Essentiality checks could help implementers determine with whom they need patent licenses. However, essentiality checking does a poor job in adjusting for over-declaration in patent counts and will encourage even more spurious declarations.
We await a new policy framework from the European Commission (EC) with its Impact Statement regarding the Fair Reasonable and Non-Discriminatory (FRAND) licensing of Standard Essential Patents (SEPs). The EC is considering instigating checks on patents disclosed—to Standard Setting Organization (SSO) Intellectual Property Rights (IPR) databases as being possibly standard essential— to establish whether they are actually essential to the implementation of standards such as 5G. Objectives for essentiality checking are to:
1. enable prospective licensees to determine with whom they need to be licensed
2. correct for over-declaration and only count patents deemed essential; and
3. use such figures in FRAND royalty determinations.
If clutches of selected patents are independently and reliably
checked to establish that prospective licensors each have at least one patent
that would likely be found essential by a court, these results might be used by
several or many prospective licensees to determine with whom they need to be
licensed.[1] But
such checks would be of limited and questionable additional use to existent court
determinations. Checks have already been made on some patents for all major
licensors and many others in numerous SEP litigation cases over many years. Greater
legal certainty is provided in court decisions where many patents have been
found standard essential, infringed and not invalid.
My full paper on this topic, which can be downloaded here, focuses on the wider use of essentiality checks and
sampling in patent counting. With too
many patents to check them all properly, it is hoped that thorough checking of
random samples of declared patents will—by extrapolation—also enable accurate SEP
counts to be derived. However, essentiality checks do not fix and can only moderate
exaggerations in patent counts due to over-declaration. For example, false
positive essentiality determinations will exceed correct positive essentiality
determinations where true essentiality rates are less than 10% unless at least
90% of determinations are correct.[2] Inadequate
checking could imbue many with a false sense of security about precision while
encouraging even more over-declaration by others which would further misleadingly
inflate their measured patent counts and essentiality rates.
My empirical analysis also shows that declared essential patents are too numerous, and bias in checking and random errors in sampling are too great to provide even the modest precision expected and that should be required for patent counts to determine FRAND royalties without very thorough and highly accurate checks on thousands of patents per standard.
Even ignoring residual bias after improved but imperfect checking, sample sizes of thousands of patents would be required to provide even only modest levels of precision in essential patent counts (e.g. a ±15% margin of error on the estimated patent count at the 95% confidence level) on patent portfolios and entire landscapes where essentiality rates are low (e.g. 10%) due to over-declarations.
The dangers in not recognizing the sources and extent of
bias and other errors and in not designing studies with sufficient scale and
precision (e.g. for a court setting a royalty rate) is that far from increasing
transparency, information provided will be imprecise, distorted and unreliable.
Ignoring analytical errors, and mistakenly implying or pretending otherwise is even worse.
This new paper, also available on SSRN, is a follow-on to my previous research on essentiality checking and patent counting in 2011, 2017 and 2021.
[1] This
ignores validity and actual infringement in any specific product, which also
determine whether licensing is required under patent law and FRAND conditions.
These are also important issues.
[2] The
essentiality rate is the number of essential patents divided by the number of
declared essential patents. An estimated or found essentiality rate will differ
from the true essentiality rate due to inaccuracies.
No comments:
Post a Comment