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China future of IP: Cooperation is necessary for the IoT

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Internet of things

The global COVID-19 pandemic is affecting the world in various ways. One of the lessons we have learnt from this traumatic period is that while people always tried to find value in cooperation rather than in rivalry, cooperation could be more fragile than expected, especially in a multilateral scenario.

There is no doubt that the process of globalisation is unstoppable in the long run in spite of the current setbacks, but the trend of decoupling has certainly manifested itself. What concerns us is whether this trend is transitory and to what extent it will have impacts on trades closely connected with globalisation, in particular, the global intellectual property community.

Notwithstanding the pessimistic atmosphere, what we feel from a series of recent activities in the industry of the Internet of Things (IoT) in locked-down China provides hope for cooperation.

On March 2 2020, OPPO announced that it will license its cellular patents to the IoT industry through the Avanci licensing platform. According to OPPO, the patents made available to the IoT and automotive markets via the platform include its global standard essential patent (SEP) portfolio in 3G/4G telecommunication technologies.

Being one of the smartphone industry leaders, the Shenzhen-based company has been working on expanding its patent applications globally in various areas of technology for a decade and was recently in the top five in the 2019 rankings of company applicants presented by the World Intellectual Property Organisation (WIPO) with 1,927 Patent Cooperation Treaty (PCT) international applications.

In the announcement, OPPO unsurprisingly highlighted its willingness to make available to the industry the licences to its SEP portfolio based on fair, reasonable and non-discriminatory (FRAND) terms. There might be limitation on the scope of that availability, as OPPO's vague wording didn't made it clear as to whether all component suppliers in the upstream are covered.

Avanci's practice suggests incompatibility with universally accessible licences. All of the current 14 licensees are end-product manufacturers, including automobile industry giants like BMW, Volkswagen, Porsche, and Volvo. Last year, three of Avanci's licensors, Nokia, Sharp, and Conversant sued Daimler in Germany for the infringement of several patents. On the other side, Daimler and its suppliers have lodged antitrust complaints with the European Commission over Nokia's refusal to license component makers.

With its patent pool focused on wireless connection for the IoT, Avanci has recruited 38 SEP holders in the field as licensors, including not only wireless communication equipment/component makers like Ericsson, Nokia, Qualcomm, and ZTE but almost all of the active patent assertion entities (PAEs) involved in the recent worldwide SEP-licensing lawsuits, such as Conversant, InterDigital, Longhorn IP, PanOptis, Sisvel, and Unwired Planet.

Patent pools have proven to be an effective and efficient approach to balancing the interests of the licensors by providing a reasonable return on their R&D investments and those of the licensees in inexpensive royalty costs. The Fair Standards Alliance (FSA) has suggested in a set of recommendations on SEP pools that the success of the IoT hinges on licensing of connectivity and that patent pools can have notable advantages such as potentially reduced transaction costs and more clarity on cumulative licensing rates, provided that the terms are FRAND.

Another recent IoT event was an agreement signed by four Chinese smart home leaders, LEEDARSON, Nanjing Wulian, YunDing, and Lumi United, on January 9 2020 at the Consumer Electronics Show (CES) 2020, solidifying their participation in the Connected Home over IP (CHIP) working group promoted by Amazon, Apple, Google and the Zigbee Alliance. Compared with Avanci, the CHIP working group is distinguished by its mandatory requirement of FRAND zero-royalty terms, which is consistent with the traditional preference for freedom to operate in the information technology sector. With the support and involvement of these members in China, global compatibility with IoT devices fuelled by Zigbee wireless connection technology could be secured.

The Zigbee quartet and OPPO have shown their faith in cooperation in this crisis of globalisation. Hopefully, their faith as well as the collective devotion of all IoT enterprises to interoperability will bring a brighter tomorrow to not only our homes but the whole world.

Guang Hou and Juan Wang

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