Masterminds Discuss Fair Play, Equitable Rewards and Market Success in Patents and Standards

I had the great privilege of presenting and debating on the topic of “IPR & Standards – Market Failure or Market Success (FRAND Commitments, Obligations of Licensors and Licensees)” at GCR Live’s IP & Antitrust Asia-Pacific conference in Seoul, South Korea, last week.  Distinguished speakers at the event included locals and those from organisations around the world in government agencies (e.g. the Korean Free Trade Commission and the U.S. International Trade Commission), industry, academia and legal practice.

With a legal and economic backdrop, and focus on my specialised subject of standards and patents, the event provided an ideal opportunity to present updates on the rude health of the smartphone and mobile services markets. These are clearly the most SEP-intensive product and service markets in existence: including cellular, other wireless, video and audio compression technologies.

Theories of dysfunctionality and abuse in patent licensing, with SEPs in particular, predict that alleged hold-up and royalty stacking will affect and harm markets and consumers in various ways by reducing R&D, slowing innovation, extracting excessive aggregate royalty payments, stagnating consumer prices, impeding or foreclosing market entry and increasing vertical integration.

I racked my brains to identify and measure all conceivable factors driving good, bad and neutral effects in smartphones and cellular service markets. However, in these “poster-child” markets for (F)RAND-based SEP licensing evidence shows opposite effects to those predicted above, at least since the introduction of 3G technologies 15 years ago and with mass-market smartphones and mobile broadband since around 2007. Everything seems very healthy and, if anything, improving:

• Consumer adoption and consumption increasing
• Innovation and technical progress accelerating
• Cellular technology R&D up 74% to $46bn since 2009
• Time-to-market for new standards shortening
• Technology/device OEM vertical integration collapsed
• Market entry downstream in smartphones burgeoning
• Concentration in handset OEM supply low and declining
• Smartphone prices falling on average, and dramatically so, on a quality-adjusted basis
• Patent royalties are a very small proportion of prices for consumer products and services

“Problems”, therefore, remain no more than unproven threats, after all these years of market success…

Click here for my presentation deck with the supporting facts and figures.