PART 7b –ETSI’s First IPR Policy

Serendipity plays a huge role so plan around it (The Ten Rules — Rule 8)

Context

It is not feasible to make a modern high-technology standard without infringing hundreds of patents. Many are hidden in the patent-filing process. It had never been a major issue in the old European telecoms ways of doing things, where patents in telecommunications standards were open to all and either free of charge or a very modest royalty was charged (e.g., 2% of the selling price).

But in 1987, a bitter argument broke out in GSM between the mobile operators and systems vendors over the IPR conditions in GSM procurement contracts. The issue was that vendors who had done all the research work under funding from the French and German Governments were being asked to give royalty-free licences whereas other vendors would be able to charge what they liked for their patents. The French and German Governments were trying to use the GSM procurement contracts across Europe to level the playing field. When the GSM Committee transferred from CEPT to ETSI the row was still raging.

Chapter 33

THE BIGGEST INTELLECTUAL PROPERTY RIGHTS (IPR) CROSS-LICENSING DEAL EVER ATTEMPTED

The Chairman of the General Assembly, Ib Loenberg and I agreed to set up an IPR Working Group to establish an IPR policy for ETSI as a whole. Our reasoning was that there had never been significant IPR disputes in the European telecom sector, and this bitter dispute in GSM would get extinguished through being addressed in the much bigger telecoms community. How wrong we were. What began as a small fire in one Technical Group was to set the whole of ETSI alight, pitch the telecoms industry against the computer industry and galvanise the USA trade authorities to pull out a big stick.

Ib suggested that, since I was already familiar with the GSM patent issue, this new IPR Committee would report to my Technical Assembly. When we had something that everyone could agree, I would submit it to the General Assembly to be included in the ETSI membership rules. The ETSI Intellectual Property Rights Group was chaired by Ron Nicholson from Plessey. The ETSI membership quickly split three ways on the issue:

At one extreme was the US computer industry, led by IBM and DEC. They were not big players (yet) in the telecoms market but were alarmed at the precedent this solution would set for other standards bodies in the computer field. They were joined by Motorola, who had a different agenda. They were prepared to follow European rules in Europe but wanted unfettered control of what happened when European standards migrated outside of Europe. It would leave them in a nice position where Europe made their patents valuable by including them in a standard like GSM and then Motorola would be able to dictate which countries in the rest of the world could adopt GSM and which could not.

At the other extreme were the Italians. They were listening to an elderly patent lawyer (formally from Hungary) who worked for the Italian STET group which owned the Italian operator SIP. He claimed that all patents in public standards should be entirely free of charge. It was very communist in philosophy (my reason for mentioning he had come from Hungary) and a non-runner in western economies. However, Italian industry liked the idea as, in general, their spending on research was relatively low. What infuriated everyone else in ETSI were the bizarre legal theories being put forward by this patent guru. Even I got irritated with is excessive interventions. A friend one recalled me telling him that he had exceeded the amount of time for interventions that their units of contribution entitled them to! He immediately put up his hand once more asking to speak. I said, "Do you really want to take the floor again Dr Boros?", his reply was "For the avoidance of doubt Mr Chairman, when I raise my hand I will always want to take the floor."

In the centre ground was the European telecoms industry, comprising mobile network operators and their principal industry suppliers. They coalesced around a proposal that IPR owners had the right for their technology not to be included in a new standard providing they made this clear at the outset. But, if that right was not exercised, and their patent was caught up in a new standard, they would be obliged to license it on Fair and Reasonable Terms and Conditions. Further, in the event of a dispute on what was ‘fair and reasonable’, they would be bound by binding arbitration. In determining what was fair, the arbitrator would take the cumulative effect of all the IPR claims into account on the final product price.

This middle ground approach would have delivered the largest patent cross-licensing deal in the world, kept prices down for consumers and fairly rewarded industry for their investment in research. The detailed proposal was put together in the IPR Working Group and strongly supported by the major European companies. It was now my turn to get it through the Technical Assembly. I put in an enormous amount of prior diplomatic work to create a consensus. ETSI was not an IT standards body, so I did not have a lot of sympathy with IBM and DEC trying to import their aggressive business models into a public telecommunications network environment. But I was concerned about Motorola, as they were a leading player in our industry. I therefore flew to Chicago to meet Chris Galvin, the CEO of Motorola, to explain the majority position in ETSI.

In turn, he explained to me that Motorola were spending huge amounts of speculative R&D on technology that would take 10 years or more to get to market. For this reason, they needed to be aggressive over protecting their IPR, and he quoted their Iridium Mobile Satellite venture as the prime example.

The Technical Assemblies were herculean endeavours. Every member had a right to attend and speak and many did on this issue... at length. Over two successive Technical Assemblies, an overwhelming consensus built-up behind the proposition. The Technical Assembly approved it by a large majority.

The final hurdle was adoption by the General Assembly. However, by the time the proposal was ready to go to the General Assembly, there had been a change of chairmanship. The new chairman was from the Italian STET Group. He was a really nice man caught in an impossible position. He came under crushing pressure from the telecoms industry to put the proposal to a vote. He was under equally crushing pressure from the entire Italian establishment to stall. The delay created the space for the US trade authorities to pile in on behalf of the US computer industry and Motorola. It reached an acrimonious impasse. Most ETSI members were, by now, fed up and looking for a way out. Governments and the EU Commission were under mounting pressure from the US trade authorities. The tipping point was when the US trade authorities threatened a leading European systems vendor that unless they changed sides and opposed the proposed ETSI IPR policy, they would be blocked from entering the US market (a fact given to me by their head of patents). The initiative collapsed, and ETSI picked up a version of the much weaker ISO based patent policy.

It is the failure that I have the most regrets about in terms of being so close to pulling it off. I still find the position of the Italians inexplicable. They finished with nothing. I knew many of the Italian ETSI members very well, and they were all enthralled by the legal ramblings of this mad former Hungarian patent lawyer. It was another case of winning a battle but losing the war.