Wednesday 18 December 2019

Biting the hands that feed you SEP technologies

Longstanding and economically efficient balance in Standard-Essential Patent licensing is being destabilized by misinformation and manipulation of commercial practices and of benchmarks in Fair, Reasonable and Non-Discriminatory licensing. This is epitomized in litigation between Apple and Qualcomm, commencing January 2017, until settlement in April 2019 and in the US Federal Trade Commission’s antitrust action against Qualcomm also commencing around the same time and now on appeal. Many in the cellular industry—who unsurprisingly like the idea of lower prices for something they assimilate and must pay for rather than that they create or sell—have lapped this up. But that does not justify the disingenuity or negate the resulting harmful effects that undermine incentives for ongoing and long-term technology development in the mobile communication sector including 5G and the emerging Internet of Things.

“Goal: Reduce Apple's net Royalty to Qualcomm” [1]

Since the 1990s, Apple among others have taken various and elaborate steps to "Devalue SEPs." As indicated in the next three endnotes, I have analysed the failings in the first three of Apple's proposed measures for "Reshaping FRAND — Licensing, Litigation & Competition Law" including:
  • “Base = derived from smallest priceable component (i.e. baseband)”[2]
  • “Rate = no higher than adjusted pro-rata share of SEPs”[3]
  • “Control for quality, over-declaration & royalty stacking”[4]
  • “Build favorable, arms-length ‘comp’ licensees”

And, regarding the fourth measure, for example, Apple’s actions over the years in the run-up to suing Qualcomm were in “Creating Evidence” for the lawsuit so “[it]can leverage [its]purchasing power” and “captur[e]IP value with purchase power.” To achieve this, Apple “selectively filter[ed][deal-flow] pipeline to identify the most desirable deals,” it “Us[ed]Liabilities as an Asset” and “Evaluated risk, cost and use[d]as evidence… as a comparable in disputes with others.” Apple sought to “create leverage by building pressure” that would “hurt Qualcomm financially,” put “Qualcomm’s licensing model at risk” and “drive Qualcomm to engage Apple” on a significantly weakened basis.

Apple’s multi-pronged attack included coercing its suppliers—contract manufacturers Foxconn, Pegatron, Wistron and Compal—into violating supply agreements, including those forged with Qualcomm two or more years before a couple of them even started making iPhones for the launch of the very first model in mid 2007. Apple’s stipulations demanded “[CM] does not settle any such claim or allegation, or make any admissions of liability or admissions relevant to the claim or allegation (related to the Goods), or take any other action that [CM] knows or should reasonably know will harm Apple’s position(s) with respect to the claim or allegation, without Apple’s prior written permission.” For example, according to one of them: “our customer has recently [as of April 2017]requested compal to stop the royalty payment to Qualcomm.” For CMs to continue paying would have left them incurring losses by not being able to recover licensing costs along with component and manufacturing costs, as was the norm. “Apple may notify Supplier that Apple will not pay Supplier any amount attributable to mobile technology license fees at any time, and after the date of any such notification, any mobile technology license fees that Supplier pays are the sole responsibility of Supplier.”
Timeline of Contract Manufacturers’ Subscriber Unit Licensing Agreements

Unlike Apple with gross profit margins of around 60 percent on its iPhones, corresponding figures for CMs are one tenth of that and CMs typically have operating margin percentages in the low single digits. Qualcomm had been receiving licensing royalties of $7.50 per iPhone until Apple forced its CMs to stop paying. That was, for example, one fifth the cost of the camera and versus total component, assembly and test costs of $325 [Endnote 5] for the iPhone 8 Plus. The unsubsidized retail price of this model was $799. Product costs and prices are from 2017/2018 for the cheapest model with 64GB of memory.
The restrictions Apple imposed on its CMs were in overt breach of its (2013-2016) Business Cooperation and Patent Agreement (BCPA) with Qualcomm for which “Apple [was]at risk for infringement, tortious interference and full royalties (plus and interest, penalties, etc).”  The BCPA required that “Apple shall not knowingly take (or continue taking) any action against or make any demand of any Qualcomm Licensee that prevents, restricts, or discourages such Qualcomm Licensee from which it purchases Apple Devices from complying fully with the terms of such Qualcomm Licensee’s QC License Agreement.”  Apple found it “Beneficial to wait to provoke a patent fight until after the end of 2016” when the flow of all the benefits it received from Qualcomm ceased with expiration of the BCPA.

IP value is unrelated to publication medium, hardware and manufacturing costs

We all understand and accept that most of the cost for books, recorded music, and movies is for the intellectual property added rather than in the publication medium. Similarly, with generic drugs typically being 80-85 percent lower in price than patented pharmaceuticals, we recognize that most of the value in the latter before patent expiration is in IP rather than in the cost of medicine manufacturing.
The parallels among book printing, audio or video disc manufacturing and chip manufacture are closer than one might imagine. In all these cases, production plant is quite generic, typically operated by independent manufacturers and can be rapidly reconfigured to serve the needs of different customers and products. Declining manufacturing process costs including in silicon foundries have little or no relationship with costs of content or technology development elsewhere. While Taylor Swift sounds and has very different IP ownership to Black Sabbath, CD production of their respective albums is as oblivious and independent of that as is TSMC’s chip foundry to the cellular or video codec SEP ownership and to the implementation of cellular modem designs by MediaTek versus Huawei’s HiSilicon. The production of CDs and chips is, therefore, rather like printing from a commercial perspective.
So why is there such resistance to paying total royalties of no more than around five percent of smartphone costs in patent licensing fees in patent-rich devices such as smartphones?
IP costs are typically buried and invisible in technology product bills of materials. Where a manufacturing company develops its own IP for the products it produces, the R&D cost is accounted for as a fixed and sunk indirect cost—not a variable cost in production, as with the addition of a camera or baseband chip. The same accounting treatment applies when that IP value is cross-licensed to other manufacturers for net-zero or much reduced net licensing charges. In some cases, concerted action among product suppliers insists that patented and other technologies are only licensed to those who contribute their IP gratis, as is the case with open source software and some royalty-free patent pooling arrangements, as is the case with the Bluetooth Special Interest Group and with the USB Implementers Forum. They do that because costs are recovered from their financial returns on selling products and services that incorporate those technologies. It is only when that IP is procured from elsewhere in licensing for cash payments and without the quid pro quo in cross-licensing the manufactures of others that true values are revealed anywhere, such in the management or financial accounts.

