Showing 9 of 253 Publications in Intellectual Property & Licensing

Europe’s New SEP Regulation: All Quiet on the Patent Front?

TL;DR Background: The European Commission is about to unveil draft regulation that will more tightly regulate how patents are incorporated into technology standards. The Commission’s expert . . .

Background: The European Commission is about to unveil draft regulation that will more tightly regulate how patents are incorporated into technology standards. The Commission’s expert report and call for comments suggest that it wants to create a regime of third-party checks that would verify whether inventors’ patents are truly essential to a technology standard (i.e., “essentiality checks”). The goal ultimately is to ensure that standard-essential patents (SEPs) are adequately disclosed to would-be licensees. There are thousands of SEPs that underpin the technologies powering the digital economy, thus making it essential that firms coordinate to develop and implement these technologies.

However… It is unclear that such regulation would improve upon the status quo. While it might not be perfect, the existing approach to essentially checks has seen SEP-reliant industries provide countless technological breakthroughs. This has led industries where SEPs are particularly relevant to occupy key geostrategic positions. By contrast, imposing heavy-handed regulation risks not only that there will be harm to consumers, but the potential that the West’s strategic position relative to adversarial foreign powers like China or Russia may be weakened.

THE ROLE OF ESSENTIALITY CHECKS

Technical standards (e.g., 5G, WiFi, USB-C, etc.) often rely on hundreds—sometimes thousands—of distinct inventions that can each be covered by multiple patents. 

Firms that commercialize goods incorporating these technologies need to know which patents are essential to those standards—thus avoiding situations where license fees are paid for technologies that are not necessary to practice a given standard.

Essentiality checks can potentially streamline this process, thereby limiting the over- and/or under-disclosure of SEPs. But this is a complex and costly endeavor. The benefits of achieving perfect disclosure of SEPs—be it via market forces or regulation—are thus unlikely to outweigh the costs.

WHO SHOULD ASSESS ESSENTIALITY?

As things stand, a patent’s essentiality is determined in various ways. These include the use of patent pools, self-assessments by inventors, and evaluations outsourced to third-party experts. 

Whatever one thinks of that heterogeneous approach, it is clear that the SEP industry has thrived under this laissez-faire paradigm, and that competition among the various inventors, implementers, and standards-development organizations (who bring inventors and implementers together) has played a useful role in optimizing these processes. Regulators should thus be wary not to upset the apple cart.

In contrast, the Commission’s expert report and its call for comments both suggest that it favors a more centralized system in which government institutions, such as patent offices, would act as backstops for essentiality checks. 

Such a system would not be without risks. Indeed, there is little evidence that SEP-heavy industries are underperforming. Any reform thus risks creating more friction than it removes.

WHAT ABOUT SANCTIONS?

There are fears that excessive sanctions for failing to adequately disclose essential patents could tilt the bargaining power in SEP-reliant industries toward implementers. In turn, this could undermine inventors’ incentive to produce new technologies.

In recent years, courts around the world have sought to strike an appropriate balance between the interests of inventors and implementers. In doing so, they have foiled attempts by several regulators to limit the royalties that inventors can extract; to prevent them from obtaining injunctions against infringers of their patents; and to determine the level of the value chain at which royalties are to be calculated. 

One concern is that the draft regulation may seek to forward those goals by assessing penalties for failing to comply with its provisions. For instance, inventors may lose the ability to bring injunctions against infringers if a third party deems their patent to be non-essential. Given the vital role that these injunctions play, such a policy would be misguided.

GEOSTRATEGIC IMPACT 

Finally, overburdening firms that are active in the SEP space could erode the West’s technological leadership relative to states with manufacturing-reliant economies whose political leaders routinely undermine the intellectual property rights of foreign firms.

Many SEPs, particularly those relevant to the telecommunications sector, are held by companies in the West and specifically in the United States. The lion’s share of implementers, by contrast, are based in China. Policies that impose significant costs on inventors and benefit implementers may thus amount to a subsidy to Chinese firms and a tax on Western innovation.

These harmful consequences are magnified in light of China’s strategic effort to shape international technology standards. With European firms systematically deterred from participating in the development of open technology standards, Chinese firms—directed by their government authorities—will gain significant control of the technologies that underpin tomorrow’s digital goods and services. The consequences are potentially catastrophic.

For more on this issue, see ICLE’s academic output on standard essential patents here and here, and our response to the Commission’s recent consultation here

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Intellectual Property & Licensing

Beware Right-to-Repair Bill’s Unintended Consequences

Popular Media The Minnesota Senate Commerce Committee last week passed SF 1598, the Digital Fair Repair Bill. The bill from Sen. Rob Kupec, DFL-Moorhead, would require manufacturers . . .

The Minnesota Senate Commerce Committee last week passed SF 1598, the Digital Fair Repair Bill. The bill from Sen. Rob Kupec, DFL-Moorhead, would require manufacturers to provide independent repair companies access to relevant repair information.

