No, Counting The Number Of Patent Infringement Lawsuits Is Not A Good Way To Quantify A Company's IP Ethics

from the look-at-this-high-number-which-is-actually-much-lower-than-several-others! dept

Much has been made about Donald Trump walking back sanctions placed on ZTE, a partly state-owned Chinese cellphone manufacturer, for selling products to Iran and North Korea. (Fun fact: our law enforcement agencies still do business with tech companies that sell to blacklisted countries.) The company has already paid millions of dollars in fines to the US for these violations, even if the working theory is the company paid zero dollars and the Chinese government picked up the tab.

The actual badness of ZTE is somewhere between the extremes resulting in sanctions and the trade war victim it tries to present itself as. Trump is a fan of trade wars, even if Pyrhhic stalemates are still considered righteous wins in the Trade War Game. Trump has decided to lift the US government boot from ZTE's mostly-unbruised neck as a gesture of goodwill or something after slapping the world's largest exporter of consumer goods with a bunch of tariffs that seem to be doing more harm than good on the home front.

And, because it's Trump lifting the sanctions, lots of people are claiming it's unilaterally a bad thing for him to do. This has resulted in some really bad arguments for maintaining sanctions and there's one being made at TechCrunch. It begins with a horrendous attempt to quantify the "terribleness" of ZTE by using an incredibly meaningless stat.

After meeting with Chinese Vice Premiere Liu He this week, President Trump is still considering easing penalties on Chinese telecommunications giant ZTE over its violation of sanctions against Iran and North Korea. But what Mr. Trump may not realize is that ZTE is also one of the world’s most notorious intellectual property thieves — perhaps even the most notorious of all.

The Most Notorious Of All!

How does one gain this desirable title? Here's how the Most Notorious sausage in made in the TechCrunch post:

To get a sense of just how egregious ZTE’s behavior truly is, we need only to consult PACER, the national index of federal court cases. A search of PACER reveals that in the U.S. alone, ZTE has been sued for patent infringement an astonishing 126 times just in the last five years. This number is even more shocking when you consider that only a subset of companies who believe their IP rights have been violated by ZTE has the means or the will to spend the millions of dollars needed to wage a multi-year lawsuit in federal courts.

SHOCKING! 126 times in the past five years. The mind boggles… oh wait.

Apple has been sued for patent infringement 296 times over the same period. It must be at least twice the egregious IP violator ZTE is, and no one (outside of the IPWatchdog staff) believes the US government should sanction it.

LG Electronics has been sued 193 times in the same time period -- an 1.5 times more astonishing rate of egregious behavior.

That's just two examples. There are countless more. There may be valid reasons to keep sanctions against ZTE in place, but IP infringement isn't one of them. If it is, there's got to be a better metric than "patent infringement lawsuits filed against." This doesn't indicate anything but how profitable patent trolling can be. Every NPE (non-practicing entity) with a pocket full of vague software patents has filed multiple lawsuits against multiple device manufacturers. The mere existence of dozens of patent lawsuits indicates nothing more than federal filing fees offer decent ROI for patent trolls.

The editorial is on more solid ground (in terms of IP enforcement) when it calls ZTE out for joining a patent pool to collect licensing fees but heading for the exit door as soon as it became apparent it would also have to pay fees to other pool members for making use of their patents.

Claiming lawsuits = valid claims based on solid, distinct patents is a bogus argument. It ignores the expected outcome of a patent troll-friendly litigation system in an attempt to score points against Trump's new favorite Chinese manufacturer. It's not so much disingenuous as it is ignorant. But ignorance gets ignored when confirmation bias comes into play, and those who hate Trump are just as susceptible to being duped by their own minds are his supporters are. If there's a legitimate case to be made against continuing sanctions against ZTE, it's for the company's willingness to sell electronics to blacklisted companies. This argument only legitimizes patent trolling, portraying it as something other than what it really is: speculative invoicing on a mass scale.

Filed Under: donald trump, patent lawsuits, patent trolls, patents, trade wars
Companies: apple, zte

How Should Standard-Essential Patents Be Licensed?

from the that's-not-fair dept

Patents are intellectual monopolies, designed to give the patent-holder control over an invention by excluding others from using it without permission. That's a problem when standards include patented elements. Anyone who wants to implement that standard must use the invention, which gives the patent-holder the ability, in theory, to demand and obtain any licensing deal it might propose. To limit that power, holders of these standard-essential patents are often required to agree to offer licensing terms on fair, reasonable and non-discriminatory (FRAND) terms.

Of course, that leaves open the rather important question of what exactly FRAND means in practice, and an interesting case before the Court of Justice of the European Union aims to obtain some guidance on this issue. The court itself has not yet handed down its judgment, but as usual, an Advocate General has offered his own thoughts as preliminary guidance (pdf). Here's the background to the case:

Huawei, a Chinese telecommunications company, holds a European patent regarded as 'essential' to the 'Long Term Evolution' (LTE) standard developed by the European Telecommunications Standards Institute (ETSI). The LTE standard relates to next generation -- that is to say, fourth generation -- mobile phone communications. Anyone complying with the standard inevitably uses the patent owned by Huawei, which is why that patent is categorised as 'essential'. Huawei is a member of ETSI and notified the patent to that institute. Huawei also made a commitment to ETSI to grant licences to third parties on fair, reasonable and non-discriminatory (FRAND) terms.