Qualcomm was targeted despite and because of its superior patent strength

Apple recognised internally that “Qualcomm is widely considered the owner of the strongest patent portfolio for essential and relevant patents for wireless standards.” However, with the measures identified above, in public statements, in its litigation complaints against Qualcomm and in its sponsorship of the FTC action against Qualcomm, Apple sought to undermine SEP valuations generally. Qualcomm leads among owners of wireless SEPs and SEPs reading on other standards applicable to Apple’s products implementations. Apple recognises Qualcomm superior position: “compared to others [Huawei, Nokia, Ericsson, InterDigital and Apple], Qualcomm holds a stronger position in each of the [ WiFi, audio/video and cellular SEP] categories, and particularly with respect to cellular and WiFi SEPs”.
Apple also recognizes that Qualcomm “has significant holdings in other areas, including many areas relevant to Apple… Compared to other licensors, Qualcomm has more significant holdings in key areas such as media processing, non-cellular communications and hardware. Likewise, using patent citation analysis as a measure of thorough prosecution within the US PTO, Qualcomm patents (SEPs and non-SEPs both) on average score higher compare to the other, largely non-US based licensors.”  And yet, Apple’s much-published arguments were also that Qualcomm’s non-SEPs are not worth much.
Qualcomm’s licensing-for-money business model was the most lucrative target for Apple in potential cost savings, because licensing by Ericsson and Nokia—that used to license defensively to protect handset business downstream and still have large downstream network equipment businesses—continue to be limited—particularly by their legacy comps including extensive cross-licensing—in the extent to which they can be fully and property rewarded in cash royalties for their patent value.

Good value for money

While some OEMs have managed to “hold out” from paying their fair share in patent licensing fees, the status quo in SEP licensing under FRAND terms has worked rather well overall. For example, billions of consumers use gigabytes of mobile data per month on smartphones that are their primary or only means of internet access. In the US, consumers spend more time on their mobile devices than they do watching television, in significant part because video streaming on these devices is substituting substantially for the former. At 3 hours 43 minutes per day in 2019, the average U.S. adult spends more time using all their mobile devices (including smartphones, tablets, etc.) than they do watching television.
Apple’ CEO Tim Cook even publicly recognized the value of improvements in cellular technology. For example, in an April 2016 call to investors he said “[T]he LTE rollout with India just really began this year, and so we’ll begin to see some really good networks coming on in India. That will unleash the power and capability of the iPhone in a way that an older network, a 2.5G or even some 3G networks, would not do.”
Licensors of the standard-essential technologies that have made much of the above possible are not simply free riding on previous accomplishments in their licensing demands.  Leading SEP developers, including Ericsson, Nokia and Qualcomm in particular, have no direct share of the large mobile phone product market, which is worth nearly $500 billion annually and provides stellar profits to Apple, or of the operator services market worth $1 trillion or of the revenues Internet platforms and applications including Android, Uber and Facebook generate from mobile devices.  Consequently, these licensors need and deserve adequate compensation, by other means, for their major R&D developments in SEP technologies.
New technology developments are enabling an accelerating pace of improvements including 5G which, for example, have unlocked access to the mmWave spectrum that is providing orders of magnitude more cellular network speed and capacity than was even thought conceivable less than ten years ago when 4G was first introduced. With significant further developments still required, 5G promises so much more in ultra-reliable and low-latency communications including connections to a multitude of things as well as people.
The pace of innovation is increasing, but it is largely the same relatively few companies that make most of the technical contributions to standard setting organizations, such as 3GPP for cellular, and that file SEP declarations to the ETSI IP rights database.  Some of those companies are increasingly dependent on licensing for fees rather than selling manufactured products to make a return on their large R&D investments.

Legal tussles and consequences of Decisions

There is much ongoing legal dispute with tensions among patent law, contract law and antitrust law: in Qualcomm’s appeal to Judge Koh’s Decision in the US FTC case and elsewhere among other litigants. Matters include those of patent exhaustion, where in the supply chain licensing may or should occur, tying and exclusive dealing, the meaning for FRAND, availability of injunctions, and jurisdictional issues among nations in contract interpretation and in global licensing.  Judgments on appeal in the US and EU and in the UK Supreme Court (i.e. Unwired Planet v Huawei; Conversant v Huawei and ZTE) could bring about major disruptive changes with significant unexpected as well as expected consequences. Litigants should be wary of possible and likely adverse long-term consequences in what they wish for, given the huge success of the mobile sector for manufacturers, operators and the enormous benefits it has provided to consumers.
I will finish with another idiom that comes to mind with the British Pantomime season upon us. While the idiom is from Mother Goose, it is more widely known from is origins in one of Aesop’s Fables. Don’t kill the goose that lays the golden egg! 


[1] This and all subsequent quotes, apart from a public announcement by Apple’s CEO, Tim Cook, are from internal documents at Apple, as found through discovery in the litigation between Apple and Qualcomm, and as revealed publicly for the first time in Qualcomm’s Opening Statement presentation at trial on April 16, 2019. In Re: Qualcomm litigation Case No. 3:17cv0108-GPC-MDD (S.D. Cal.) The trial was terminated very shortly thereafter that day with dispute settlement between Apple and Qualcomm. See also:
[5] TechInsights estimates for component, assembly and test costs. 

Keith Mallinson is a leading industry analyst, commercial consultant and testifying expert witness. Solving business problems in wireless and mobile communications, he founded consulting firm WiseHarbor in 2007.

