Patent Law Based Concepts for Promoting Creation and Sharing of Innovations in the Age of Artificial Intelligence (“AI”) and Internet of Things (“IoT”)
(Paper presented by Prof. Dr. Heinz Goddar)
An elegant way, in other words, to make AI inventions that are patented accessible to newcomers, like developers of certain applications of the respective AI, will be that the newcomer develops and patents the improvement and thereafter requests from the original, superior patentee, who may be in the possession of a too-broad, prophetic patent, a compulsory license against a cross-license. This provision could also be used, by the way, in cases where research-tools in pharma would be patented in such a manner that reach-through claims would be allowed, since in that case a too-broad protection could be avoided by a cross-license of the aforementioned kind.
With certainty, provisions of the aforementioned kind, which do exist in some, but not all European countries, but as realized already by Art. 24 (2) GPA for Germany, would open a reliable possibility to the public to make sure that innovations created in fields which are heavily patented, even by some kind of reach-through claims, could be further improved and then be used, under reasonable, shared conditions, by the respective “players” in a mutually satisfying manner.
3.2. Access for newcomers to Standard Essential Patents (SEPs)
The German Patent Act (GPA), however, does not “only” contain, in its Article 24 (2), a provision which gives the possibility to de-block situations in which dependent inventions otherwise could not be used by anybody in a reasonable manner, which particularly is of importance in case of rather broadly patented AI inventions, but not restricted thereto, but also contains a provision which would give the famous and widely discussed FRAND declarations requested from owners of SEPs a more reliable fundament.
In this context, an approach should be considered which already since 2011/2012 has been discussed in Germany, particularly with and within the Ministry for Economy and Energy (“BMWi”), but also with the Ministry of Justice and Consumer Protection (“BMJV”), namely as follows:
The patent laws of many European countries, amongst them Germany (namely in the form of Art 23 (4) of GPA), provide for the determination of reasonable royalties - in case that the parties that have registered a License Of Right (LOR) for a patent are not able to agree on reasonable license terms – by the respective patent office, like GPTO. Therefore, if FRAND-obliged owners of SEPs would be compelled to register LORs for their SEPs before they could ask for injunctional relief in patent litigation procedures, the burden of determining FRAND royalties would be shifted from the ordinary courts into patent offices, like GPTO.
In Germany, for that purpose mechanisms as developed by the Board of Arbitration for Employees Inventions at GPTO could be used. Such Board has close connection to industry because of the possibility of parties in employee-invention-disputes to enlarge the Board of Arbitration by an industry representative. In order to enable the aforementioned enlargement, a pool of licensing experts of industry is designated by the GPTO in cooperation with industry in advance. In specific cases, where one of the parties of an arbitration procedure concerning remuneration for employees’ inventions, particularly on the basis of license analogy, requests and enlargement, the respective industry expert is taken from the aforementioned pool. But also in other cases, where no enlargement is sought for by one or both of the parties of an arbitration procedure at the Board, the Boards usually seems to obtain advice, concerning e.g. market-accepted royalty rates in various industries, from the aforementioned pool of experts. In other words, the Board of Arbitration for employees’ inventions at GPTO and its decision practice, resp., are connected to market/commercial reality by the aforementioned expertise obtainable from members of the pool of industry representatives.
One could enhance the aforementioned LOR system by increasing its attraction for SEP owners by granting them easier burden of proof obligations in case of patent enforcement, namely by shifting the burden of proof that a certain SEP is not used by e.g. a newcomer to a standard to the defendant.
It is remarkable that the "Final Report" of the EU Commission on "Patents and Standards", i.e. Ref. Ares2014)917720 - 25/03/2014, does mention LOR "solutions" briefly, without, however, mentioning the aforementioned possibility to have FRAND royalties determined by patent offices. This is even more remarkable because also a forthcoming Unitary Patent (UP) system would provide for an LOR mechanism similar to the German one, with appeal possibilities against royalty proposals of the EPO to the Unified Patent Court (UPC). (Regulation (EU) No. 1257/2012, where in Art. 8 LOR is mentioned to be filed at EPO, furthermore to be found in the Agreement relating to UPC, Art. 32, under (1) (h), according to which the authority of UPC for licenses according to Art. 8 of Regulation (EU) No. 1257/2012 is mentioned.
