IEEE Amends its Patent (FRAND) Policy

Guest Post by Professor Jorge L. Contreras

On February 8, the Board of Directors of the Institute of Electrical and Electronics Engineers (IEEE) voted to approve a set of amendments to the organization’s patent policy.  The changes largely relate to the commitment of IEEE members to license patents to users of IEEE standards on terms that are “fair, reasonable and nondiscriminatory” (FRAND).  As most readers are aware, these commitments have been the subject of recent litigation.  IEEE’s Wi-Fi standards alone have played prominent roles in Microsoft v. Motorola, Apple v. Motorola, In re. Innovatio and Ericsson v. D-Link, among others.  In most of these cases, there has been sharp disagreement over whether the patent holder complied with its FRAND obligations.  To decide these cases, judges and juries have been required to speculate regarding the scope and intent of these obligations, choosing between the divergent views advanced by the litigants and their experts.

Observers of these disputes have long wondered why standards-setting organizations (SSOs) like IEEE have not simply clarified these issues in their patent policies.  Doing so would eliminate much of the uncertainty and debate that currently characterizes disputes over FRAND compliance.  In fact, in a 2013 article, the chief economists of the U.S. Department of Justice, Federal Trade Commission and European Commission Directorate-General for Competition jointly urged SSOs to clarify issues surrounding FRAND in their patent policies.  Yet few SSOs, if any, did so.  Until now.

The IEEE amendments do several things.  Most notably they makes clear that IEEE members holding patents covering IEEE standards:

  • must offer to license those patents to all applicants requesting licenses, and cannot pick and choose among licensees,
  • may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses,
  • may insist that licensees offer them reciprocal licenses under their own patents,
  • may arbitrate disputes over FRAND terms,
  • may charge a reasonable royalty that is based, among other things, on the value that the patented technology contributes to the smallest salable component of the overall product, and
  • should ensure that subsequent purchasers of these patents agree to abide by the same commitments.

Readers may recall that disputes regarding several of these issues have arisen in recent litigation. For example, myriad articles and briefs have debated whether or not a FRAND licensing commitment precludes a patent holder from seeking injunctive relief against an infringer who is willing to negotiate a license.  On one hand, committing to license one’s patents on FRAND (or any) terms implies that monetary compensation is acceptable to the patent holder, thus weighing heavily against the issuance of an injunction under the Supreme Court’s 4-factor test in eBay v. MercExchange (U.S. 2006).  However, patent holders have argued that FRAND commitments were never intended to eliminate one of the principal equitable remedies available to them should potential licensees be intransigent or unwilling to negotiate on reasonable terms.  Arguments have been made under antitrust, contract, estoppel and various other theories, all seeking to adduce the “intention” of the parties submitting to the FRAND commitment. Now, the speculation is over, at least for IEEE standards.  The SSO members have announced what their FRAND commitment means, and further dispute is unnecessary.  The same can be said for most of the other issues addressed by the IEEE amendments.  Such clarity can only help to reduce the uncertainty and litigation burden that has affected the standardization world over the last few years.

IEEE sought and obtained clearance for the amendments from the Department of Justice, which issued a favorable Business Review Letter on February 2.  Among other things, the DOJ concluded that the amendments have “the potential to benefit competition and consumers by facilitating licensing negotiations, mitigating hold up and royalty stacking, and promoting competition among technologies for inclusion in standards.”  Readers may recall that this is not the first DOJ Business Review Letter that the IEEE has obtained.  It 2007 it also sought clearance for a set of patent policy amendments that permitted patent holders to disclose maximum royalty rates prior to approval of a standard (so-called “ex ante” disclosure).  Though the DOJ approved these amendments as well, the procedures they introduced were not widely used by IEEE members.