Thursday 5 December 2019

How to use your company’s IP to shed light on your firm’s value

Last month, a small mobility company based in Texas popped up on my regular online monitoring of the IP world. This company had written a clever press release about the value of its patent portfolio. While I can’t vouch for the veracity of its claims, I do think more entrepreneurs can learn from its tactics.

As an IP specialist, I am frequently surprised by how little start-up founders and entrepreneurs think about harnessing the value of their IP. Several years ago, I did some work for a start-up working with high-temperature superconductors. Its founders were having trouble determining the value of their IP and decided to seek some professional help. Armed with this IP valuation, they began meeting potential investors. The offers quickly started rolling in. IP valuations can be helpful to companies in multiple ways. Savvy entrepreneurs leverage their patent portfolios for cash, license them out, or use valuation data to ensure they adequately protect their products. And, for a start-up that is pivoting, IP can even be sold to private equity investors, patent aggregators or other market players.

Undertaking an IP valuation on one’s own can be difficult, however. And tech companies get into IP battles all the time on who should pay whom, and how much is at stake. Nevertheless, there are a few simple principles that you can apply to put your company and its IP in a better position.

Determine your goals
Valuing your IP portfolio can help you decide how much to invest in R&D, build a pitch deck, or engage in licensing negotiations. It can also help when you are optimizing your tax structure, entering into a joint venture or collaboration, or seeking to insure your business. Your goals will depend on what stage your business is in. And depending on what exactly those goals are, simpler methods for rough estimates can be used to serve your purposes. Before you seek any professional help in IP valuation, it’s best to decide what you hope to accomplish with any number you receive.

Research several methods to decide which works best for you
The most common IP valuation methods assess either the incremental value of the IP, potential income generated from it, or the broader market for the IP. It is also possible to use a combination of these methods. The right method will depend on various circumstances. The UK Intellectual Property Office, for instance, believes it can be helpful to assess the revenues that IP rights may generate in the future. This method focuses on the potential size of the total market and competition, as well as actual cash flow. A discount rate can be applied to future cash flows in order to reflect risks, which need to be determined appropriately. Using a market method, meanwhile, may produce additional insights when compared to an income method. Often, it can be a good idea to use several methods so as to understand value in different ways.  

Find a simple way to convey what you uncover
This is perhaps the most neglected element of IP valuation among companies, particularly those in the high technology industry. Media conglomerates and sports franchises have no trouble demonstrating the value of cartoon characters or football players. But because so much of IP valuation comes from complex economic models, it can become difficult to demonstrate when IP value that is not as visible or easily understandable. This is why the Texan mobility company stood out so much for me. They had made their patent portfolio a central feature of their communication strategy. This tactic isn’t going to work for everyone. Nevertheless, you should try where possible to show how your IP is making a difference to the market. Keep that information prominent – on your website, in your investor presentation pack, even in the short description on your press release. Rather than telling people how many patents you have, for instance, emphasize your licensing potential or what economic advantages your patented technology offers.

Among founders and entrepreneurs, understanding of the importance of IP valuations is growing. Even so, the market is not yet mature. Companies that are early movers within their industry, in communicating the value of their portfolio, stand to gain a great deal in the minds of potential investors, customers, and even employees.

Roya Ghafele is the Executive Director of IP management consultancy OxFirst. She previously worked for the World Intellectual Property Organization, and now specializes in providing advice on IP valuation and strategy. You can follow her on LinkedIn.

Saturday 23 November 2019

Anti-Troll LOT Network Expands to 500 members

The Anti-Troll (or Troll protection) LOT Network has expanded to 500 members.  I first wrote about the Google started LOT Network in 2015, and I believe it had about 47 members then.  Around four years later and we are at a significant increase.  For more on the LOT Network, please see these two prior posts, here and here.  Also, here is a blurb from a release by the LOT Network: 

"When you’re caught up in the day-to-day business of moving things forward, it’s easy to lose sight of accomplishments. It was in this way that a significant milestone — LOT Network’s membership reaching 500 members — caught us nearly by surprise. We are very proud of our community, which now counts Disney, Meituan Dianping, Centerpoint Energy, Synchrony, Yamaha,  VISA, Juniper Networks, 7-Eleven and Netgear as some of its newest members.

Our growth now spans industries — including automotive, finance, entertainment, cloud computing, retail, manufacturing, and emerging industries like blockchain — as well as continents. You can find LOT members in more than 35 different countries and counting; some of the biggest tech companies in Asia are among our strongest supporters.

Further, we’ve seen an uptick in startup membership, confirming that LOT is a solution for all companies regardless of their size or industry. Our momentum toward becoming a standard business practice grows stronger every day — more and more, we see members joining us based on information they’ve found online — often joining without contact from a LOT Network team member.  And that is because of you — the collective reputation of our membership makes joining LOT an easy decision."

Trump's New Drug Pricing Plan to be Released Soon -- Pay to Play?

How strange.  I was just thinking about why President Trump hasn't said much about drug pricing recently and then this . . . .  President Trump tweeted today that he and Secretary Azar will release a plan to lower drug prices by relying on the importation of drugs from other countries.  It will be interesting to see which states can import prescription drugs given the upcoming election--he seems to imply only some will be able to do so--expect a challenge to that.  His tweet stated: 

and I will soon release a plan to let Florida and other States import prescription drugs that are MUCH CHEAPER than what we have now! Hard-working Americans don’t deserve to pay such high prices for the drugs they need. We are fighting DAILY to make sure this HAPPENS...

Friday 15 November 2019

US Supreme Court will hear Google v. Oracle Copyright Suit

The United States Supreme Court has just granted review of the Google v. Oracle Copyright law suit.  This is a huge case concerning copyrightability and the scope of fair use of software.  Additional information, including briefs, can be found at the SCOTUS blog, here.  Hat tip to Dmitry Karshtedt.  

