Partner Mauricio Uribe and Of Counsel Hironori Kubota present Key terms in negotiating standards-essential patent licenses

1. Key Terms in Negotiating
Standards Essential Patent
Licenses
Mauricio A. Uribe
February 13, 2020

2. © 2020 Knobbe Martens
Standards and Standards Organizations – Key Language Considerations
2

3. © 2020 Knobbe Martens
Standards and Standards Organizations – Key Language Considerations
General Definitions
• Affiliates
• Term and Capture Period
• Covered Standards
• Patents/Essential Patents
• Covered Products
3
GENERAL
DEFINITIONS
LICENSE
GRANTS AND
RELEASES
PAYMENTS AND
WARRANTIES
ADDITIONAL
TERMS

4. © 2020 Knobbe Martens
Key Language Considerations – General Definitions
General Considerations
• Corporate Organization
⎼ Parent Companies
⎼ Child Companies
⎼ Related Companies
• Grant of Patent Rights
• Receipt of Patent Rights and Sublicense Rights
4
Affiliates

5. © 2020 Knobbe Martens
Key Language Considerations – General Definitions
General Considerations
• Term of the Granted Licenses
⎼ Life of the Patent
⎼ Fixed Time
• Capture Period – Balance of IP
⎼ Alternative 1: Fixed time period – Requires Additional Negotiations
⎼ Alternative 2: Life of standards – Creates Long Term License
5
Term and
Capture Period

6. © 2020 Knobbe Martens
Key Language Considerations – General Definitions
General Considerations
• Identification of Specific Standards or Chapters
• Identification of SSOs
• Identification of Technical Subject Matter
6
Covered Standards

7. © 2020 Knobbe Martens
Key Language Considerations – General Definitions
General Considerations
• Definition of Patents
⎼ Continuations/Divisionals/CIPs/Reissues/Corresponding International
Filings
• Identification of Specific Patents - Appendices
• Definition of Patents Necessarily Infringed by Covered Standards
7
Patents/Essential
Patents

8. © 2020 Knobbe Martens
Key Language Considerations – General Definitions
General Considerations
• Identification of Products that Match Covered Standards
• Scope Issues
⎼ Combinations/Sub-Components
⎼ Anti-Foundry Provisions
⎼ Post-Acquisition Applicability
8
Covered Products

9. © 2020 Knobbe Martens
Standards and Standards Organizations – Key Language Considerations
License Grants and Releases
• Granted License Rights
• Geographic Scope and Considerations
• Assignment of Granted Rights
9
GENERAL
DEFINITIONS
LICENSE
GRANTS AND
RELEASES
PAYMENTS AND
WARRANTIES
ADDITIONAL
TERMS

10. © 2020 Knobbe Martens
Key Language Considerations – License Grants and Releases
General Considerations
• Make, Use, Sell, and Distribute Covered Products
• Have-Made Rights – Use of Third Party Manufacturers
• Rights to Sub-License Third Party Patents
• Avoiding Third Party Duplicative or Overlapping Licenses
10
Granted License
Rights

11. © 2020 Knobbe Martens
Key Language Considerations – License Grants and Releases
General Considerations
• Variations in Royalties by Region
• Interplay of “Most Favored Nations” Clauses
11
Geographic Scope and
Considerations

12. © 2020 Knobbe Martens
Key Language Considerations – License Grants and Releases
General Considerations
• Scope Issues
⎼ Maintenance of Product Lines
⎼ Limiting Potential Scope of Covered Products
⎼ Anti-Foundry Provisions
• Disclosure of Assignment Rights - Publicity Restrictions
• Assignment Based on Written Permission
12
Assignment of Granted
Rights

13. © 2020 Knobbe Martens
Standards and Standards Organizations - Illustrative Negotiation Flow
Payments and Warranties
• Lump Sum Royalties vs. Running Royalties
• Royalty Base
• Multi-Standards Royalties
• Reporting/Audit Rights
• Taxes
• Third-party Payments/Pass-through
GENERAL
DEFINITIONS
LICENSE
GRANTS AND
RELEASES
PAYMENTS AND
WARRANTIES
ADDITIONAL
TERMS
13

