As of February 8, 2015, the Institute of Electrical and Electronics Engineers (IEEE), the world's largest association of technical professionals, has adopted a new policy regarding the availability of injunctive relief for standard essential patents. Many intellectual property attorneys believe the new policy puts patent owners at a disadvantage by decreasing the leverage they have over accused infringers.
The IEEE is one of the leading standards-making organizations in the world. Members range from electrical and electronic engineers to individuals in the computer science, software engineering, mathematics and physics communities. IEEE has developed standards for over a century in these fields and others, and while not recognized by any government, it is widely regarded as the industry standard in these communities.
Generally, a standard essential patent is one that any party that wants to comply with the industry standard must infringe order to comply with that industry standard. Thus the IEEE often requires members to disclose and grant licenses to these patents at a “reasonable rate”. Prior to the implementation of the February 8, 2015 policy changes, “reasonable rate”was not defined by the IEEE standards. Standard essential patent owners were able to base their valuation of their patent on the percentage of the entire product containing the implementation. However, the new policy defines the “reasonable rate” that patent owners may seek for standard essential patent licenses as the “smallest saleable compliant implementation”. By valuing the patent at the smallest saleable compliant implementation, patent owners are likely to find the new policy reduces the potential value of their standard essential patent.
The new policy may further reduce the leverage of standard essential patent holders over accused infringers by making injunctive relief tougher to obtain. Under the new policy, a standard essential patent holder will likely be precluded from seeking injunctive relief against an accused infringer until after a fair, reasonable and non-discriminatory royalty is determined and the first level of appeal in the appropriate jurisdiction is exhausted. Thus some patent attorneys believe the new rules will cause more litigation between standard essential patent holders and accused infringers to determine the reasonable rate.
Prior to the new policy being put into effect, companies holding standard essential patents, such as IBM, Nokia, General Electric, Qualcomm, SanDisk and Panasonic wrote to the IEEE, expressing their concern the policy change will affect their future participation in IEEE standards because the new policy will threaten innovation by disincentivizing inventors. However, not everyone believes the new policy will negatively affect innovation. Companies, including Apple, Cisco, Samsung, Intel, Microsoft, and Verizon, and numerous universities sent a letter to the IEEE supporting the patent policy change, believing the policy change supports innovation by encouraging participation in essential patent pools. The letter cites a current standard essential patent producing entity seeking licensing fees of thousands of dollars per Wi-Fi chip against hotels and small retail businesses as an example of a technology hold up that will be addressed by the new policy. Further, on February 2, 2015, the United States Department of Justice issued a Business Review Letter largely supporting IEEE’s proposed policy changes believing the new policy could foster competition and innovation by reducing any technology hold ups by owners of standard essential patents in products implementing the IEEE standards.