Saturday 9 November 2019

US State of Wyoming Ready to Charter "Blockchain" Banks

US State of Wyoming enacted a law concerning the creation of special purpose depository institutions which concern digital assets.  The legislature’s findings in the new law state: 

(a) The legislature finds the following: 

(i) The rapid innovation of blockchain technology, including the growing use of virtual currency and other digital assets, has resulted in many blockchain innovators being unable to access secure and reliable banking services, hampering development of blockchain services and products in the marketplace; 

(ii) Federally insured financial institutions are not generally permitted to manage accounts in virtual currency or hold other digital assets; 

(iii) Blockchain innovators have greater compliance challenges with federal customer identification, anti-money laundering and beneficial ownership because of the complex nature of these obligations and the unfamiliarity of regulators with blockchain innovators' businesses;

(iv) These intricate obligations have resulted in many financial institutions in Wyoming and across the United States refusing to provide banking services to blockchain innovators and also refusing to accept deposits in United States currency obtained from the sale of virtual currency or other digital assets; 

(v) Compliance with applicable federal and state laws is critical to ensuring the future growth and reputation of the blockchain and technology industries as a whole; 

(vi) Most financial institutions today do not have the requisite expertise or familiarity with the challenges facing blockchain innovators which is required to provide secure and reliable banking services to these innovators; 

(vii) A new type of Wyoming financial institution that has expertise with customer identification, anti-money laundering and beneficial ownership requirements could seamlessly integrate these requirements into its operating model; and

(viii) Authorizing special purpose depository institutions to be chartered in Wyoming will provide a necessary and valuable service to blockchain innovators, emphasize Wyoming's partnership with the technology and financial industry and safely grow this state's developing financial sector.

The full bill is available, here.  More information concerning the law is available, here

Friday 1 November 2019

OxFirst’s 4th Symposium on IP and Competition suggests views on FRAND licensing are far from converging


On October 18, IP economic consultancy OxFirst held its 4th Symposium on Globalization and fair, reasonable and non-discriminatory (FRAND) licensing of Standard Essential Patents (SEPs). Academics, judges and policy makers convened at St Cross College of Oxford University to debate FRAND licensing rates, terms and conditions. The symposium, which was chaired by Judge Fabian Hoffmann of the German Federal Court, offered arguments from both legal and economics perspectives.

First the economics: FRAND licensing disputes are on the rise. Compared to non-SEP disputes, patent families containing SEPs were 6.4 times more likely to be exposed to infringement actions than non-SEPs. At the same time, SEPs are also 9.5 times more exposed to validity challenges than non-SEPs.

Of particular interest is the strong involvement of non-practicing entities (NPEs) in FRAND disputes. The data presented showed that in the US, 77.5% of SEP infringement and validity actions involved NPEs.  In Europe that same figure amounted to 43.9%.

As to the role of NPEs in the innovation eco-system, research sponsored by the French public authorities showed that NPEs do not necessarily foster the diffusion of innovation. Rather, they can have the opposite effect. Professors Valerio Sterzi of the University of Bordeaux and Gianluca Orsatti of the University of Turin used forward patent citations as a proxy for a technology’s use. They found that patents passed on to NPEs see systematic falls in forward citations. Their suggestion is that patents held by NPEs lead market participants to seek to stay away from such IP -- an insight that is intuitive, but now has the data to back it.

Legal scholarship presented at the conference discussed extraterritorial constraints. The pros and cons of anti-suit injunctions and global FRAND licensing rates were addressed. Particular attention was paid to issues such as forum shopping, controlling the costs of litigation, and the relationship of such acts to the sovereignty of other nations. The effects that setting a global FRAND licensing rate can have on licensing negotiations were addressed by Roya Ghafele. Ghafele presented arguments that underline the need to set a balance between the interests of the licensor and the licensee.

The symposium concluded with an outlook on possible solutions to the FRAND licensing challenge. That there is a need to come to grips with the licensing of SEPs was undisputed. After all, the Internet of Things thrives on interconnectivity; and standards will continue to play an instrumental role in establishing such interconnectivity. The experts invited were far from having a conclusive, let alone homogenous, view on the topic.

Should regional institutions be established to resolve the issues at stake? Should the global community at least strive to achieve a minimal understanding of what terms and conditions a FRAND licensing agreement should entail? Or should the issue be solved by simply enlightening the market on how to calculate FRAND royalty rates? 

The conference concluded with an outlook on what is clearly the most pressing issue in this matter. Namely, how to manage an increasingly international economic order under the parameters set by a territorially limited patent system.

Thursday 31 October 2019

US Collegiate Athletes may Profit from Name, Image and Likeness

The National Collegiate Athletics Association, an organization which essentially regulates collegiate athletics in the United States, has voted to begin the process of allowing student athletes to profit from the use of their name, image and likeness.  This vote was made in light of California’s recent decision to allow collegiate student athletes to be paid for playing.  Historically, collegiate student athletes were prohibited from receiving payment.  The NCAA press release states: 

Board of Governors starts process to enhance name, image and likeness opportunities

Each NCAA division directed to immediately consider modernization of bylaws and policies

October 29, 2019 1:08pm

In the Association’s continuing efforts to support college athletes, the NCAA’s top governing board voted unanimously to permit students participating in athletics the opportunity to benefit from the use of their name, image and likeness in a manner consistent with the collegiate model.

The Board of Governors’ action directs each of the NCAA’s three divisions to immediately consider updates to relevant bylaws and policies for the 21st century, said Michael V. Drake, chair of the board and president of The Ohio State University.

“We must embrace change to provide the best possible experience for college athletes,” Drake said. “Additional flexibility in this area can and must continue to support college sports as a part of higher education. This modernization for the future is a natural extension of the numerous steps NCAA members have taken in recent years to improve support for student-athletes, including full cost of attendance and guaranteed scholarships.”

