European Commission Roadmap on Standard Essential Patents
Response by One-Blue, LLC
May 4, 2017
One-Blue, LLC (One-Blue) is a New York-based patent pool that administers global
patent licensing programs for standard essential Blu-ray Disc patents owned by 17 licensors.
One-Blue's licensors include leading consumer electronics companies and other optical media
innovators. One-Blue participated in the European Commission's Consultation on Patents and
Standards in 2015. 1 One-Blue submits this letter in response to the Commission's request for
comments on the Roadmap for its "Standard Essential Patents for a European Digitalized
Economy" initiative.
One-Blue welcomes the opportunity to comment on the Roadmap and applauds the
Commission' s goal of addressing practical problems related to the licensing of standard essential
patents (SEPs). In particular, One-Blue commends the Commission for recognizing that the
European Court of Justice' s (CJEU) decision in Huawei/ZTE has led to legal uncertainty with
respect to portfolio licensing. For patent pool administrators such as One-Blue, and for SEP
owners willing to license their patents through patent pools, this uncertainty undermines the
ability to enforce legitimate patent rights and creates severe disincentives for patent pool
formation. In addition, rigid application of the Huawei/ZTE framework has the potential to
reinsert inefficiencies into the licensing process that patent pools were designed to eliminate.
One-Blue would welcome further Commission guidance to complement the existing
jurisprudence regarding SEP enforcement, and highlights in this letter the issues Huawei/ZTE
has created, particularly for patent pools. One-Blue ·also offers potential solutions, including
looking to the recent UK High Court's opinion in Unwired Planet/Huawei for direction in
crafting the European Commission's guidance.
Patent Enforcement Uncertainty in the Portfolio Licensing Context
In its 2015 response to the SEP consultation, One-Blue explained that business and legal
uncertainty is one of the main obstacles to successful patent pool formation and operation.2 SEP
owners are less likely to make their patents available through patent pools if the commercial and
legal framework of participation in a pool is unclear. One dimension of patent pools in which
uncertainty is particularly problematic is the ability to enforce pooled patents against unwilling
Response by One-Blue, LLC, European Commission Consultation on Patents and Standards (January 29,
2015) (hereinafter "2015 Submission"). The 2015 Submission is enclosed with this letter.
2
2015 Submission at 4 .
One Blu e, LLC
13 50 Broad wa y , Suite 1406
New Yo rk, NY 1001 8 USA
w ww .one-b lue.co m
licensees. As One-Blue's experience has shown,3 patent pools that offer enforcement
mechanisms against companies that infringe pooled patents but are unwilling to pay royalties are
more attractive to licensors and, therefore, more likely to operate successfully.
Following the CJEU' s decision in Huawei/ZTE, seeking an injunction based on SEPs can
constitute a violation of EU competition law where the patent holder has agreed to license its
4
patents on FRAND terms and the implementer is willing to negotiate on such terms. Because
most SEP owners-including all of One-Blue's licensors-commit to license on FRAND terms,
the critical question is how to determine whether a potential licensee is unwilling to negotiate on
those terms. Huawei/ZTE seeks to resolve this question through an information and negotiation
framework: prior to bringing an action against an implementer, an SEP holder must (1) alert the
implementer of the infringement in writing, (2) present a written offer for a license on FRAND
terms, (3) consider a promptly presented, reasonable counter-offer, and (4) accept that FRAND
terms be determined either by a court or arbitration tribunal if negotiations are unsuccessful. An
injunction is available only if the infringing manufacturer refuses to negotiate in good faith.
Whatever the merits of this framework in the context of individual patent enforcement, it
is ill-suited for patent pools.5 One-Blue summarized the main practical problems with applying
the Huawei/ZTE requirements in its 2015 response to the Commission's Patents and Standards
consultation: 6
•
The first two Huawei/ZTE requirements (notice of infringement and written offer).are
simply unnecessary in the patent pool context. Manufacturers of standard-compliant
products typically do not need notice regarding the infringement because they intend
their products to comply with the relevant standards and lists of pooled SEPs are
publicly available. 7 In addition, there is rarely dispute over the terms that the patent
pool is willing to offer because royalty rates and complete license agreements are
routinely published online. 8
•
The third Huawei/ZTE requirement (consideration of counter-offers) is impractical,
jeopardizes some of the key efficiencies of patent pools, and creates daunting
See Ruud Peters, One-Blue: A Blueprint for Patent Pools in High-Tech, Intellectual Asset Management,
Sept/Oct. 2011 , 38 at 39.
4
Case C-170/13 -Huawei/ZTE (July 16, 2015).
See 2015 Submission at 9.
6
One-Blue's 2015 submission was prepared on the basis of the Advocate General' s opinion in Huawei/ZTE,
without the benefit of the CJEU' s decision. One-Blue ' s concerns continue to be relevant after the CJEU's
decision, however.
S ee, e.g., One-Blue, http://www.one-blue.com/license-programs/bd-player-recorder/ (essential patents for
BD Player and BD Recorder listed on One-Blue 's website).
S ee e.g., One-Blue, http://www.one-b1ue.com/license-programs/bd-player-recorder/ (license agreements
BD Player and/or BD Recorder available on One-Blue ' s website).
2
FRAND compliance challenges for patent pool administrators. One of the key
benefits of modern patent pools is that they reduce transaction costs by offering "onestop-shopping" for all relevant SEPs owned by their licensors on uniform terms.
Patent pools can only achieve this benefit if they are not required to consider and
accommodate "a la carte" license requests from infringing manufacturers. Patent
pools also would face serious FRAND compliance risks if they were required to
entertain alternative license requests, because each departure from the published
terms and royalties raises the risk of discrimination claims from licensees that may
have obtained a different rate or different terms. 9
•
More generally, the negotiation requirement is an invitation for abusive practices by
implementers that seek to delay enforcement. For example, many patent poolsincluding One-Blue-offer licenses only on a global basis. A requirement that they
negotiate individualized licenses could result in potentially lengthy delays in
enforcement. Notably, infringers could evade royalties and enforcement for an
extended period of time by negotiating for geographically narrow (perhaps countryspecific) licenses with the patent pool even though it is clear that the pool is not
authorized to offer such licenses and their standard-compliant products infringe all
pooled patents everywhere in the world.
Potential Solutions
As explained in the 2015 Submission, One-Blue strongly believes that there are
differences between individual enforcement of standard-essential patents outside of the patent
pool context, and enforcement when patent pools are involved. 10 These differences justify a
modified framework for determining whether an implementer is "unwilling" to license relative to
what may be appropriate outside the patent pool context.
The recent decision by the UK High Court in Unwired Planet/Huawe/ 1 provides a
compelling approach to enforcement of SEPs in the patent pool context. 12 As Justice Birss
To be clear, One-Blue does not believe that non-discrimination requires that each licensee pays precisely
the same royalty and is subject to precisely the same terms as every other licensee. But a legal requirement
to negotiate royalties and terms on a case-by-case basis for dozens or hundreds of licensees dramatically
complicates FRAND compliance.
10
2015 Submission at 11.
II
Case No: HP-2014-000005 - Unwired Planet v. Huawei (April 5, 2017).
12
One-Blue recognizes that the UK High Court departs from the Commission's decision in Motorola. Case
AT.39985 - Motorola (Apr. 29, 2014). Motorola however involved individual rather than portfolio license
negotiations through patent pools. The Commission's decision also was based on the view that the
country-specific license was FRAND. It did not consider the case from the perspective that there was only
one set ofFRAND terms in any given situation, as the UK High Court does in Unwired Planet, and does
not analyze whether a worldwide scope would be FRAND. See Unwired Planet/Huawei at ii 551-52.
3
observed in that decision, the CJEU in Huawei/ZTE did not intend to set out a series of rigid
