Battle for Standard Essential 5G Patents
Hardly any expects the boring technical field of patent law to become one of the epicenters of the technological struggle of nations. Conflicts and competitions among nations now are more defined by strategic commercial & business motivations than by the divisional strength of infantry brigades. We see this in the data security space where state-sponsored hackers run rampant leaving a trail of chaos, regulatory fines and class action lawsuits against their data breach victims.
This update explores the intersection between patent law and national security, namely- the domination of 5G standard essential patents.
A new front in this battle of nations is now raging in the patent law front. As reported by IP Watchdog here, the People’s Republic of China (PRC) has been waging a war to standardize key 5G patents owned by PRC companies like Huawei as industry standards. For example in the 5G space, the Center for Strategic and International Studies (CSIS) defines 5G “standards” as “performance requirements and technologies that will define 5G networks…[t[hey outline how the technology should work and set levels of performance and compatibility among technologies made by different companies.” (Here at page 7).
There are organizations like the IEEE that determines whether a patent ought to be deemed as essential for a particular industry or sector known as “standard essential patents”. For example, in the 5G sector, the key standards setting organizations are the 3GPP (3rd Generation Partnership Project), ITU and 5GPPP.
Such standard-setting organizations (SSOs) have rules and protocols that govern the identification and determination of such standard essential patents. SSOs consist of corporate and private members who are called upon to vote on motions to determine which patents ought to be made into standard essential patents.
There are important implications flowing from a determination that a patent has been promoted as standard essential.
First, standard essential status increases the commercial reliance, wide-scale adoption/traction and visibility of its underlying technology deemed essential in a particular sector or field. For example, if there are two competing patents on how to reduce noise during a 5G mobile call, the patent selected as “standard essential” would ultimately become more popular as other industry players build their products and services around the patent deemed more essential. Effectively, if your company’s patent is deemed standard essential, it will be required by to be built into the products & services of other companies competing in the relevant sectors covered by such patent. This is a very big commercial boost for your patent because it will effectively dictate the commercial traction of the technologies covered by such patent as well as the future of research and development in the relevant sector.
Second, the owner of a standard essential patent is required to form a contract with the SSO promising that it will license its standard essential patent on fair and reasonable licensing terms (known as FRAND). There is an entire panoply of patent law focusing on what constitutes FRAND licensing terms. Major court cases have been fought over this. The idea of FRAND aims to strike a balance between allowing the patent owner to recoup a portion of its cost in creating the technology protected by the patent versus promoting the wider dissemination of such patent among other industry players at a lower license fee than would otherwise be charged on the free market for a patent “essential” for a particular sector.
As reported, the PRC is strategically gaming the standard setting process to ensure that key patents owned by PRC “private” companies like Huawei are being identified and selected as “standard essential”. Nowhere is this battle raging more intensely than in 5G.
In its December 2018 report on 5G innovation & security, CSIS noted that “the focus of competition is over 5G’s intellectual property, standards, and patents.” The report says that 5G will require “hundreds of standards to be developed” which “have become a national security issue.” (Here at page 7).
According to the report, the PRC “has politicized the standards-making process” because the PRC Communist Party demands that PRC private companies vote along party loyalty rather than technological prowess when determining which patents to deem standard essential while voting at SSOs to which they are members. The report cites an example: “[w]hen Lenovo, a leading Chinese IT company, voted for a proposed standard from Qualcomm in 3GPP instead of one proposed by Huawei, it faced intense criticism in China.” (Here at page 7).
However, the PRC seems to have lost the opening salvo in the war for 5G domination. The CSIS report noted that the PRC tried to standardized PRC patents identified in the first tranche of agreed 5G standards In June 2018 to no avail when “collaboration among Western companies ultimately determined the outcomes in the standards-making process”. Continued vigilance is required in future 5G standards setting.