The truth about the creation of the ETSI IPR policy
A first-hand account by former Philips CIPO Ruud Peters explains why the standards body rejected policies that would have severely restricted patent holders’ rights
By Jacob Schindler
According to an oft-cited figure, around 75% of SEP lawsuits involve patents declared to ETSI.i That gives the Institute's IPR policy a central role in the licensing process. The current document runs to just 12 pages and has undergone only minor revisions since 1994.
A new paper from Ruud Peters, Director of Peters IP Consultancy and former Chief IP Officer and Executive Vice President of Philips, revisits the process by which the IPR policy was created. Crucially, as an active member of the ETSI IPR Committee from 1989 to 1994, Peters was in the room for many of the events he writes about.
In the article, Peters sets the record straight on a number of matters, rebutting what he sees as recent efforts to “rewrite the history” of this period in search of support for policy positions that would weaken the hand of SEP holders.
What follows is a high-level summary of some of the most interesting points. For anyone with a serious interest in this topic, it is well worth reading in full here.
The ill-fated 1993 IPR policy
One thing that’s important to remember about the 1994 ETSI IPR policy is that it represented “a complete reset”, in Peters’ words, following the disastrous rollout of an earlier 1993 policy which would have severely limited patent owners’ rights.
Peters catalogues the controversial aspects of the 1993 policy, which entailed a “licensing by default” approach akin to compulsory licensing:
Required ETSI members to license their SEPs unless they had indicated specific patents they would not make available within 180 days of the publication of a standard's work programme (no more than a half-page description of high-level requirements for that standard), even if the member did not participate in its development.
Contained provisions limiting relief to monetary compensation, setting maximum cumulative royalties, providing no back royalties or damages for SEPs not previously identified, establishing most-favoured-nation (MFN) conditions, and imposing binding arbitration for dispute resolution.
Set out different licensing conditions for manufacturers importing standard-compliant products to the EU versus those who made their products within the EU.
Provided more favourable treatment of SEP owners who were non-ETSI members versus SEP owners who were ETSI members (the latter were subject to certain requirements obliging them to manufacture standard compliant equipment in the EU).
How did such a skewed policy come about? Peters says that it was mainly based on proposals from network operators. These companies were the driving force behind the ETSI predecessor organisation called CEPT, which had sought to make the GSM standard royalty-free. The motivation for these proposals, Peters argues, was not to strike a balance that fairly rewarded SEP owners, or even to address antitrust concerns; it was simply to serve the commercial interests of operators by minimising SEP licensing costs.
Predictably, the 1993 ETSI IPR policy generated an outcry, including objections from companies like Motorola, Philips, AT&T and Apple. According to Peters, the US government and major industry groups got involved, and the European Commission itself had concerns about the policy’s compliance with EU and international law.
Although the policy was formally enacted, ETSI first decided not to implement it and then scrapped it altogether. The 1994 policy, which followed just a year later, abandoned the controversial provisions in favour of an approach summed up by Peters as “requiring SEP owners to be prepared to grant FRAND licenses, without further detailing FRAND”. This brought ETSI in line with other standards bodies, including ISO/IEC and CEN/CENELEC.
Today’s ETSI IPR policy, Peters argues, was therefore shaped by a “deliberate and intentional rejection” of the 1993 provisions which had sought to “reduce the fair reward to SEP owners for the use of their patents”.
The objective of ETSI IPR policy
Peters also argues against the notion that the primary objective of the ETSI IPR policy is to address EU competition law concerns inherent in the combination of patents with standards-setting.
Peters acknowledges that remedies from a series of US antitrust rulings informed the RAND concept developed by the American National Standard Institute (ANSI) and subsequently emulated by many other standards bodies in the US and Europe.
However, from his perspective as a participant, Peters says the primary focus was always “to reduce the risk that the implementation of a standard would be blocked due to the non-availability of a standard essential patent”. ETSI stakeholders wanted to avoid the wasted effort that would result if an essential patent was unavailable. At the same time, they intended that SEP owners should receive adequate and fair rewards for the use of their rights.
The above language used by Peters comes almost verbatim from the “Policy Objectives” section of the ETSI IPR policy itself. There is no mention of European competition law, which Peters points out would be an odd omission if compliance with those laws were the main focus of the document.
The supply chain licensing level debate
Peters also finds no support for a “license-to-all” principle in the ETSI IPR policy itself or in contemporaneous statements from the European Commission or others.
“[T]here was a clear understanding among ETSI members that licenses were directed to end-user equipment or devices,” Peters states. “In the more than four years of discussions in the IPRC, I do not recall that it was ever contemplated to extend the FRAND commitment beyond licenses to end-user systems or devices and also to cover licenses to components and sub-systems.”
The text of the ETSI IPR policy reflects this understanding, Peters says. Clause 6.1 makes a distinction between, on one hand, the right to make or have made components and subsystems for use in manufacturing equipment fully confirming to the standard, and, on the other hand, the right to sell that equipment.
This, he claims, makes clear that ETSI members and the European Commission officials who approved the IPR policy did not intend the FRAND commitment to oblige licensing beyond end-user devices and equipment.
A multi-decade success story
It is true that over 30 years there have been plenty of debates and disputes over the meaning of various terms within the ETSI IPR policy. But this is a footnote next to the explosive growth in standardised cellular technologies that ETSI members have helped to usher in over the same time period.
Looking back, it seems fortunate that stakeholders set aside an overly restrictive policy motivated by one interest group’s desire to minimise supplier costs in favour of a balanced policy that secured access to standards while providing fair rewards to patent owners.