Imagine downloading four "Star Wars" movies in the time you finish reading this sentence, donning your $6.99 virtual reality headset, and then walking next to Darth Vader (or Luke Skywalker). 5G, with its gigabit download speeds and millisecond latencies, is bringing that world.
Along with artificial intelligence, virtual reality, internet of things and big data, 5G has sparked a super-connected revolution. Companies across industries strive to make smart and connected products, from the expected, vehicles and TVs, to the unexpected, inhalers, kitchen appliances, trash cans.
With the explosion of smart and connected products comes the need to navigate complex licensing negotiations and litigation over standard-essential patents in communications and networking technologies.
Recent Developments in the SEP Landscape
Escalating SEP Battles
Many standard-setting organizations require members to dedicate their SEPs or license them on fair, reasonable and nondiscriminatory terms. What constitutes a FRAND term, however, has long perplexed corporate negotiators, courts and governmental agencies around the world.
That problem becomes more difficult when one side is a relative newcomer to SEP/FRAND licensing. For instance, an auto or medical device manufacturer will generally lack the FRAND licensing experience of a smartphone maker. Up until 2018, SEP litigation mostly involved smartphone competitors and chip suppliers. Since then, telecom giants like Nokia Corp. and Qualcomm Corp. have sued auto makers like Daimler AG and Volkswagen AG. The next-generation connected vehicles, and various other super-connected products, require fast, stable networking, the type of connections 5G offers.
By January 2020, there were more than 95,000 applications and granted patents declared relevant to 5G worldwide, with Huawei Technologies Co. Ltd., Samsung Electronics Co. Ltd., LG and Nokia leading the race.1
With the emergence of patent pools targeting particular industries, nonpracticing entities continue to play a part in the SEP battles. Avanci LLC, for instance, aggregates SEPs for cellular standards (2G, 3G and 4G) from industry players and licenses them to IoT device manufactures like automakers. Avanci's licensors now include Qualcomm, Nokia and InterDigital Inc., and NPEs such as Sisvel SpA, Unwired Planet, and Conversant. Avanci has struck deals with Audi, Volvo, Volkswagen, Porsche, Peugeot and Lamborghini. For those who find the $15 dollar-per-vehicle rate not so fair, reasonable, or nondiscriminatory, Avanci and its members have turned to the courts.
Recently, Avanci member Conversant sued Tesla in Texas based on cellular SEPs acquired from Nokia,2 shortly after another member, Sharp, sued Tesla in Japan.3 Yet another Avanci member, Sisvel, sued Tesla Inc. (and 11 others) in Delaware in May 2020.4 Meanwhile, auto-parts supplier Continental has sued Avanci and its members for breaching FRAND commitments and committing other anti-competitive acts based on its practice of licensing only at the original equipment manufacturer level.5
In Europe, the world awaits the U.K. Supreme Court's ruling on whether a U.K. court can order Huawei to take a global FRAND license from Unwired Planet based on U.K. patents, or else face a U.K. injunction. Daimler, joined by Continental and a few other auto-connectivity module suppliers, continues its antitrust fight against Nokia. Nokia's 10 infringement suits in three German patent courts against Daimler have not yet forced it to accept Avanci's royalty demands.
All this is just the beginning. As more actors take part in the super-connected world, SEP battles will find their way onto the agenda of more players in more industries.
Recent Policy Shift - Does "Essential" Make It Special?
With industrywide deployment, an SEP magnifies the potential antitrust and anti-competition concerns of patents in general and has attracted increasing attention from regulators.
In December 2019, the U.S. Patent and Trademark Office, the U.S. Department of Justice Antitrust Division, and the National Institute of Standards and Technology issued a joint policy statement on remedies for SEPs.6 The 2019 statement replaces the 2013 statement jointly issued by the USPTO and the DOJ and signifies a shift in enforcement priorities from deterring patent holdup to ensuring compensation for SEP holders.
In the 2013 statement, the agencies observed that...
