SEP Licensing in the IoT: Is There a Case for a Duty to License Upstream Implementers?

Abstract

With the advent of the Internet of Things (IoT), network connectivity provides the foundation for a wide array of innovative products and services. From agriculture to energy and utilities, industrial manufacturing, transportation, consumer electronics, retail, healthcare, finance or the public sector, IoT-related products and services will be offered in just about every sector of the economy. Uses for connectivity in the IoT context are extremely varied and differ substantially from traditional voice and data services. Moreover, a growing number of market actors for which network connectivity has played no or only a marginal role in their business models will in future hinge on it. These changes challenge developers and implementers of connectivity technologies alike.
Among the manifold and complex questions that the licensing of SEPs in the IoT context poses, the choice of the level of licensing is surely one of the most disputed ones. The great diverging views among stakeholders and legal scholars have led the Regional Court of Düsseldorf to look for legal guidance by the CJEU. Already in its Huawei judgment, the CJEU reflected on the potential abusive nature of a SEP holder's refusal to license on FRAND terms and confirmed the general applicability of Article 102 TFEU to SEP-based injunctions. Yet, while sharing some basic elements, the circumstances surrounding current SEP-disputes in the IoT context differ from those of the Huawei case. Looking at the innovation-related dimension of standardization was largely neglected by the CJEU in Huawei. In these cases, it may prove to be decisive. The present paper explores whether the functional conditions underlying innovation-related standardization set limits on the SEP holder's freedom to decide to whom he grants a license and analyzes whether Article 102 TFEU could serve as the legal basis for a direct claim to compel a FRAND license.

Keywords: standardization; collaborative innovation; standard essential patents; licensing; Internet of Things; FRAND; value chain; effective access; refusal to license; Article 102 TFEU