rules, deviation from which would be abusive regardless of the circumstances. 13 In addition,
multi-jurisdictional portfolio licenses are unlikely to be inherently anticompetitive, and a
licensor's demand for a worldwide license therefore does not necessarily harm competition. 14
Every licensing situation has only one FRAND rate, which can be determined by adjusting a
benchmark royalty rate calculated based on the SEP holder's (or holders') portfolio. 15 In the
case of a licensor with a worldwide patent portfolio, and a licensee that manufactures or sells in
multiple countries (multinational implementer), a worldwide license is FRAND. 16 Country-bycountry licensing is inefficient, and tracking individual licenses and royalty payments require
considerable effort, which the Court observes no rational business would choose to do. 17 As a
result, an internationally active implementer is not a willing licensee when its willingness to take
a FRAND license is conditioned on the license being a patent-by-patent or country-specific
license.
Applied in the patent pool context, the Unwired Planet/Huawei framework would allow
patent pool licensors to seek injunctions against multinational implementers upon a showing that
the implementer was offered a global license in accordance with standard patent pool terms, and
that it refused to consider licensing of the offered package on a global basis. Although this
approach does not solve every complexity of enforcement in the patent pool context, its adoption
would greatly simplify enforcement of pooled SEPs against multinational implementers because
it prevents such implementers from engaging in delay tactics by requesting narrower-than-global
licenses that many patent pools-One-Blue included- simply do not offer.
Adoption of the Unwired Planet/Huawei framework in the patent pool context would not
create undue injunction risks for implementers that in good faith require licenses only for a small
set of countries. These implementers can easily demonstrate their willingness to license by
engaging in negotiations with individual licensors. In One-Blue' s experience, however,
implementers that are unwilling to take One-Blue ' s global license rarely go down this path,
preferring instead to negotiate for something that One-Blue does not (and should not be required
to) offer, and seeking to rely on those futile negotiations to escape enforcement.
****
Commission guidance regarding SEP enforcement is necessary to address some of the
questions left unanswered by Huawei/ZTE. One-Blue recognizes that the Commission must
13
Unwired Planet/Huawei at ,-i 740-41.
14
Id. at ,-i 535 , 572.
15
Id. at ,-i 164.
16
Id
at~
540-43, 572.
17
Id
at~
544.
4
balance competing interests of licensors and licensees, and encourages the Commission to
consider the UK High Court' s opinion in Unwired Planet/Huawei and its reasoned and balanced
judgment as it drafts its own guidance.
One-Blue would be delighted to provide additional information about its licensing
experience and about the administration of global patent pools in general. Please do not hesitate
to contact One-Blue' s General Counsel, Jack Slobod with any questions.
5
European Commission Consultation on Patents and Standards
Response by One-Blue, LLC
January 29, 2015
A.
Introduction
This response is submitted by One-Blue, LLC (“One-Blue”), the administrator of a patent pool
for Blu-ray Disc ("BD") Products. The pool administered by One-Blue presently includes patents
of 15 licensors that are essential to the BD Standards, as well as patents of these licensors that are
essential to the Digital Versatile Disc ("DVD") and Compact Disc ("CD") Standards. The
essential DVD and CD patents are included for the purpose of enabling required backward
compatibility with these earlier optical disc standards. More information about One-Blue is
available at www.one-blue.com.
Contact information:
One-Blue, LLC
Attn. Jack Slobod, General Counsel
555 Madison Ave, 11th Floor
New York, NY 10022 (USA)
[email protected]
B.
Key Issue 5 – Patent Pools Related to Standardization
Topic 1: Benefits and Costs of Patent Pools
Q 5.1.1 Target areas: What are the situations/external factors which render a patent pool
useful? Are you aware of specific standards for which a patent pool would be useful but where
there has been a failure to create one?
Patent pools substitute a single regularized transaction (the pool license) for a licensing system in
which each patentee and potential licensee must bargain individually for each licensing
transaction. As such, patent pools have efficiency benefits that are particularly pronounced in
industries with “patent thickets,” i.e. situations where the manufacture of standard-compliant
products infringes multiple patents, and where manufacturers must obtain licenses from multiple
patent holders.1 This is the case with almost all standards for “high-volume” products for which
large markets are expected.
1
See the definition on p. 9 of the Commission’s Questionnaire.
1 BD technology is a textbook example of a patent thicket, with thousands of patents essential to
make and sell standard-compliant, backward-compatible BD products. Here as in other patent
thickets, individual licensing would be time consuming and complex, hinder the adoption of
technology standards,2 and expose even diligent manufacturers to potential infringement risks.3
One-Blue’s licensing programs eliminate these challenges by offering “one-stop shop” licensing
under all relevant essential patents owned by its 15 Licensors. One important efficiency of OneBlue’s programs is that – unlike most other patent pools – One-Blue provides licenses not only
under patents essential to a single standard (e.g., BD), but under all patents essential to all optical
standards used in BD products (i.e., BD, DVD and CD).4 This is an important feature because
greater technology convergence means that products increasingly include multiple standards.
Consequently, the licensing complexity for implementers has moved up one level, from needing
multiple licenses from different licensors for a single standard to needing multiple licenses from a
number of individual licensors (and possibly patent pools) for multiple standards. One-Blue has
solved this issue with its product-based licensing (as opposed to standard-based licensing)
approach.
Wireless telecommunications provides another example of widespread patent thickets, but is an
area where patent pool formation has been less successful. For example, a large number of
companies has declared thousands of patents standard-essential to the LTE standard,5 but the
existing Via and Sisvel LTE pools appear to cover patents from only a subset of these licensors.
Moreover, even if the Via and Sisvel LTE pools included a greater number of patent owners, they
would not fully address the needs of wireless device manufacturers because their standard-based
licensing approach does not provide licenses under patents essential to predecessor standards
(such as GPRS) in those devices. This emphasizes the importance of incentivizing standard
essential patent owners to create and join patent pools.
Q 5.1.2 Benefits of patent pools: What are the benefits of patent pools in the above situations
(Q 5.1.1) respectively for patent holders and/or patent users? What aspects in patent pool
governance are particularly relevant in practice to ensure the realization of these benefits?
2
See, e.g., Richard J. Gilbert, Ties That Bind: Policies to Promote (Good) Patent Pools, Antitrust Law
Journal 2010, 1 (“The time and effort required to assemble [multiple patent rights] can interfere with the
adoption and diffusion of new technologies and the cumulative payments to rights holders for the use of
their intellectual property can weigh heavily on technology costs.”).
3
Prior to the establishment of patent pools for essential BD patents, Apple founder Steve Jobs famously
described the licensing of BD technology as “a bag of hurt” and announced that Apple would “wait[.] till
things settle down and Blu-ray takes off in the market place.” See Darren Murph, Apple’s Steve Jobs calls
Blu-ray “a bag of hurt,” engadget, October 14, 2008, available at
http://www.engadget.com/2008/10/14/steve-jobs-calls-blu-ray-a-bag-of-hurt. This is precisely the type of
obstacle to the adoption of new technology that patent pools are designed to address.
4
See Ruud Peters, One-Blue: a blueprint for patent pools in high-tech, Intellectual Asset Management,
Sept/Oct. 2011, p. 38 at 38-39.
5
See Cyber Creative Institute Co. Ltd., Evaluation of LTE essential patents declared to ETSI, (Version 3.0),
June 2013, at p. 29, 30, available at http://cybersoken.com/research/pdf/lte03EN.pdf.
2 The benefits of patent pools generally, and especially in industries with patent thickets, have long
been recognized.6 Notably, patent pools:

