In this chapter, the author looks at the challenges to the IoT system due to standard essential patents (SEPs) by looking at guidelines issued by regulators across the world to enable policymakers and judiciaries to deal with critical issues raised in cases involving SEPs. SEPs present a unique challenge as they require balancing the principles of intellectual property law and competition policy. The author analyses four critical challenges raised in disputes involving SEPs by looking at policy guidelines and arrives at the best practices drawn from these guidelines so that they may be used as guideposts for policymakers and regulators to resolve the increasing number of disputes involving SEPs. Finally, the author identifies some key challenges and systemic issues that are yet to be addressed – issues at the centre of some of the most significant disputes involving SEPs today.
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Patents have been accorded special protection under the law to allow the people who create it or generate it to gain financially through the use of the property provided the innovators/creators of the intellectual property place the innovations in the public domain. The law is formulated to strike a balance between the rights and responsibilities of innovators and the greater public good generated from the dissemination of the knowledge (created by the innovators). As a result, while at the same time protecting the innovators from other imitators seeking to gain off of the inventions, the law also requires innovators to make the details of the innovation public. This is done to encourage knowledge development through new inventions based on the earlier innovations, whose inventors must disclose the details publicly in exchange for patent rights.
As described above, patent rights bestow a specific set of rights upon the innovators. These rights are negative. This means that the person/entity who owns these rights can prevent others from commercially exploiting or otherwise taking advantage of the assets covered by these rights without the explicit permission of the rights holder. In the case of patent rights, they can be the right to prevent commercialisation, copy, distribute copies, etc. These negative rights give the patent rights holder a monopoly over the commercialisation (or otherwise gaining monetarily) for a specific period. While the intent of this might seem to be at cross-purposes with laws that seek to curb monopolistic tendencies, both intellectual property laws and competition/antitrust laws share common goals – to promote innovation, enable efficient allocation of resources by the economy and improve consumer welfare. Regulatory agencies and the judiciary also recognise these common goals. In Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990), the court pointed out that
[T]he aims and objectives of patent and antitrust laws may seem, at first glance, wholly at odds. However, the two bodies of law are actually complementary, as both are aimed at encouraging innovation, industry and competition (Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990) c.f. U.S. Department of Justice, Federal Trade Commission, 2017, p. 2).
Although both intellectual property laws and competition laws have similar goals, intellectual property can, in some cases, give the I.P. rights owner market power, which the rights holders can abuse. This is especially true in the case of blocking patents. High-technology industries are greatly susceptible to the issue of blocking patents. Blocking patents are often a crucial part of new technological development or underpin an entirely new avenue for research. Given their nature, the holders of blocking patents wield an enormous amount of market power – they can easily stifle innovation (especially from competitors). Because of this, any new invention or research which requires licensing from the holder of blocking patents can come to a stop or become entirely unprofitable. Blocking patents can also run afoul of competition authorities, especially if the patent holder and its competitors are working on similar research. These outcomes are often displayed in sectors with a rapid rate of technological advancements and see quick obsolescence, like in the case of information and communication technology or high-tech industries. The power that the owner of blocking patents holds over other competitors or researchers is not something that was observed recently. The ability of the blocking patent holders to stifle innovation has been studied in depth since the 19th century, where it was first looked at in great detail by Cournot (Cournot 1838, c.f. Shapiro 2001). Cournot describes the issue of blocking patents itself as a special case of the complements problem that he studied.