Apple vs Motorola - ITU aims for clarification after 'heated debate'

Mobile phone firms including Apple and Motorola met with regulators and others on Wednesday in an attempt to resolve the issues around standards-essential patent licensing, but failed to come to any fresh conclusions for now.

Many patents are essential to certain standards, such as 3G, and they tend to come with so-called fair, reasonable and non-discriminatory (FRAND) terms attached — effectively meaning that anyone can license them at a reasonable price. In the mobile patent wars over the last couple of years, FRAND-encumbered patents have sometimes been used as legal weapons, notably by Motorola.

In a meeting held on Wednesday under the auspices of the International Telecommunications Union (ITU), a UN agency, companies, regulators and academics took part in a patent roundtable in Geneva. No resolution came out of the meeting, but the convenors remained upbeat about future developments.

"Today's event has gone a long way to help clarify the positions of various stakeholders in determining the effectiveness of FRAND commitments and the impact of litigations surround standards-essential patents," ITU Telecommunication Standardization Bureau chief Malcolm Johnson said after what he referred to as a "heated debate".

The issues

There are two key issues that remain unresolved: what 'reasonable' means; and whether it should be permissible for a company to use a FRAND-protected patent as a weapon for getting a ban on a rival's product.

"Today's event has gone a long way to help clarify the positions of various stakeholders in determining the effectiveness of FRAND commitments" — Malcolm Johnson, ITU

Google's Motorola subsidiary has tried to use standards-essential patents against Microsoft and Apple in injunction bids, and has argued that a reasonable rate for licensing those patents would be 2.25 percent of the sales price of the full product. Microsoft, Apple and Cisco have banded together in disagreement.

"The average selling price [ASP] approach wrongly permits the patent holder to collect value unassociated with its contribution to the standard," Apple chief intellectual property counsel BJ Watrous argued in a morning session. "Using the ASP of the end user product as the royalty base [is] discriminating against companies like Apple who sell high-value products."

During the same session — the morning talks were open, while those during the afternoon were held under the Chatham House Rule — Motorola senior licensing counsel Ray Warren said Apple was misunderstanding the way FRAND works in the telecoms industry, as it is relatively new to that game.

"For 20 years the [FRAND] licensing commitments made by innovators in the communications industry have been sufficient," Warren said. "Past experience would indicate that [FRAND] has been effective… but that doesn't mean there isn't room for improvement to improve the present situation."

Keep trying

The industry-wide talks will now continue, starting with another, more low-level, meeting on Thursday.

"Any attempt at providing market players with clear, transparent, effective and up-to-date patent policies and guidelines… would work to the benefit of the industry as a whole," Johnson said.

"The ITU will not interfere with bilateral negotiations. However, taking into account the concerns voiced by some participants today regarding the effectiveness of current FRAND commitments and impact on standards-essential patents… I believe clarification in this regard could be a significant contribution from the ITU in addressing the current difficulties."

The various participants' contributions to the debate can be read here.