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Dr. Thomas Reimann rokh-ip

Global IP Issues in Standard-Setting Activities - Europe - AIPLA, Midwinter Institute 2008 Joint Committee Meeting. Dr. Thomas Reimann www.rokh-ip.com. Overview. Underlying issues Contractual remedies by Standardization Bodies Antitrust law based remedies Recent developments.

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Dr. Thomas Reimann rokh-ip

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  1. Global IP Issues in Standard-Setting Activities - Europe - AIPLA, Midwinter Institute 2008Joint Committee Meeting Dr. Thomas Reimann www.rokh-ip.com

  2. Overview • Underlying issues • Contractual remedies by Standardization Bodies • Antitrust law based remedies • Recent developments www.rokh-ip.com

  3. A. Underlying Issues • Patents are granted “to promote the progress of science and useful arts” • By granting monopolies for limited times to ensure a fair revenue for R&D in consideration of fostering technical advance • By encouraging third parties to develop new ideas in design arounds www.rokh-ip.com

  4. A. Underlying Issues (2) • Standards • shall ensure interoperability of products of a variety of manufacturers and in so far ease competition • Do generally not allow design arounds www.rokh-ip.com

  5. A. Underlying Issues (3) • Patents covering standards leave third parties in a situation where they are excluded from competition if there is no fair, reasonable and non-discriminatory (FRAND) access to such patents • To resolve this issue • Standardization bodies create contractual obligations for members • European authorities and courts apply antitrust law www.rokh-ip.com

  6. B. Contractual remedies by Standardization Bodies • Example: ETSI IPR Policy • Sec. 4 ETSI: Disclosure of IPRs • Sec. 6 ETSI: Availability of Licences www.rokh-ip.com

  7. B. Contractual remedies by Standardization Bodies (2) • Sec. 4 ETSI: Disclosure of IPRs • 4.1: “Subject to Clause 4.2 below, each MEMBER shall use its reasonable endeavours, in particular during the development of a STANDARD or TECHNICAL SPECIFICATION where it participates, to inform ETSI of ESSENTIAL IPRs in a timely fashion. In particular, a MEMBER submitting a technical proposal for a STANDARD or TECHNICAL SPECIFICATION shall, on a bona fide basis, draw the attention of ETSI to any of that MEMBER’s IPR which might be ESSENTIAL if that proposal is adopted.” • 4.2: “The obligations pursuant to Clause 4.1 above do however not imply any obligation on MEMBERS to conduct IPR searches.” www.rokh-ip.com

  8. B. Contractual remedies by Standardization Bodies (3) • Sec. 6 ETSI: Availability of Licences • 6.1: “When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory terms and conditions under such IPR at least to the following extent: • MANUFACTURE, including the right to make or have made customized components and sub-systems to the licensee‘s own design for use in MANUFACTURE; • Sell, lease, or otherwise dispose of EQUIPMENT so MANUFACTURED; • Repair, use, or operate EQUIPMENT; and • Use METHODS. The above undertaking may be made subject to the condition that those who seek licences agree to reciprocate.“ www.rokh-ip.com

  9. B. Contractual remedies by Standardization Bodies (4) • Sec. 6 ETSI: Availability of Licences (cont’d) • 6.2: “As long as the requested undertaking of the IPR owner is not granted, the COMMITTEE Chairmen should, if appropriate, in consultation with the ETSI Secretariat use their judgment as to whether or not the COMMITTEE should suspend work on the relevant parts of the STANDARD or TECHNICAL SPECIFICATION until the matter has been resolved and/or submit for approval any relevant STANDARD or TECHNICAL SPECIFICATION.” www.rokh-ip.com

