Patent Challenges for Standard-Setting in the Global Economy Lessons from Information and Communications Technology (2013) / Chapter Skim
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5 Transfers of Patents with Licensing Commitments
5 Transfers of Patents with Licensing Commitments
Pages 81-94
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From page 81... ...
The patent owner may be no longer active in an area of technology, seek to recognize monetary value for its R&D investment through patent sales, exchange patents or patent portfolios with other entities, be insolvent or in bankruptcy proceedings leading it to sell assets, or may have other purposes. Buyers may acquire patents for any number of reasons including for defensive purposes, financial opportunities in owning patents, or a desire to ensure access for themselves and others to the patented technology, among others.
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From page 82... ...
If the pendulum swings too far in the other direction, in favor of SEPs holders, then firms that have invested in implementing the standard based in part on FRAND licensing commitments could be at risk of patent hold-up, including via injunctive relief, by a new SEP owner not encumbered by the existing li 1 See EU Horizontal Cooperation Guidelines, Section 285, which strongly recommends "a requirement on all participating IPR holders who provide such a commitment to ensure that any company to which the IPR owner transfers its IPR (including the right to license that IPR) is bound by that commitment, for example through a contractual clause between buyer and seller." 2 Decision and Order, In re Negotiated Data Solutions LLC, FTC File No.
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From page 83... ...
Under the decree, N-Data was bound only to license on FRAND terms but also to honor the licensing conditions originally published by NSC.5 In a 3-2 decision, the FTC majority found that N-Data's efforts to charge higher rates, after the standard incorporating the NSC technology was widely adopted, in part out of reliance on the $1000 commitment, was an unfair method of competition under Section 5 of the FTC Act. 4 In re Negotiated Data Solutions LLC, FTC File No.
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From page 84... ...
Also, as the dissent noted, "from the time National submitted its letter of assurance in 1994 and at least until 2002, some patent holders changed or clarified the terms of their letters of assurance – even after the relevant standard was approved."7 (Majoras, 2012)
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From page 85... ...
Ultimately, a group of companies, including Apple, RIM (now BlackBerry) , Microsoft, Sony, and Ericsson, formed an entity they called Rockstar Bidco LP to acquire the patents and agreed to abide by Nortel's standards licensing commitments.9 Not long after, Google acquired Motorola Mobility, and its sizable patent portfolio, including numerous FRAND-encumbered SEPs.
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From page 86... ...
A related issue arises when a transferee does not know that patents it acquires may contain SEPs attached to particular standards, may bear FRAND licensing commitments, or may be restricted by SSO policies. In the absence of actual or at least constructive knowledge of prior specific license terms, as in the N-Data case, it is not clear whether a transferee is bound to fulfill such terms.
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From page 87... ...
A further question worth brief discussion is whether antitrust-related concerns may impact the transfer of a FRAND-encumbered SEP. In the competition area, regulators typically consider a patent holder's market power in determining whether an antitrust violation has occurred.
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From page 88... ...
2013) in which a patent holder sent an alleged infringer a letter and took no action for 4 ½ years during which there was detrimental reliance – equitable estoppel was validly raised by the letter recipient's successor.
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From page 89... ...
The common patent policy of ITU/ISO/IEC further provides for the passing down of the licensing commitment with a SEP transfer:20 In the event a Patent Holder participating in the work of the Organizations assigns or transfers ownership or control of Patents for which the Patent Holder reasonably believes it has made a license undertaking to the ITU/ISO/IEC, the Patent Holder shall make reasonable efforts to notify such assignee or transferee of the existence of such license undertaking. In addi tion, if the Patent Holder specifically identified patents to ITU/ISO/IEC, then the Patent Holder shall have the assignee or transferee agree to be bound by the same licensing commitment as the Patent Holder.
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From page 90... ...
The policy suggests that this is accomplished through a contractual provision in the transfer agreement binding the successor to any licensing commitment the original SEP holder has made for any SEPs being transferred.22 An SSO policy featuring the cascading approach may also face the question of how an implementer may seek a FRAND license if there is a break in the chain of commitment downstream. In this case, an implementer should be able to challenge the party that is at fault on one or both of two grounds – first, that he is not complying with the obligation to license the SEP on FRAND terms, or second, that he is not complying with the requirement to bind the successor-ininterest to the FRAND commitment.
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From page 91... ...
While the fee for USPTO recording has been nominal at $40, a revision to the USPTO fee schedule will eliminate the fee totally for recording a transfer electronically, starting January 1, 2014.24 Some have suggested that recording might be more convenient if linked to payment of periodic fees to maintain the patent, but that would leave several multi-year periods during which ownership could change hands many times without actual ownership being revealed to standards implementers, thereby undermining transparency. Others have raised concerns about how much information may be sought in the recordation process.
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From page 92... ...
. Notification A second approach to addressing SEP transfers involves a patent holder who has made a FRAND commitment "notifying" its SEP transferee that there is or may be a licensing commitment.
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From page 93... ...
Recognizing the complexity of this legal terrain, the committee makes the following recommendations for SSOs and public authorities to advance the proposition that licenses and licensing commitments should travel with the patent to minimize uncertainty and additional transaction costs for licensees. Recommendation 5:1 Where they have not already done so, SSOs should develop meaningful policies by which successors in interest are bound to whatever licensing com 27 For example, an SSO policy may address situations where a party might seek to circumvent a FRAND commitment in anticipation of joining the SSO or thereafter.
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From page 94... ...
SSOs should develop guidelines to ensure that the licensing assurances made to them remain with the patent in bankruptcy proceedings and support legislation, if necessary, to the same end. Recommendation 5:5 Competition authorities and international policy negotiators should, through legislation or regulation, find means to reduce inconsistencies across national legal jurisdictions in patent-transfer issues, including in bankruptcy processes.
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