reduce transaction costs (for licensees and licensors) involved in assembling and making
available the necessary patent rights, as well as in reporting and paying royalties;

mitigate royalty stacking;

reduce litigation risks resulting from an incomplete portfolio of patent licenses;

reduce uncertainty in the patent landscape, patent availability and pricing; and

contribute to the establishment of a level playing field across implementers and reduce
potential for discrimination between implementers and give equal access to all companies,
whenever they enter the market.
In practice, these benefits are best achieved in patent pools that:

offer one-stop shop licenses under all essential patents owned by participating licensors
under standard and transparent licensing terms;

are separate from the relevant standard setting body(ies) in order to avoid conflicts of
interest between the standards body (which focuses mainly on the promotion of the
widespread use of the relevant standard) and the holders of essential patents (which are
interested in standard promotion but also want to collect fair and reasonable royalties for
their SEPs);

allow essential patent holders to determine the structure and set-up of the licensing
program, to ensure that they have sufficient incentives to participate in the pool and
induce other SEP holders to join;

use a separate licensing administrator to run patent licensing operations (this can be a
dedicated patent pool service provider with a number of different licensing programs or
an entity specifically created for the pool at issue, either by some or all of the participating
licensors or by a third party);

include a committee with representatives of the participating licensors to supervise the
operation of the licensing administrator and address issues that may occur during the
execution phase of the licensing program(s);
6
See, e.g., European Commission, Patents and Standards – A Framework for IPR-based Standardization
(Final Report 2014) (“2014 Patents and Standards Report”), p. 173; European Commission, Guidelines on
the Application of Article 101 of the Treaty on the Functioning of the European Union to Technology
Transfer Agreements (2014) (“2014 Technology Transfer Guildelines”), para. 245.
3 
contribute to a level playing field through appropriate enforcement mechanisms against
implementers that either fail to comply with their obligations under the patent pool
licenses or refuse to take pool (or individual) licenses;

involve independent experts to guide discussions among the essential patent owners,
which may not have experience with setting up patent pools;

involve and regularly consult competition counsel to ensure that the pool is structured and
administered in line with competition laws in the relevant jurisdictions.
One-Blue has adopted all of these features.
Q 5.1.3 Alternatives to patent pools: What alternatives to patent pools do you see to achieve
efficient licensing in situations where ownership of patents which are essential to a standard is
widely dispersed?
In industries with patent thickets, One-Blue does not see licensing alternatives that would offer
the same efficiency benefits as patent pools.
Q 5.1.4 Difficulties of pool creation: What are the main difficulties in setting up a patent pool
and how can they be addressed? Are there differences in national law or its application across
countries of the EU/EEA or worldwide that make patent pool creation more difficult?
The main challenges of patent pool formation are costs, business and legal uncertainty, and the
need to provide an attractive licensing model for patent owners with sometimes diverging
interests. Public authorities such as the European Commission can best address these difficulties
by offering clear frameworks that maximize pool formation incentives and minimize costs and
legal uncertainty, as discussed in response to Q 5.2.2 below.