14. © 2020 Knobbe Martens
Key Language Considerations – Payments and Warranties
General Considerations
• Royalty Rates and FRAND
• Royalty Models
⎼ Lump Sum Royalties – Fixed Volume Amounts & Releases
⎼ Running Royalties
• Interplay of Royalty Framework with Capture Period, Term, and Royalty Base
14
Lump Sum Royalties
vs. Running Royalties

15. © 2020 Knobbe Martens
Key Language Considerations – Payments and Warranties
General Considerations
• Least Saleable Patent Practicing Unit – Higher Royalty Rate(s)
• Combination Products – Lower Royalty Rate(s)
15
Royalty Base

16. © 2020 Knobbe Martens
Key Language Considerations – Payments and Warranties
General Considerations
• Royalty Stacking - Multi-Mode Devices
• Future Proofing For Additional Standards
16
Multi-Standards
Royalties

17. © 2020 Knobbe Martens
Key Language Considerations – Payments and Warranties
General Considerations
• Format for Reporting – Royalty Base
• Frequency for Reporting/Audits
• Access to Information for Audits
• Allocation of Audit Costs/Penalties
17
Reporting/Auditing
Rights

18. © 2020 Knobbe Martens
Key Language Considerations – Payments and Warranties
General Considerations
• Tax Payment Set-Offs or Withholdings
• Tax Consequences By Type of License
18
Taxes

19. © 2020 Knobbe Martens
Key Language Considerations – Payments and Warranties
General Considerations
• Sub-license Rights and Grants
• Consideration of Automatic Payment Provisions Based on Grants
19
Third-Party
Rights/Pass Through

20. © 2020 Knobbe Martens
Standards and Standards Organizations - Illustrative Negotiation Flow
Additional Terms
• Publicity
• Term/Termination
• Reformulations
• Dispute resolution
• Forum selection
• Third-party rights
20
GENERAL
DEFINTIONS
LICENSE
GRANTS AND
RELEASES
PAYMENT AND
WARRANTIES
ADDITIONAL
TERMS

21. © 2020 Knobbe Martens
Key Language Considerations – Additional Terms
General Considerations
• Existence of Agreement
• Terms
• Most Favored Nation Clauses
21
Publicity

22. © 2020 Knobbe Martens
Key Language Considerations – Additional Terms
General Considerations
• Termination Based on Breach
• Future Proofing License
⎼ Defined Time vs. Open Ended
⎼ Renewal Based on Fixed Time Periods
⎼ Voluntary Termination
22
Term/Termination

23. © 2020 Knobbe Martens
Key Language Considerations – Additional Terms
General Considerations
• Changes in the Standards
• Changes in the Patent Portfolio
• Changes in the Licensor/Licensee
23
Reformulation

24. © 2020 Knobbe Martens
Key Language Considerations – Additional Terms
General Considerations
• Resolving Breach
• Challenging Patents
• Challenging FRAND Terms
• Effect of Additional Disputes
24
Dispute Resolution/Forum
Selection

25. © 2020 Knobbe Martens
Key Language Considerations – Additional Terms
General Considerations
• Customer Rights/Exhaustion
• Vendor/Supplier Rights
25
Third Party Rights

26. © 2020 Knobbe Martens
Standards and Standards Organizations – Key Language Considerations
26
General Definitions License Grants and
Releases
Payment and
Warranties
Additional Terms
• Affiliates
• Capture Period
• Covered Standards
• Patents/Essential
Patents
• Covered Products
• Assignment of
Rights
• Geographic Scope
• Granted Rights
• Lump Sum
Royalties vs.
Running Royalties
• Royalty Base
• Multi-Standards
Royalties
• Reporting/Audit
Rights
• Taxes
• Third-Party
Payments/Pass-
through
• Publicity
• Term/Termination
• Reformulations
• Dispute Resolution
• Forum Selection
• Third-Party Rights

27. Thank you!
Mauricio A. Uribe
mauricio.uribe@knobbe.com