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Slides for Class #9

ASU Technology Standards Seminar

March 29, 2010

Brad Biddle

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Introduction

Taxonom

y / “How

”

Business strategy / “W

hy”

Antitrust

IPR

: RA

ND

v. RF

IPR

(+): “O

penness”

IPR

: Patent pools

Policy: private stnds &

law

Policy: R

ole of government +

C

hina

Student presentations

Student presentations

*G

uest discussion re US

B

3/22 3/29 4/5 4/12 4/19 4/26

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PATENT CLAIM A

PATENT CLAIM B

PATENT CLAIM C

PATENT CLAIM D

NON-PATENTENED TECHNOLOGY

STANDARDS-COMPLIANT PRODUCT

Patent owners A, B, C and D all agree to separately license on royalty-free terms to any adopter

Patent owners A, B, C and D all agree to separately license on RAND terms to any adopter

Patent owners A, B, C and D all agree to license collectively to adopters at an agreed-upon rate

RF, RAND-Z, RF-RAND RAND Pool

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Overly inclusive definitions?

http://www.uspto.gov/web/offices/pac/dapp/opla/patentpool.pdf

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Layne-Farrar, Anne and Lerner, Josh, To Join or Not to Join: Examining Patent Pool Participation and Rent Sharing Rules (January 7, 2008). Available at SSRN: http://ssrn.com/abstract=945189

Is every RF SIG a pool?

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1850 – Sewing machine patent

pool, others

1912 – 1995 pools generally disfavored by

U.S. antitrust law & regulation

1995 – FTC/DoJ IP Guidelines: pools

can be pro-competitive

1997 – MPEG-2 letter

1998 – DVD-3C letter

1999 – DVD-6C letter

2002 – 3G PPP letter

2008 – RFID letter

1999 – Summit/VISX FTC case

2007 – FTC/DoJ memo

Formal, standards-focused pools are a recent phenomenon

Much of the U.S. ‘black letter’ law on patent pools

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3rd-party administered pools Participant-administered pools

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9http://www.multichannel.com/article/128111-MPEG_LA_Dueling_Lawsuits_Get_Settled.php

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Key concepts

• “Blocking” patents • “Complementary” patents• “Competing” or “substitute” patents

• DOJ-FTC IP Guidelines: “pooling arrangements are often procompetitive . . . [but] can have anticompetitive effects in certain circumstances”– Generally evaluated under “rule of reason”

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Pro-competitive benefits

• Clearing blocking positions

• Integrating complementary rights

• Avoiding infringement litigation

• Reducing transaction costs

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Some anti-competitive risks

• Overly inclusive? – Essential v. non-essential IP / tying– Competing v. complementary patents– Mitigate via independent evaluator

• Pricing/royalty discussions/decisions• Exclusivity

– Mitigate via open calls for patents– Mitigate via independent licensing of

individual patents

13http://www.justice.gov/atr/public/hearings/ip/222655.pdf

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16http://www.hdmi.com/pdf/HDMI_Adopter_Agreement_2002.11.01.pdf

[Note: DRAFT agreement from 2002]

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EE Times Asia Feb. 28, 2007 http://www.eetasia.com/ART_8800454467_499486_NT_3843e7b8.HTM

Financial analysts at WR Hambrecht and Co. have lowered their estimates of SanDisk's revenue for 2007 and 2008 due to concerns that Samsung might dictate a change to the royalties it pays on secure digital (SD) flash memory cards.

Samsung is estimated to have contributed around 90 percent of SanDisk's royalty revenues in recent years. WR Hambrecht analysts have lowered SanDisk's expected royalty revenues for 2007 from $373 million to $327 million, and from $500 million to $405 million for 2008; drops of $46 million and $95 million respectively.

…. "In the past, Samsung has paid an 8 percent royalty fee to SanDisk on NAND MLC. As Samsung began making finished SD cards using NAND MLC it was obligated to pay an additional 6 percent royalty fee to the SD Card Association for the cards, of which 2 percent of that went to SanDisk as a founding member of the association," according to WR Hambrecht.

"The result is that SanDisk has collected a staggering royalty fee from Samsung on its finished SD cards. We have learned that Samsung decided to no longer make those payments and therefore only pay a 2 percent royalty fee to SanDisk on any SD card that Samsung makes and no longer pay the 8 percent MLC NAND royalty," the analysts noted in a statement. The analysts estimated that Samsung's move puts at risk around 15 percent of SanDisk royalty revenues as early as Q2 of 2007 and about 25 percent of the MLC royalty payments that Samsung currently pays SanDisk.

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IT hardware Telecom

Software

Content protection

Consumer electronics

RAND (but licensing programs

uncommon)

RAND (w/ $ licensing

programs)

RF (pragmatic and ideological

rationales)

RF-like “non asserts”

Patent Pools “lite”

Common models (caution: vastly oversimplifies)

21http://arstechnica.com/open-source/news/2009/07/decoding-the-html-5-video-codec-debate.ars

The HTML5 video codec debate

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Common areas of license scope and debate:

• Scope of license (ie spec reach or multiple specs)

• Categories to be licensed

• Who takes license/pays royalty

• Royalty allocation

• Cross-license accommodation or credits

• Defensive suspension

• Grantback

And the biggie…

• What should the royalty rate be?

All of the above tend to be debated vigorously by companies that are either explicitly or not explicitly (as is often the case) at odds with each other

Companies also may participate in pool meetings without firm commitment to joining pool!