Specifically, the board said modernization should occur within the following principles and guidelines:  

  • Assure student-athletes are treated similarly to non-athlete students unless a compelling reason exists to differentiate. 
  • Maintain the priorities of education and the collegiate experience to provide opportunities for student-athlete success. 
  • Ensure rules are transparent, focused and enforceable and facilitate fair and balanced competition. 
  • Make clear the distinction between collegiate and professional opportunities. 
  • Make clear that compensation for athletics performance or participation is impermissible. 
  • Reaffirm that student-athletes are students first and not employees of the university. 
  • Enhance principles of diversity, inclusion and gender equity. 
  • Protect the recruiting environment and prohibit inducements to select, remain at, or transfer to a specific institution.

The board’s action was based on comprehensive recommendations from the NCAA Board of Governors Federal and State Legislation Working Group, which includes presidents, commissioners, athletics directors, administrators and student-athletes. The group gathered input over the past several months from numerous stakeholders, including current and former student-athletes, coaches, presidents, faculty and commissioners across all three divisions. The board also directed continued and productive engagement with legislators. 

The working group will continue to gather feedback through April on how best to respond to the state and federal legislative environment and to refine its recommendations on the principles and regulatory framework. The board asked each division to create any new rules beginning immediately, but no later than January 2021.

“As a national governing body, the NCAA is uniquely positioned to modify its rules to ensure fairness and a level playing field for student-athletes,” NCAA President Mark Emmert said. “The board’s action today creates a path to enhance opportunities for student-athletes while ensuring they compete against students and not professionals.”

Friday 25 October 2019

OxFirst Webinar: FRAND injunctions - A summary of recent case law

by Joan Ng & Roya Ghafele. 

OxFirst’s latest webinar on Oct 24 featured Prof Dr Peter Georg Picht of the University of Zurich. Prof Picht highlighted several issues that have surfaced in recent cases dealing with injunctions pertaining to standard essential patents. He started off by using the overall Huawei vs ZTE framework to highlight under which conditions injunctions can and cannot be issued under CJEU case law. 

Ultimately, said the OxFirst speaker, all parties must behave in a proactive manner. This is the case even if the other party may be non-compliant at a particular point in time. Also, on the issue of conditional injunctions and FRAND injunctions in the UK, the OxFirst speaker noted that the UK has produced fewer SEP- and FRAND-related cases than Germany. Nevertheless, cases heard in the UK have been high profile ones, particularly when it comes to granting what has come to be known as a 'FRAND injunction.'

Particularly noteworthy, he said, was the case of Unwired Planet v Huawei ([2017] EWHC 711 (Pat)), in which the court allowed a conditional injunction only. This is important because it signifies that FRAND is not only about content but also about conduct. Parties should behave in a FRAND compliant manner. The injunction would be in force only if the implementer failed to agree to take a global FRAND licence set by the court, said the speaker. That case was however heard by the Supreme Court this week and its decision in this matter is to be expected in the next couple of months.

In addition, on the issue of anti-hold-out injunctions, the speaker noted the offer of a grace period in the case of TQ Delta v Zyxel Communications ([2019] EWHC 745 (Pat)). Rather than award an injunction immediately, there was the suggestion of a grace period for Zyxel to fulfil some necessary commitments.

Finally, on the issue of anti-suit and anti-anti-suit injunctions, the speaker recognized the complicated nature of case law given that multiple jurisdictions are involved. Prominent points were that it is important that parallel proceedings are not necessarily vexatious or oppressive, because there is some flexibility for such a judgement. But at the same time, it is important that the patentee is able to seek judicial help.

Broadly speaking, the OxFirst presenter pointed out that injunctions have gained relevance in SEP licensing negotiations over time, but that there is still no certainty on when and how injunctions will be granted. He sees, however, a tendency for courts to compete for patent cases, and a grant or refusal of injunctions is one of the points on which courts would tend to compete. The conflict between national case law and global patent law remains to be resolved.

 - The views expressed in this webinar are those of Professor Picht and cannot be attributed to OxFirst, its affiliates, staff, or consultants.-

Friday 18 October 2019

Reducing Costs in the Fast-Changing Regulations of Foreign Direct Investment

I think this is a fascinating idea.  Latham & Watkins has released a free app that covers the regulations of several countries concerning foreign direct investment.  Here is the press release

Latham & Watkins LLP1 is pleased to announce the launch of the Foreign Direct Investment Regimes (FDI) app, an interactive tool designed to summarize key aspects of the Committee on Foreign Investment in the United States (CFIUS) and other foreign direct investment regimes around the world. The FDI app is available as a free download in the Apple App Store and Google Play that can be used on iPhone, iPad, and Android devices.

The Latham FDI app is organized by select countries around the world, including the US, Australia, China, France, Germany, Italy, Spain, Russia, Saudi Arabia, Singapore, United Arab Emirates, and the UK. After choosing a country, users can click through to read summaries of information pertinent to the respective jurisdiction, such as:

  • Legal authority responsible for foreign investment review
  • Mandatory filings
  • Voluntary filings
  • Timelines
  • Filing fees
  • Penalties
  • Definitions of key words and phrases

“Businesses looking at cross-border investments must consider and be prepared for national security reviews by the jurisdictions in which the business has or would have operations,” said Les Carnegie, a partner in Latham & Watkins’ Washington, D.C., office and co-leader of the firm’s CFIUS & US National Security Practice. “We are excited to launch this first-of-its-kind app that will bring enormous value to foreign investors around the world by summarizing information and procedures that have become increasingly fundamental to successfully executing cross-border transactions.”

Steven Croley, a partner in Latham & Watkins’ Washington, D.C., office and co-leader of the firm’s CFIUS & US National Security Practice, added, “Latham aims above all to provide exceptional service to our clients. We are therefore constantly looking for creative and innovative ways to address their most pressing business needs. Clients are increasingly focused on the growing prominence of regulatory programs and foreign investment review both in and outside the US, and our goal in developing the FDI app is to provide a summary that is quickly and easily accessible.”

“Evaluating and preparing for reviews by CFIUS and other foreign direct investment regimes has become a critical component to cross-border deal-making in today’s geopolitical environment,” said Luke Bergstrom, Global Vice Chair of Latham’s Mergers & Acquisitions Practice. “Latham’s CFIUS and national security lawyers are deeply experienced in helping clients navigate the CFIUS process and related agency reviews. This offering is part of the firm’s global, integrated approach to helping clients achieve market-leading transactional results.”

