Translation | Zhongchun Xiao Xiangmin
School of Law/School of Intellectual Property, Jinan University
table of contents
I.. Preamble
II.. Industry Landscape
A. Industry Status
Needs assessment
III.. Main Directions of Action
A. Guiding Principles
B. Current Activities
C. Strategic direction
IV.. Summary
On April 3, 2024, the World Intellectual Property Organization (WIPO) published its Strategy on Standard Essential Patents 2024-2026. As WIPO's three-year strategic plan in the field of SEPs, the strategy sets out its main strategic actions based on the principles of neutrality, complementarity and voluntariness. WIPO plays a role at the international level in addressing global issues surrounding standard essential patents (SEPs) and FRAND licensing, facilitating dialogue, enhancing transparency, facilitating negotiated settlements and contributing to international discussions on SEPs. This article has been translated by Professor Zhong Chun of the School of Law/School of Intellectual Property of Jinan University and his student Xiao Xiangmin for readers' reference.
I.. Preamble
The vision set out in the World Intellectual Property Organization's (WIPO) Medium-Term Strategic Plan (MTSP) 2022-2026[1] aims to ensure that innovation and creativity around the world are supported by intellectual property (IP) for the benefit of all. With regard to this objective, WIPO's mission statement envisages the Organization to play a leading role in the development of a balanced and effective global IP ecosystem to foster innovation for a better and sustainable future.
This high-level vision entailed leveraging WIPO's global reach and neutrality. The Organization was working to establish an IP system that promoted innovation in an inclusive and balanced manner. In this context, standard essential patents (SEPs) constitute an area that deserves special attention, as "balance" has a very specific meaning in its licensing and enforcement.
Each of the strategic pillars of the MTSP – from (1) raising awareness, to (2) shaping the future of the IP ecosystem, to (3) providing global services, to (4) supporting stakeholders in using IP as a tool for growth and development – is positively linked to the question of how the patent system is used, both to guarantee the necessary incentives for innovators and to ensure that technological innovations are available in the best public interest. The discussion around SEPs goes to the heart of issues of possession, reward and equitable access. Accordingly, as stated in the WIPO Program and Budget for the 2024/25 Biennium, adopted by the Sixty-Fourth Series of Meetings of the Assemblies of the Member States of WIPO, "the [Patents and Technology] Sector will also continue to engage with Member States and external stakeholders to explore, identify and resolve current issues arising in areas such as the intersection of patents and technology standards." ”[2]
This WIPO SEP strategy document provides a brief overview of the specific areas where IP and competition law intersect (Section II.A), then assesses the need for such a strategy (Section II.B), identifies the guiding principles (Section III.A), describes WIPO's current activities in this area (Section III.B), sets out the main directions of the initiative under the MTSP (Section III.C) and provides a summary in Section IV.
II.. Industry Landscape
A. Industry Status
Standardization is an issue of global importance. Standards Development Organizations (SDOs) provide an open, inclusive, and collaborative environment in which their members can agree on a common technology platform. In turn, this environment supports the rapid development, approval and testing of systems, applications, products and services related to various technologies worldwide, especially in the field of information and communication technology (ICT). Interoperability through technology standards helps reduce costs for all parties involved, while laying the groundwork for a competitive market at the consumer level, enabling consumers to make purchasing decisions based on characteristics other than basic but critical connectivity needs, such as price, additional features, or design [3].
On the one hand, the voluntary cooperation of competitors organized by SDOs can be considered a success story, as it has led to a high degree of innovation and some widely adopted technologies. On the other hand, the standards setting environment presents its own set of challenges. The process by which competitors develop standards that incorporate proprietary technology inherently involves the intersection of intellectual property law and antitrust law. Standard Essential Patents (SEPs) are patents that protect inventions that are necessary to implement a standard.
In order to address the inherent friction between making standardized technology available to standard implementers on the one hand and taking into account the economic incentives for patent-granting rights holders, it is essential to establish a robust licensing system. The licensing of standard essential patents (SEPs) needs to be done under fair, reasonable and non-discriminatory (FRAND) conditions to ensure that the benefits of technology standardization benefit society as a whole, while maintaining a balance between the legitimate interests of SEP rights holders and implementers – in many cases, implementers and SEP rights holders can play both roles.
The requirement to commit to Fair, Reasonable and Non-Discriminatory (FRAND) licensing conditions stems from the Intellectual Property Rights (IPR) policy of SDOs. However, the implementation of these commitments and the determination of what constitutes FRAND do not fall within the purview of these bodies. Patent families can be represented by their national or regional members covering a wide range of fields, and their claim sets are often not identical. In addition, companies often file a large number of patents as SEPs before the standards are finalized and when some patents have not yet been granted. The uncertainty inherent in such a system, coupled with the lack of an authoritative assessment of necessity[4], has resulted in limited transparency of the exact IP rights that need to be licensed when implementing the standards.