Costs. As the Commission has recognized, patent pool formation is expensive.7 Pool
founders must allocate often significant resources to the identification of potential
licensors and licensees and to the negotiation and drafting of the pool’s foundational
documents. In addition, licensors that contribute their patents to pools for standardized
technologies must bear the expense of determining standard-essentiality by independent
evaluators.8
7
2014 Patents and Standards Report, p. 174.
8
See the response to Q 5.1.5 for estimated evaluation costs for One-Blue’s licensors. Additional significant
costs may result from pre-formation consultation (and sometimes filings) with regulatory bodies and postformation compliance efforts, especially with the patent and competition law rules applicable to patent
pools. Compliance with these rules requires specialized guidance and ongoing scrutiny, which is expensive
and time-consuming. In addition, to the extent the formation of a patent pool requires regulatory approvals,
the preparation of the requisite submission is a significant cost factor.
4 
Business and Legal Uncertainty. To generate the benefits typically associated with
them, patent pools must attract a critical mass of licensors and licensees, or else they fail
to form or become unstable.9 Moreover, pools must form within a reasonable period of
time after development of the licensed technologies or the adoption of relevant standards.
Whether these requirements can be met is often uncertain at the time of planning of a
patent pool, which is a significant practical obstacle to pool formation. In addition, there
is continued uncertainty about the legal environment in which pools operate, as discussed
in response to Q 5.2.2 below.

Licensor Incentives. Patent pools require compromise between the interests of multiple
rights owners, which may not always align. This is particularly significant for patent
pools in technology areas characterized by large patent portfolios and multiple rights
owners.10 For example:
o Patent owners may disagree about the structure of the pool, such as whether the
pool should be administered by one of the parties, by a dedicated licensing agent
(such as One-Blue), or by a licensing agent that also administers other pools (such
as MPEG-LA).
o Patent owners may disagree about appropriate royalty rates11 and how royalties
should be allocated across the pooled patents and between licensors. In this
context, One-Blue welcomes the Commission’s acknowledgment that licensors of
properly structured patent pools generally are “free to negotiate and fix royalties
for the technology package (subject to any commitment to license on fair,
reasonable and non-discriminatory terms, FRAND) and each technology’s share
of the royalties …”12 Given the sensitivity of licensors to royalty setting and
allocation, this is an important contributor to the successful formation of patent
pools.
o Related to royalty allocation, patent owners may believe that (at least some of)
their SEPs are more important to the standard than SEPs contributed by other
licensors, and want to see that reflected in royalty distribution. Traditional pools
9
Economic research suggests that a patent pool can work if the number of individual licensors outside the
pool is limited to one or two.
10
E.g., in patent pools for second or third technology generations, see den Uijl/Bekkers/de Vries, Managing
Intellectual Property Using Patent Pools – Lessons from Three Generations of Pools in the Optical Disc
Industry, California Management Review 2013, 31 at 36.
11
For example, licensors primarily active in downstream manufacturing may prefer lower licensing costs over
higher potential revenues from the patent pool, while licensors with more limited downstream activities may
seek to maximize licensing income for use in R&D and upstream technology areas.
12
2014 Technology Transfer Guidelines, para. 268.
5 often have allocated royalties based on a patent count rule that attributes the same
value to each licensed patent, which has the benefit of simplicity but encourages
over-reporting of essential patents and inevitably undervalues some patents
relative to others. As a result, significant patent owners have sometimes declined
invitations to join patent pools. One-Blue’s founders recognized this problem and
sought to minimize it by (i) differentiating the value of each patent based on the
nature of its underlying invention and (i) limiting the number of divisionals or
continuations for each parent patent.13
o Patent owners may differ in their willingness to litigate in order to induce
unwilling licensees to take a pool license. In One-Blue’s experience, effective
enforcement is an important element of patent pool strength that many previous
patent pools have lacked.14 One-Blue has addressed this by requiring mandatory
participation in legitimate enforcement action; pool members are required to make
their patents available for infringement litigation15 unless they waive the right to
damages or royalties paid by the unwilling licensee.
Q 5.1.5 Costs of pool creation: What are the costs involved (do you have estimates)? What do
these costs depend on? How are they usually (pre-)financed?
The cost of One-Blue’s formation was borne by its founders, six companies that made the initial
investments in One-Blue LLC.16 Most of the cost of its formation arose from the need to
dedicate investor resources (employees, time, travel expenses, etc.) to the negotiation of the
pool’s foundational agreements over a period of several years, as well as from external legal and
consultant fees. One-Blue estimates that the costs of its formation to the six founders was
between 10 and 15 million Euros. These costs include legal and administrative fees for the
preparation of competition law filings and interaction with regulatory bodies in various
13
For a description of One-Blue’s royalty allocation mechanism, see Ruud Peters, n.4 supra, at 40-41; see also
den Uijl/Bekkers/de Vries, n.10 supra, at 42.
14
See Ruud Peters, n.4 supra, at 39 (“In most patent pools, licensors individually decide whether to engage in
and cooperate with enforcement actions. This creates a serious free rider problem. Companies that do not
participate in an enforcement action obtain almost all of the benefits at no cost; whereas companies that
participate not only bear the costs, but are also disproportionately exposed to retaliatory action from the
companies that were targeted by the enforcement initiative. […] In order to avoid the problem, the OneBlue companies agreed that if One-Blue decides that an enforcement action is warranted, each licensor must
make its patents available for use.”); see also den Uijl/Bekkers/de Vries, n.10 supra, at 42, (“They learned
that a key requirement for these licensees was a true level playing field whereby the pool would ensure that
all participants in the market would take licenses and pay royalties due. To achieve this, One-Blue had to
find a way to protect licensees and licensors from companies that failed to pay royalties, and to be effective
in engaging non-licensees.”)
15
See Ruud Peters, n.4 supra, at 39; see also den Uijl/Bekkers/de Vries, n.10 supra, at 42.
16
In alphabetical order, the six investors are Cyberlink Corporation, Hitachi Consumer Electronics Co. Ltd.,
Koninklijke Philips N.V., Panasonic Corporation, Samsung Electronics Company Ltd., and Sony
Corporation.
6 jurisdictions, which can be another disincentive to pool formation. One-Blue believes that this is
an area where competition regulators interested in successful pool formation should consider
simplified filing requirements, exemptions from filing fees, or other forms of direct or indirect
ways of reducing the financial burden on pools and their founders.
Additional costs to individual licensors resulted from the pool’s requirement that pooled patents
be reviewed by independent experts.17 One-Blue estimates that for the nearly 10,000 patents
included in the pool, the total cost of evaluation amounted to about 40 million USD.18
Topic 2: Incentives for Pool Participation
Q 5.2.1 Decision to participate in pool: What factors influence a patent holder's decision to
participate in a pool or not?
One-Blue believes that patent holders join patent pools for the following reasons:

Lack of resources and expertise to license themselves;

Individual licensing on a bilateral basis to numerous licensees is expensive, burdensome,
and time-consuming;

Patent pools license a multitude of patents which allows licensors to license more
efficiently, stimulate faster standard adoption and generate revenues more quickly;

Patent pools generate a level playing field among manufacturers, which is important to
licensors active in downstream markets for standard-compliant products; and

Patent pools can provide an effective enforcement mechanism for its pool members.
Q 5.2.2 Incentives for pool participation (follow-up to 5.1.1): How can this balance be
influenced positively? What incentives can be provided by public authorities and/or standard
setting organizations to increase patent pool participation?
Public authorities can best provide incentives for patent pool formation by establishing clear legal
frameworks for the formation and administration of patent pools. One-Blue commends the
European Commission for its detailed, economics-based patent pooling guidance published as
part of the recently updated Technology Transfer Guidelines. One-Blue has found this guidance
to be very helpful for its formation and daily operation and believes it generally strikes an
17
In addition to the six founding investors, nine other licensors currently make their relevant patents available
through One-Blue but do not own membership interests in One-Blue, LLC: Dell Global B.V.; Fujitsu
Limited; Hewlett-Packard Company; JVC KENWOOD Corporation; LG Electronics Inc.; Pioneer
Corporation; Sharp Corporation; Taiyo Yuden Company Ltd.; and Yamaha Corporation.
18
The answer to this question is also relevant to Q 3.3.4 of the Commission’s Questionnaire.
7 appropriate balance between competition policy and the practicalities of patent pooling. It is also
useful that the Commission’s guidance is generally consistent with guidance issued by the
Commission’s sister agencies in the United States, especially the Department of Justice.
However, several areas of uncertainty remain. Notably, (i) recent developments of the
competition law of enforcement of standard-essential patents have created significant uncertainty
for patent pools; (ii) certain parts of the Commission’s patent pool guidelines would merit
refinement; and (iii) patent pool guidance in jurisdictions outside the EU and US raises concern
about potential divergence of the competition law of patent pooling. All of these uncertainties,
laid out in more detail below, negatively affect incentives to establish and operate patent pools.
I.
Enforcement of Pooled Standard-Essential Patents
The Commission has recognized that an efficient standardization process requires “that patent
holders contributing to standards get a fair return on their investment and that implementers get
access to the standardized technology.” 19 Patent pools contribute to both goals because they
provide a framework that guarantees implementers efficient access to standard-essential
technology while providing patentees with a regular stream of royalty income. Moreover, the
Commission has emphasized that “[r]ecourse to injunctive relief against unwilling licensees has
to remain available in order to ensure that SEP holders can receive timely FRAND compensation
for their SEPs.”20 This is important in the patent pool context because – as One-Blue’s
experience has shown21 – patent pools that offer enforcement mechanisms against companies that
infringe pooled patents but are unwilling to pay royalties are more attractive to licensors and,
therefore, more likely to operate successfully.
One-Blue welcomes the Commission’s recognition that injunctive relief against unwilling
licensees must remain available, but is concerned that recent developments of the law of Art. 102
TEUV create significant practical problems for patent pools that provide mechanisms for the
enforcement of pooled patents, and for their licensors. Many of these problems are caused by
divergence between the legal rules applicable to patent licensing and patent enforcement: while
joint licensing through patent pools is possible and indeed encouraged in most major
jurisdictions, enforcement of a complete pool of patents is extraordinarily difficult, especially for
pools such as One-Blue whose licensing programs include several thousands of patents. This is
because standing rules in most countries require licensors to bring suit in their individual capacity
and, as a practical matter, typically only a few pooled patents can be enforced in such suits at any
given point in time. As a result, unwilling implementers can refuse to take a pool license and
force licensors into wasteful sequential litigation, by only taking licenses under the patents
19
See Speaking Points by the European Commission Services for ETSI IPR Committee Meeting #20, 17-19
September 2014 in Sophia-Antipolis (ETSI/IPR(14)20_017), p. 2.
20
Id., p. 3.
21
See Ruud Peters, n.4 supra, at 39; see also den Uijl/Bekkers/ de Vries, n.10 supra, at 42.
8 specifically in suit – even though it is clear that their standard-compliant products infringe the
entire pool portfolio.
These effects are exacerbated by legal rules that impose additional obligations to negotiate on
licensors before suit can be brought. Against this background, as further explained below, OneBlue would welcome clarification from the Commission that if a patent pool exists and has
offered licenses to an implementer, which the implementer refused, individual licensors can bring
suit (including for injunctive relief) unless the implementer makes a detailed licensing offer
similar to the Orange Book22 standard under German law. Without this clarification, One-Blue
fears that the Commission’s recent precedent on the application of Art. 102 TEUV on SEP
enforcement could significantly diminish patent pool formation incentives and threaten the
efficiencies generated by patent pools.
Specifically:
1.
The Impact of Motorola and Samsung on Patent Enforcement in the Patent Pool Context
The Commission’s recent Motorola23 and Samsung24 decisions, as well as the Advocate
General’s opinion in Huawei/ZTE,25 suggest that the seeking of an injunction based on standardessential patents can constitute an abuse of a dominant position under EU law if the patent holder
has committed to license its patent(s) on FRAND terms and the implementer is “willing” to
negotiate a license agreement on such terms. However, the precise conditions under which an
implementer is “willing” to accept a license are unclear.
According to the Advocate General,26 prior to bringing an action against an infringer, the patent
holder must (i) alert the alleged infringer of the infringement in writing; (ii) present to the alleged
infringer a written offer on a license on FRAND terms; (iii) consider a promptly presented,
reasonable counter-offer by the alleged infringer; and (iv), if negotiations are not commenced or
unsuccessful, accept that – at the request of the alleged infringer – FRAND terms be fixed either
by a court or by an arbitration tribunal. In brief, the patent holder is required to “negotiate” a
licensing agreement prior to bringing an action against an infringer.
Whatever the merits of this framework in the context of individual patent enforcement, it seems
ill-suited for patent pools. With respect to the first of the Advocate General’s requirements,
implementers that have previously negotiated with a patent pool hardly need “alerts” as to the
alleged infringement because lists of the pooled essential patents are virtually always publicly
22
See German Federal Court of Justice, Decision of May 6, 2009, KZR 39/06 – Orange Book Standard, juris,
paras. 29 et seq.
23
Case AT.39985 – Motorola (Apr. 29, 2014).
24
Case AT.39939 – Samsung (Apr. 29, 2014).
25
Opinion of Advocate General Wathelet in Case C-170/13 – Huawei/ZTE (Nov. 20, 2014).
26
Id., para. 103.
9 available.27 The second requirement is easily met for the pool license because pools normally
provide public access to complete license agreements,28 such that there can be no doubt about
licensing terms. The third requirement, on the other hand, puts pools in a difficult position
because they frequently offer only one standard license to avoid discrimination problems and
lower administrative burden, and individual negotiation jeopardizes both of these goals.
The Advocate General’s requirements also raises significant uncertainty for individual licensors
seeking to bring suit in the context of a patent pool’s enforcement program. For example:

