Just-in-time%20inventions%20and%20the%20development%20of%20standards%20%20How%20firms%20use%20opportunistic%20strategies%20to%20obtain%20standard-essential%20patents%20(SEPs) - PowerPoint PPT Presentation

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Just-in-time%20inventions%20and%20the%20development%20of%20standards%20%20How%20firms%20use%20opportunistic%20strategies%20to%20obtain%20standard-essential%20patents%20(SEPs)

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Title: Just-in-time%20inventions%20and%20the%20development%20of%20standards%20%20How%20firms%20use%20opportunistic%20strategies%20to%20obtain%20standard-essential%20patents%20(SEPs)


1
Just-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

2
Introduction
  • 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
3
Introduction
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
4
Introduction
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
5
Introduction
  • 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
6
Introduction
  • 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

PAGE 4
7
Introduction
  • 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)

PAGE 6
8
Introduction
  • 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

PAGE 7
9
Essential 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)

PAGE 8
10
Essential 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?
PAGE 9
11
Essential 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.)

PAGE 10
12
Data 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.

PAGE 11
13
Data 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
PAGE 12
14
Data and findings
H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting
PAGE 13
15
Data and findings
H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting
PAGE 13
16
Data and findings
H1 There is an increased intensity in essential
patent filing just before and during a
standardization meeting
PAGE 13
17
Data 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
PAGE 13
18
Data and findings
H2. Patents applied for just before or during a
standardization meeting have an increased
likelihood to become essential patents
PAGE 14
19
Data and findings
H2. Patents applied for just before or during a
standardization meeting have an increased
likelihood to become essential patents
PAGE 14
20
Data and findings
H2. Patents applied for just before or during a
standardization meeting have an increased
likelihood to become essential patents
PAGE 14
21
Data 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
PAGE 14
22
Data 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.
PAGE 15
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Data 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

PAGE 16
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Data and findings
PAGE 17
25
Data and findings
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26
Data and findings
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27
Data and findings
PAGE 18
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Data and findings
PAGE 18
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Data and findings
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30
Data and findings
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31
Data and findings
PAGE 18
32
Data 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

PAGE 19
33
Discussion 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)

PAGE 20
34
Discussion 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.

PAGE 21
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