The Latham FDI app is the latest addition to a suite of information produced by the firm on the topic of CFIUS and other foreign direct investment regimes.

A summary and analysis of the US Department of Treasury’s recently-proposed regulations to implement changes that the Foreign Investment Risk Review Modernization Act (FIRRMA) made to CFIUS’ jurisdiction and processes is available here. A comprehensive primer, “Key Questions Answered on CFIUS,” is also available here.

For additional resources and more information about Latham’s CFIUS & US National Security Practice, please visit

Improving the Allocation of Resources: Artificial Intelligence to Predict Future Clinical Success of Basic Research

In a new paper published on October 10, 2019 titled, “Predicting Translational Progress in Biomedical Research,” authors B. Ian Hutchins, Matthew T. Davis, Rebecca A. Meseroll, and George M. Santangelo describe a new way to use artificial intelligence to measure and predict which basic research type findings are likely to be translated into clinical advances.  The abstract states: 

Fundamental scientific advances can take decades to translate into improvements in human health. Shortening this interval would increase the rate at which scientific discoveries lead to successful treatment of human disease. One way to accomplish this would be to identify which advances in knowledge are most likely to translate into clinical research. Toward that end, we built a machine learning system that detects whether a paper is likely to be cited by a future clinical trial or guideline. Despite the noisiness of citation dynamics, as little as 2 years of postpublication data yield accurate predictions about a paper’s eventual citation by a clinical article (accuracy = 84%, F1 score = 0.56; compared to 19% accuracy by chance). We found that distinct knowledge flow trajectories are linked to papers that either succeed or fail to influence clinical research. Translational progress in biomedicine can therefore be assessed and predicted in real time based on information conveyed by the scientific community’s early reaction to a paper.

The full paper is available, here.  This appears to have the promise of mitigating some significant investment risk.  

OxFirst Conference: Globalization and FRAND

OxFirst is hosting a very interesting conference on FRAND and globalization on October 18, 2019 at the University of Oxford.  The press release states: 

The decisions of national courts on fair, reasonable, and non-discriminatory (FRAND) licensing rates have the potential to impact the licensing and litigation of standard essential patents (SEPs) internationally, according to speakers at OxFirst’s 4th intellectual property (IP) and competition forum.

“The global FRAND licensing framework is meant to strike a balance between the rights of the Standard Essential Patents (SEPs) holders and the needs of downstream innovators,” says Dr Roya Ghafele, founder and CEO of OxFirst.

“Decisions made at the national level, by national courts, bear the potential to affect licensing negotiations in other jurisdictions. It is therefore important that such decisions take into account the increasingly global nature of commerce,” Ghafele adds.

SEPs have become central to patent wars in information and communications technology because the use of these patents is essential for compliance with technical standards. Standards such as 3G, 4G, GSM or UMTS have been instrumental for the establishment of wireless communication. The advent of 5G bears the potential to be a crucial element for the internet of things. (IoT) As such, there is a lot at stake.

OxFirst’s conference, titled “Globalisation and FRAND: Coming to grips with the interplay of IP and competition law”, addresses issues facing the various players in these patent wars.

The conference, held Oct 18 at St Cross College, at the University of Oxford, is attended by academics, government officials, and IP experts in the commercial world.

Among the speakers at the conference are Hon Judge Fabian Hoffman, a judge of the Bundesgerichtshof (Federal Court of Justice of Germany); Prof Eric Sergheraert, from the University of Lille; Prof Valerio Sterzi, from the University of Bordeaux; and Prof Thomas Cotter, from the University of Minnesota.

OxFirst is scheduled to host its next IP and competition symposium in Brussels in February 2020. OxFirst Conferences are fully accredited for continuous legal professional education for the legal profession.

About the conference:

Wednesday 16 October 2019

Patent Eligible Subject Matter Reform in the United States: The Pendulum Will Swing Too Far (again)?

In the United States, the law of patent eligible subject matter has become a big mess.  There are many different ways to frame how we got to this point.  One narrative tracks the concern with so-called patent trolls and the issuance of poor patents by the USPTO.  For sure, many have had concerns about the enforcement of patents and there have been a number of issued poor quality patents by the USPTO.  Part of the problem with the reform effort may have been that there were just too many proposals adopted to confront the issues.  In a perfect world, I suppose that a proposal would be enacted and then we would gather data and try to assess its impact.  We essentially made many policy changes creating perhaps an even larger mess with different problems--perhaps to the detriment of innovation.  Indeed, perhaps the changes to patent eligible subject matter law by Alice and Mayo may have gone too far—in light of other changes to the U.S. patent system designed to curb troubling enforcement and poor patent quality.  

One of the main current problems seems to be the application of the Alice/Mayo test and the failure to achieve consistency in its application.  Unfortunately, one casualty of Alice/Mayo may be collegiality amongst U.S. Court of Appeals for the Federal Circuit judges and the institution itself—the recent opinion, American Axle & Manufacturing v. Neapco Holdings, issued on October 3, 2019 is an interesting example.  Basically, Judge Moore writing the dissent is accusing Judge Dyk, author of the majority opinion, for engaging in judicial activism among other things.  I believe that most think that judges should “call it as they see it.”  However, the problem may be the test itself—it’s just too difficult to apply with consistency and that a reasonable application could result in problems, particularly if there is an underdeveloped record.  For sure, the attempt to utilize patent eligible subject matter as a way to eliminate cases early has been eroded by some panels of the Federal Circuit.  Does this mean that the main value of the test has been lost?  Should we stick to obviousness as the gatekeeper of patentability?  Can Congress actually fix this without overshooting eligibility resulting in more and different problems?  What about the concern with drug pricing?  Is the current test for patent eligible subject matter unfixable?  Do we need to think harder about different patent eligible subject matter rules for different industries?  Does it look like the Federal Circuit is properly using doctrines as policy levers across different industries?  I do think we would likely agree that keeping the Federal Circuit is a good idea (there are some that disagree).  

