Title: Just-in-time%20inventions%20and%20the%20development%20of%20standards%20%20How%20firms%20use%20opportunistic%20strategies%20to%20obtain%20standard-essential%20patents%20(SEPs)
1Just-in-time inventions and the development of
standards How firms use opportunistic
strategies to obtain standard-essential patents
(SEPs)
- Byeongwoo Kang, Tokyo University
- Rudi Bekkers, Eindhoven University of Technology
- IEEE-SIIT Conference
- 24 26 September 2013, Sofia Antipolis, France
2Introduction
- Standards have complex relation to Intellectual
Property Rights (IPRs) and essential patents in
particular. - That as a general proposition patented design or
methods not be incorporated in standards.
However, each case should be considered on its
own merits and if a patentee be willing to grand
such rights as will avoid monopolistic
tendencies, favorable consideration to the
inclusion of such patented designs or methods in
a standard might be given - 1932, ANSIs Committee on Procedure
- Including patented technology can be a desirable
thing - Standards design requirements often imply
trade-offs and dilemmas - Valuable technology may improve standards
performance, cost-effectiveness, or environmental
friendliness - Many valuable technologies are patented
- As long as benefits outweigh costs, inclusion may
be legitimate - But some standards include gt3000 essential patent
families by 60 owners - Is the inclusion process still rational?
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3Introduction
Data based on Bekkers, R., Catalini, C.,
Martinelli, A., Simcoe, T. (2012). Intellectual
Property Disclosure in Standards Development.
NBER conference on Standards, Patents
Innovation, Tucson (AZ), January 20 and 21, 2012.
PAGE 3
4Introduction
Top standards in terms of number of disclosed
patents
Data based on Bekkers, R., Catalini, C.,
Martinelli, A., Simcoe, T. (2012). Intellectual
Property Disclosure in Standards Development.
NBER conference on Standards, Patents
Innovation, Tucson (AZ), January 20 and 21, 2012.
PAGE 3
5Introduction
- Standards have complex relation to Intellectual
Property Rights (IPRs) and essential patents in
particular. - That as a general proposition patented design or
methods not be incorporated in standards.
However, each case should be considered on its
own merits and if a patentee be willing to grand
such rights as will avoid monopolistic
tendencies, favorable consideration to the
inclusion of such patented designs or methods in
a standard might be given - 1932, ANSIs Committee on Procedure
- Including patented technology can be a desirable
thing - Standards design requirements often imply
trade-offs and dilemmas - Valuable technology may improve standards
performance, cost-effectiveness, or environmental
friendliness - Many valuable technologies are patented
- As long as benefits outweigh costs, inclusion may
be legitimate - But some standards include gt3000 essential patent
families by 60 owners - Is the inclusion process still rational?
PAGE 3
6Introduction
- Companies owning essential patents have a range
of benefits - Revenue generating opportunities
- Good bargaining position for cross licenses
getting access to SEPs and non-SEPs - Influencing the standard to get closed to its own
technological strength, know-how, existing
products or product platforms, and markets and
clients - As a line of defense when attacked for
infringement - A valuable asset that may be sold in times of
need - All these advantages create incentives to obtain
essential patents. - Firms that do not own such patents are prepared
to spend billions of dollars purchasing them,
e.g. Google gt US5B, Rockstar (Apple, MS,
Blackberry) ltUS4.5B - SEPs also may create risks (Non-availability of
licenses, Ex post patent holdup, Royalty
stacking) - Special regime F/RAND
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7Introduction
- Standards Essential Patents (SEPs) have become a
fruitful research topic - Early conflicts. Good (EIPR 1999), Bekkers et al
(EIPR 1999, RP 2001) - Existence of standard essential patents. SSO
patents database by Rysman Simcoe (MS 2008),
Interplay study for European Commission (2010),
Open Essential IPR Disclosure Database (OEIDD) by
Bekkers, Martinelli, Catalini and Simcoe (NBER,
2012) - Features of SEPS. Rysman and Simcoe (MS 2008)
- Effects of SEPs on the standardization process.
