ITU, Apple, iPhone and a happy finish for the smartphone patent wars

Patent industry reform seems to be on the table as Apple [AAPL] continues attempting to protect its intellectual property against other smartphone industry players, and those players (Samsung, Motorola, et al.) fight back through the vehicle of abusing the gentleman's agreement concerning FRAND patents. The war is bloody, never-ending and, frankly, quite dull. This morning the ITU (International Telecommunication Union) announced what could be an important step toward ending some of the insanities of this conflict.

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Standing up for FRAND

The Geneva, Switzerland-based organization will hold a Patent Roundtable on October 10, inviting standards organizations, key industry players and government officials to attend the discussion.

Participants will be looking at the issues of the litigation-heavy patent wars. They want to address the worldwide surge in patent litigation and the growing lack of adherence to standards bodies’ existing patent policies. Topics include potential improvements to existing policy frameworks, entitlement to injunctive reliefs, and definitions of what constitutes a royalty base.

Dr Hamadoun Touré, ITU Secretary-General explains:We are seeing an unwelcome trend in today’s marketplace to use standards-essential patents to block markets. There needs to be an urgent review of this situation: patents are meant to encourage innovation, not stifle it. Acknowledging patent holders and user requirements, as well as market needs, is a balancing act. This timely multi-stakeholder roundtable will help press for a resolution on some of the critical issues.”

This promises to be an important debate of particular relevance to all sides in the patent wars. For example, should decisions be reached which define fair royalty payments, Motorola and Samsung will be unable to pursue royalty payments from Apple which are set at a higher level than those paid by other players in the space for use of their industry standard FRAND patents.

For its part, Apple will be less able to pursue claims of patent abuse for usage of its patents: Indeed, a bipartisan agreement on such matters could lead toward other players being required to pay Apple for use of its patents in their products. Though court cases in which Apple attempts to prove such use seem likely to continue.

This is all good for consumers: It should lead to a more open environment for innovation that enables creativity but also demands fair fees for those who invent. This could lead to fewer instances in which patent-breaking producers are denied sales in specific markets; it could also force all involved to sit down and reach realistic agreements for future fair use.

Android fans will already be objecting to such deals as they clearly feel that all intellectual ideas should be shared openly, (with the exception of FRAND-related patents, for use of which they appear to feel Apple should pay more than anyone else.) That's just clear partisan bias. Equally, some of Apple's fights (Slide-To-Unlock, for example) could be construed as nit-picking.

Seeking the smartphone standards sweet spot

The many inequalities within the current system have been subject to discussion by wiser heads than mine, but the ITU has helpfully gathered a few statements that offer a glimpse of what the industry beyond the antagonistic Apple/Android group-thinkers have to say. The discussion will include experts from relevant standards-setting bodies worldwide, including China, Korea, Japan, Germany, Europe and more.

Sample statements:

Feng Pan, Deputy Director-General, China Communications Standards Association (CCSA) observes: “International standards should represent globally-agreed best practices for the cutting-edge of technology, reflecting innovation occurring across the world. As a consequence, international standards bring all countries up to speed with the latest technological developments, enabling further, internationally-harmonized ICT development. Standards thus often demand the inclusion of patented technology, and CCSA looks forward to ITU’s IPR roundtable where standards-developers and patent-holders can express their concerns with RAND-based policies and suggest means of balancing the relationship between standardization and intellectual property."

Florian Mueller, analyst and author of Foss Patents blog lays it down: “Litigation over standard-essential patents is on the rise, worldwide. Judicial and regulatory decisions can help give meaning to FRAND, and this is the right time for leading standard-developing organizations to brainstorm about clear rules able to limit the scope of future disputes involving standards.

One thing is clear: telecommunications standards-setting bodies are more concerned regarding the practice of selective licensing and non-equitable royalty rate demands of those in possession of standards which are part of generally accepted technologies such as 3G than they are at those protecting, for example, design patents.

It is, after all, possible to design a product in a different form factor: it is far less possible to re-develop a standard with which to replace 3G. They understand that the threat to innovation is not through courtroom battles over proprietary technologies, but from the disruption of agreements favoring free use of standards-based technologies.

From the ITU press release:

"The information and communication technology (ICT) industry in particular is affected, with key protocols implemented in devices sometimes encompassing hundreds of patents. If just one patent holder decides to demand unreasonable compensation for use of its intellectual property (IP), the cost of the device in which that IP is implemented can skyrocket.

"Dr Hamadoun Touré, ITU Secretary-General: “We are seeing an unwelcome trend in today’s marketplace to use standards-essential patents to block markets. There needs to be an urgent review of this situation: patents are meant to encourage innovation, not stifle it. Acknowledging patent holders and user requirements, as well as market needs, is a balancing act. This timely multi-stakeholder roundtable will help press for a resolution on some of the critical issues.”

"The development of technical standards more and more frequently anticipates technology, as opposed to following it, leading to potentially challenging situations. ITU, as the world’s pre-eminent global standards-making body, strives to accommodate both end-user requirements and the intellectual property requirements of the originator of the technology. This need for balance led to the development of an IPR policy on the basis of RAND – a policy that will continue to demand ongoing review to address the new challenges of the fast growing ICT industry."

What does this mean?

Some argue the whole patent system is broken. Judge Richard Posner argues that: "It's not clear that we really need patents in most industries." He believes that banning a device (most recently in response to Apple's attempt to ban a Motorola smartphone for its contravention of video streaming-related patents) on the basis of patents regarding individual features is not to be supported by the courts, partially because these devices carry a plethora of patents.

What's been skipped over is his other decision, barring Motorola from pursuing similar litigation against Apple. In that regard he pointed out that Motorola had "pledged to license its patent on fair and reasonable terms to other companies - in exchange for having the technology adopted as an industry standard".

That's important in that this controversial and senior US Judge has found that FRAND patents -- or, more specifically, patents held by firms which they have pledged to honor as part of the FRAND process -- cannot be used as sticks to beat competitors with.

To my mind all this activity suggests the writing is on the wall for those companies seeking to use the standards-related patents they offer under FRAND (or RAND) agreements as ways to attack competitors. You cannot hold a patent that's essential for 3G and offer it to most companies for $1 while charging those firms you're in conflict with more. That's unequal, unfair and denies the essential spirit of FRAND arrangements. That behavior is truly bad for consumers.

FRAND abuse harms innovation

When it comes to innovation, the biggest threat to future invention is not in protection of design patents or proprietary user interface patents, but in the selfish destruction of the FRAND system that enables the solutions which make smartphone culture possible, such as 3G.

The selfish, defensive behavior of a few in this industry will eventually impact what's available to consumers far, far more than Apple's attempts to protect its own proprietary -- non-FRAND -- IPO.

The nature of the patent system as it is applied across the tech industry is a separate conversation. There's several ways for that to go: one way is for the existing system to remain, another is to abandon patent protection in favor of an open and agreed royalty licensing system, which would at least affect all patent holders in the space equally.

I'm glad the ITC has taken notice of what’s going on. It will be interesting to see if its round table debate impact the topics and frequency of future litigation between the lawyer-loving smartphone combatants.

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Copyright © 2012 IDG Communications, Inc.

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