Patent pools bring crucial transparency to SEP licensing
As connectivity grows into new verticals, a new academic study highlights pools’ role in helping new entrants navigate an increasingly complex world
By Jacob Schindler
In patent licensing, a significant share of negotiations and deals are concluded under non-disclosure agreements. This has created worries that newcomers to the market – specifically product makers in IoT verticals – may face challenges due to a lack of familiarity with how it works. As a result, transparency in standard essential patent licensing has become a major policy focus recent years. Notably, it is the central stated aim of the European Commission’s proposed SEP regulation.
Against this backdrop, a quartet of researchers from universities in Finland have presented a paper1 looking at how much information SEP licensing programmes choose to make publicly available. The authors claim the study is the first to analyse the information disclosure choices of various SEP owners and licensing administrators.
Patent pools provide market-leading transparency
Of course, there are significant disparities in the amount and type of information which various licensing programmes choose to make public. In general, the authors write, SEP licensing is much more transparent than non-SEP licensing, and patent pools disclose more public information than bilateral licensing programmes.
There is also significant variation within these categories. The authors list the programmes operated by the major pool operators (including Sisvel), as well as five prominent bilateral licensors, and compare what information they disclose in areas such as royalty structure, patent lists and template agreements. Patent pools, it is clear, represent a significant source of publicly-accessible information about declared SEPs, requested royalties and standard licence terms.
This information is a valuable resource for anyone seeking greater insight into the market, including researchers, policymakers and new commercial players. Pool licence terms are often the product of sustained engagement and compromise, involving both patent owners and implementers, to find a consensus around terms that will promote technology adoption while enabling further innovation. Tracking their evolution over time can support evidence-based policymaking by illustrating the revealed preferences of market players.
Patent pools level the playing field for new entrants
Another point stressed by the authors is the importance of know-how in the patent licensing market. The SEP space has previously been characterised by repeat transactions between the same patent owners and device makers. This iteration allowed licensing teams on all sides to build up institutional experience and market knowledge, resulting in a high level of sophistication.
Today, there are many new entrants among both patent owners and device makers. In the current 5G era, more companies than ever are participating in standards-setting and developing SEP portfolios. At the same time, the proliferation of connectivity into more verticals means there has been a surge in the number of entities seeking freedom to operate.
As a result, the authors characterise the market as consisting of ‘insiders’ and ‘outsiders’. New entrants need to go through a learning process which is heavily impacted by the availability of public information and data points related to SEPs, royalty rates and licensing terms.
Given this situation, the emergence of licensing programmes in the IoT space adopting the traditional, transparent pool model is clearly beneficial. As the study concludes: “The availability of licensing scheme information publicly online should reduce transaction costs and search costs and promote the efficiency of licensing.”
Part of the solution
This study is not the only new piece of research out of Europe which emphasises the transparency advantages of the pool licensing model. In March, Sisvel Insights highlighted a paper from the Technical University of Munich’s Yanis Luca Gamarra, who wrote that: “Comprehensive openness is vital for equitable and efficient pool operations, fostering stakeholder trust and compliance.”
As Sisvel president Mattia Fogliacco and senior policy counsel Vincent Angwenyi explained in a February article, Sisvel’s Cellular IoT pool was specifically structured to address concerns over transparency and efficiency expressed by the European Commission. “Pools significantly reduce the knowledge asymmetry that is typical in bilateral licensing,” the pair wrote. “Most publish information and licensing terms in a transparent manner, while keeping commercially sensitive information confidential.”
EU regulators have put the SEP world under a microscope. As more people from academia and elsewhere examine the day-to-day realities of patent licensing – and as pool-based solutions focused specifically on IoT continue to gain traction – it will be hard to avoid the conclusion that patent pools offer a time-tested, market-driven method to bring new licensees and licensors into the market in a transparent and efficient way.
Jacob Schindler is Senior Manager, Content and Strategic Communications, based in Sisvel's Hong Kong office
1 Özmen, Gülfem and Heikkilä, Jussi and Karvonen, Matti and Ojanen, Ville, Digital Marketing of Standard Essential Patent Licensing Programs. Available at SSRN: https://ssrn.com/abstract=4766891 or http://dx.doi.org/10.2139/ssrn.4766891. Sisvel provided no support of any kind to the research.
