JPO’s initiatives · Telecomm company vs Company in other business In IoT Era...

JPO’s initiatives

Commissioner Akira Matsunaga

November 7th 2019

1. Background

2. JPO’s Initiatives(1) Guide to Licensing Negotiations Involving

Standard Essential Patents (SEPs)(2) “Hantei” Advisory-Opinion System to Judge

the Standard Essentiality of Patents

3. Open Questions

Table of Contents

1

1. Background




3. Open Questions

2

3

Imminent Issue on SEPs: Changes in Licensing Negotiations

Telecom companyvs

Telecom company

In the Past

Telecomm companyvs

Company in other business

In IoT EraDisputes/Negotiations among ICT companies

Disputes/Negotiations among parties from different business

Cross-licensing

Perspectives on licensing rates

Almost consistent Significantly different

Perspectives on Essentiality

Can be easily evaluated by parties

Difficult for licensees to evaluate

Possible DifficultSuppliers

Source: Made by the JPO based on “the SEP Guide”, “Research Report on Actual State of How Disputes over SEPs Were Being Resolved”, and various news reports. 4

Disputes over SEPs Arising in Numerous Countries

ChinaNational Development and Reform Commission (NDRC) v. Qualcomm

Iwncomm v. SonyHuawei v. Samsung

JapanJapan Fair Trade Commission (JFTC) v. Qualcomm

Apple v. Samsung

U.K.Unwired Planet v. Huawei

Conversant Wireless Licensing v. Huawei

EUEuropean Commission v. Qualcomm

Huawei v. ZTE

GermanyNokia v. Daimler

Sisvel v. Haier

U.S.Federal Trade Commission v. QualcommContinental Automotive v. Avanci et al.

Core Wireless Licensing v. AppleCSIRO v. Cisco

Apple v. QualcommHTC v. Ericsson

Continental Automotive v. Avanci et al case (U.S. District Court in California in 2019)

Nokia v. Daimler case (Germany, Regional Court in 2019)

Major Lawsuits and Administrative Actions Concerning SEPs

Disputes Arising among Different business

http://www.abysse.co.jp/world/flag/asia/japan.html

http://www.abysse.co.jp/world/flag/europe/united_kingdom.html

http://www.abysse.co.jp/world/flag/europe/germany.html

http://www.abysse.co.jp/world/flag/america/america.html

JPO’s Initiatives to Deal with SEP Issues

The environment surrounding SEPs is undergoing a great change as the wider use of theIoT.

The range of parties involved in licensing negotiations has been expanding to companiesin various business.

“Guide to Licensing Negotiations involving Standard Essential” “Hantei on SEPs”

Background

5

JPO’s Initiatives

Perspectives on reasonable licensing rates are different in licensing negotiationsbetween telecommunications business and other business.

It is difficult to resolve disputes through cross-licensing. When disputes are arising among parties from different business in decisions on

whether or not patents at issue are based on the essential standards, the parties mayfail to reach an agreement.

Issues to Be Solved

1. Background




3. Open Questions

6

I. Purposes of the Guide

Aiming to ・ Enhance transparency and predictability

・ Facilitate negotiations between rights holders and implementers

・ Help prevent or quickly resolve disputes concerning SEPs

Not Recipes (Not legally binding, Not intended to be prescriptive)

II. Licensing Negotiation MethodsA. Good Faith Desirable acts Specific examples of actions in bad faith

B. Efficiency Factors in terms of enhancing the

efficiency of licensing negotiations Who in the supply chain should be the

main entity?

III. Royalty Calculation MethodsA. Reasonable Royalties How to determine the royalty basis How to determine royalty rates

B. Non-discriminatory Royalties Is a use-based license discriminatory?

C. Other Factors Methods for paying royalties

7

Overview of the Guide









main entity?




8


Based on the framework suggested by the ECJ

Based on the framework suggested by the European Court of Justice (Huawei v. ZTE case, 2015), the Guide summarizes factors that parties should consider at each stage in the negotiation process.

