FRAND and deliver: Telco patents work out
Fair, reasonable, and non-discriminatory terms have led to a huge decrease in patent litigation between telecommunications companies, writes Gwilym Roberts
Mobile phone ubiquity marks one of the greatest human technological achievements
in history. Not because we
can all now play PokÃ©mon Go together, but because of the revolution in human interaction it has already brought about, and the mobilisation of public opinion we are beginning
And the role the patent system has played in that ubiquity marks one of its greatest successes, especially now that we have reached peace, or at least stalemate, in the patent wars
we witnessed as the players secured their space.
The early signs weren't good. Long before smartphones caused it problems, when it was in its pomp, Blackberry was nearly brought to its knees by various patent actions. Only because its technology was so dominant and important did Blackberry reason that it was better to pay NTP over $600m in the US rather than risk a lost patent action, and until a few years ago the web of telecoms patent actions connected
These suits took two main forms: between telco and telco, and between telco and troll.
Very different strategies were involved. In the case of trolls, charitably termed non-practising entities, companies were buying and asserting patent portfolios with no intention of building products themselves, and with juries in the US willing to award lottery levels of damages, the business case was clear.
Perhaps less well thought through were the battles between telcos. Patent litigation is seldom simple and almost never cheap, and when innovating companies began asserting multiple patents against each other in cross-jurisdictional battles, all bets were off.
Yet it's difficult to identify how any of the litigation established
a dominant player. What it did achieve was a more mature understanding of the market and legal framework, and
most importantly a greater appreciation of how the gentle side of patent posturing its relationship with standards really worked.
Usually when a groundbreaking technology appears, we see multiple noncompliant variants appear as businesses jostle for the market: think Betamax versus VHS, DVD versus BluRay.
If that had happened with phones it would have been a disaster. But it didn't.
Instead, the developers got together early, agreed to share and interoperate, and now
you can phone a Samsung in Cirencester from your Xiaomi in Xi'an. And this wasn't a triumph of technologies '“ mobile phones are just glorified walkie-talkies, after all '“ it was a triumph of cooperation in incremental innovation.
The phones all meet a standard, all players contribute to and improve the standard, the level of contribution is judged
by how much improvement
each player brings, and this is measured, and regulated, by
the corresponding patents. So the patents govern the royalty flow between the parties: they provide the currency that facilitates the market.
In conjunction with the
fair, reasonable, and non-discriminatory (FRAND) terms on which the royalties are calculated, we have seen a huge decrease in telco-versus-telco cases. The cynic might argue that this comes at the cost of mobile technology sitting in the hands of, if not one, then a small pool of businesses. While the competition regulators keep quiet, though, this situation looks set to continue.
Up to now, however, this
wasn't helping with the trolls. But recently we have started to see
a new strand of FRAND develop as a key to resolving deeper disputes, and the beginnings of,
if not a patent peace, a welcome stalemate. Because, whereas before the game played into
the hands of the trolls, with an injunction as the nuclear option, suddenly we see the judges ask: surely a FRAND licence would suit this? And the troll has a good hard look at the legal bill and begins to wonder whether all this is worth it any more.
This decrease in litigation activity and potential solution
to the troll conundrum point us tentatively to peace breaking out. But we're not there yet, and chaos could lie in the direction of disruption. If we see a paradigm change technology emerge, or
a truly well-funded debutante enter the patent pool, the balance could be disrupted,
and the truce over. Until then, let's look up appreciatively from our
mobiles from time to time,
and thank FRAND for some peace and quiet.