However, when another Chinese company, ZTE, sought a license from Huawei, they were unable to agree on the terms, so Huawei brought an action for infringement against ZTE. According to ZTE, Huawei's attempt to obtain an injunction against it constituted an abuse of its dominant position, since ZTE was willing to negotiate a license. Here's the key part of the Advocate General's opinion. After making the alleged infringer aware of its infringement, the standard-essential patent-holder must also:

Present the alleged infringer with a written offer of a licence on FRAND terms and that offer must contain all the terms normally included in a licence in the sector in question, including the precise amount of the royalty and the way in which that amount is calculated.

The infringer must respond to that offer in a diligent and serious manner. If it does not accept the SEP holder’s offer, it must promptly present the latter with a reasonable counter-offer, in writing, in relation to the clauses with which it disagrees.

The rest of the opinion then goes on to fill out details of what is reasonable and unreasonable as the negotiations continue, and as recourse is made to the courts. In many ways, it's an attempt to flesh out what that problematic "fair, reasonable and non-discriminatory" means. But a far better solution would be to stipulate that all standard-essential patents must be licensed on an RF -- royalty-free, also known as requirement-free -- basis. That's precisely what the leading web standards body, the W3C, specifies in its patent policy:

In order to promote the widest adoption of Web standards, W3C seeks to issue Recommendations that can be implemented on a Royalty-Free (RF) basis. Subject to the conditions of this policy, W3C will not approve a Recommendation if it is aware that Essential Claims exist which are not available on Royalty-Free terms.

To this end, Working Group charters will include a reference to this policy and a requirement that specifications produced by the Working Group will be implementable on an RF basis, to the best ability of the Working Group and the Consortium.

It's quite reasonable to expect holders of standard-essential patents to agree to RF licensing since the inclusion of their invention in a standard is, in itself, an important benefit: it places the patent-holder at the center of the standard, and enhances its influence over the field it refers to. It also helps it avoid the need for costly and pointless lawsuits like the one between Huawei and ZTE.

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Filed Under: etsi, eu court of justice, frand, licenses, lte, patents, rand, royalty free, standards essential
Companies: huawei, zte

Congress: Fear Chinese Networking Companies! But Ignore That China Makes All Our Networking Equipment!

from the where's-the-smoking-gun? dept

For years, there have been reports or whispers about how Chinese networking giant, Huawei, might not be trustworthy. Specifically, people talked about how China might hide trojan horses in the equipment for economic espionage or even cyberattack reasons. These rumors got so loud that Huawei last year flat out told the US government to investigate it and come to its own conclusion. Well, the House Intelligence Committee has done exactly that... and Huawei is not pleased (pdf). Despite the investigation coming at its own request, with its promises to be as open as it could be, the report slams Huawei and another company ZTE, and basically says "don't trust these companies."

Huawei has hit back hard, claiming that the report is "libel" and "utterly lacking in substance." They also note that it appears to just be political, calling it "an exercise in China-bashing and misguided protectionism." Indeed, some commentators are noting that this has all the indications of blatant protectionism, rather than a legitimate concern, with some pointing out that the Intelligence Committee seems to consistently ask Huawei to prove a negative and then bashes the company for failing.

But again and again, throughout the report, the pattern emerges: an allegation is made, Huawei denies it, without providing evidence deemed detailed enough to substantiate the denial, and the Committee is unimpressed.

As that writeup notes, Huawei has not been found guilty, but is repeatedly asked to prove its innocence, and being unable to prove conclusively that it hasn't done anything, the Intelligence Committee insists that the threat is just too great.

It is, of course, quite possible that something nefarious is going on with Huawei and ZTE. But there doesn't appear to be any detals in the report that actually proves anything. Instead, it's all just baseless allegations, followed by Huawei (and ZTE) not providing enough details to convince investigators that they're innocent. Given Congress' history of grandstanding, this certainly raises some questions.
But... an even bigger issue is that the whole focus on Huawei may be kind of silly. Yes, it's a Chinese company, but as others have noted, basically all of our electronics products are made in China, and if that country really wanted to do something questionable, why not sneak in trojan horses there as well?

One fundamental failure of all this official hand-wringing is that it neglects the fact that many if not most of the components, with the exception of certain higher-value chips like those from Intel, are manufactured in China. Cisco Systems and Juniper Networks in the U.S., Alcatel-Lucent in France and Ericsson in Sweden, all use Chinese-made parts and carry out at least some portion of the final assembly of their equipment in China.

Furthermore, that same report notes that, if this is just kicking off a trade war between the US and China over telco products, the US companies may get hurt a lot more than the Chinese:

Might China respond with its own restrictions against U.S. telecom firms like Cisco and Juniper? Is this the first shot of a telecom trade war? We’ll see.

If that happens, expect Cisco to be hurt more than Huawei. U.S. sales account for only 4 percent of its overall revenue, whereas Cisco’s operations in Asia, the Pacific Rim and China account for more than 16 percent, and China was its second fastest-growing market in that region after Japan.

Yes, it's entirely possible that Huawei and ZTE are doing something bad -- but you'd think any report claiming that would have a lot more evidence than what's in this report. Of course, considering it's by the same FUD-spewing folks responsible for CISPA, perhaps we should get used to the fact that FUD without evidence is their standard operating procedure.

Filed Under: china, congress, cybersecurity, espionage, house intelligence committee, mike rogers, protectionism
Companies: huawei, zte