Friday 11 October 2019

A Greater Appreciation for the Contribution and Value of Some Intangibles (particularly "free" intangibles)?

In a recent speech titled, “Trucks and Terabytes: Integrating the 'Old' and 'New' Economies,” at the 61st Annual Meeting of the National Association for Business Economics, Federal Reserve Chairman Jerome H. Powell challenged the underlying data concerning measurements of economic growth.  He asks: “with terabytes of data increasingly competing with truckloads of goods in economic importance, what are the best ways to measure output and productivity? Put more provocatively, might the recent productivity slowdown be an artifact of antiquated measurement?”  In considering the question, here are his comments: 

How Should We Measure Output and Productivity?
Let's now turn to the second question of how to best measure output and productivity. While there are some subtleties in measuring oil output, we know how to count barrels of oil. Measuring the overall level of goods and services produced in the economy is fundamentally messier, because it requires adding apples and oranges—and automobiles and myriad other goods and services. The hard-working statisticians creating the official statistics regularly adapt the data sources and methods so that, insofar as possible, the measured data provide accurate indicators of the state of the economy. Periods of rapid change present particular challenges, and it can take time for the measurement system to adapt to fully and accurately reflect the changes in the economy.

The advance of technology has long presented measurement challenges. In 1987, Nobel Prize–winning economist Robert Solow quipped that "you can see the computer age everywhere but in the productivity statistics."6 In the second half of the 1990s, this measurement puzzle was at the heart of monetary policymaking.7 Chairman Alan Greenspan famously argued that the United States was experiencing the dawn of a new economy, and that potential and actual output were likely understated in official statistics. Where others saw capacity constraints and incipient inflation, Greenspan saw a productivity boom that would leave room for very low unemployment without inflation pressures. In light of the uncertainty it faced, the Federal Open Market Committee (FOMC) judged that the appropriate risk‑management approach called for refraining from interest rate increases unless and until there were clearer signs of rising inflation. Under this policy, unemployment fell near record lows without rising inflation, and later revisions to GDP measurement showed appreciably faster productivity growth.8

This episode illustrates a key challenge to making data-dependent policy in real time: Good decisions require good data, but the data in hand are seldom as good as we would like. Sound decisionmaking therefore requires the application of good judgment and a healthy dose of risk management.

Productivity is again presenting a puzzle. Official statistics currently show productivity growth slowing significantly in recent years, with the growth in output per hour worked falling from more than 3 percent a year from 1995 to 2003 to less than half that pace since then.9 Analysts are actively debating three alternative explanations for this apparent slowdown: First, the slowdown may be real and may persist indefinitely as productivity growth returns to more‑normal levels after a brief golden age.10 Second, the slowdown may instead be a pause of the sort that often accompanies fundamental technological change, so that productivity gains from recent technology advances will appear over time as society adjusts.11 Third, the slowdown may be overstated, perhaps greatly, because of measurement issues akin to those at work in the 1990s.12 At this point, we cannot know which of these views may gain widespread acceptance, and monetary policy will play no significant role in how this puzzle is resolved. As in the late 1990s, however, we are carefully assessing the implications of possibly mismeasured productivity gains. Moreover, productivity growth seems to have moved up over the past year after a long period at very low levels; we do not know whether that welcome trend will be sustained.

Recent research suggests that current official statistics may understate productivity growth by missing a significant part of the growing value we derive from fast internet connections and smartphones. These technologies, which were just emerging 15 years ago, are now ubiquitous (figure 3). We can now be constantly connected to the accumulated knowledge of humankind and receive near instantaneous updates on the lives of friends far and wide. And, adding to the measurement challenge, many of these services are free, which is to say, not explicitly priced. How should we value the luxury of never needing to ask for directions? Or the peace and tranquility afforded by speedy resolution of those contentious arguments over the trivia of the moment?

Researchers have tried to answer these questions in various ways.13 For example, Fed researchers have recently proposed a novel approach to measuring the value of services consumers derive from cellphones and other devices based on the volume of data flowing over those connections.14 Taking their accounting at face value, GDP growth would have been about 1/2 percentage point higher since 2007, which is an appreciable change and would be very good news. Growth over the previous couple of decades would also have been about 1/4 percentage point higher as well, implying that measurement issues of this sort likely account for only part of the productivity slowdown in current statistics. Research in this area is at an early stage, but this example illustrates the depth of analysis supporting our data-dependent decisionmaking.

The full speech is available, here.  The paper concerning measuring value using volume of data, titled, "Accounting for Innovations in Consumer Digital Services: IT Still Matters," is available, here.  

OxFirst Webinar featuring Professor Peter George Picht: "Injunctions in SEP/Frand Cases"

Our friends at OxFirst have another interesting free webinar titled, “Injunctions in SEP/Frand Cases,” scheduled for October 24, 2019, starting at 16:00 BST (14:00 CET).  The speaker is Professor Peter George Picht.  Here is his bio: 

Prof Peter Georg Picht studied law at Munich University and Yale Law School, did his PhD (summa cum laude) at Munich University/the Max Planck Institute for Innovation and Competition, and holds a masters degree from Yale Law School.

He has been working, i.a., with the EU Commission’s DG for Competition, as a Senior Research Fellow with the Max Planck Institute for Innovation and Competition, as well as with two international law firms.

Prof. Picht now holds a chair for Economic Law at the University of Zurich and is head of the University’s Center for Intellectual Property and Competition Law (CIPCO). He remains affiliated to the Max Planck Institute as a Research Fellow and is an Of Counsel with the law firm Schellenberg Wittmer. His further affiliations include board memberships in the Academic Society for Competition Law (ASCOLA), the Association Europ√©enne du Droit √ąconomique (AIDE), and the Munich IP Dispute Resolution Forum. In 2019, he will be a Visiting Professor at King’s College, London.

