The IEEE's new patent policy could slash royalty revenues and limit ways to enforce patents, says the chief executive of InterDigital.
Last week, our company sent an open letter to the Institute of Electrical and Electronics Engineers (IEEE), the standards-setting organization that brings us Wi-Fi among other things. In that letter, we advised the group we don’t agree with its new patent policy and that in the future our company won’t be submitting IEEE’s Letters of Assurance, but will provide alternative licensing assurances on a case-by-case basis. I want to explain to you -- technology people, like us -- why we chose to do that and what it means.
Our company has almost 200 engineers focused on very advanced technology. We pay to conduct research, whiteboard out advanced algorithms, fly people around the world so they can collaborate on, or argue over, mathematical formulae or interference mitigation schemes, for the benefit of everyone in the industry.
We do this work because if you’re successful at it, you make money. Not crazy money -- there are a lot of bogus figures out there -- and nothing that changes the cost category of a device or makes a profitable company unprofitable. In fact, because the research is shared across the industry, the process lowers the costs of devices by allowing the companies to effectively share R&D expenses.
Wi-Fi, or IEEE 802.11 is one of the technologies that has advanced rapidly based on this system. Since 1997, standards research and innovation has driven speeds from 2 Mbits/second to almost 2 Gbits/s -- a 1,000-fold increase -- and massively extended the range of applications. These are standards-based improvements that come built into any Wi-Fi device you purchase.
Here’s where patents come in. When an organization does something to improve the standard, they have to commit to negotiate licenses for any patents they have on that technology on reasonable, non-discriminatory terms. What exactly was reasonable and how royalties were to be calculated was left to individual negotiations, which occurred without fanfare for 20 years. That system worked very well and the performance of Wi-Fi grew by leaps and bounds.
This year, the IEEE voted to change its patent licensing policy. Rather than leave it to the parties to decide how royalties would be calculated, the IEEE endorses a calculation based on the value of the chip inside the device, even if many other aspects of the device benefit from or use the contributed technology.
This move could slash revenues for standards developers. The IEEE also wants to make it pretty near impossible to stop someone from shipping products even if they refuse to pay a license -- and that refusal will become more commonplace if there are limited means to enforce patents.
So in a nutshell, they don’t want developers to be paid much, and they’ve also made it as hard as possible for them to get paid at all. It’s all very one-sided, and so was the process that led to the decision.
A handful of manufacturers of devices -- the people who pay for the use of the technology -- essentially co-opted the IEEE patent committee. They got support from people at the Department of Justice who have never worked in this industry and are basing their thinking on economic theory rather than real-world practices. There were closed-door meetings involving a select few participants. Principles of due process, openness, and consensus were disregarded.
After the decision, Qualcomm stated that it would reconsider how it participates in IEEE standards development. It will continue to do research and contribute it, but make other licensing commitments.
This week, we’ve announced something very similar in a letter you can read here. We advised the IEEE that our company objects to its new patent policy and, going forward, on a case-by-case basis, will provide alternative licensing assurances to those specified in the 2015 policy.
The situation is difficult for us, because we have a long and valued history with the IEEE. One of our engineers and a current member of our board of directors are IEEE Fellows, a very high honor. Our former chief scientist, Brian Kiernan, was honored with a lifetime achievement award by the IEEE, ironically for “outstanding skills and diplomacy, team facilitation and joint achievement, in the promotion of computer standards where individual aspirations, corporate competition, and organizational rivalry could otherwise be counter to society's benefit.”
It is likely that other companies will soon follow suit in objecting to the new IEEE patent policy. The result is frankly a mess. Now contributions likely will be made under a myriad of licensing assurances, perhaps very different from one another.
What was once an evaluation of technical merit for proposals becomes a Rubik’s cube analysis as engineers may now have to weigh technological advantage against licensing terms and their implications. In fact, when one working group in 802.11 met a couple of weeks ago, they were forced to seek further guidance from the IEEE on the patent mess. I’m sure they would prefer to simply evaluate contributions that could be beneficial to the evolution of Wi-Fi, but now the process has been thrown into a state of uncertainty.
When developers were afforded a fair return on their innovations, the system worked. When you start to tilt the playing field in favor of implementers, as the IEEE has done, the market will collapse.
We are beginning to see the first signs already. Under the new policy, panels of engineers can’t evaluate new technology contributions solely on their merits because of a patent mess. This is no way to advance technology for humanity.
-- Bill Merritt is president and chief executive of InterDigital.