Standard essential patents And frand licensing – the need fora balanced approach

Ulrika Wester, Senior Group Legal Counsel,

Stockholm, 14 October 2015

IPR and Licensing at Ericsson | Ericsson Confidential | 2015-04-26 | Page 2

PATENTS AS MARKET ENABLERS

Driving open standards

Early significant investments in R&D

Selection through consensus selection – based on technical merits

Requirements agreed early

Joint technology ownership

Technology sharing

Collaborative process

Need for availabilityNeed for ongoing

investmentTelecom standards

are complete blueprints

Fair and reasonable

licensingF/RAND

IPR and Licensing at Ericsson | Ericsson Confidential | 2015-04-26 | Page 3

Standard Essential Patents and FRAND licensing› Standard Essential Patents = Patents that are essential to implementation of a

collaboratively-set standard. A product that is compatible with a standard necessarily needs to use the patent for that standard

– A mobile device that can connect to an WCDMA (3G) network will have to use technology (and thus essential patents) that has contributed to the WCDMA standard

› Subject to a Fair Reasonable and Non-Discriminatory (“FRAND”) Commitment where such commitment was voluntarily made

› FRAND commitment means: › Standard essential patents are licensed on fair, reasonable and non-discriminatory terms› Fair return on investments provide and incentive for further innovation › The standard is accessible, therefore vendors can invest in infrastructure and device

businesses. Enables new companies to enter the market› Technology transfer is possible through reasonable cumulative royalty

Fair compensation Access to market

IPR and Licensing at Ericsson | Ericsson Confidential | 2015-04-26 | Page 4

Frand policy debate – how did it start?

› In recent years, FRAND licensing regime has come under attack

› Strongest voices for change and the need to restrict the FRAND system in various ways come from those who did not (or to a far lesser extent) contribute to the standard

› This has resulted in a series of developments in courts, competition authorities and SSOs in many regions, where the licensing of standard essential patents (especially the right to use injunctive relief), is under challenge

› Antitrust intervention in standard essential patent disputes has been justified as a remedy against potential “hold-up” (due to a need to comply with a standard)

› Hold-out strategies (non-litigation delay tactics, sham complaints to competition authorities, delay the payment of any royalties) equally problematic and more prevalent (because infringement is easy without taking a license)

IPR and Licensing at Ericsson | Ericsson Confidential | 2015-04-26 | Page 5

The right to injunctive relief

› Patent holders have a basic right to seek and, under appropriate circumstance, obtain injunctive relief

› Having exhausted reasonable efforts in offering and negotiating a license on FRAND terms, it must be legitimate for an Standard Essential Patent holder to seek an injunction against a potential licensee

› FRAND is a “two-way street”. Under ETSI IPR policy, both innovators and technology-users are recognized to have FRAND obligations

› Ericsson appreciates the fact that the ECJ’s decision in Huawei v. ZTE clarifies that FRAND is a two-way street (consistent also with US law); and attempts to mitigate hold-out strategies

› Standard Essential Patent holders will not obtain a fair return on its investments by court-awarded damages only. This will lead to more litigation & higher costs

IPR and Licensing at Ericsson | Ericsson Confidential | 2015-04-26 | Page 6