WIPO-KIPO-KIPA IP Panorama Business School, October 6 to 10, 2008

1. WIPO-KIPO-KIPA IP Panorama Business School, October 6 to 10, 2008 IP Strategies in Standards Setting Tomoko Miyamoto Senior Counsellor, Patent Law Section World Intellectual Property Organization (WIPO)

2. Patents and standards Patents Standards ? ? Exclusive rights Wide implementation From the business perspective,the objective is: NOT blocking competitors out BUT making profits

3. Encourage investment in innovation (R&D) Disclosure of technological information Dissemination of technology Patents and StandardsCommon policy objectives Patents Standards

4. Characteristics of patents (intangible assets) non-rivalry in consumption scalability in use inverse value development Patents and StandardsBusiness strategies Patents Standards Standardization is one of the “patent exploitation processes” to realize a supranormal return

5. Positive effects: encourage innovation economies of scale facilitate commerce and trade reduce transaction costs network externalities: value raises with the size of network Potential risks: discourage innovation locked-in effect and switching cost reduced choice market concentration Standards

6. Competition Aspects Innovation/Competition(after standards adoption) Innovation/Competition(before standards adoption)

7. Patents and standardsex. ICT industry Characteristics • Interoperability • Network externality • Cumulative technology • To “communicate”, standards are necessary • Many patents involved • Many patent holders involved Not an “exclusivity” modelEverybody needs to use everybody else’s patents

8. Patents and StandardsPotential conflicts Standard Essential patents $ $ $ $ $ Licensing royalties Standard implementers • Wide implementation of standards • Legitimate exploitation of patents

9. Patents and StandardsPotential conflicts • Patent hold-up • A patent holder claims his rights after the standard has been widely implemented (essential patents: no alternative technology) • Unreasonable licensing terms and conditions • Unreasonably high royalty  Locked-in/ Opportunity costs • Patent thicket • Transaction costs to negotiate licenses with multiple patent holders • Cumulative royalties

10. Policy Challenges Find a balance between: • the rights of the patent owners to enforce the patents • the ability of third parties to make and sell interoperable products • the public interest not to lock users in specific technology platforms, or not to force consumers to bear all the negative consequences Fair and competitive environments for the current industry-driven standardization process

11. IPR Policies of Standard Setting Organizations (SSOs) • Self-regulating mechanism to improve transparency and accessibility to patented technology • Assist participants to take an informed decision • “Common Patent Policy for ITU-T/ITU-R/ISO/IEC” • Encourage early disclosure of essential patents and patent applications during the standardization process • no patent search required (2) Licensing commitment • Reasonable and non-discriminatory (RAND) terms • Royalty Free (RF) terms Some SSOs publish patent statements and licensing commitments on their web sites

12. IPR Policies of Standard Setting Organizations (SSOs) • SSOs not involved in verifying patents and assessing the compliance with the licensing commitment • Licensing negotiations outside the SSOs • Practical and flexible solution for each SSO • Binding effect to non-participants? • Competition law concerns? (ex-ante disclosure of licensing terms) • Finding max. number of essential patents = patent search  risk triple damage in the US? • Licensing commitment made by a previous owner bounds a new owner?

13. Patent pools • Address the issue of cumulative royalty • Access to patented technology in reasonable and non-discriminatory manner • A single, standard license for the pooled patents to licensees who are not members of the pool • Lower than accumulated royalties • Includes patents to be added in the pool in the future • Lower transaction costs • Licensing fees allocated among members of the pool • Not all essential patents may be in the pool(voluntary participation) • Competition concerns: market power of the pool; complementary/substitute technology; essentiality of patents; grant back; involvement of independent experts

14. Mechanisms in the patent system • Limitations to the right in order to strike a balance with public interests • Research exemptions • Prevent abuse of right • Compulsory licenses • Need to ensure the quality of patents granted by national/regional patent offices • Prior art effect of technical information disclosed during the standard setting • Patent registry: up-to-date legal status information

15. Settlement of disputes • Patent related litigation can be expensive Alternative dispute settlement mechanism • WIPO Arbitration and Mediation Center • Intellectual property disputes • A single procedure • Party autonomy and confidentiality • Save costs and time ex. “essentiality” of a patent disclosed; validity of the essential patents; compliance with the licensing policy (RAND terms); “reasonable endeavor”/”best efforts” to disclose; compliance with patent pool licensing terms and conditions; allocation of royalty among pool members…

16. Thank you tomoko.miyamoto@wipo.int