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

Award-Winning Manga Author Opens Up His Work To Be Used By 'Anyone, Anywhere, For Anything,' Royalty-Free

from the your-move,-Disney dept

There's a rhetorical question that often gets thrown our way here at Techdirt: "If you remove the protection of copyright, how are artists supposed to make a living?" Despite many, many answers having been given, the question persists. Here's another look at a possible answer in progress.

Via Plagiarism Today comes the news that Shuho Sata, the author of "Burakku Jyakku ni Yoroshiku" ("Say Hello to Black Jack"), is getting set to fly without the copyright safety net. He's freeing his 10-million selling manga from the limits of copyright as a form of "second use."

This means that after 15 September anyone in the world will be free to novelize, televise, create merchandise, or in any way adapt the original work for either commercial or non-commercial purposes without having to pay royalties. This is the latest move in the writer's quest to find alternatives to the “outdated” model of intellectual property rights.

Earlier this year, Sato ended his relationship with the original publisher of the Black Jack series and started his own publishing website, where his works are currently uploaded. That was the first step in Sato's quest to discover how artists might make a living without relying on exclusivity and enforcement.

“The traditional model of making profit by holding onto a copyright is gradually going stale” he said. “I want to explore the possible benefits to authors beyond this system.”

To this end, Sato will also be displaying his work at the pixiv Zingaro in Tokyo and providing a copier for visitors to use to "replicate whatever they want." A few more details of his plan are available at the pixiv Zingaro site. Sato will not actually be renouncing his copyright. Instead, he has chosen to not enforce it, in essence granting the entire world free rein to use his work to create foreign language adaptations, applications, commercial films, TV series, produce merchandise or anything else the "second users" can come up with. 

The fine print on the deal reads as such (translation a bit wonky -- via Chrome):

Terms of Use: do not need to contact us in advance.
Royalty others: we do not require any reward.
You are happy if you can use the work freely.

Sato admits he has no idea how this will turn out, but is clearly interested in observing the results. His feeling seems to be (again, translation issues) that there has to be a better system than the current one and the only way we'll find something better, or one that fits more in line with today's technology, is to head in the opposite direction and see where that leads us.

Someone is sure to point out that Sato is only doing this after selling 10 million copies thanks to existing copyright laws, as if that somehow negates the effort he's making. I invite those particular someones to observe all the other artists out there who have sold millions but still clutched that copyright close to their chests for the remainder of their lifetimes and well into the lives of their heirs. 

Filed Under: copyright, manga, royalty free, shuho sata