19 October 2017
Reporter: Barney Dixon

EU Commission should prohibit use-based SEP licensing, says ACT

The App Association (ACT) has called on the European Commission to prohibit any form of use-based pricing of technology essential to the internet of things.

The commission is set to issue guidance on how standard-essential patents should be licensed to help the development of Europe’s internet of things industry, which could exceed €1 trillion in contributions to the European economy by 2020.

But ACT is concerned about the potential inclusion of use-based pricing as one of the accepted licensing models in the guidance.

ACT explained that use-based pricing would “allow standard-essential patent holders to charge internet of things developers higher fees to use their technology and deter investment and innovation—a serious mistake that could hamper, not help, the development of the internet of things in Europe”.

Mike Sax, founder and chairman of ACT, commented: “The potential impact of the internet of things is huge, not just in economic terms but for the way we live and work.”

“But that potential won’t be fully realised if obstacles to innovation are placed in its path. Basing the price of a licence for an essential patented technology on how it is used is toxic to innovation.”

He added: “It isn’t fair or reasonable, and it discriminates against many tech firms and developers along the supply chain.”

Research and development organisation, IP Europe, has rejected this idea, stating in a blog post that “a change to the longstanding practice of use-based licensing would result in the collapse of the current system of shared open connectivity standards, putting the upcoming 5G standard at risk”.

It continued: “ACT and its sponsors are seeking to impose a uniform standard-essential patent licensing model on the whole internet of things ecosystem, without any flexibility and even before some of the standards are developed. This is illogical, inefficient and runs against competition as it is not for Silicon Valley to decide.”

However, ACT’s Sax explained that listing use-based pricing in the guidance would endorse its use in Europe, giving unfair advantages to a small number of patent holders, including Qualcomm, Nokia and Ericsson.

Qualcomm is currently embroiled in several anti-trust lawsuits and fines worldwide over the licensing of its standard-essential patents.

IP Europe recently proposed an industry code of conduct on licensing standard-essential patents for 5G and the internet of things.

At a workshop in Paris on 6 October, IP Europe produced a draft project plan for a code of conduct, which will establish best practice SEP licensing arrangements for the internet of things marketplace.

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