Address the patent trolls, but don't ignore the patent evaders

In wireless, standards-based innovation – on things like LTE and WiFi – is incredibly beneficial, leveraging research and development organizations around the world to drive an industry forward at incredible speed. Case-in-point:  The transition in cellphone technology from 2G to 3G saw worldwide cellphone shipments go from 700 million units a year to 1.3 billion units a year… in only two years. As an example of how it can help companies, the launch of 3G, which significantly increased cellular data rates and enabled mobile internet access,  also saw Apple cellphone shipments go from an average of 1.2 million per quarter to more than 5 million per quarter.

Our company began working on 4G LTE in the early 2000s, nearly a decade before the first LTE network was turned on. Back then, the technical challenges and specifications of the new standard were laid out for the first time, and engineers around the world from various companies went back to their whiteboards and started sorting out solutions to those challenges. In 2001, four of our engineers spent a week brainstorming a signaling and data transfer method for a previous generation of wireless technology. It was too advanced for that technology, but it was perfect for LTE – ten years before LTE market adoption. And that is just one example among many from our company and others. 

Those contributing organizations and companies are now working to license the companies that are building LTE devices. Many companies remember the contributions made and sign license agreements without much fanfare. Others, even some who worked alongside us to develop the LTE standard, do not and indeed seem unwilling to take a license under any circumstances. They even go so far as to argue for a fair and efficient process when looking to license their own patents, but seeking a complicated, convoluted and never-ending process when faced with licensing the patents of others.

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That’s not how it should be. When you participate in standards work, you commit to negotiate in good faith and to be prepared to license essential patents on certain terms such as fair, reasonable and non-discriminatory (FRAND) terms. In the cellular space, the FRAND framework has existed for almost twenty years. It’s pretty simple – two parties negotiating in good faith to arrive at reasonable terms for a licensee agreement.  And, as evidenced by the enormous success of the wireless market over the past two decades, most times it works.

However, it takes two to resolve a dispute, and what we’re running up against is a new class of companies that are using Washington’s ongoing patent debate to label any licensing request, however reasonable, from any patent holder as unfair and detrimental to the industry. 

I call them patent evaders. Like tax evaders, they go beyond the appropriate means for avoiding the payment of royalties and instead rely on distortion, manipulation and abusive process. Consequently, they rob innovators of capital that would be used to create American jobs and drive new innovation and new products. Like tax evasion, it’s wrong.

But they get away with it because of a level of tacit or expressed support from some in Washington. The relentless rhetoric has been that patents are bad. The FTC and Department of Justice and others are investigating so-called patent abuse.  And even when the U.S. International Trade Commission after exhaustive review seeks to stop an evader, other U.S. Government agencies suggest that the ITC should be restrained from excluding the evader’s infringing products from the U.S. Indeed, those in the government who are most vocal about so-called patent abuse have yet to even suggest that there may be patent evaders out there at all.  

But there are and their numbers are growing. U.S. and foreign companies alike have swelled the ranks of the patent evaders, stealing American innovation. They fight and prevaricate and buy time, hoping that the United States will ultimately throw away the protections that our patent system so effectively provides.

Efforts to curtail abusive litigation tactics by patent holders are important – no one supports frivolous litigation based on bad patents. But abusive tactics can be employed by patent holders and patent evaders alike. At some point patent evaders need to come under the same microscope that so-called patent trolls have. Until then, the dialogue out of Washington should not embolden them.

Merritt is president and CEO of InterDigital, Inc., a wireless research and development company with offices across the U.S. as well as in Canada and the UK.