“Creating a FRAND framework is not ETSI’s responsibility”

JUVE Patent: Many market shareholders are calling on ETSI for clearer guidelines on how to assess FRAND rates. What is your view on this?

Christian Loyau: First of all it’s important to mention that ETSI is not taking part in commercial discussions regarding SEP licensing. Any change of this principle would require a change in our rules of procedure. At ETSI, every decision regarding the IPR policy has to be taken by the general assembly. For such a change of the rules, a majority of 71% is necessary if not taken by consensus. Assuming members would agree,  the  creation of a framework for FRAND-rate setting would still be a problem for ETSI.

Christian Loyau

As a patent is an asset of the company, only the owner can determine its value and it’s even more true when we are talking of patent portfolios. ETSI does not have  inside knowledge what the inherent value of a patent or the patent portfolio is.

Furthermore, it depends on each company. Therefore, deciding what an SEP is worth must lie in the hands of the patent owners and they must propose the adequate FRAND licence rate. In many cases this works out very well. After all, compared to the overall number of SEP deals, we see only few in litigation.

Implementers especially require more thorough essentiality checks. Can ETSI provide these?

ETSI does not have the capacity and the expertise to take these checks in hand. This is a job for an independent body of experts on patents and standardisation. Currently, the European Commission is working on an initiative to this end.

”Everybody would benefit from third-party essentiality checks”

Everybody would profit from voluntary third-party essentiality checks by independent experts. The patent owners could be sure they have strong SEPs, and the licensees would know that it makes sense to take a licence, because the patents really are essential and/or necessary to the standard they want to use.

How is essentiality currently determined?

Currently the patent owners assess which patent is essential. But this creates problems, since of course they do not want to risk missing out on a potentially essential patent. So, we do see a tendency to over declare.

Usually, a patent’s essentiality is related to a specific part of a standard. The declaration for a standard at ETSI includes a part where a patent’s technical claims are matched to the standard in question. But only 9% of patent owners actually fill out this part.

Lack of transparency in licensing negotiations is a main point of criticism. Would clearer rules within the ETSI Intellectual Property Rights policy (IPRs) solve this problem?

According to the current rules, ETSI is not involved in the commercial discussions and licensing negotiations of the parties, hence ETSI cannot be criticised for this lack of transparency. We can, however, possibly discuss more accuracy in the declarations of SEPs and request that members review their declarations and ensure the patents are still valid and essential for the standard. For instance, if the patent has been nullified or declared non-essential during litigation, the members should update this.

“We do see a tendency to over declare”

Once an essentiality declaration is accurate, it makes licensing negotiations much easier. In our guidelines, we strongly recommend a regular update; but it is not mandatory. So, to make this an obligation, a change in the rules of procedures would again be necessary, but this needs the qualified majority of the general assembly.

If not ETSI, then which body might be a possible candidate to determine global FRAND rates?

Many consider the UPC as a possible solution. But I don’t believe that the UPC will be able to decide on terms and conditions of FRAND licences as it is not part of the charter. The judges rule on legal aspects of patent law, while licensing rates are a purely commercial matter.

Mediation is certainly an interesting option, since it allows parties to find an agreement when they have exhausted all possibilities of bilateral negotiations. The mediator as an independent third party, can bring the different positions together. Many jurisdictions impose a mediation before a patent dispute goes to court on the merits. Attempting to find a resolution by mediation could also demonstrate that the parties are willing to find a solution.

Arbitration is another possibility and some SDOs have incorporated the resolving of disputes by arbitration in their IPR policy. Courts or arbitration tribunals such as (but not only) WIPO are certainly the best fora for such determination of FRAND rates.

This interview was conducted by Konstanze Richter