Can the infringer’s unwillingness to license be established by showing that the patent pool
offered a license that included the patent-in-suit, which the infringer refused to accept?
This is an important issue for the viability of enforcement mechanisms in patent pools,
and for pool formation incentives more generally, because discussions between the
infringer and the patent pool administrator about pool licenses can go on for months. If it
is necessary for a plaintiff licensor to start a new, individual license negotiation after an
extended period of pool license negotiations, it could be years before enforcement is
possible in practice. To avoid enforcement delay, licensors effectively would have to
offer specific individual licensing terms in parallel with the pool negotiations – a highly
inefficient outcome that generates precisely the types of transaction costs that pools are
designed to avoid.

What is the necessary scope of any potentially required licensing proposal? Patent pool
licenses typically encompass all relevant essential patents from all participating licensors
on a global basis. Indeed, One-Blue does not offer any other form of license. If the
Motorola, Samsung, and Huawei line of cases does require some form of individual
license offer even after – potentially lengthy – negotiations with the patent pool, the
requisite scope of that proposal is highly uncertain. For example:
o Can the plaintiff licensor establish unwillingness by offering a license under all of
its pooled essential patents on a global basis, or does it have to adjust its proposal
to the purported individual needs of the implementer? And if a tailor-made
proposal is necessary, does the implementer have an obligation to explain how the
pool license fails to satisfy its needs, or can it simply refuse the pool license and
force the plaintiff licensor to take its best guess at what the implementer may want
or need? Needless to say, the answer to these questions has a significant impact
on whether, and for how long, implementers can delay enforcement – an issue that
will be a significant disincentive for licensors to join patent pools.
27
See, e.g., the essential patent lists for BD Players listed on the One-Blue website at http://www.oneblue.com/license-programs/bd-drive. It is routine for patent pool administrators to publish such lists, see
e.g. http://www.mpegla.com/main/programs/AVC/Pages/PatentList.aspx (listing essential patents for
MPEG-LA’s AVC/H.264 program).
28
See, e.g., http://www.one-blue.com/license-programs/bd-drive.
10 o Can one of the pool licensors establish unwillingness for all participating licensors
by showing that the infringer has refused to accept a licensing proposal to one or
more of the licensor’s pooled patents, and refused to make a considered
counteroffer? Or is it acceptable for the infringer to evade royalties and
enforcement for an extended period of time by negotiating for narrow (perhaps
country-specific) licenses with each participating licensor even though it is clear
that its standard-compliant products infringe all licensors’ essential patents?
o Can the infringer avoid enforcement at any given point in time during the
individual negotiations by reverting back to the pool license that it previously
rejected? For example, assume a patent pool with 15 licensors such as One-Blue.
Manufacturer M discusses a pool license for BD players with One-Blue for one
year, but ultimately refuses to accept One-Blue’s licensing conditions. The
licensors then start individual licensing discussions with M. At some point – say
three years after One-Blue first started discussions with M – M realizes that the
stack of the individual royalties exceeds One-Blue’s royalty rate, rejects all
individual offers, but accepts the pool license. Does the Motorola, Samsung, and
Huawei line of cases mean that One-Blue’s licensors would have been at risk of
infringing Art. 102 TEUV if they sought to enjoin M from manufacturing
infringing products somewhere along the way?
One-Blue acknowledges that the enforcement of FRAND-encumbered standard-essential patents
raises difficult legal and policy questions. However, as the above examples demonstrate, a direct
application of available precedent to patent pools raises many practical problems and risks
reinserting inefficiencies into the licensing process that patent pools are designed to avoid. As a
result, licensors are likely to have fewer incentives to consider the formation of, or participation
in, patent pools.
2.
Potential Solution
One-Blue strongly believes that there are differences between individual enforcement of
standard-essential patents outside of the patent pool context, and enforcement when patent pools
are involved. As noted above, one obvious difference is that implementers have already been
presented with a license offer (i.e., the pool license) before enforcement becomes an issue.
Moreover, implementers know precisely which patents they infringe because modern patent
pools – One-Blue included – publish lists of essential patents licensed through them and there is
rarely dispute about whether the offending products implement the relevant standard.29 Finally,
29
The concern expressed by Advocate General Wathelet that the implementer may not be aware that it is
infringing the enforced patent(s) therefore does not exist when there were prior negotiations with a patent
11 enforcement of standard-essential patents after unsuccessful negotiation with a patent pool is
ancillary to an unquestionably pro-competitive purpose – the provision of bundles of licenses that
otherwise would be costly and burdensome to negotiate, and may not be available at all.
All of these benefits must be weighed against concerns about anticompetitive effects of injunctive
relief. In One-Blue’s view, they justify a more lenient framework for the determination of
whether an implementer is “unwilling” to license than may be appropriate outside the patent pool
context.30 One option to mitigate the inefficiencies discussed above is the following: instead of
requiring licensors to add to the pool administrator’s unsuccessful efforts by proposing specific
individual license terms to implementers, the law could shift the burden of making adequate
individual licensing proposals to implementers that have rejected package license proposals from
a properly structured patent pool, similar to the Orange Book31 approach under German law.
Shifting the proposal burden to the implementer seems appropriate because the implementer (i)
has already been presented with a licensing offer; (ii) knows which conduct and which patents are
at issue; and (iii) is best positioned to determine why the pool license does not meet its needs.
Moreover, shifting the proposal burden eliminates the implementer’s ability to engage in the
delay tactics discussed above and decreases transaction costs.
One-Blue hopes that the Commission will keep this proposal in mind, or consider other ways to
allow properly structured patent pools to offer appropriate enforcement mechanisms to
participating licensors, as it further refines the conditions under which infringing manufacturers
may be considered unwilling licensees.
II.
Technology Transfer Guidelines
As noted, One-Blue believes that the patent pool section of the Technology Transfer Guidelines
generally provide a useful framework for the establishment and operation of patent pools
consistent with EU competition law. The resulting legal certainty is an important factor in
enabling pool formation. One-Blue respectfully submits, however, that a few areas would merit
refinement:

