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Call to Action by Competition Authorities

Efforts by two leading standards-setting organizations to clarify the effect of a F/RAND licensing commitment in connection with Standard-Essential Patents (“SEPs ”) . Call to Action by Competition Authorities. E.g., European Commission Vice President Almunia (head of DG Competition):

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Call to Action by Competition Authorities

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  1. Efforts by two leading standards-setting organizationsto clarify the effect of a F/RAND licensing commitment in connection with Standard-Essential Patents (“SEPs”)

  2. Call to Action by Competition Authorities • E.g., European Commission Vice President Almunia (head of DG Competition): • “Indeed, standardised technology is the basis for the IT industry to function. Different devices can exchange information and work with each other only thanks to commonly agreed standards. To build a smartphone one needs thousands of standard-essential patents. The holders of these patents have considerable market power and can effectively hold-up the entire industry with the threat of banning competitors' products from the market through injunctions for patent infringements. By threatening to use injunctions, these companies can also make demands that their commercial partners would not accept under normal circumstances. For example, fearing exclusion from the market, companies might be forced to share valuable patented inventions with a competitor or pay excessive royalties which are then passed on to consumers.” • Competition authorities address “hold-up” after the fact – so DG Competition, US DOJ, and US FTC are calling for leading standards organizations to address these concerns up-front by clarifying the effect of a F/RAND licensing commitment in their IPR Policies

  3. Two Standards-Setting Organizations (SSOs) Undertake to Review SEP Issues • ETSI (the European Telecommunications Standards Institute) • One of the three official European Standards Organizations • Decisions primarily taken based on a consensus of its members • Home of UMTS/3G • SEPs issues referred to its IPR Special Committee for review • ITU-T (the telecommunications arm of the International Telecommunication Union) • Treaty-based, under the United Nations • Home of H.264 • Patent Roundtable event (http://www.itu.int/en/ITU-T/Workshops-and-Seminars/patent/Pages/default.aspx) • SEPs issues referred to the IPR Ad Hoc Group (advisory to the TSB Director – head of the ITU-T)

  4. Discussions at ETSI • Clarification or no clarification? • Four issues: • Injunctive relief • Safe harbor for implementers? • Capable of objective determination? • F/RAND compensation • Value of the patent before it was included in a standard? • Royalties based on smallest component implementing the standard or the end product price? • Reciprocity • SEPs for SEPs? • Non-SEPs for SEPs? • Transfer of a F/RAND-encumbered SEP

  5. Discussions at the ITU-T • Issues under review that are similar to discussions at ETSI: • Injunctive relief • F/RAND compensation • Different from ETSI: • There will be clarifications on these two issues • Announced by the TSB Director at the conclusion of the Roundtable event • Reciprocity already is defined at the ITU-T • SEPs for SEPs in the same standard • Transfer of F/RAND-encumbered SEPs already is addressed in terms of binding successors-in-interest

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