• Rights holders do not provide any claim charts.

• Rights holders do not provide any claim charts to the implementers.

• Implementers unreasonably have delayed negotiations

• Implementers refuse to conclude any confidentiality agreement.

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Stages in Licensing Negotiations and Good Faith Negotiations

1. Offer licensing

negotiations

2. Express willingness to

obtain a license

3. Offer FRAND terms 4. Present

Counteroffers on FRAND

terms

Right Holder Implementer

Lawsuits or ADRs

Stages in Licensing Negotiations SEP Right Holder’s Argument

End-Product Manufacturer’s Argument









main entity?




10


Further discussions are needed

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Parties to Negotiate in Supply Chain

Supplier 1

Supplier 2

Offer licensing negotiation

Components

(e.g. TCU)

Offer licensing negotiation

Components

(e.g. module)

Patent Indemnification Agreement

PatentIndemnification Agreement

Supply Chain

Implementer to become a party in negotiation

Right HolderEnd-Product Manufacturer

• The Guide organizes factors to be considered, such as who in the supply chain, for example, either end-product manufacturers or parts manufacturers, should be the main entity in concluding any licensing agreements.

•License to all

•Access for all

SEP Right Holder’s Argument


Smallest Salable Patent Practicing Unit (SSPPU) Approach

Entire Market Value (EMV) Approach

SEP Right Holder’s Argument


The Guide organizes factors to be considered in determining the basis for calculating royalties, i.e., the prices of individual parts or prices of completed end-products.

Royalty Base: EMV and SSPPU

12

Chips

Communi-cation Modules

Telematics Control Unit (TCU)

End products

Essential part of SEP technology

Relation between Contribution of SEP and Royalty Base

1. Background




3. Open Questions

13

Standard

Advisory Opinion “Hantei” for Essentiality Check

14

Request for Advisory Opinion(Specify subject product/process (allegedly infringing

product/process), etc.,Compare/explain claims of the patented invention and

the subject product/process)

Reply

Proceedings by Administrative Judge Panel(Compare/determine claims of the patented invention

and the subject product/process, etc.)

JPO began providing advisory opinion “Hantei” for essentiality check on April 1st, 2018 for the purpose of early dispute resolution of Standard Essential Patents (SEPs)

Demandant

Demandee

Advisory Opinion “Hantei”

Advisory Opinion(The Virtual Subject Article, etc. falls or does not fall within the technical scope of the patented invention)

Essentiality Check Utilizing the “Hantei” System

Request for Advisory Opinion(Specify Virtual Subject Article (Virtual Object), etc. that is compliant with the standard, Compare/explain claims of the

patented invention and the Virtual Subject Article)

Reply

Proceedings by Administrative Judge Panel(Compare/determine claims of the patented

invention and the Virtual Subject Article, etc.)

Advisory Opinion(The subject product/process, etc. falls or does not fall within the technical scope of the patented invention)

If Hantei is concluded that the Virtual Subject Article, etc. “falls” within the technical scope of the patented invention

=> It is possible to determine that the patented invention is “essential” to the standards

a. ・・・・・・・・・・・・・・・・・・・・・・・・・・・・

b. ・・・・・・・・・・・・・・・・・・・・・・・・・・・・

c. ・・・・・・・・・・・・・・・・・・・・・・・・・・・・

the technical scope of the patented invention

a. ・・・・・・・・・・・・・・・・

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b. ・・・・・・・・・・・・・・・・

・・・・・・・・・・・・

c. ・・・・・・・・・・・・・・・・

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a. ・・・・・・・・・・・・・・・・・・・・・・・・・・・・

b. ・・・・・・・・・・・・・・・・・・・・・・・・・・・・

c. ・・・・・・・・・・・・・・・・・・・・・・・・・・・・

configuration of

Virtual ObjectVirtual

Objectthe technical scope of the patented invention

a. ・・・・・・・・・・・・・・・・・・・・

・・・・・・・・

b. ・・・・・・・・・・・・・・・・・・・・

・・・・・・・・

c. ・・・・・・・・・・・・・・・・・・・・

・・・・・・・・

configuration of

allegedly infringing

product/process

allegedly infringing

product/process

Demandee

Demandant

1. Background




３．Open Questions

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efficiency of licensing negotiations

Who in the supply chain should be the main entity?

