Kappos offered his thoughts on another looming issue: how to handle licensing for patents on standards such as 3G cellular networks that a broad range of products must use. At heart, he believes, regulators need to strike a balance between the rights of patentees and patent implementers.
"If you put a finger on either side of the scale, your actions could have dramatic implications," he says. "It's an important question of national innovation policy -- it's a tough and important policy call...
"I don't think regulators are fully considering the implications [because] they are highly driven by a desire to make sure prices are as low as possible and price and feature competition comes as quickly as possible. The problem is, to get to that, you devalue patents by limiting options of patentees and sending a message to innovators they should not participate in standards setting."
Some have lobbied for using final-offer arbitration popularized by baseball negotiations. In this approach each side makes an offer, and an arbitrator can choose only one of them, motivating both sides to be reasonable. But the approach doesn't fit patents, says Kappos.
"In my experience, money isn't the issue. The hardest parts are all the other things -- the technology and geographic scope, the terms, whether future patents are included, releases and termination and extension clauses, change-of-control clauses. Final-offer arbitration can't deal effectively with any of those issues."
Kappos feels a proposal by Harvard law professor Henry E. Smith shows a better way -- applying to intellectual property concepts from 500 years of practice of real estate law:
When you look at that law you find the kind of situations that get standards bodies upset come down to strategic behavior -- parties on the sidelines not participating and using patents against [the process] or opting out [of the process] at the last minute, or parties later disputing what is [fair licensing]. All these are strategic behaviors, close cousins of fraud.
A neutral third party would say it's not right. So why not reinvigorate the area of equity and let judges exercise more discretion, not with one-size-fits-all rules like having no injunctions on standards-essential patents. Extreme positions won't produce good results and will dramatically sway markets in wrong directions. Use the equitable power of courts.
The approach is not easy, but Kappos finds it compelling. "The easy way tends not to be the right way," he told us. "It tends to be true that if you study the details you can make really good decisions."
— Rick Merritt, Silicon Valley Bureau Chief, EE Times