Safe harbor. The “safe harbor” concept in para. 261 of the Guidelines is useful, but
many of the safe harbor conditions are vaguely defined. For example, to fall into the safe
harbor, patent pools must adopt “sufficient safeguards” to ensure that only essential
technologies are pooled. However, “sufficient” is not defined and requires consultation of
other, highly complex, sections of the Guidelines. One-Blue encourages the Commission
to increase the precision of the safe harbor in future revisions of the Guidelines.
pool administrator. See Opinion of Advocate General Wathelet in Case C-170/13 – Huawei/ZTE (Nov. 20,
2014), paras. 82, 84.
30
One-Blue takes no position about what principles should apply in cases where the patent(s) in dispute are
not available for license through a patent pool.
31
See German Federal Court of Justice, Decision of May 6, 2009, KZR 39/06 – Orange Book Standard, juris,
paras. 29 et seq.
12 III.

Essential v. Non-Essential Patents. Paragraph 263 of the Guidelines recommends that
formerly essential technologies, which have become non-essential because the standard
was changed or – in the case of so-called “commercially essential” patents – due to the
emergence of new technology, normally should be removed from a pool. The Guidelines
also suggest that the resulting royalty rate should be lower. This seems unnecessarily
restrictive. First, pools need safeguards to ensure that licensees that have sunk costs into
formerly essential, but now superseded, technology are not subject to hold up from the
licensor whose technology is no longer in the pool. This justifies inclusion in the pool
license of formerly essential patents at least for existing licensees. Second, it is far from
clear that removing certain technologies from the pool should automatically lead to lower
royalties. Indeed, given the significant costs savings involved in patent pooling, the
royalty rate post-exclusion of formerly essential patents often will continue to be fair and
reasonable and there will be no need to adjust the total rate.

Enforcement. The Guidelines are silent on patent enforcement in the patent pool context.
One-Blue would welcome a clear statement that joint enforcement mechanisms in
otherwise properly structured pools increase formation incentives and raise no
competition concerns.
Patent Pool Guidance Outside of the EU and US
Jurisdictions outside of the EU and US have increasingly issued guidelines on the interface
between intellectual property and competition law that also include guidance on patent pools.
China and Korea are prominent examples. Although the relevant sections on patent pooling are
still relatively basic, it will be interesting to follow their implementation in practice. Inconsistent
guidance on patent pooling would complicate the formation and operation of patent pools
because it is very difficult for patent pools with global license programs to tailor these programs
to specific countries. One-Blue therefore encourages the Commission to monitor patent pool
guidance of its sister agencies in other parts of the world, and proactively engage in dialogue to
avoid divergent (and potentially more restrictive) patent pooling principles.
Topic 3: Organizational Links
Q 5.3.1 Right moment for pool creation: What is the right moment in the standard setting
process to start the process of creating a patent pool? What part of work on setting up a patent
pool start could/should be done in parallel to the standard setting discussions?
To maximize the adoption of new standards, patent pooling should begin as early as possible. A
licensee should be able to apply for a pool license prior to manufacturing products reading on the
pooled patents. To date, patent pooling mostly commences after the standard has been finalized,
and patent pools typically are established only after standard-compliant products have entered the
market. To ensure that a patent pool is established before products reading on the pooled patents
13 enter the market, patent pooling should be initiated as soon as the standard specification has
become relatively stable.
Q 5.3.2 Role of SSOs: What contribution can standard setting organizations make with regard
to patent pools? Should they provide guidance for patent pools? Should they provide and/or
select patent pool administration services?
Patent pools should be formed independently from SSOs by patent owners and should remain
open for further patent owners to join the patent pool. However, SSOs may support the formation
of patent pools by including incentives for patent owners to establish and participate in patent
pools:32

Mandatory Royalty Rate Arbitration. SSOs may bind owners of standard essential
patents to mandatory arbitration unless they join a patent pool within due course. This can
be achieved by incorporating mandatory arbitration for royalty rates in the standard
setting rules which apply if a patent pool is not formed or is formed with less than a
defined percentage (e.g. 70%) of essential patents held by participants in the standard
setting process. The DVB Forum had included such an incentive in the standard setting
process for Digital Video Broadcasting.33