Clearly, there are inconsistencies in the interpretation of FRAND commitments at the global, regional and even national levels, and antitrust rules vary from jurisdiction to jurisdiction. Several controversial issues have emerged over the past decade amid the Standard Essential Patent (SEP) licensing controversy and the litigation that followed, while also expressing concerns about abuses such as hijacking and counter-hijacking. [5]
Among the issues currently under review are:
- the necessity and manner of necessity checks;
- The prerequisites for the SEP right holder and implementer to meet before asserting patent rights or FRAND defenses;
- the methodology for determining FRAND and its geographical scope;
- the feasibility of the ban;
- In specific contexts such as the Internet of Things, there is a need to provide a hierarchy of the value chain for FRAND licenses and the basis for such licensing.
Courts in certain jurisdictions, when adjudicating disputes based on national rights, have shown a willingness to assess or even determine the global FRAND royalty rates for the SEP license of the other party in the litigation. In order to preserve their own judicial sovereignty and prevent parallel litigation from being initiated or continued in other countries, some courts have issued anti-suit injunctions (ASIs), while others have issued anti-anti-suit injunctions as a countermeasure. This phenomenon, although less prominent in recent times, can be seen as "judicial competition", which makes litigation in this area more complex and increases the transaction costs of litigation cases. It has also sparked disputes between certain jurisdictions, raising questions about whether ASI's approach is in line with international trade rules.
In light of the above challenges, different forms of alternative dispute resolution (ADR) are also available to parties who are willing to refer their differences to such proceedings in order to pool resources and avoid lengthy and costly litigation.
Jurisdictions with frequent SEP disputes are considering what policy measures need to be added to existing or emerging market regimes (e.g., patent pools, licensing frameworks with targeted incentives and technology solutions). Given the lack of consensus between SEP holders who are in a strong position and often equally strong implementers even on fundamental issues, these policy-making efforts are challenging and may lead to case-by-case reviews in the absence of broad consensus on general principles.
Proposed legislative or regulatory interventions are facing skepticism from all sides, and many stakeholders seem to prefer a market-based approach in the absence of proven government policy solutions with empirical benefits. However, policy initiatives and advice on these issues can help to enliven discussions and bring parties to the negotiating table. At the very least, it is crucial to increase transparency in the SEP space for interested market participants.
Needs assessment
There are several factors at the intersection of patents and standards that pose specific challenges, including:
- globalization of value chains;
- the potential for increased potential for cross-border or global SEP disputes, including trends in global adjudication and forum selection;
- the potential for all industry sectors to participate in the digital economy;
- Issues involving the standardization process are increasingly complex and span many areas of law (e.g., patent law, competition law, contract law, trade law, etc.).
Importantly, this area is not just about countries with a surge in high-risk litigation. Courts in a growing number of jurisdictions are being put to the test by SEP cases, and as technology deployments go global, larger markets with less experience in such disputes will be targeted for licensing agreements and court cases. National industrial, innovation or IP policies needed to take into account developments in the field of standardization, and developing countries had to prepare for the consequences of the need for their industries to access or use standardized technologies involving proprietary solutions to ensure that those technologies were licensed on fair terms. On a related note, the globalization of the market for ICT products and the associated global consumption of ICT products make the issue of SEP licensing relevant to all economies, as the outcome of any dispute related to SEP may affect the availability of certain products in a particular region.
These issues have led to a range of challenges for policymakers, judges, SDOs, and industry stakeholders to varying degrees. These challenges can be summarized as follows:
- In some areas of technology related to standards, the density of standard-essential patents (SEPs) is high, which involves issues of patent quality, importance and overall transparency;
- different methodologies for assessing necessity and determining FRAND rates;
- the transaction costs of litigation that is protracted and multi-jurisdictional;
- incentives for licensing agreements, rather than exclusion or delaying tactics;
- Differences in judicial practice have led to the choice of courts and different outcomes;
- Standard Essential Patents (SEPs) appear in industries and market segments that are not usually covered due to technological developments and convergence.
In view of these challenges, there seems to be a growing need for information, guidance, solutions and services at the international level. As noted above, given the inherently global nature of the implementation of standardized technologies and the resulting SEP licensing, it is clear that WIPO, as a recognized neutral and global member organization, has a role to play in complementing national and regional strategic initiatives in this area.
