Patents and Standards: are the rules helping SMEs?

PIN-SME responded to the public consultation of the European Commission on the interplay between patents and standards. The document aims at giving an SME perspective on complex issues that regard the treatment of patents in standards, such as the pricing of royalties, the transparency of licensing negotiations, patent pools, fair competition etc. Read the PIN-SME Position Patents & Standards.

Standards make available new technologies by disclosing and sharing innovation. As such different companies, including SMEs, can implement and contribute to a complex technological ecosystems. The success of standardization in complex technological sectors depends on the willingness of companies to disclose and share their proprietary solutions. Inevitable tensions exist between those who own the intellectual property and the vendors who implement the standards into sellable products. The right balance between these conflicting business models is necessary in order to encourage all parties to invest in standardization and implement the standardised technologies.

Telecommunication and consumer electronics industries have been particularly affected by the patents and standards debate. In the last years, the so-called “standard essential patents” (SEP) have spurred disputes and litigation among giants. Companies such as Apple, Intel, Ericson and Nokia among others are at the centre of this debate. Although SMEs are less visible, they are important stakeholders since many of them need standards to build their products and they are in many cases contributors to standards.

Besides the disputes that are happening in courts and the debate that is public on the media, Standards Setting Organisations are moderating the discussions among their members with a view of adapting their patent policies. At the same time, the European Commission has launched a public consultation by which it aims at gathering information and views on the interplay between standardisation and intellectual property rights (IPR).

The ETSI special committee on IPR is the body where ETSI members, in particular manufactures and telecom operators, discuss the IPR policy of the organisation. Currently, an important item of discussion is aimed at giving better guidance on the meaning of Fair, Reasonable and Non Discriminatory (FRAND) licencing terms that every member who contributes to a standard commits to respect. Indeed, the lack of a unique and transparent way of interpreting FRAND is a big obstacle for SMEs who implement standards since they are incapable of predicting the licencing costs related to the placement on the market of a new product.

This month IEEE, an international standards body that releases commonly used technical specifications for some ICT fields such as WiFi, announced significant changes to its IPR rules. A very controversial issue is that IEEE wants patent charges to be based on a percentage of component price, not whole device price, as has been the norm. If this will save vendors billions of dollars between them, on the other hand it will hit significant holders of IPR with a risk to discourage future contributions to standards.

On its side, the European Commission closed its public consultation on 15 February. All the major players and other stakeholders, including PIN-SME, submitted their contributions. For the time being it is still not known what will be the next decisions of the Commission on this topic. The hopes of PIN-SME on behalf of the SME community are that the Commission helps to streamline a framework where great uncertainty combined with high legal costs create barriers for SMEs.