International car manufacturers and technology companies have been racking up court losses in recent months for violating patent rights. It happened to Ford in Germany last May, to the Chinese Oppo also before the German court in July, and more recently to Apple, which also lost a trial in Colombia.
What is reproached to these multinationals? You have to make a previous paragraph. A standard-essential patent is a patent that claims an invention that must be used for a technology standard to function. Standards such as HDMI, 4G or 5G, Wi-Fi, Bluetooth, USB ports, etc. Behind these technologies are thousands of patents.
“When we buy these products that incorporate them, part of the price we pay goes to pay for these licenses. This is the hidden toll of technological products. However, these licenses previously should have been paid for by the manufacturers and marketers of these electronic products. But not all companies decide to pay for these licenses and this represents a risk for their businesses”, explains Gian Lluis Ribechini, an industrial engineer. “Firms like Google or Apple came to the market with their technological services and products after these standards were created by others, they did not participate in their preparation, for which they now have to pay”, emphasizes the industrial property consultant Josep Maria Pujals.
Two arguments are faced in court: the companies that sell the products argue that without them these standards would have no commercial outlet (that is, it is thanks to the smartphone that bluetooth is used), while the firms that were behind the patents object that it is thanks to its technological advances that the goods sold acquire added value for the consumer (a car with an internet connection is worth more than one without).
At the time, more than a decade ago, Google acquired Motorola's patents to mitigate its essential patent risks, and Apple, along with Blackberry and other companies, acquired Nortel's patent portfolio. But they stayed halfway. The companies that are making cash by owning this type of patent right now are above all Nokia (it entered 1,000 million euros in 2021) or Ericsson (obtained 500 million). In 5G, China's Huawei continued to be the world leader in standard essential patents in 2021, with 6,566 families of 5G inventions.
One of the problems is the high number of them. According to a 2021 study by Clarivate, an independent company that provides data analysis and scientific research, the total number of declared 5G-related essential patent families was 46,322.
Hence, to manage the rights and collections of these patents, what is known as a patent pool is created: the companies that exploit these patent rights have decided to group together and jointly pay the licenses to their holders. For example, Avanci, which operates in the automotive industry, has managed to get 80 car brands (representing 100 million vehicles) to reach a licensing agreement for the use of 4G in their vehicles.
Manufacturers include Vokswagen, GM, Citroën, Fiat, Toyota or Kia. Even Ford, after the aforementioned sentence, joined, in addition to Honda, Nissan or Toyota. While on the side of the 52 patent owners, who share the income, are Panasonic, Philips, ZTE, TIM, Hewlett Packard or China Mobile. The cost of the license is now around 20 dollars per vehicle: this allows you to sell a car with 5G or USB without infringing rights.
The success of this business model may lead to the emergence of other similar consortia in all technologies with essential patent standards. In fact, there is already talk of how to manage 6G. The Sisvel consortium, which has an office in Barcelona, is already working on it.
“The use licenses of all of them will be paid by those of us who buy products with these technologies; as long as the manufacturer has paid them before to be able to sell. But perhaps the most worrying thing is that technological organizations in our country today do not participate in this business, because they do not have essential standard patents”, concludes Ribechini.