The passage of the amendments within IEEE required a significant effort over a period of approximately two years.  As reported in the DOJ letter, the initial drafts generated 680 public comments.  The resulting document was narrowly approved by a 3-2 vote of the IEEE Standards Association’s (IEEE-SA) Patent Committee.  The IEEE-SA Standards Board approved it by a vote of 14-5, and the IEEE-SA Board of Governors, usually the final authority on standardization matters, voted 9-3 in favor of the amendments.  Nevertheless, opponents brought the amendments before the Board of Directors of the IEEE parent organization, which finally voted to approve the amendments on February 8.  In the weeks leading up to the final vote, both supporters and opponents of the amendments mustered support from industry and academia, resulting in numerous public statements and letters both pro and con the proposed amendments.

The vigorous pubic debate over the IEEE amendments highlights a rift in the standardization world between what I have termed patent-centric and product-centric firms.  The business models that these firms have adopted are different, yet they have co-existed for decades.  Some have predicted that important contributors will leave IEEE as a result of the recent amendments.  This may happen.  But more likely it will not.  Similarly dire predictions were made prior to the IEEE’s 2007 amendments, but the ill effects that were predicted never materialized.  In this author’s opinion, the IEEE’s policy amendments offer much-needed clarity to the murky world of FRAND commitments, and it is hoped that other SSOs will soon follow with clarifications of their own patent policies.

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

35 thoughts on “IEEE Amends its Patent (FRAND) Policy

  1. One major modification in the revised policy is that any “reasonably royalty”calculation must exclude the value added to the patent by the mere fact that the patent covers standard essential technology. “‘Reasonable Rate’ shall mean appropriate compensation to the patent holder for the practice of an Essential Patent Claim excluding the value, if any, resulting from the inclusion of that Essential Patent Claim’s technology in the IEEE Standard.” I know there is at least one Federal Circuit case from December of 2014 that laid down this rule, but I’m not sure if it was the first Federal Circuit panel to do so. Regardless, it is in the policy now and thus required. I view this as a major change, perhaps the most major, but I did not see it in the blog post.

    1. Obviously, this policy makes very little sense as does much of the IEEE policy.

      A committee owes a duty to the public to identify standard essential patents and applications before they adopt a standard. Moreover, they need assure that all comers have a license thru a licensing agent, with the royalty rates defined, and the compensation to the patent holders agreed to, with even the patent contributors paying the defined royalty.

  2. Prof. Contreras writes —

    Some have predicted that important contributors will leave IEEE as a result of the recent amendments. This may happen. But more likely it will not. Similarly dire predictions were made prior to the IEEE’s 2007 amendments, but the ill effects that were predicted never materialized.

    It only took 24 hours. Qualcomm, probably the largest contributor of technology into WiFi, pulled out in 48 hours.

    Academics don’t understand profits or commercial reality.

    1. And Ericsson and Nokia did the same, prospectively announcing that they will not contribute technology in the future if IEEE-SA adopted this policy. This was known at the date of Prof. Contreras’ paper — naive prognostication is foolish enough, but ignoring facts that are already on the ground is, well, … You pick the word.

      This article is a pretty clear example of why the patent bar looks at patent academia with such skepticism. As Justice Roberts noted a few years ago, so much of legal academic writing is not “of any particular help or even interest to the members of the practice of the bar or judges.”

    1. I would love to hear from Dave Boundy on this subject, seeing as he is a membe of the IEEE-IP board (not sure if that is the US contingent).

  3. In an article like this for a lay audience it would be a good idea make it clear that these FRAND licensing agreements do not apply to the patents of the numerous IEEE members, and others, who did not participate in IEEE standards settings relevant to those patents.

  4. must offer to license those patents to all applicants requesting licenses, and cannot pick and choose among licensees,


    may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses,

    Good faith? The failure to include any requirement for good faith seems unfair on its face.

    may insist that licensees offer them reciprocal licenses under their own patents,

    Without a limit that the reciprocal licenses be limited to the other party’s patents that similarly cover the standard, this provision guarantees that the licenses are not going to be “uniform” and “nondiscriminatory.” This is a nonstarter, and it may be a central reason why negotiations actually fail.

    may arbitrate disputes over FRAND terms,

    Is this an illusory promise? Was it not always true that the parties to any dispute could arbitrate?

    may charge a reasonable royalty that is based, among other things, on the value that the patented technology contributes to the smallest salable component of the overall product, and

    This presents a problem in that the language should say that the license royalties should be uniform depending upon product type – similar products should bear similar royalties. The “smallest salable component” really throws a monkey wrench into license negotiations.

    should ensure that subsequent purchasers of these patents agree to abide by the same commitments.

