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Standards-Setting Body in the IP News Over Policy Change

Posted on Feb 25, 2015 in Articles

This article originally appeared in The Legal Intelligencer on February 25, 2015.

If someone does not have a technical background, then he or she may have never heard of the Institute of Electrical and Electronics Engineers, but IEEE plays a huge role in many of the most popular electronic devices that are used today. IEEE, of which I am a proud member, is the world’s largest association of technical professionals, with more than 400,000 members worldwide. IEEE has recently been in the news because of a significant policy change that will affect the patent rights of many patent holders. In fact, the policy change has initiated significant controversy, because while some technology users will benefit from this change, some patent owners have expressed not only dismay and concern, but outright defiance.

IEEE serves numerous functions for its many members. It publishes many journals and texts on a variety of technical issues; organizes various conferences for scientists, engineers and other technologists to exchange information; provides employment, development and continuing education resources; and makes available benefits such as insurance. Of particular recent interest is the IEEE Standards Association (IEEE-SA), a business unit of IEEE, which creates “standards” for many electrical devices.

A “standard” (sometimes referred to as a technical standard) is a formal document that sets forth a technical specification. When a manufacturer states that it is following a standard, then its product complies with the technical specification of the standard. Technical specifications for electronic devices may include the way in which data is organized, the electrical voltages of certain signals, the order in which data is to be transmitted, etc. Manufacturers and consumers benefit from standards because compliance with standards ensures interoperability of devices. A disc that has been recorded in the “DVD standard” will correctly reproduce video when used with any DVD standard disc player. An audio headset that satisfies the Bluetooth standard will operate correctly with any Bluetooth-compatible cellphone. A computer device (laptop, smartphone, tablet) that is compatible with the 802.11(n) standard will communicate with any router that is also 802.11(n) compatible.

IEEE-SA strictly adheres to a very detailed process for creating a standard. A standard may be created based on an idea that can be either broad or narrow. A project authorization request (PAR) is initially prepared. The PAR is a very detailed document that explains why the standard is needed. Once approved, a working group is formed, which, under the direction of a chair, divides the work among its members to prepare a first draft of the standard. Subsequent drafts are prepared and voted upon until consensus is obtained. A formal consensus ballot is then taken.

IEEE-SA produces standards that receive widespread adoption. For example, the IEEE 802.11 standards have been adhered to by most local area networks (e.g., Wi-Fi) throughout the world for the past 15 years. As such, IEEE-SA standards are internationally significant.

Because IEEE standards relate to electronics, IEEE standards may be covered by patents. In other words, there are times when implementation of an IEEE standard may read on a patent claim. What happens in such a situation? What happens when IEEE approves a standard, but following the standard results in patent infringement? The IEEE has policies for dealing with this situation, and those policies have recently been in the news because of some significant changes to the rights of patent holders.

IEEE-SA bylaws define what is called an essential patent claim as follows: “Any patent claim the practice of which was necessary to implement … the IEEE standard when, at the time of the IEEE standard’s approval, there was no commercially and technically feasible non-infringing alternative.”

While IEEE-SA is drafting a standard, every person in the working group is asked to identify holders of potential essential patent claims. IEEE-SA then contacts all holders of potential essential patent claims and requests their licensing intentions. This is done through an IEEE letter of assurance (LOA) form. The LOA form requests that the patent holder state its licensing intentions from a menu of choices. The choices are:

  • It will make a license available, without compensation, for its essential patent claims, to any number of applicants for uses implementing the standard.
  • It will make a license available, for its essential patent claims “under reasonable rates, with reasonable terms and conditions that are demonstrably free of any unfair discrimination,” to any number of applicants for uses implementing the standard. This option is typically referred to as the “IEEE RAND commitment.”
  • It will not enforce its essential patent claims against any person or entity that complies with the standard.
  • It is unwilling or unable to license its essential patent claims without compensation or under reasonable rates, or to agree that it will not enforce those patent claims.

IEEE-SA then considers whether to adopt the standard based on the patent holders’ response or lack thereof.

On Feb. 8, the board of governors of IEEE approved significant changes to IEEE’s patent policies. The changes are as follows:

1. The definition of “reasonable rate” (the IEEE RAND commitment) has been modified. The “reasonable rate” excludes “the value, if any, resulting from the inclusion of that essential patent claim’s technology in the IEEE standard.” Three recommended factors that “should” be included are also stated:

  • “The value that the functionality of the claimed invention or inventive feature within the essential patent claim contributes to the value of … the smallest saleable compliant implementation that practices the essential patent claim.
  • “The value that the essential patent claim contributes to the smallest saleable compliant implementation that practices that claim, in light of the value contributed by all essential patent claims for the same IEEE standard practiced in that complaint implementation.
  • “Existing licenses covering use of the essential patent claim, where such licenses were not obtained under the threat of a prohibitive order, and where the circumstances and resulting license are otherwise sufficiently comparable to the circumstances of the contemplated license.”

2. A company that chooses to make a RAND commitment of essential patent claims “shall neither seek nor seek to enforce a prohibitive order based on such essential patent claims [unless a party implementing the standard] fails to participate in, or to comply with the outcome of, an adjudication.”

3. A patent holder who has a RAND commitment must make a license for essential patent claims available to “an unrestricted number of applicants on a worldwide basis.”

4. A licensor can require a licensee of an essential patent claim to grant back a license to the licensor for its own patents essential to the same standard.

Patent stakeholders have taken opposing positions on the new IEEE rules. A letter mailed to IEEE on Jan. 30 and signed by representatives of Cisco, Intel, Samsung, Microsoft and Apple (and other parties) fully supported the new rules. Various news sources, however, have reported that Qualcomm has stated that it will not follow the new rules. Qualcomm (and others) argue that the new rules will reduce the level of protection afforded by their patents.

Ambiguity in the previous RAND rules created issues in licensing rates that were the subject of litigation. With the modifications described above, IEEE-SA sought to reduce the ambiguity in order to decrease those issues. It remains to be seen whether the new rules will accomplish that goal.

– by Lawrence Ashery

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