Read the full piece here.

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Intellectual Property & Licensing

Misusing a Decades-Old Law Isn’t the Way to Lower Drug Prices

Popular Media More than two dozen members of Congress recently petitioned the Biden administration to upend America’s patent system – a move that could wreck our economy . . .

More than two dozen members of Congress recently petitioned the Biden administration to upend America’s patent system – a move that could wreck our economy and deprive consumers of life-enhancing new inventions.

Read the full piece here.

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Intellectual Property & Licensing

State-Mandated Digital Book Licenses Offend the Constitution and Undermine Free-Market Principles

TOTM Various states recently have enacted legislation that requires authors, publishers, and other copyright holders to license to lending libraries digital texts, including e-books and audio . . .

Various states recently have enacted legislation that requires authors, publishers, and other copyright holders to license to lending libraries digital texts, including e-books and audio books. These laws violate the Constitution’s conferral on Congress of the exclusive authority to set national copyright law. Furthermore, as a policy matter, they offend free-market principles.

Read the full piece here.

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Intellectual Property & Licensing

A Few Questions (and Even Fewer Answers) About What Artificial Intelligence Will Mean for Copyright

TOTM Not only have digital-image generators like Stable Diffusion, DALL-E, and Midjourney—which make use of deep-learning models and other artificial-intelligence (AI) systems—created some incredible (and sometimes . . .

Not only have digital-image generators like Stable Diffusion, DALL-E, and Midjourney—which make use of deep-learning models and other artificial-intelligence (AI) systems—created some incredible (and sometimes creepy – see above) visual art, but they’ve engendered a good deal of controversy, as well. Human artists have banded together as part of a fledgling anti-AI campaign; lawsuits have been filed; and policy experts have been trying to think through how these machine-learning systems interact with various facets of the law.

Read the full piece here.

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Intellectual Property & Licensing

Patent Pools, Innovation, and Antitrust Policy

TOTM Late last month, 25 former judges and government officials, legal academics and economists who are experts in antitrust and intellectual property law submitted a letter to Assistant . . .

Late last month, 25 former judges and government officials, legal academics and economists who are experts in antitrust and intellectual property law submitted a letter to Assistant Attorney General Jonathan Kanter in support of the U.S. Justice Department’s (DOJ) July 2020 Avanci business-review letter (ABRL) dealing with patent pools. The pro-Avanci letter was offered in response to an October 2022 letter to Kanter from ABRL critics that called for reconsideration of the ABRL. A good summary account of the “battle of the scholarly letters” may be found here.

Read the full piece here.

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Antitrust & Consumer Protection

Noah Phillips’ Major Contribution to IP-Antitrust Law: The 1-800 Contacts Case

TOTM Recently departed Federal Trade Commission (FTC) Commissioner Noah Phillips has been rightly praised as “a powerful voice during his four-year tenure at the FTC, advocating for rational . . .

Recently departed Federal Trade Commission (FTC) Commissioner Noah Phillips has been rightly praised as “a powerful voice during his four-year tenure at the FTC, advocating for rational antitrust enforcement and against populist antitrust that derails the fair yet disruptive process of competition.” The FTC will miss his trenchant analysis and collegiality, now that he has departed for the greener pastures of private practice.

Read the full piece here.

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Antitrust & Consumer Protection

Rebalancing Section 512

TL;DR Section 512 of the Copyright Act, passed in 1998, was created to preserve incentives for online service providers (OSPs) and copyright owners to cooperate on detecting and policing copyright infringement, while also giving those OSPs greater certainty about their legal exposure.

Background…

Section 512 of the Copyright Act, passed in 1998, was created to preserve incentives for online service providers (OSPs) and copyright owners to cooperate on detecting and policing copyright infringement, while also giving those OSPs greater certainty about their legal exposure. The idea was to provide a safe harbor to OSPs that would also help to fight piracy.

But…

In practice, while Section 512 has reduced OSPs’ liability risk, piracy has grown exponentially. This is partly due to how federal courts have interpreted the law. Indeed, the U.S. Copyright Office has concluded that, when it comes to Section 512, “Congress’ original intended balance has been tilted askew.”

Read the full explainer here.

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Intellectual Property & Licensing

FTC on the Gig Economy: The Glass is Almost Empty

TOTM The business press generally describes the gig economy that has sprung up around digital platforms like Uber and TaskRabbit as a beneficial phenomenon, “a glass that is almost full.”

The business press generally describes the gig economy that has sprung up around digital platforms like Uber and TaskRabbit as a beneficial phenomenon, “a glass that is almost full.” The gig economy “is an economy that operates flexibly, involving the exchange of labor and resources through digital platforms that actively facilitate buyer and seller matching.”

Read the full piece here.

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Antitrust & Consumer Protection