    I am not sure how this can be enforced except by breach of contract actions against the original member of the FRAND organization. But the way I see the language written, there is no actual contractual obligation.

    1. “may arbitrate” might be interpreted to mean- provide an offer, if they do not accept it propose arbitration to calculate how much they owe you, and if they refuse you can say they are not “willing to negotiate for a license” and file a suit seeking an injunction. May speed things up from a patent holder’s point of view, as they don’t have to go through several rounds of ‘well that’s not fair’ or ‘I don’t think its worth that much but I still want to negotiate with you in good faith so don’t sue me while I spend another 3 months calculating a counter offer’.

    2. IIRC, there was a case where the patent holder of the FRAND patent wanted a license back of all of the target licensee’s patents. Would anyone consider this demand reasonable, but it does seem authorized by the new FRAND policy.

  5. Recent news regarding Qualcomm (a dissenter from the IEEE amendments):

    On Monday, Qualcomm agreed to pay China $975 million in fines [PDF] after a months-long antitrust investigation into the way the San Diego-based chip maker licensed its patents to Chinese companies in the mobile phone market. The company also agreed to a relaxed licensing scheme that will reduce the royalty payments that mobile phone makers in China have to pay to Qualcomm.

    The Wall Street Journal notes that about half of Qualcomm’s revenue comes from China…

    Qualcomm’s fine is among the biggest antitrust fines levied on a tech company around the world, and Reuters says Qualcomm’s fine is the largest in China’s corporate history.

    But Qualcomm is very concerned about “strong patent rights”. We should all listen because they are very serious people with profound respect for the law.


  6. The FRAND commitment requires “…may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses,”

    The author then states: “Now, the speculation is over, at least for IEEE standards. The SSO members have announced what their FRAND commitment means, and further dispute is unnecessary. ”

    My question is: Who decides if the potential licensee is willing to negotiate for licenses? If they’re willing to pay $.02 on the dollar for a license, is that a willingness to negotiate? How about $.002 on the dollar? I don’t think that this provision eliminates further disputes.

    1. A member of the cross-license [a standard-setting participant having or needing a license to a subject FRAND patent] not being able to get an injunction does not preclude suing to get a reasonable royalty. There have now been a least two D.C. decisions in which such a FRAND royalty has been calculated and imposed.
      I am not aware of anyone successfully getting a patent infringement injunction on a FRAND subject patent before now anyway.

      If someone could point to OTHER provisions of this association’s new royalty calculation agreement that are inconsistent with current Fed. Cir. patent infringement damages calculation decisions, that would be of interest.

      1. Paul, you know better than that. The right to exclude is the essential anchor point for any pricing or damages calculation. If no injunction is available, then all the rules of economics, which center around the cost of the “next best alternative,” go out the window.

  7. Going to be interesting to see how much a couple of the provisions are going to change the value of the patents.

    “smallest salable component” — makes you wonder if this isn’t going to change patent writing and maybe the design of devices.

    “may arbitrate disputes over FRAND terms” & “reciprocal licenses” — makes you wonder if a D with patents can force arbitration.

  8. “patent-centric and product-centric firms.”

    The do nothings vs the do somethings: always at war. It’s a fundamental division in humanity.

        1. Merely pointing out a fact for your enjoyment 6.

          Perhaps you need to recalibrate yourself (and your role) in this grand scheme [pun intended] of things, seeing as your entire professional career is geared to producing those things that simply don’t require a “make.”


    1. Right…”do nothings” like Qualcomm, Ericsson, Nokia who’ve invested billions in R&D. Real slackers.

      Clearly, you have never been within 100 miles of a licensing deal.