  10. B. Contractual remedies by Standardization Bodies (5) • ETSI “declarations”  contractual obligation for ETSI members (Regional Court Düsseldorf, 4a O 124/05, decision of 13 February, 2007, p. 18, unpublished: Probably contract in the favor of third parties) • “fair, reasonable and non-discriminatory” (FRAND, sec. 6.1 ETSI): No express definition available • “negative definition”: FRAND (-) if disproportionate royalties are claimed (“exploitation”) or if licensing practice is discriminating and/or disproportionate (Regional Court Düsseldorf, InstGE 7, 70 (93, mn. 90) – Video-Signal Encoding I; Regional Court Düsseldorf, 4a O 124/05, decision of 13 February, 2007, p. 19, unpublished) • Purpose of (F)RAND: Leaving room for license negotiations, i.e. a differentiated determination of license fees on the one hand, while, on the other, setting limits for the negotiations by allowing an evaluation (cf. Ullrich, GRUR 2007, 817 (826)) • But: Only a construction of (F)RAND which is not derived from national antitrust law will ensure a uniform application of the licensing conditions (cf. Ullrich, GRUR 2007, 817, fn. 128) www.rokh-ip.com

  11. B. Contractual remedies by Standardization Bodies (6) • Licence grant and conditions are subject to the negotiations of patent owner and potential licensee, no interference or review by ETSI www.rokh-ip.com

  12. B. Contractual remedies by Standardization Bodies (7) • Problem: Owner of an essential patent who is not member to the ETSI  no contractual obligation to license protective right to FRAND conditions www.rokh-ip.com

  13. B. Contractual remedies by Standardization Bodies (8) • Comparable declarations by other standardization bodies, not imposing a direct contractual obligation on their members • e.g. “Patent Statement & Licensing Declaration” of International Organization for Standardization (ISO), Patent owner has 3 options: • To grant a license free of charge to an unrestricted number of applicants on a worldwide, non-discriminatory basis and under reasonable terms and conditions • To grant a license to an unrestricted number of applicants on a worldwide, non-discriminatory basis and under reasonable terms and conditions • Not to grant licenses as described before www.rokh-ip.com

  14. C. Antitrust law based remedies • Antitrust law as a defence against injunction • based on the idea that it is an abuse of rights, if a patent owner tries to assert his protective right against a user of the patented teaching to an extent which is not (fully) enforceable, because he is obliged to grant a licence to the user from antitrust law www.rokh-ip.com

  15. C. Antitrust law based remedies (2) • Antitrust law as a defence (cont’d) • If the patent owner uses the fact that access to a downstream market is dependent on using the patented teaching in order to limit access to this market based on criteria which contradict the legal aim of freedom of competition, this means a misuse of a market dominating position (cf. German Federal Supreme Court, GRUR 2004, 966 (968) – Standard Bung Barrel) • whether this idea can be relied on as a defence has been left open by the German Federal Supreme Court www.rokh-ip.com

  16. C. Antitrust law based remedies (3) • Antitrust law as a defence (cont’d) • Antitrust defence against injunction accepted by Regional Court Düsseldorf (InstGE 7, 70 (90, mn. 82) - Video-Signal Encoding I; 4a O 124/05, decision of 13 February 2007, p. 16, unpublished) • Likewise Higher Regional Court Karlsruhe, GRUR-RR 2007, 177 (178) - Orange Book Standard) www.rokh-ip.com

  17. C. Antitrust law based remedies (4) • Limitations • on royalties • on non-monetary terms for licensing www.rokh-ip.com

  18. C. Antitrust law based remedies (5) • Limitation on royalties • Regional Court Düsseldorf: A missing limitation for the overall licence burden can render a licensing offer inadequate and thus an „exploitation“ under antitrust law (4a O 124/05, decision of 13 February, 2007, p. 20 ff., unpublished) • Regional Court Düsseldorf: When assessing the adequacy of the royalties being claimed for a license to a standard patent, it has to be taken into account that the patent owner can claim not only an amortisation for his R&D costs, but also an adequate financial compensation for his innovative performance (InstGE 7, 70 (99, mn. 100 and p. 103, mn. 121) - Video-Signal Encoding I). • Relevance, if negotiation of royalties by standards group? As such not contrary to antitrust law, if conditions are not discriminatory or inadequate („exploitation“) (Regional Court Düsseldorf, InstGE 7, 70 (93, mn. 90 and 94, mn. 92) - Video-Signal Encoding I). www.rokh-ip.com

