Potential changes to compensation possibilities in the European telecommunications standardization system

Abstract

Within the telecommunications industry most standards are decided in the SSO’s where representatives from actors from the different parts of the value chain are represented. The discussions in these forums in the different SSO’s are limited to being of a technological content and not business in order to simplify the discussions and decisions made about the new standards. The telecommunications industry is defined by the standards and the IP-holders of the innovations included in the standards are subjected to license according to FRAND rules as long as they are members of the SSO’s. Patents that either belong to actors outside the SSO’s or patents of members within the SSO’s that are not part of the standard are subjected to licenses that are negotiated individually between the different actors. This current standardization system is characterized by conflict and a lack of clarity, due to a lack of administrative clarity and of consensus regarding the interpretation of policies such as FRAND licensing. Members of the SSO’s are believed to take advantage of this fact by demanding high royalties from the licensees. Current complaints include the perception that licensing costs are unduly burdening the costs required to produce mobile terminals based on standardized innovation. The inability to monitor the royalties opposed by the different IP-holders has resulted in the total price for licensing all essential patents within a standard for a licensee to become too high and in no way FRAND. The conflicts in the system have motivated actors to present changes to the current structures of the system, and these will most likely impact the compensation possibilities for actors involved in standardization. In this thesis the focus is placed on analyzing four such potential changes and their impact on compensation possibilities. These four scenarios concern Patent Pools, Royalty Caps, Ex Ante Declaration and New Standards Bodies. These scenarios and the material used to analyze and determine the effects of scenarios like those being implemented are a product of interviews with mainly a major Swedish IP-holder within the telecommunication industry, law and market studies and last but not least the actual ongoing discussions about changes within the SSO’s made by the different actors/members of the SSO’s. As will be seen in this thesis all these new proposals although they will indisputably solve some of the problems with the current standardization system, they will also present difficulties in terms of implementation and the creation of consensus. A key conclusion of the thesis is that such changes can lead to a number of different outcomes based on their implementation, and recommendations are therefore made for the strategically aware actor wishing to initiate such changes in a beneficial manner.