  9. Interestingly, a rather different take on this event is being portrayed at:

    link to

    The article is written by Innovation Alliance and appears to represent the view that this change was opposed by the US contingent of the IEEE (IEEE-USA), among others.

    1. Somebody at the “Innovation Alliance” gambled and lost so now they are going to have a sad:

      These policy changes at the IEEE were developed and advanced not in response to any documented problems with the current policies, but rather to artificially depress the market value of patent-protected technologies.

      I guess we’re all free to decide whether to believe Dennis or “Innovation Alliance” on this point.

      They represent an anti-competitive shift favoring the buyers of inventions at the core of Wi-Fi and other IEEE technologies, at the expense of those who invented them.

      The inventions “at the core of Wi-Fi” are in the public domain and have been for quote some time.

      [Funny side note re the wiki entry for Wi-Fi: “On August 11, 1942, U.S. Patent 2,292,387 was granted to Hedy Kiesler Markey, Hedy Lamarr’s married name at the time, and George Antheil…. Lamarr’s work was honored in 1997, when the Electronic Frontier Foundation gave her a belated award for her contributions. In 1998, an Ottawa wireless technology developer, Wi-LAN Inc., acquired a 49% claim to the patent from Lamarr for an undisclosed amount of stock.” <—what?]

      The IEEE’s new policy will arbitrarily reduce the level of protection given to Wi-Fi-related patents

      The reduction is not arbitrary.

      impose unconstitutional limits on patent rights

      Highly doubt that.

      end the traditional market-based negotiation process for these patents by imposing what amounts to de facto compulsory licensing.

      These guys seem to be working really hard to miss the point.

      Companies that spent many years and billions of dollars in R&D to develop Wi-Fi and other technologies could find themselves unable to recoup their investments.

      Or not. Meanwhile other companies will be better off and will have an easier time “recouping” their investments. Most importantly, entities that aren’t involved in manufacturing or providing services and who’s sole purpose for existing is to manipulate the patent system and put roadblocks in the paths of targeted manufactures/service providers will (hopefully) be dissuaded from playing the game. That’s good news for just about everybody.

      1. I looked at the Innovation Alliance (IA) website, to see who are its members.

        I didn’t see a good fit between the set of companies that are responsible for IEEE Standards Setting policy and the set of companies that are members of the IA.

        How many Whole Industry Standards does the IA set? I suppose not a single one. So, in relation to Whole Industry Standards Setting Policy, should I take any notice of what the IA argues? Surely not.

        1. Your “logic” is a fail, MaxDrei, as there is not one single entity – anywhere – that meets your self-imposed burden for being listened to of “setting a Whole Industry Standard.”

          …so much for the “mind eager to understand”…

          1. Well yes Night, I did see that. Indeed, it was that which gave me pause. Why aren’t all the other IEEE members also members of the IA? Shouldn’t they be, if the IA is important?

            anon, there are entities I would pay attention to. One would be the DOJ. Another would be an academic who specialises in this field and has no axe to grind.

            Important for me would be to see where (other than naked self-interest) the commenting entity is “coming from”.

            1. Typical MaxDrei, moving goalposts…

              First, it was your statement of “setting a Whole Industry Standard” that you now want to ig nore, given that you now insert the seeming desire for neutral an objective parties – and I am more than sure that the DOJ and academics NEITHER are involved with participating in the industry nor write any standards themselves.

              Further, if you think academics are neutral or objective, your Pollyannaism will accord your views their typical persuasiveness of next to nothing.

              Yes, there will be naked self-interest from ANY of the entities actually involved in writing of the standard, but then again, the standard is FOR those entities who have that interest.

              Or did that context escape your notice?

            2. Yeah there isn’t a lot beyond Qualcomm in the IA. Seems to be some of the standards players that are stronger on the patents than the tech are in IA.

      2. MM>>>The inventions “at the core of Wi-Fi”

        This is just more of your nonsense. You evaluating the technology and putting a worth on different components based on your gist. Offensive and ridiculous.

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