Transparency and Identification of Licensors. SSOs can enhance transparency and
facilitate the process of identifying potential licensors. This could be achieved by creating
databases in which standard essential patents are stored in two separate files: (i) the first
file containing patents confirmed as standard-essential by an independent evaluator and
(ii) the second file containing patents alleged to be essential by the patent owner but
which have not been evaluated by an independent evaluator. This would be a valuable
source of information for both licensors and licensees: licensors interested in creating
patent pools could easily identify other potential licensors and approach them in order to
initiate the patent pooling process. The database could thus reduce the pool formation
expenses discussed in response to Q 5.1.4 above. Moreover, licensees interested in
commercializing a standard would benefit from such a database in that they could easily
identify (and approach) owners of standard essential patents in order to obtain licenses.
Q 5.3.3 Role of public authorities: What contribution can public authorities make to facilitate
patent pool creation? What role could publicly owned patents play? Are there specific features
of non-EU legal systems that could be useful also in the EU? Under what conditions and to
what purpose would public financial support be beneficial?
32
The answer to this question is also relevant to Q 3.3.4 of the Commission’s Questionnaire.
33
See 2014 Patents and Standards Report, p. 174, (“Specific incentives for SEP owners to create/join pools: if
for a given standard more than 70% of all known SEP owners joined a pool 2 years after the standards’
adoption, then the adopters right of arbitration, as defined by the DVB Forum patent policy is lifted”).
14 See the response to Q 5.2.2 above.
In addition, One-Blue would like to note that one of the difficulties patent owners face is the
limited number of evaluators and the difficulties in seeking out independent evaluators, which
results in the evaluation process being costly and time-consuming. The Commission could
mitigate this by helping to set up a network of independent evaluators in the European Union for
the evaluation of standard-essentiality of European standards and take up a supervisory role
regarding quality and pricing of such evaluations. This would facilitate seeking out independent
evaluators and ensure that the evaluation process is offered at reasonable prices, making it
affordable for both large and small patent owners. Moreover, a network of independent
evaluators would guarantee a consistent quality of evaluations.
C.
Key Issue 6 – Notions of “Fair”, “Reasonable,” and “Non-Discriminatory”
Q 6.1.5 Other methods of ensuring reasonableness of licensing terms and conditions: Can
patent pool prices for a given standard be a proxy for FRAND terms and conditions? What are
the limits of the use of patent pools as a proxy? How can bias coming from such a method be
avoided?
Patent pool royalty rates are poor proxies for the determination of FRAND royalties for
individual patents. Pool royalty rates are substantially discounted relative to individual licensing
to account for lower transaction costs, the fact that participating licensors frequently have
incentives to accept lower royalty rates to increase standard adoption, and to decrease their own
licensing costs and infringement risks as manufacturers. None of these factors typically exists in
individual licensing and, consequently, “a rate higher than a pool rate [can] still be [F]RAND.”34
There are also policy concerns with using pool rates as proxies for individual FRAND rates
because, “[i]f pool rates were held to be the most appropriate [F]RAND royalty rates, SEP
holders with valuable SEPs would hesitate to participate in standard-setting activities” because
they may believe that “they will not receive full and fair value for their patents.”35 In sum, while
pool royalty rates attributable to an individual patent may sometimes indicate a FRAND royalty
floor (i.e., the lowest reasonable rate for the patent at issue), they should not be used to calculate
stand-alone FRAND rates without carefully accounting for the efficiencies of patent pooling and
licensors’ pooling incentives.
Q 6.6.1 Definition in practice: In your opinion, what is the best definition of the nondiscrimination principle? What aspects of non-discrimination do you find important? Is there
sufficient clarity on what non-discrimination means and how it is to be applied in practice?
Does the non-discrimination principle relate to the initial offer of the patent holder or the
34
Microsoft Corp. v. Motorola, Inc., 2013 WL 2111217 at *80 para. 499 (W.D. Wash., April 25, 2013)
(Robart, D.J.).
35
Id. para. 502.
15 actual outcome of negotiations? Does it relate to an offer isolated to a single standard or to
multiple standards? Do you consider that the non-discrimination principle creates obligations
on the (potential) licensee?
As a general matter, One-Blue believes that a commitment not to discriminate only means that
similarly situated licensees must be given materially similar terms, not that all licenses must be
identical.36 In practice, however, it can be extraordinarily difficult to determine whether two sets
of licensees are given materially similar conditions, especially when payment terms and patent
scope are not exactly the same. One-Blue avoids these difficulties by offering only one type of
license for each of the BD products covered by its licensing programs. Each of the BD licenses
includes all relevant essential patents owned by all of the One-Blue licensors, and the royalty rate
is the same for all licensees.
Specifically for the patent pool context, this has two implications: first, patent pools should be
free to refuse “à-la-carte” or “partial-pool” licenses, at least so long as licensors “retain the ability
to license their patents individually and the pool’s design is otherwise pro-competitive.”37
Requiring pools to offer tailor-made licenses to manufacturers which, for one reason or another,
want neither the full pool license nor incur the cost of individual negotiation dramatically
increases the complexity of pool licensing, forces pool administrators and licensors into difficult
analyses of whether the terms of different types of à-la-carte licenses are materially identical (i.e.,
non-discriminatory), and therefore destroys many of the classic pool benefits. Second, to the
extent pools or individual licensors do decide to offer tailor-made licenses, the law should
recognize the complexity of comparing the terms of different sets of licenses and grant
substantial discretion to licensors and licensees in setting appropriate royalty rates. Absent a
clear showing of large differences in royalties between unquestionably comparable portfolios,
discrimination claims generally should fail.
36
See Jorge L. Contreras, Standards Development Patent Policy Manual, American Bar Association
Committee on Technical Standardization Section of Science & Technology Law at 22 (2007)
(“’Nondiscriminatory’ signifies that the licensor must not refuse to license different parties who are
similarly situated on material similar terms . . . . However, given that different Implementers may want
different license scopes or have different consideration to offer in return, ‘nondiscriminatory’ does not mean
that the terms of all licenses offered or granted must be identical.”).
37
U.S. Department of Justice and Federal Trade Commission, Antitrust Enforcement and Intellectual Property
Rights: Promoting Innovation and Competition (2007) at 84 (available at
http://www.ftc.gov/reports/antitrust-enforcement-intellectual-property-rights-promoting-innovationcompetition-report).
16