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19 June 2018Patents

5G specs provide FRAND food for thought

The first 5G specifications have been released, prompting questions about the challenges of licensing standard-essential patents (SEPs) in the internet of things (IoT).

Members of the 3rd Generation Partnership Project (3GPP), a collaboration of standards-development associations in the telecoms industry, approved the 5G specifications on Thursday, June 14.

According to IP Europe, a coalition of R&D-intensive European businesses, the specifications show the cellular technologies necessary to build core 5G cellular network and base stations.

IP Europe said companies including Ericsson, Nokia and Orange are leading the development of 5G standards. The standardisation process is enabling the development of a wireless standard which will be made available to all technology manufacturers globally through licensing on fair, reasonable, and non-discriminatory terms (FRAND).

Francisco Mingorance, executive secretary of IP Europe, said the release of the 5G specifications is the first step in “the creation of 5G systems that will connect new exciting products and services such as autonomous vehicles and the IoT”.

Speaking to WIPR, Philippe Lucas, senior vice president of strategy, architecture and standardisation at Orange, said: “FRAND is important to reward the investments in standards that the companies are making to develop a standard that will benefit the whole industry.”

Alexander Ritter, senior associate at Baker McKenzie, noted that this is a balancing exercise, as reasonable payments should be made to companies inventing goods, but this should not hinder the further development of the IoT.

Ritter explained the importance of standardisation in the IoT. “All electronic devices intended to talk to each other must speak the same language, which is where the ‘standard’ comes in,” he said.

FRAND licensing is an area of complexity which has been gaining extensive attention as technology advances. Last November the European Commission released guidance on the licensing of SEPs, following industry disputes over the role of FRAND agreements in the IoT.

Peter Koch, legal director at Pinsent Masons, said that as with any other standard (such as 3G or 4G), participants in the 5G area will have to commit to grant licences on FRAND terms.

“The key challenge in any subsequent licence agreement is to define what FRAND is,” he explained, adding that this is an “ever more complicated task”.

Ritter said that for 5G, the ability for patent owners and licensees to be able “quickly find common sense in their agreements” is key.

Koch added that “the IoT and connectivity of products that make use of standards will lead to more and more complicated SEP/FRAND litigation”. He believes that inventors and companies need to “team up” to “enable cross licensing and/or consider other strategic decisions to prepare themselves”.

Though courts have shown that they are prepared to set FRAND rates in disputes where necessary, Ritter noted that the German courts prefer that the industry itself defines what is fair, reasonable and non-discriminatory.

“Companies have the insight into the market and therefore they themselves have the knowledge of how to solve the problems,” he explained.

Koch also believes that FRAND rates should be determined by industry, rather than the courts. “Where parties involved are on equal footing, I see no reason why this very complicated matter of determining FRAND should be left to the court,” he said.

He added that the courts do have an important role to play: where a company is delaying the process by making use of a SEP without paying the appropriate FRAND rate, this “demands that injunctive relief is granted by the courts”.

Earlier this month, WIPR published an article by Koch about the challenges that the increasingly interconnected technology landscape can cause in the area of SEPs.

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More on this story

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30 November 2017   The European Commission released its communication on the licensing of standard-essential patents yesterday, with the guidance being backed by both IP Europe and The App Association.
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1 August 2018   Ericsson and LG Electronics have renewed their global licensing agreement on fair, reasonable, and non-discriminatory (FRAND) terms, putting an end to pending litigation between the competitors.
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