The above mentioned mechanism of shifting the burden of determining FRAND royalties to agencies like GPTO and EPO, resp., or to semi-private arbitration organizations would, from our viewpoint of the author, enhance the access to new technologies particularly for small and medium-sized entities (SMEs) that do not have large patent portfolios available for cross-licensing arrangements.
4. Patent Pools a Solution for SEPs?
The problem of royalty-stacking in case of multiple SEPs necessary for accessing a certain standard could be, according to the author’s opinion, largely avoided if from presently used procedures like at ETSI, a mechanism similar to AMPEC-LA would be generally imposed onto owners of SEPs, like in telecommunication, but not restricted thereto. This would mean that the pool members would bring their SEPs into a pool under the "control" of a central Administrator who has the right to grant "package licenses" under all necessary SEPs to interested parties, like newcomers.
That "package license" would necessarily have to be FRAND compliant as a whole. In other words in order to i.e. the overall license should not be so high that it factually would prevent any product under that "package license" to practically become un-marketable because of a too high overall royalty load. The aforementioned viewpoint of considering the maximum royalty load of products being protected by multiple patents is explicitly considered e.g. in the Guidelines for Calculating Remuneration for Employees' inventions in Germany based on license analogy, all this being subject of Art. 19 of such Guidelines. In the European and particularly German IP community insofar discussions are on their way as to whether models similar to collection societies as used in collective copyright systems might be useful also for the distribution of the overall FRAND license fees. This would make it necessary, of course, to determine the mutual value of value/contribution of the individual SEPs and SEP packages coming from different SEP owners. With regard to the aforementioned model of “collective societies”, reference is made to an article on such problem written by Christian Czychowski and Martin Schaefer and published in GRUR 2018, 582.
With regard to the role of the Central Administrator of a patent pool as mentioned above, it should also be envisaged that SEP owners would be obliged to give a license, with a right to sub-license, to the aforementioned Central Administrator. That license, in accordance with Art. 19 of GPA, would stick to the respective patent, so that even after sale of that patent to e.g. a Patent Asserting Entity (PAE) the respective patent would remain available for e.g. newcomers wishing to enter the standard by obtaining a respective license from the Administrator. This would avoid problems existing e.g. under German law with regard to “simple” FRAND declarations, which are not considered as license agreements and therefore do not guarantee to the public the same protection as Art. 19 of GPA, according to which the licenses under patents covering Germany, once granted, would “walk” with the patent to any new owner, obliging that owner to stick to the original license offer to the Central Administrator and therefore giving, to the public, a much more reliable “guarantee” to access the respective technology than “simple” FRAND declarations can do.
5. Essentiality Check and Arbitration
It should be duly considered whether owners and right-holders relating to SEPs, but also owners of “broad” AI-related patents covering “prophetic inventions” should not be requested to let self-declared SEPs first undergo an essentiality check at a “suitable” authority, like Japan has now provided it for SEPs at the Japan Patent Office (JPO), before such patents could be used in litigation, specifically with regard to injunctional requests. One could make such an essentiality check. The condition for the right to request injunctional relief from defendants, which request otherwise would be possibly considered by the courts as being an abuse of an alleged dominant position even it would in reality not exist in a strict sense.
Similarly, one could think of making arbitration compulsory before any court action could take place, specifically with injunctional requests (of specific importance in countries with compulsory bifurcation, like Germany …), again with the consequence that only after such arbitration a respective court action, particularly with injunctional request, would be considered as lawful.
In this context, one might consider the ongoing efforts and already available mechanisms as achieved by the WIPO Mediation & Arbitration System, which is dealing with questions of SEPs in specific detail.
The WIPO mechanisms have, insofar, according to the author’s experience, the advantage of containing certain, rather reasonable caps for fees, not only of the arbitrators, but also of the parties/lawyers involved on the side of the parties, and therefore could make the burden for newcomers to SEP protected technologies easier to bear than under other arbitration systems.
6. Conclusions
It is recommended that the already existing conflict solution mechanisms of the patent system should be more thoroughly used to solve specific problems of patent use and commercialization in the age of AI/IoT. The multiplication of patent portfolios, compared with the present status, will otherwise lead to tremendous problems in the world of AI/IoT, where the number of patents, particularly SEPs, but also of rather broad patent protection, will otherwise possibly impede further technological developments. De-blocking provisions and cross-licensing regulations as embedded in patent systems of certain countries, like in Germany, together with well-known arbitration mechanisms, might be a way into a more peaceful patent world in which innovators can have a smoother life than in a world of increasing global patent disputes.