However, WIPO's efforts to address these issues required the cooperation of Member States and regional organizations, SDOs, industry stakeholders and the legal community to ensure fair and balanced access to essential technologies.
The purpose of this strategy is to lay the groundwork for WIPO's activities in the field of standard IP during the period 2024-2026. Some of these action lines will be a continuation of ongoing activities (see section III.B), others will be new initiatives, some of which will be pilot projects.
III.. Main Directions of Action
A. Guiding Principles
The three guiding principles of WIPO's SEP strategy can be summarized as follows:
1. Neutrality. WIPO must take full account of the relevance of a wide range of stakeholders from different backgrounds in the area of SEPs to ensure a fair, inclusive, representative and multifaceted approach.
2. Complementarity. WIPO's activities must be geared towards creating added value by meeting real needs, rather than replicating or pre-empting existing or planned measures at the national or regional level.
3. Voluntary. Any activities or services deployed by WIPO should remain optional and available to Member States and others.
B. Current Activities
In addition to the new course of action (see Section C), WIPO has undertaken certain activities related to the SEP, the topic of which has been included in the agenda of several events organized by WIPO [6].
At the 34th session of the Standing Committee on the Law of Patents (SCP), the Delegation of Canada made a proposal to hold a practical experience sharing session for observers and other stakeholders on standard essential patents (SEPs) and FRAND licensing during the 35th session in October 2023. The thirty-sixth session of the SCP will further hold a sharing session on Member States' policy experiences in this area. Sharing sessions in the SCP and other activities agreed among Member States could increase awareness of SEP issues and contribute to substantive discussions.
Since 2015, the WIPO Arbitration and Mediation Center (AMC) has been actively involved in the field of FRAND disputes[7]. AMC provides tailored ADR services, in particular mediation, arbitration and expert determination, which are voluntary and confidential in nature. The AMC provides a model submission agreement that the parties can use to refer disputes determined by FRAND provisions to one or more of the above mechanisms. Mediation services can also be used as a mechanism to facilitate the negotiation and conclusion of FRAND licensing agreements during the "transaction mediation" process. This type of mediation is not limited to disputes between the parties, but can also be used to facilitate ongoing licensing negotiations. It would also be useful to have WIPO experts take a decision during FRAND licensing negotiations, including to determine whether a patent was necessary.
In order to facilitate the referral of FRAND disputes to WIPO ADR, the AMC has published a document entitled "WIPO ADR Options for FRAND Dispute Management and Resolution" [8], which explains in detail the AMC's FRAND services. Such services provide a means for the industry to minimise potential disputes at an early stage and provide added value to entities with limited experience in FRAND negotiations, such as small and medium-sized enterprises (SMEs). AMC collaborates with different stakeholders [9] to promote these services and continues to gain interest from the industry through targeted communication [10].
These ongoing activities related to the work of the AMC and the SCP will be continued and further developed, as appropriate.
C. Strategic direction
After a period of reflection, and in order to gain a clearer understanding of how the global SEP policy landscape has evolved and how the Organization can contribute meaningfully to the discussions, and in conjunction with a review of policy and case law developments, four thematic clusters have been identified in line with the principles set out in section A. Each of the four thematic clusters is marked with the corresponding expected results (ERs) of the MTSP framework [11].
1. WIPO as a forum for global dialogue – ER 2.2, 2.4 and 4.3
WIPO is uniquely positioned to provide a platform for global dialogue. This includes talks, symposia and other forms of activities that enable stakeholders from different fields and professions to share their views and contribute to the discussions. The sharing of experiences, case law, policy considerations, and the results of consultations or legislative measures can help build a common understanding of the area and its potential dynamics, and may lead to a convergence of ideas and best practices among Member States and stakeholders.
This set of activities includes:
(a)the ongoing work carried out by the SCP;
(b) possible global events dedicated to SEPs (e.g., WIPO Dialogues or targeted seminars organized in cooperation with other international organizations involved in trade, standardization or development to review these specific perspectives);
(c) Maintain ongoing engagement with jurisdictions around the world, including through the WIPO Judges' Forum and Master Classes.
2. WIPO as a source of knowledge and data – ER 1.1, 2.4, 3.2 and 4.3
Another strength of WIPO was its ability to act as a knowledge hub, thanks to its data and expertise on a global scale. As information related to standard essential patents (SEPs) is fragmented and difficult to collect, greater transparency in all aspects of the field can help to gain a clearer picture of key issues and reduce transaction costs.