Farrell et al. (ALJ 2007), Dokko and Rosenkopf
(OS 2010), Baron et al. (2012) - Effects on the market and competition/antitrust
concerns Lemley/Shapiro (TLR 2006), Geradin et al
(BOJST 2008), Besen Levinson (AJ2012), American
Bar Association (Kobayashi Wright, 2010), FTC
(2011) - Firm strategies with regard to SEPs. Leiponen (MS
2008). Bekkers et al. (RP 2011) Omachi (2004).,
Berger et al. (RP 2012) - Patent pools Merges (1999), Shapiro 2000 (NBER),
Lerner Tirole (AmER 2004), Ménière Lévêque
(2008), Baron Delcamp (2010)
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8Introduction
- Diverse literature, but mainly focuses on the
existence and impact of essential patents - One apparent gap how do these organizations
manage to obtain SEPs in the first place? - This study is (among the few) that focuses on the
standardization processes and strategic behavior
therein - Builds on Bekkers, Bongard and Nuvolari (RP 2011)
- found that whereas patent quality indeed was a
determinant of a patent being a SEP, the
strategic behavior of the patent owner being
involved in the standard setting process was yet
a much stronger determinant - This study aims to investigate such strategic
behavior in more detail
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9Essential patents and the standards process
- The standardization process
- Voluntary process of interested parties /
stakeholders - Takes place in Standard Setting Organizations
(SSOs), usually in Technical Committees (TCs) - Standards drafted by participants (usually
firms), not SSO staff - Set of rules and decision procedures that govern
process principles of openness, neutrality,
consensus and decision-making, no collusion or
anti-competitive conduct - TCs may or may incorporate patented technology
(and may or may not be aware)
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10Essential patents and the standards process
- How can a patent become essential? Depends on
exact scope of (granted) patent, and exact text
of (final) standard. - -gt Third scenario 'Just-in-time inventions'
- Some insiders have even expressed concerns over
this process - parties can propose technologies "just for
getting patented technology into the standard
rather than to improve the standard ... No
mechanism exists to determine whether a patent
claim brings a standard forward (real innovation)
or just tries to get a patent into the standard
in order to make money.
Scenario Time lap between patent application and inclusion Technical merit
TC decides to include technology which was already long patented Long High
Work in TC raises technical challenges or trade-offs, and participants get engaged in additional RD, possible resulting in patented technology that are incorporated in the standard Short High
Participants 'push' their own patented technologies into the standard, even when it has little merit. They may bargain among other participants for support of inclusions, possible giving favors in return Short Low?
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11Essential patents and the standards process
- Hypotheses
- H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting - H2. Patents applied for just before or during a
standardization meeting have an increased
likelihood to become essential patents - H3. Standard essential patents applied for just
before or during a standardization meeting have a
lower technical quality than comparable patents - H4, explorative Engagement in just-in-time
strategies depends on a result of a firms
different positioning (business model, world
region, previous experience, etc.)
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12Data and findings
- Data based on the 3G WCDMA standard and the 4G
LTE standard - Standard with major impact (over a billion
worldwide users, and successor of 2G GSM which
has gt6 billion users) - Dynamic standard with smooth evolution from 3G to
4G - continues technical improvements - From 1999 to 2010, we analyzed 77 meetings of the
'3GPP RAN1' group, with 939 individual
participants at these meetings, affiliated with
53 firms, owning 14,000 patents in relevant
technology area, and 988 patents claimed as
essential - (Claimed) essentiality data from OEIDD
- Additional metadata of patents from PATSTAT
(especially relating to priority date, citations,
etc.) - Data cleaning and harmonization on assignee,
inventor names, etc. - Additional data collection on business models,
geography, etc.
