NCPA - National Center for Policy Analysis

The Institute of Electrical and Electronics Engineers Patent Restrictions Will Discourage Innovation

March 6, 2015

Ignoring the tradition of non-intervention in licensing negotiations undermines support for strong patents, which are critical to economic growth and innovation. So when the Institute of Electrical and Electronics Engineers (IEEE) formally accepted new policies that reduce the value of standard essential patents (SEP), they discouraged involvement by innovative companies in IEEE standard setting.

The new policy greatly undermines incentives to make patents available for use in IEEE standards. Several of the new IEEE patent policy's key features include:

  • In order to have its patents included in an IEEE standard, a patent holder will have to provide the IEEE with a letter of assurance waiving its right to seek an injunction against an infringer. This eliminates a great deal of leverage that SEP holders have to get infringers to the negotiating table quickly.
  • An analysis of comparable licenses for purposes of determining a F/RAND royalty can consider only licenses for which the SEP holder relinquished the right to seek and enforce an injunction against an unlicensed implementer.
  • An SEP holder cannot condition granting a license on receiving reasonable reciprocal access to non-SEP patents held by the other negotiating party. As a result, businesses might shy away from developing patents that could be used to improve the quality of standard setting.
  • Royalty negotiations involving an SEP holder must be based on the value of the "relevant functionality of the smallest saleable compliant implementation that practices the essential patent claim." This provision would create an artificially low upper limit on potential SEP royalties and prevent SEP owners when they engage in negotiations.

Because the new IEEE policy essentially micromanages contractual negotiations among large numbers of firms that often compete among themselves, it may raise questions under U.S. antitrust law, which prohibits contracts that unreasonably restrain trade.

Source: Alden Abbott, "Patent Policy Change would Undermine Property Rights and Innovation," Heritage Foundation, March 4, 2015. 


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