Initiatives that can help achieve these goals include:
(a) the establishment of a dedicated SEP page on the WIPO website;
(b) hosting databases and repositories (e.g. SEP case law collected on WIPO Lex and the regulatory framework for competition law on the SEP page);
(c) conducting research on important topics such as the methodology for determining FRAND;
(d) The voluntary declaration of standard necessity function has been enabled in PATENTSCOPE. These activities represent the first initiatives under the strategy to be implemented from 2024 onwards and will provide relevant information and materials (e.g. policy, case law, methodology and materiality statements) obtained through research or voluntary declarations.
3. WIPO as a Venue for Friendly Agreements – ER 3.1
WIPO will continue to expand its role as an important venue for ADR and transaction facilitation, thereby facilitating technology licensing. AMC's tailored mediation, arbitration, and expert determination services, as well as tools to facilitate access to these services, such as model filing forms, are being continuously improved.
The promotion and further development of ADR, including the provision of transaction mediation services such as FRAND licensing, in SEP-related disputes, is an important cornerstone of this strategy. New partnerships are being forged, and raising awareness of the efficiencies that such fair procedures can provide is an important component of planned activities.
4. WIPO as a Service Provider – ER 3.2, 3.3 and 4.5
In addition to the above-mentioned lines of action, WIPO could also provide services directly to the target stakeholders. An important area to be explored was to improve the quality of patents by facilitating access to publications and standardized documents of SDOs. Global IP Offices could benefit from such access to conduct prior art searches, taking into account the availability of these references and the business model of the holding organization. In addition, an assessment of the need and feasibility of deploying voluntary necessity check services using the pooled resources of IP offices and eventually using AI-assisted elements has been identified as an interim objective.
Activities within the four clusters span the three-year duration of the strategy and depend on the success, sustainability and uptake of individual deliverables. The implementation of WIPO's SEP strategy will include monitoring technological developments, industry trends, the global political climate and national or regional policies, as well as the progress of legislative or regulatory measures. The strategy itself and individual activities will be adjusted as necessary, and any activities that do not produce the expected added value or cannot be implemented due to the lack of support from the necessary external collaborators will be abandoned or stopped.
IV.. Summary
WIPO has a role to play at the international level in addressing global issues surrounding Standard Essential Patents (SEPs) and FRAND licensing. The global distribution of products using standardized ICTs underscores the need to transcend national or regional borders. The International Bureau of WIPO does not intend to replace or correct market mechanisms or domestic policies, but rather to undertake a range of activities to promote dialogue, enhance transparency and help parties find amicable solutions in SEP licensing negotiations.
As a global discussion platform and important information hub, as well as providing complementary and voluntary solutions, WIPO is ideally positioned to contribute to the international discussion on SEPs, benefiting policymakers, judges and industry.
Annotations (scroll up and down to view)
[1] See WIPO's Medium-Term Strategic Plan 2022-2026.
[2] See WIPO, Programme of Work and Budget 2024/25, p. 22.
[3] Well-known connectivity-related standards include Wi-Fi, USB, Bluetooth, MPEG-4, and different generations of cellular network technologies such as 4G and 5G.
[4] The "necessity" of a patent to a standard refers to the characteristic of the patent, i.e., that the standard cannot be implemented without the use of the patent-protected invention. This means, to a certain extent, that if a third party places a product or service that meets the criteria on the market without permission, at least one claim is infringed.
[5] "hold-up" refers to a situation in which a standard essential patent (SEP) right holder uses the threat of an injunction to obtain more than FRAND licensing terms, while "hold-out" refers to the implementer using technology covered by the SEP without obtaining a license and employing tactics such as delay to avoid paying FRAND patent licensing rates.
[6] For example, the World Intellectual Property Organization (WIPO) included thematic sessions on standard essential patents (SEPs) in both the 2023 IP Adjudication Masterclass and the 2020 IP Judges Forum. The International Patent Case Management Guidelines contain information on how SEP disputes are handled in China and the United States.
[7] To date, AMC has handled more than 70 FRAND mediation requests. These requests for mediation to WIPO include licensing negotiations between large SEP rights holders and implementers in court proceedings in several jurisdictions. Other examples include cases involving patent pool administrators and implementers, involving ongoing unsuccessful patent licensing negotiations. In addition, the Chinese Intellectual Property Court has referred 10 ICT technology patent infringement cases to WIPO for mediation.
[8] The document is now in its third edition and is available on www.wipo.int/amc/en/center/specific-sectors/ict/frand.
[9] Stakeholders include IP institutions, SDOs, SEP holders, implementers and IP associations.
[10] For information on past and upcoming AMC events, please visit: www.wipo.int/amc/en/events.
[11] See page 7 of WIPO's Medium-Term Strategic Plan (MTSP) 2022-2026.
Author: Zhongchun Xiao Xiangmin
Edited by Eleven