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13Data and findings
H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting
Figure 1 Schematic presentation of the
occurrence of 3GPP RAN1 meetings
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14Data and findings
H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting
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15Data and findings
H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting
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16Data and findings
H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting
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17Data and findings
H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting
-gt The results suggest that we can accept the
hypothesis -gt Additional finding participating
firms peak the week before a meeting, while
non-participating firms peak during the meeting
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18Data and findings
H2. Patents applied for just before or during a
standardization meeting have an increased
likelihood to become essential patents
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19Data and findings
H2. Patents applied for just before or during a
standardization meeting have an increased
likelihood to become essential patents
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20Data and findings
H2. Patents applied for just before or during a
standardization meeting have an increased
likelihood to become essential patents
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21Data and findings
H2. Patents applied for just before or during a
standardization meeting have an increased
likelihood to become essential patents
-gt Patents applied just before hypothesis
accepted, robust after adding controls -gt Patents
during meeting hypothesis rejected
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22Data and findings
H3. Standard essential patents applied for just
before or during a standardization meeting have a
lower technical quality than comparable
patents Forward citations are often used as a
proxy for patent value (Carpenter et al., 1981
Trajtenberg, 1990 Karki, 1997) but are by no
means perfect (e.g. Gambardella, 2008) Likely
better as indicator for technical merit (as value
is related to more non-observed dimensions)
SEPs are already known to have longer citations
tails, so we truncated at 2005 (minimal 7 years
to collect) We removed patents lt1999 to prevent
bias We applied year correction (Trajtenberg,
2002) All types of SEP have higher scores than
non-SEP reference (1), magnitude irrelevant for
our purposes SEPs applied for during pre-meeting
or meeting have much lower citation score than
those applied during 'idle' H3 firmly accepted
Figure 2 Citation performance of claimed
essential patents for three different periods.
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23Data and findings
- H4 Engagement in just-in-time strategies
depends on a result of a firms different
positioning - Explorative approach
- Variables
- Nine business models distinguished (reduced to
upstream vs. downstream) - World region
- Incumbent suppliers (major market share during
previous technology generation) - Patent stock (total)
- Patent stock (in specific technology field)
- Inevitable that above variables are related, so
due respect required for interpretation
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24Data and findings
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25Data and findings
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26Data and findings
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27Data and findings
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28Data and findings
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29Data and findings
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30Data and findings
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31Data and findings
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32Data and findings
- H4 Engagement in just-in-time strategies
depends on a result of a firms different
positioning - We found that a strategy of applying for patents
in the 7 days preceding a standardization meeting
is employed by - Vertically integrated firms (hence less by US
firms, which are mostly upstream firms) - Incumbent champions of the previous technology
standard (hence more by European firms, where
these champions are found) - Smaller companies that nevertheless have large
SEP portfolios for the standard (i.e. very
dedicated companies) - Companies that are very actively participating in
3GPP meetings
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33Discussion and limitations
- Our interpretation Just-in-time patenting
consists of two different strategies. - Anticipatory patent filing strategy,
- Combinatory patent filing strategy
- (Note that, up to recently, sharing information
in an SSO setting was NOT considered prior are
when determining patentability) - Implications Potential effects relevant to
policy makers, competition authorities and end
users - Higher barriers to entry of potential
implementers - Lower level of competition in the market
- Reduced incentive for 'real' inventors to invest
in RD - Higher prices (when passed on along the business
chain, and as effect of lower competition) - Recommendations SSO to take critical look at
inclusion processes, and patent offices to
consider SSO prior art (increasingly happening)
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34Discussion and limitations
- Limitations
- We investigated just one standardization process
(albeit a quite significant one). Other processes
and SSOs may have different rules, different
culture, and companies with different conduct. - Our analysis is based on self-disclosure of
essential patents (as there exists no reliable
source of actual essentiality). - Our determination of all relevant patents for
this field (based on the IPC codes of the SEPs)
might be imperfect.
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