Development of innovative new standards jeopardised by IEEE patent policy
In March 2015, IEEE significantly
amended its patent policy in what was couched as an “update” but that seeks to significantly
revise commitments from parties holding patent claims essential to IEEE standards
to license those rights on reasonable and
non-discriminatory (RAND) terms. Changes disallow patent holders from receiving
any value attributable to the standards, require licensing at the smallest
saleable patent practicing unit level, and deny these rights holders
entitlement to seek an injunction against an unlicensed implementer until
appellate review is exhausted. IEEE’s
stated objective was to protect implementers from patent holdup, which was alleged
without any substantiation.[1]
IEEE is promoting, by reducing
technology licensing costs, the short-term interests of certain implementers while
undermining standard-essential patent values and the ability of SEP owners to
receive adequate compensation, they are entitled to, from licensing their SEPs.
As I predicted in the IP Finance blog prior to the adoption
of this controversial new patent policy,[2]
and as indicated by others including senior government officials,[3] the purported “clarification” is
significantly jeopardising the IEEE Standards Association as a venue for development
of open technology standards that include significant patented intellectual
property. Large proportions of contributors to IEEE standards are now unwilling
to provide “positive” Letters of Assurance (“LOAs”) under IEEE’s new patent
policy.
In this paper, I have reviewed available data on LOAs and
some third-party analysis of this. My conclusions are striking: almost three
quarters (i.e. 73 percent) of LOAs for the IEEE flagship 802.11 WiFi
standard, accepted by IEEE and posted on its website in the 18-month period to
June 2017, are “negative” LOAs, indicating the submitter’s legitimate ex ante refusal
to pledge RAND licensing under the new patent policy. Nearly half (i.e. 47
percent) of all accepted LOAs posted on the IEEE website over the same period
are negative LOAs. More than one third (i.e. 42 percent) of companies
portrayed as leaders with LOAs to IEEE standards are unwilling to pledge their
SEPs under the new patent policy or have not provided LOAs when asked to do so.
The new patent policy has created a perverse situation among
patent owners and implementers. In the
absence of positive LOAs, implementers are left uncertain about which patent
policy applies, if any, and about future ability to implement the standard. Therefore,
implementers may be unclear whether many SEPs are subject to new licensing
terms, the old licensing terms or are not subject to RAND licensing terms under
any patent policy at all. This is unacceptable. Proponents of the new patent policy
are also lamenting this lack of clarity, while trying to use this as a pretext
to breach binding contractual agreements between IEEE and patent owners in
previously-accepted LOAs.[4]
Source: IPlytics empirical study
report on patenting and standardisation activities at IEEE[5]
(black and green); WiseHarbor added Chart titles in bold black, identifiers and
annotations in other colours.
Orange is the successor to France Telecom.
“Not applicable:” Positive blanket LOA accepted prior to March 2015 under previous patent policy.
“Not applicable:” Positive blanket LOA accepted prior to March 2015 under previous patent policy.
Approvals for “standard-amendments” 802.11ah and 802.11ah deferred with policy impasse
There is deadlock between the two sides of this argument –
largely, patent owners who seek adequate compensation from licensing their SEPs
versus some implementers[6]
who would like to minimise their costs. Despite attempts by advocates of the
new patent policy text to portray IEEE standardization work as continuing to
proceed well, to the contrary, this is an illusion with unreconciled
differences regarding applicable patent policy and LOAs. Previous attempts to significantly
undermine rights of patent owners in other standard development organizations
(SDOs) have failed: for example; with an intellectual property rights (IPR)
policy change at ETSI in the 1990s that was abandoned before taking effect.
Unwillingness of SEP holders to pledge to the new patent
policy are delaying standardization approval decisions. IEEE seeks to approve
standards for which all known SEPs are pledged under the new patent policy with
accepted IEEE LOA forms. But it is failing in this objective with an
unprecedented high number of negative LOAs submitted and because LOAs requested
from others are not forthcoming and should therefore be regarded as “missing.” Negative
LOAs that have been accepted by IEEE are, for example, with standard-amendments
802.11ai and 802.11ah. However, numerous other prospective negative LOAs have
been rejected by IEEE because patent owners have sought to indicate – and IEEE
has refused to allow – willingness to license on a basis other than the new
patent policy, such as on the basis of the previous IEEE patent policy. With numerous
known SEPs for which there are no licensing commitments, the above amendments to
the 802.11 standard have only been “conditionally approve[d]” by the IEEE-SA’s
Standards Board.[7]
Conditional approvals are merely deferral tactics because
there can be no reasonable expectation that the LOA conditions preventing full
approval with the new patent policy will ever be met. Patent holders who have
submitted negative LOAs are not going to change their minds and replace them
with positive LOAs in the prevailing circumstances. Similarly, it seems very
unlikely that those who acknowledge receipt of a request for an LOA but refuse
to submit a positive LOA are likely to change their minds about doing so and
submit a positive LOA. Deferring full
approval until these two amendments are rolled up into the next version of the
entire standard (i.e. 802.11/D10) amounts to “kicking the can down the road.” [8]
This impasse has occurred because many contributors to IEEE
standards are, independently of each other, unwilling to pledge assurances
under the new patent policy, which was established without consensus[9]
among a closed group of interested parties. The new patent policy text is
purported to be a “clarification” of existing patent policy and not a new
patent policy — begging the question why many of the new positive LOAs
submitted merely restate previous LOAs already-submitted pursuant to the
previous patent policy needed to be submitted at all. It is, instead, increasingly
creating ambiguities and concerns that courts might interpret new conditions as
mandatory. Many patent owners are unwilling to agree to the new patent policy
because being bound by it could undermine their licensing businesses —
including pre-existing agreements.
