Standard Essential Patents Licensing Royalty Disputes 4Q 2013

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Standard Essential Patents Licensing Royalty Disputes 4Q 2013

  1. 1. Standard Essential Patents Licensing Royalty Disputes 4Q. 2013 ©2013 TechIPm, LLC All Rights Reserved www.techipm.com
  2. 2. 1. Main Causes of FRAND Licensing Royalty Disputes In Apple, Inc. v. Motorola, Inc., No. 1:11-cv-08540 (N.D. Ill. 2012), Dkt. No. 1038 at 18, the court ruled that a FRAND royalty should not reflect the ex post hold up value that standard essential patens (SEPs) acquired after a standardized te chnology was adopted widely in the relevant technology market. Thus, the FRAND royalty can be a measure of value the implementer can obtain by adopting the standardized technology over available alternatives at the time the standard was specified. In other words, FRAND royalty can be the maximum royalty amount that a licensee would be willing to pay in return for the incremental profit produced by implementing the patented standardized technology over the alternatives. Therefore, hypothetical negotiation framework to determine FRAND royalty subject to the incremental value over alternatives at the time the standard was specified can be applied. ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 2
  3. 3. 1. Main Causes of FRAND Licensing Royalty Disputes -2 Motorola argued that a FRAND royalty should be determined as a reasonable royalty based on a hypothetical negotiation at the time of infringement because the damages adequate to compensate would be damages that place the patentee in the position it would have been but for the infringement. Motorola also argued that the FRAND royalty can be measured from a comparable licensing price in the relevant licensing marketplace. On the other hand, Apple argued that market value for FRAND royalty could not be used as providing the reliable FRAND royalty levels unless the comparable licensing royalty has not been affected by enhanced market power of SEPs. ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 3
  4. 4. 2. Arguments against the Court’s FRAND Royalty Qualcomm insisted that there is nothing wrong with the licensing practice of using the price of the entire end product as the appropriate royalty base, because licensing at the end user device level has been an industry custom in the telecommunications sector. By the telecommunications industry custom, Qualcomm explained that patentees of SEPs usually did not enforce licensing obligation to component manufactures. Therefore, FRAND royalty base cannot be the smallest saleable component that embodies the relevant SEPs. Additionally, Qualcomm reasoned that the contribution of the patented feature to consumer demand should not be limited to components of devices because extended consumers’ benefits are coming from the services provided by the network connecting devices. ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 4
  5. 5. 2. Arguments against the Court’s FRAND Royalty -2 Therefore, the smallest saleable component that embodies the relevant SEPs is actually the device itself in the telecommunications sector. Furthermore, developing standard technology in mobile telecommunications is a high-risk business. Thus, without strong patent protection and return for R&D, there will be no encouragement for further investment in telecommunications standards. Consequently, artificially diminished royalties on mobile telecommunications standard-compatible products will impede innovation, and thus, harm to the industry and consumers ultimately. ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 5
  6. 6. 2. Arguments in favor of the Court’s FRAND Royalty Cisco, HP, and several other IT companies argued that the use of the entire market value as a royalty base should not be used unless all of the profit of the infringing product is attributed to the features of SEPs. Thus, the value of SEPs should be determined by apportion to the contribution actually the patented features made to the accused product. They also insisted that patentees bear the burden of proof for the value of SEPs. ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 6
  7. 7. Thank you! • If you have any questions please contact Dr. Alex G. Lee at alexglee@techipm.com ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 7
  8. 8. Company Overview TechIPm, LLC is a professional research and consulting company specializing in technology and intellectual property mining and management. Technology Expertise • Mobile Computing & Wireless Communications Technology: LTE, UMTS, WLAN, WPAN, RFID, NFC, WSN, Cognitive Radio/SDR, M2M, Mobile TV etc. • Smartphone Applications: Location Base Services/Indoor Navigations, Mobile Payments, Augmented Reality, Wireless/Mobile UI/UX etc. IP Expertise • Strategic Patent Evaluation & Valuation: M&A Patent Due Diligence, Acquisition Feasibility Analysis, Investment Valuation • Patent Portfolio Analysis & Development: Design Around Strategy, Essentiality & Claim Development for Standard Essential Patents • Patent Litigation Strategy: Evidence of Use, Claim Construction Strategy • Patent Prosecution: U.S. Provisional Filing, U.S. Non-provisional Prosecution, International Prosecution (PCT and Foreign Offices) • Patent Business Strategy: Licensing/Monetization Strategy, IP Intelligence • Patent Analysis: Patentability, Freedom-to-Operate, Infringement, Validity Analysis, Patent Mining for Strategic Planning ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 8
  9. 9. Major Clients Technology management professionals planning, developing, and investing in new technologies/products/services. In-house IP counsels developing patent strategy. Licensing professionals looking for a new licensing opportunities. High-tech investment management firms/banks. IP monetization/management consulting firms. ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 9
  10. 10. 4G LTE Standard Essential Patent Candidates Data 2Q 2013 LTE Standard Essential Patent Candidates Data 2Q 2013 is a product based on LTE patents research for US market leader among LTE UE (cellular phones, smart phones, PDAs, mobile PCs, etc.) and base station (eNB) product manufactures. LTE Essential Patent Candidates Data provides MS excel file for assignee, patent (publication) number, prosecution status for published applications, related 3GPP TS36 Release 10 specifications, and the key technology components for an implementation of the products. ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 10
  11. 11. References ©2013 TechIPm, LLC All Rights Reserved www.techipm.com 11

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