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19 October 2017Patents

Clashes break out over IoT FRAND proposal

A bitter row over the licensing of standard-essential patents (SEPs) in the internet of things (IoT) is continuing ahead of expected guidance from the European Commission.

Trade body the App Association is worried that the commission may extend use-based pricing—a practice currently used for licensing of smartphone technology—to the IoT.

But IP Europe, which was originally launched by Ericsson and Airbus, said it is a long-established and fundamental procedure in the area of fair, reasonable and non-discriminatory licensing (FRAND).

A letter seen by WIPR also claims that a code of conduct on IoT licensing was recently agreed despite some attendees at a meeting in Paris having walked out.

According to the App Association, the commission is soon expected to publish a communication on SEPs containing guidance on how they should be licensed “to help foster the development of an IoT sector in Europe”.

Speaking at a meeting in Brussels yesterday, October 18, founder of the App Association Mike Sax said that basing the licence fee for an essential patented technology on its use is “toxic to innovation”.

“It isn’t fair or reasonable, and it discriminates against many tech firms and developers along the supply chain,” he added.

Sax said a small number of large patent owners would gain an unfair advantage from use-based pricing when they negotiate the licensing of their communication chips with firms developing IoT applications.

“Many of these downstream developers are small firms or startups, including our members,” he said.

“Use-based pricing is a form of levy on innovation. For that reason, we strongly urge the commission not only to exclude it from any list of acceptable licensing practices, but also to introduce a prohibition on its use in the area of IoT in Europe,” he said.

These comments provoked a backlash from IP Europe, which said in a statement that such proposals would result in the collapse of the current system of “shared open connectivity standards, putting the upcoming 5G standard at risk”.

Francisco Mingorance, executive secretary of IP Europe, claimed no app developer has “ever had to take a licence or pay a penny to the inventors of the cellular technologies used on smartphones and other connected devices”.

“Why app developers are not calling instead for a reduction in the fees they pay to the monopoly owners of the online platforms they must use to sell their innovative technologies is a mystery and certainly a lost opportunity for app companies across the world.”

IP Europe said use-based fees are very reasonable, even for large companies that produce smartphones.

The statement added it “could not be further from the truth” to claim that 3G and 4G technology inventors—“who are investing heavily in developing technologies for the future 5G open standard which will underpin the IoT”—are seeking anything different now.

It is the second time this month the two groups have clashed.

On October 9, an IP Europe statement said that “leading European innovators and international companies” developing 5G and IoT technologies had kickstarted the development of a best practice industry code of conduct on licensing SEPs.

The meeting in Paris was held by the European Committee for Standardization (CEN) and the European Committee for Electrotechnical Standardization (CENELEC).

But the App Association claimed that its views were not being recorded and it therefore walked out of the meeting.

In a letter to CEN and CENELEC on October 17, the App Association and the Fair Standards Alliance said that at the end of the meeting, the proposals were “declared as having been approved by virtue of support of a minority and against the express objection of a majority of meeting participants”.

The groups said that in light of their concerns, “we would like to encourage you to reconsider whether and how to move forward with the project”.

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