Adjusted LOA counts have reduced
dramatically since introduction of new patent policy
The counts of submitted LOAs have been misleadingly presented
to suggest that the new patent policy is having no overall adverse effect on
licensing commitments. The numbers of accepted LOAs since the patent policy
change have been inflated by a large proportion of “duplicate” LOAs (resubmissions
of LOAs for standards for which there are already existing LOAs) that are not
required by IEEE bylaws. Instead, after some well-justified adjustments to LOA
counts for these and for negative LOAs and “missing” LOAs (in cases where IEEE
sought from a disclosed essential patent holder, but did not receive, an
accepted LOA), figures indicate that LOAs are dramatically and statistically
significantly lower since the patent policy change. This indicates major adverse
effects.
Chart 2: Rejection of
IEEE’s new patent policy is indicated by dramatic fall in positive LOAs[10]
Continuing activity in technical working groups, for now, is no assurance this will persist
Technical working group activity is continuing while
participating companies wait to see if conflicts will be resolved so that new
standards, as well as improvements and amendments to existing standards, will
be approved. However, any suggestions that the continuing rate of Project
Authorization Requests (PARs) — to commit IEEE-SA resources to new standard-development
work — indicate that all is well in IEEE standardisation are phoney. Many IEEE
projects do not include many, or even any, patented technologies: so, these
might be unaffected by difficulties with the new patent policy. The standards
that provide significant innovative value beyond compatibility are rich in
patented technologies. LOAs identify these patents, their ownership, and the
basis upon which they can be licensed. For those standardisation projects that
include significant patented technologies, it is what is occurring with LOAs,
rather that PARs, that spells trouble.
It could be several years before it is evident how much IEEE
standardisation has been harmed. For example, clarity (to implementers, in
particular) could be rapidly restored by allowing patent owners optionally to indicate
their willingness to license based on the old patent policy. Meanwhile, IEEE
standardisation work including supporting R&D and product implementation
will suffer as participants consider switching to other SDOs. By then it could
be too late to fix things.
The whole story
My entire paper can be accessed from 4iP Council's web site, here. Since its publication this month, Ron Katznelson has updated his analysis to 20th September 2017, here, as also reflected in my summary for IP Finance, above.
[1]
IEEE-SA request for business review letter, November 7, 2014; http://www.gtwassociates.com/answers/DOJ%20PDF/IEEEBRL2015/PatentHoldUpasRationaleIEEE_Bus_Review_Document_02_11072014.pdf
[2]
Keith Mallinson: IEEE will jeopardise its attractiveness as venue for standards
development if proposed new IP policies are adopted, February 6, 2015; http://www.ip.finance/2015/02/ieee-will-jeopardise-its-attractiveness.html
[3]
See e.g. Former Rep. Terry Lee, Don’t turn off Wi-FI (January 8, 2015),
available at http://thehill.com/blogs/congress-blog/technology/228817-dont-turn-off-wi-fi;
Adam Mossoff, Reality Check: Weakening Wireless Technology Patents Hurts
Everyone (RCR Wireless News, January 28, 2015) available at http://www.rcrwireless.com/20150128/opinion/reality-check-weakening-wireless-technology-patents-hurts-everyone-tag10;
Leah Nylen and Lewis Crofts, EU Warns of Impact of IEEE’s Patent Policy Change
(MLex, January 27, 2015); U.S. Senator Christopher Coons letter to U.S.
Department of Justice (14 January 2015) available at http://www.advancingengineering.org/christopher-coons.
[4]
See March 2017 slides by Gil Ohana on behalf of Cisco at http://grouper.ieee.org/groups/pp-dialog/email/pdf6eBTMFaO8V.pdf, http://grouper.ieee.org/groups/pp-dialog/email/msg00437.html
and comments in response at http://grouper.ieee.org/groups/pp-dialog/email/msg00418.html.
[6] This paper’s author recognises that a large proportion
of implementers are also patent owners.
[8] “Put off
confronting a difficult issue or making an important decision, typically on a continuing
basis.” Oxford Living Dictionaries.
[9] To mask it, in the fall of 2014, the IEEE-SA removed
the most-prominent indication of its previously long-standing principles of
consensus, due process and openness from its website. See comparative
website snapshots http://web.archive.org/web/20140723051820/http://standards.ieee.org/about/strategy.html versus new page: http://standards.ieee.org/about/strategy.html.
[10]
Standard Essential Patents – the
empirical record since adoption. Symposium on Antitrust, Standard Essential
Patents, and the Fallacy of the Anticommons Tragedy, Berkeley, CA. October 29,
2016. [Updated March, 2017 in my full report and, again, to September 2017 in this summary for IP Finance] Ron D. Katznelson, Ph.D.* http://bit.ly/IEEE-LOAs