Prof. Picht’s academic teaching and writing, as well as his counseling activity, focus on

· intellectual property law

· competition law

· international private and procedural law, in particular commercial arbitration (mainly IP and Competition), trusts and estates.

In these fields, he advises governments, companies, foundations, trusts, as well as private persons and families. Prof. Picht is admitted to the bar in Germany and Switzerland (Art. 28 BGFA).

For further information, see:

Here is a link to register:, and here are the details concerning registration: 

Attention, please sign up with your professional email account. We don’t accept registrations from personal email addresses. Participation is limited at 100 participants. We reserve the right to eliminate participants.

Saturday 28 September 2019

US Treasury Department CFIUS Proposed Regulations Released

The U.S. Treasury Department has recently issued new regulations for review concerning the Committee on Foreign Investment in the United States (CFIUS).  CFIUS reviews transactions implicating national security concerns.  The Fact Sheet concerning the new proposed regulations from the U.S. Treasury Department states: 

FIRRMA Provisions on Non-Controlling Investments

FIRRMA expands CFIUS’s jurisdiction beyond transactions that could result in foreign control of a U.S. business to also include a non-controlling investment, direct or indirect, by a foreign person that affords the foreign person: 

access to any material nonpublic technical information in the possession of the U.S. business;  membership or observer rights on the board of directors or equivalent governing body of the U.S. business or the right to nominate an individual to a position on the board of directors or equivalent governing body; or any involvement, other than through voting of shares, in substantive decisionmaking of the U.S. business regarding— the use, development, acquisition, safekeeping, or release of sensitive personal data of U.S. citizens maintained or collected by the U.S. business; the use, development, acquisition, or release of critical technologies; or the management, operation, manufacture, or supply of critical infrastructure.  

This new authority only applies to a non-controlling investment in a U.S. business that:  produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies;   owns, operates, manufactures, supplies, or services critical infrastructure; or maintains or collects sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security.

FIRRMA also requires that CFIUS prescribe regulations that further define the term “foreign person” in the context of non-controlling investments by specifying criteria to limit its applicability over certain categories of foreign persons.

Key Aspects of the Proposed Regulations Regarding “Covered Investments”

Types of investments covered:  Non-controlling investments that afford a foreign person certain access, rights, or involvement in certain U.S. businesses (referred to as “covered investments”).

Largely a voluntary process:  Process remains largely voluntary, where parties may file a notice or submit a short-form declaration notifying CFIUS of a covered investment in order to receive a potential “safe harbor” letter (after which CFIUS does not initiate a review of a transaction except in certain limited circumstances).  In some circumstances, filing a declaration for a transaction is mandatory.  In particular, FIRRMA creates a mandatory declaration requirement for specified covered transactions where a foreign government has a “substantial interest”.  Additionally, FIRRMA authorizes CFIUS to mandate declarations for covered transactions involving certain U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies.  

U.S. businesses covered:  The new provisions on covered investments only apply to investments in U.S. businesses involved in specified ways with critical technologies, critical infrastructure, or sensitive personal data—referred to as “TID U.S. businesses” for technology, infrastructure, and data.  

 Critical technologies:  CFIUS may review transactions related to U.S. businesses that design, test, manufacture, fabricate, or develop one or more critical technologies.  “Critical technologies” is defined to include certain items subject to export controls and other existing regulatory schemes, as well as emerging and foundational technologies controlled pursuant to the Export Control Reform Act of 2018.  

 Critical infrastructure:  CFIUS may review transactions related to U.S. businesses that perform specified functions—owning, operating, manufacturing, supplying, or servicing—with respect to critical infrastructure across subsectors such as telecommunications, utilities, energy, and transportation, each as identified in an appendix to the proposed regulations.  

 Sensitive personal data:  CFIUS may review transactions related to U.S. businesses that maintain or collect sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security. “Sensitive personal data” is defined to include ten categories of data maintained or collected by U.S. businesses that (i) target or tailor products or services to sensitive populations, including U.S. military members and employees of federal agencies involved in national security, (ii) collect or maintain such data on at least one million individuals, or (iii) have a demonstrated business objective to maintain or collect such data on greater than one million individuals and such data is an integrated part of the U.S. business’s primary products or services.  The categories of data include types of financial, geolocation, and health data, among others.  Genetic information is also included in the definition regardless of whether it meets (i), (ii), or (iii).  

 Foreign person and excepted investor:  The regulations create an exception from “covered investments” for certain foreign persons defined as “excepted investors” based on their ties to certain countries identified as “excepted foreign states,” and their compliance with certain laws, orders, and regulations.  The regulations do not except these persons from control transactions previously subject to CFIUS jurisdiction; investments from all foreign persons remain subject to CFIUS’s jurisdiction over transactions that could result in foreign control of a U.S. business.

FIRRMA Provisions on Real Estate Transactions

In FIRRMA, Congress authorized CFIUS to review “the purchase or lease by, or a concession to, a foreign person of private or public real estate that”

“is, is located within, or will function as part of, an air or maritime port…” 

“is in close proximity to a United States military installation or another facility or property of the United States Government that is sensitive for reasons relating to national security;”

 “could reasonably provide the foreign person the ability to collect intelligence on activities being conducted at such an installation, facility, or property; or”

 “could otherwise expose national security activities at such an installation, facility, or property to the risk of foreign surveillance.”

 Pursuant to FIRRMA, this authority does not extend to “a single ‘housing unit.’”  This authority also does not apply to “real estate in ‘urbanized areas’ . . . except as otherwise prescribed by [CFIUS] in regulations in consultation with the Secretary of Defense.” (emphasis added)

 FIRRMA directs CFIUS to “prescribe regulations to ensure that the term “close proximity” refers only to a distance or distances within which the purchase, lease, or concession of real estate could pose a national security risk.”

 FIRRMA also requires that CFIUS prescribe regulations that further define the term “foreign person” for real estate transactions by specifying criteria to limit its applicability over certain categories of foreign persons.

The full text of the regulations is available, here