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Why We Support IEEE’s Patent Policy

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Publius
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Mark Chandler's defense of IEEE patents policy is misleading
Publius   4/6/2015 5:01:31 PM
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Mark Chandler's defense of the IEEE's new patents policy is misleading in at least three key respects. 

1)     Mr. Chandler asserts that a "supermajority of the people who run the IEEE's standards development function" voted in favor of the new policy.  The vote was by the Board of IEEE-SA and broke down along these lines:  Implementers of standards, who have an interest in reducing the price of patent licenses, all voted in favor of a policy to undermine FRAND negotiations and artificially force down those prices; while contributors of patented technologies, whose investments in R&D make it possible to accelerate product introduction and interoperability, voted to uphold their long-established rights to defend their patents. That the IEEE-SA board is stacked with implementers is another aspect of the problem.

Also note that the IEEE-USA, representing American members' interests, was OPPOSED to the policy. 

2)     Mr. Chandler claims IEEE's consideration of the updates "involved multiple public discussions and an open commenting process."  In fact, it is well documented that representatives of selected companies (all implementers) were invited to participate in side meetings outside of the plenary to discuss topics that were supposed to be resolved in the open plenary.  Multiple companies protested this and other "closed-door" aspects of the process, to no avail.  Dozens of formal comments that were critical of these changes were simply ignored, and two appeals were summarily dismissed, while the majority of implementers' comments were accepted.

3)     Finally, Mr. Chandler seems to have invented a new euphemism for "patent trolls," repeatedly criticizing "those who monetize patents aggressively as part of their business model."  However, his own piece notes that Cisco has a strong patent portfolio, and I daresay that their licensing team – as well as those of every company and organization engaged in R&D – is engaged in "aggressive patent monetization."  

 

Bert22306
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Re: It's nothing more than an optimization problem with different constraint sets
Bert22306   4/5/2015 6:27:09 PM
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So in other words, overpriced implementations are okay, but overpriced IP is not?

Yes.


Apple made the same commitment for its patents that are in standards such as HEVC.  They did not make a commitment to price their products under FRAND terms.

Perhaps that's why this becomes such a "who cares" topic for so many people who aren't directly involved. Greed vs greed is not a subject that should be expected to evoke strong emotions among bystanders, sorry! A classic case of "there are no good guys here."

This reminds me a bit about the retransmission consent rules that apply to over the air broadcasters who make their signal available to cable and satellite networks. Some people get all bent out of shape, arguing that the signal is available for free over the air. But that's immaterial. The simple fact is, consumers make loud noises if these OTA broadcasters' signals are not on their cable system, and the cable system charges hefty fees for the privilege of being connected to that service. So the broadcasters have every right to demand their pound of flesh.

That's just the way it is. Boo hoo to those who don't get it.

Doug_S
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Re: It's nothing more than an optimization problem with different constraint sets
Doug_S   4/4/2015 8:34:44 PM
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So in other words, overpriced implementations are okay, but overpriced IP is not?

 

Yes.  That's the commitment you make when you submit your patents to be part of a standard.  FRAND stands for fair, reasonable and non-discriminatory; those are the terms under which you must license your patents.  You don't get to discriminate and charge more when your patent is used in a more expensive product.  Apple made the same commitment for its patents that are in standards such as HEVC.  They did not make a commitment to price their products under FRAND terms.


Those who don't like this are under no obligation to take part in the standards process.


Bert22306
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Re: It's nothing more than an optimization problem with different constraint sets
Bert22306   4/4/2015 5:24:32 PM
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The whole idea of charging based on the sales price of the device rather than the chip is ridiculous.

I agree with that too. But that was not the argument put forth by Merritt, or at least, not the way I understood it. His argument was that the amount of royalty would be negotiated, which to me says, based on how much that IP was worth to the project.

LTE would be a major component part of new smartphones, if not only because of bandwidth, compared even  with 3G practical limits, also because of bragging rights. I doubt even Apple, with its devoted true believer fan base, could convince people to jump without bragging about LTE these days. So sure, most consumers, for most apps, would probably not notice the difference. Still, these days, you gotta brag about LTE.

This also deserves a discussion:

Why do LTE patent holders deserve tens of dollars because my phone retails for $649,

So in other words, overpriced implementations are okay, but overpriced IP is not? This sort of behavior exists throughout our economic system, in which the price of a product or service is based more on "what the market will bear" than on the cost of material. If Apple can sell overpriced smartphones, or let's say, "at a premium price," then you can expect everybody in that supply chain to demand his pound of flesh. That's just the way it is.

This is a case of greed vs greed, ultimately, making it hard to take sides.

Doug_S
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Re: It's nothing more than an optimization problem with different constraint sets
Doug_S   4/4/2015 5:13:11 PM
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So, let's say I invent an antigravity machine, which turns out to be quite simple, and it's so darned clever that it can be built cheaply. This one cheap, simple product, would revolutionize all manner of things made by implementers. And yet, crucial component as it might be, the new IEEE policy would hardy reward the patent holder.

 

No one forces you to submit your antigravity machine patents to standards processes.  You can choose to be the only one selling antigravity machines, sell the patent, license it for however much you want to whoever you want, or sit on it and allow no one to make antigravity machines via the method of your patent until it expires.

None of the patent holders who took part in creating standards like 802.11, LTE or HEVC were coerced into doing so, their participation was voluntary.  If a few of them are upset because they felt they found a way to make an end run around the FRAND requirements, boo hoo!  They are free to the sit on the sidelines with future patents when future standards are being determined, but risk their patents becoming nearly valueless if the standard ends up designed in a way that does not utilize their patents.


The whole idea of charging based on the sales price of the device rather than the chip is ridiculous.  If Airbus includes LTE on an A380, should patent holders get millions of dollars for each A380 sold?  Why is it different for a phone, which these days is not a merely phone but a handheld computer with many functions, of which LTE (as opposed to display, computation, GPS, taking pictures, wifi, bluetooth, and 3G to name just a few) is a small part.  If LTE was removed from my phone, I'd hardly notice since I rarely use cellular data anyway.  Why do LTE patent holders deserve tens of dollars because my phone retails for $649, and how is LTE worth more than 6x more in my phone versus a low end one that sells for only $100?


Bert22306
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It's nothing more than an optimization problem with different constraint sets
Bert22306   4/3/2015 6:50:22 PM
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I can easily agree with this sentence:

But the standards process exists not to enrich a few patent holders, but rather to simplify product introduction and interoperability for consumers around the world.

Problem being, that's only half the equation. The other piece is the patent process, which exists to reward innovation. So the two have to be balanced. Otherwise, it's easy enough to argue that the patent holders should be given nothing at all, so the standards can be implemented at the lowest possible cost, and gain the widest possible adoption rate.

Implementers of patents have to sell products or services. Most implementers mentioned in this article sell products. Even if they are also patent holders, they can balance the royalty payments they might receive against selling more product.

The innovator who is NOT also an implementer has a different measure of success. His optimum point is skewed toward the higher royalty payments, although he too ultimately has to know that someone selling product is how he gets those royalty payments.

This is the crux of the disagreement, as stated by Mr Merritt in the article mentioned, which should be discussed more thoroughly:

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.

So, let's say I invent an antigravity machine, which turns out to be quite simple, and it's so darned clever that it can be built cheaply. This one cheap, simple product, would revolutionize all manner of things made by implementers. And yet, crucial component as it might be, the new IEEE policy would hardy reward the patent holder.

Anyway, bottom line, in the real world, there are any number of patent holders who have ruined their lives obsessing over their royalties, or lack thereof. The sides taken on this argument will depend on what increases the revenues of the arguer most.

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