This paper – which can be seen here – provides a comparative empirical study of European patent litigation relating to standards essential patents (SEPs).
- The paper begins with a description of SEPs and, more interestingly for our purposes, of the contexts in which SEP litigation arises.
The simpler type of litigation occurs when the holder of a SEP and its potential licensee disagree whether an offered royalty rate is, indeed, FRAND. However, some SEP holders’ transfer patents to non-practicing entities (NPEs), including patent assertion entities (PAEs), for a variety of financial and strategic reasons. This practice is sometimes referred to as “privateering”. There are already a number of well-known cases involving SEP assertions by PAEs and other NPEs. Moreover, there is increasing evidence that operating firms, often participants in SDOs, have been transferring significant numbers of SEPs to PAEs for enforcement purposes in privateering transactions. PAEs accounted for approximately 19% of patent assertions between 2000 and 2008 in Germany and 9% of patent assertions between 2000 and 2013 in England and Wales. Several individual cases of SEP assertion by PAEs in Europe have also attracted attention, particularly in Germany and the UK.
This trend raises a number of issues: (a) unlike operating firms, the principal reason why many PAEs obtain patents is to assert them for the purpose of generating revenue, either through licensing or litigation settlements and awards. Will the acquisition of SEPs by PAEs increase the overall rate of SEP litigation, thereby increasing the costs of standardization and the financial burdens on standardized products? (b) to what degree are PAEs bound by the licensing commitments made by SDO participants with respect to their SEPs? In most cases, the typical PAE likely played no role in the development of a standard covered by a given SEP, nor made any affirmative commitment, FRAND or otherwise, to the relevant SDO. As such, is the PAE an “outsider” to the standards process, and can it rightly be bound by the SDO’s rules and policies? (c) To the extent that PAEs and other SDO outsiders are not bound by FRAND and other commitments made with respect to the SEPs that they enforce, is injunctive relief available to a greater degree than in SEP cases?
- The paper looks at empirical data regarding the assertion of SEPs by NPEs in Germany – which is widely recognized as the most important European jurisdiction for patent litigation, both in terms of the quantity of cases adjudicated and the size of the German market – and the UK – which, despite smaller than Germany, still is one of the major centres for patent litigation in Europe. It then compares trends and modalities on both sides of the Atlantic.
Without going into the methodology, the paper finds that:
- 422 German and 36 UK cases involving the assertion of patents declared essential to a total of twenty-nine different standards were brought during the relevant time period. These figures correspond to roughly 8% and 6% of all patent cases in the German and UK datasets respectively. Of these totals, PAEs initiated 330 (78%) German cases and 8 (22%) UK cases.
- The most litigated standards were the ETSI’s DAB standard (digital audio broadcasting) (313 cases), ISO/IEC’s 13818 MPEG-2 standard (322 cases), and unspecified standards developed at the Open Mobile Alliance (OMA) (225 cases).
- The widely-adopted wireless telecommunications standards developed at European Telecommunications Standard Institute (e.g., GSM, GPRS, UMTS, LTE) were moderately litigated (84 assertions), but the large majority of claims (98%) were brought by operating companies.
- Settlement rates of SEP assertion cases in Germany and the UK do not vary substantially based on whether they were initiated by NPEs or operating companies. Thus, 77.9% of NPE-initiated cases settled while 73.5% of operating company cases settled. This is not unlike rates previously found for the US.
- NPEs had higher success rates proving infringement (25.3%) than operating companies (18.6%). While the difference is not statistically significant (p=0.147), it runs counter data from the US, according to which operating company plaintiffs are much more likely to prevail on the merits of infringement claims than NPEs. It is unclear what explains this variation.
This is one for nerds and other people genuinely interested in the topic.