, recommendations and RFCs. However, accessing this documentation available in SSO websites is often not easy.

In Part I of this two-part article, we provided an analysis of the Wi-Fi 6 litigation and technology landscape. This Part II discusses important changes to the IEEE rules governing the reasonable and non-discriminatory (RAND) licensing encumbrances on SEPs held by participants in IEEE standardization work. Unfortunately, these rule changes fall short of clarifying what RAND means for Wi-Fi licensors and implementers. Instead, fueled by Wi-Fi 6’s growing valuation and adoption of heavily patented core technologies from LTE and 5G, the rule changes arguably will only heat up the current litigation trend.    

Lenovo has been ordered to pay InterDigital a lump sum of $138.7 million for a global FRAND (fair, reasonable and non-discriminatory) license covering sales of cellular devices from 2007 to December 31, 2023, in the second full FRAND trial to be decided by the UK courts, following the landmark Unwired Planet case. (Interdigital Technology Corporation & Ors v Lenovo Group Ltd (FRAND Judgment – Public Version) [2023] EWHC 539 (Pat).) In his redacted judgment published on March 15, Mr. Justice Mellor found that neither InterDigital’s August 2021 license offer (which amounted to $337 million) nor Lenovo’s counter offer (which comprised a lump sum of $80 million +/-15% for all sales in the six-year term to the end of 2023 with a full release for all past sales for no additional consideration) were FRAND or within the FRAND range.

Wi-Fi 6 shares new technologies with LTE and 5G that are subject to heavy patenting. The firms and institutions that currently monetize their standard essential patents (SEPs) against LTE and 5G will likely be looking to increase their royalty income from Wi-Fi 6 and 6e. This could mean that the recent disputes over LTE and 5G standardization participants’ fair, reasonable, and non-discriminatory (FRAND) SEP licensing commitments will spill over into Wi-Fi. Current Wi-Fi litigation trends suggest that this is already afoot, and the recent licensor-friendly changes in the IEEE IPR rules are feared to only fuel this trend.

Artificial Intelligence (AI) is providing enormous productivity and increased value in many applications. But AI is no panacea and is not yet sufficiently well developed to be precise or dependable everywhere. For example, much better AI training data is required to reliably estimate patent essentiality to standards such as 4G and 5G, where AI is being advocated by various experts and has already been adopted by one patent pool. There is also a lot of room for improvement in inferencing.