  19. C. Antitrust law based remedies (6) • Negotiation of royalties by standards group • As such not contrary to antitrust law, if conditions are not discriminatory or inadequate („exploitation“) (Regional Court Düsseldorf, InstGE 7, 70 (93, mn. 90 and 94, mn. 92) - Video-Signal Encoding I). www.rokh-ip.com

  20. C. Antitrust law based remedies (7) • Limitation on non-monetary terms for licensing • grant of gratuitous cross-licences to companies belonging to the corporate group of the patent owner can be discriminatory (Regional Court Düsseldorf, InstGE 7, 70 (104 f., mn. 125 ff.) – Video-Signal Encoding I) • grant of preferential terms to some licensees which are not granted to others can be discriminatory (Regional Court Düsseldorf, InstGE 7, 70 (104 f., mn. 125 ff.) – Video-Signal Encoding I) • selective enforcement of patent rightscan be discriminatory (Regional Court Düsseldorf, InstGE 7, 70 (109, mn. 135) – Video-Signal Encoding I) www.rokh-ip.com

  21. C. Antitrust law based remedies (8) • Limitation on non-monetary terms for licensing (cont‘d) • obligation to grant a gratuitous cross-licence can be an “exploitation” (Regional Court Düsseldorf, 4a O 124/05, decision of 13 February, 2007, p. 19, unpublished) www.rokh-ip.com

  22. C. Antitrust law based remedies (9) • Attitude of Regional Court Mannheim • no defence against injunction claim, assertable only in a counter action (7 O 287/02, decision of 20 April 2007, p. 38 f., unpublished) • “Standard Bung Barrel” decision and considerations on misuse of market power only relates to a standard covering a specific, non-substitutable embodiment protected by an IP right (7 O 287/02, decision of 20 April 2007, p. 42, unpublished) • antitrust law can only be invoked in cases where the standard requires such a specific embodiment, but not, if substitute products exist (7 O 222/06, decision of 3 August 2007, p.25, unpublished; 7 O 287/02, decision of 20 April 2007, p. 42, unpublished) • but: Mannheim decisions inapplicable with regard to essential patents in Telecommunication, no substitution for respective standards www.rokh-ip.com

  23. C. Antitrust law based remedies (10) • Authorities (Complaint with EC Commission) • Investigation in parallel or independent of infringement action • Commission can grant compulsory licenses or issue fines • Preliminary measures possible www.rokh-ip.com

  24. D. Recent developments • Revision of the ETSI IPR rules: • November 2005: ETSI established „ETSI IPR review & ad-hoc group“ • All initial recommendations implemented, e. g. • increased transparency by timely disclosure of essential IPRs, i.e. before it becomes part of the standard (cf. sec. 4 ETSI IPR Policy) • possibility for ex ante disclosure of licensing terms (cf. sec. 4.1 ETSI IPR Guide) • Further recommendations: • Establishing an arbitration proceeding • Substantiation of FRAND conditions by adding the principles of „Aggregated Reasonable Terms“ (ART) and „Proportionality“ • No agreement found yet, further discussion necessary www.rokh-ip.com

  25. Thank you for your attention! Dr. Thomas Reimann REIMANN OSTERRIETH KÖHLER HAFT Rechtsanwälte Partnerschaftsgesellschaft Steinstraße 20 Tel. +49 (0)211 550 220 40545 Düsseldorf Fax +49 (0)211 550 22 550 Thomas.Reimann@rokh-ip.com www.rokh-ip.com www.rokh-ip.com

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