III. Royalty Calculation MethodsA. Reasonable RoyaltiesHow to determine the

royalty basis How to determine royalty rates



16


Q1: Which kind of considerations would affect whether SSPPU or EMV?

HTC v. Ericsson (US, 2019）

The IPR policy of the ETSI neither requests nor excludes any FRAND license using royalty based on the SSPPU approach.

FTC v. Qualcomm (US, 2019)

Qualcomm must make SEP license available to modem-chip suppliers on FRNAD terms.

Ｑ：What kind of considerations would affect whether the SSPPU approach or EMV approach should be used?

Which do SEPs technology contribute to, End-products or Chips?

Basis for calculating royalties is to be identified based on the part to which the essential part of the SEP technology contributes to the end-product.

Chips

Commu-nicationmodule

Telematics Control Unit（TCU)

End-products

Essential part of SEP technology

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Relation between Contribution of SEP and Royalty Base

Q2: Who in the supply chain should be the main entity?

Ｑ：For the supply chain side, who should be the main entity in licensing negotiations with the SEP owner to facilitate licensing negotiations efficiently?

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A supply chain consisting of end-product manufacture and two suppliers of Tier1 and Tier2.

Communication module is being manufactured by Tier2

Patent indemnification obligation agreements are concluded between the end-product manufacture, supplier Tier1, and supplies Tier2, under each of which suppliers bear the payments of licensing fees.

Case

Supplier 1

Supplier 2

Components

(e.g. TCU)

Offer licensing negotiationComponents

(e.g. module)



Supply Chain


？


Q3: Who should determine the allocation of the licensing fees among the supply chain?

Ｑ：Who should determine the allocation of the licensing fees among the supply chain? 19

A supply chain consisting of end-product manufacture and two suppliers of Tier1 and Tier2.

Communication module is being manufactured by Tier2

Patent indemnification obligation agreements are concluded between the end-product manufacture, supplier Tier1, and supplies Tier2, under each of which suppliers bear the payments of licensing fees.

Case

Supplier 1

Supplier 2

Components

(e.g. TCU)

Components

(e.g. module)



Supply Chain



？ + Negotiations between end-product

manufacturer and Right holder.Offer licensing negotiation

Questions Being Raised

• The 4G and 5G telecommunications technologies are becoming widely used.

• Licensing negotiations have become more complicated.

• Different types of business without any common background are conducting licensing negotiations.

• Difficult to reach a consensus on the essential issue of to what extent each player contributes to creating added value by using the 4G and 5G telecommunications technologies.

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21

Questions Being Raised

Consumers

Telecom EnergyCommon parts

and appliers

・・・

Industrial infra-structure

to what extent each player contributes to creating added value

End-product manufactures

Service businessIT companies ×

Smart agriculture Automobile Factory Smart house

End-product manufactures/ service business

Createadded value

In the age of the IoT,

Expectations for Further Discussions

• Various parties with conflicting interests are negotiating licensing agreements involving SEPs.＞ not easy to resolve disputes over licensing negotiations.

• Evaluate the value of 4G and 5G technologies.

• Evaluate how much 4G and 5G technologies have contributed to creating the entire added value of new technologies and innovative products.

• Discuss these evaluations from the broad perspectives.

• Promote a multi-stakeholder process in which various stakeholders discuss together such as business, academia and government.

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JPO’s initiatives · Telecomm company vs Company in other business In IoT Era...

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