Enabling business India’s IoT goals

To fully unlock the potential of the Internet of Things in India, a balanced coexistence of patent pools and bilateral negotiations is vital in the IoT ecosystem.

With the Internet of Things (IoT) gaining popularity and getting integrated across sectors, businesses are incorporating cellular standards from 2G to 5G to enhance their products, processes, or services. And the products cut across sectors, including security, transportation, construction, healthcare, and more. The technology also promises massive economic benefits for Indian companies and the country.

India’s IoT market grew to USD 1 billion (around Rs 82 billion) last year and is projected to experience a 14.23% growth between 2023 and 2028. Within this context, standardised cutting-edge technologies are often protected by standard essential patents (SEPs) that are necessary to implement a standard or technical specification. Such SEPs, for example, can enable IoT devices to communicate with each other via the Internet. SEPs are typically available on fair, reasonable, and non-discriminatory (FRAND) terms and conditions, which are determined by the parties in good faith licensing negotiations.

India’s IoT market grew to USD 1 billion (around Rs 82 billion) last year and is projected to experience a 14.23% growth between 2023 and 2028.

Setting royalties based on this economic value is crucial to incentivise the development of technology that can unlock even greater economic value.

NEED FOR A PATENT POOL

The FRAND licensing can be worked out through bilateral negotiations or via an intermediary like the patent pool. A patent pool is an agreement between a pool administrator and two or more patent owners to jointly license their SEPs. While pools are subject to scrutiny under competition law, their positive impacts are widely recognised. For instance, patent pools can reduce transaction costs by offering a single point of access to multiple SEP portfolios. They can also provide more transparency if pricing information is publicly available and increase certainty by verifying the importance of the patents submitted to the pool.

Now here is the catch! Considering that patent owners can collaborate to create a pool and jointly market it, one may wonder whether a single patent pool can be established to cover all SEPs utilised in various sectors entering the IoT. Unfortunately, such an initiative would likely be more detrimental than beneficial for the development of the IoT.

ONE SIZE DOES NOT FIT ALL

A successful pool addresses the specific needs and requirements of an industry. For example, the needs and requirements for smartphones and base stations will be different from those for connected vehicles or industrial automation. One such set of needs and requirements would be cross-licensing considerations.

Smartphone and base station companies tend to contribute their patented R&D much more heavily to cellular standardisation, whereas vehicle and industrial automation companies do not. Appreciating the needs and requirements of different industries takes time to understand and develop, and cannot be addressed all at once in one pool.

While creating a centralised patent pool for all IoTs across sectors may not be feasible, efforts could be made towards promoting patent pools in general.

Secondly, it is important to realise that consumers in different industries derive varying levels of economic value from standardised technology, depending upon factors such as the type of standardised technology, the end product, and the specific use case. Understanding this economic value requires time and collaboration between industries and patent holders or pools of patent holders.

Setting royalties based on this economic value is crucial to incentivise the development of technology that can unlock even greater economic value for consumers. Hence, a patent pool that attempts to establish uniform royalties across all use cases and industries for all standards, without considering the economic value of such standardised technology in those particular contexts, would not align with this significant policy objective.

Thirdly, the industry consensus regarding patent pools has led to successful outcomes in terms of pools that incentivise further innovation and widespread adoption of standardised technology. Consensus-based patent pools attract innovators and implementers, whereas those that overlook the interests of either party are less successful. Building consensus among stakeholders is a crucial aspect, albeit a time-consuming one. Consequently, attempting to establish a single patent pool encompassing all use cases in all industries for all standards would not be viable without a consensus.

While creating a centralised patent pool for all IoTs across sectors may not be feasible or advisable, efforts could be redirected toward promoting patent pools in general. In this way, the market could create different pools according to the needs of the diverse industry sectors.

Patent pools can facilitate the licensing of SEPs, but it is important to acknowledge that bilateral agreements may be more suitable in certain situations. For instance, parties might prefer to cross-license their SEPs, exchange know-how, explore joint ventures, or negotiate non-essential patents through direct agreements. Therefore, both patent pools and bilateral negotiations need to coexist in the IoT ecosystem for India to fully realise its potential.

By Gitanjali Sharma & Dr Sheetal Chopra

Gitanjali is a Disputes Attorney based in New Delhi.

Dr Sheetal is the Director for IPR Policy at Ericsson.

The views expressed in this article are those of the authors and do not reflect the views of current or former employers.

feedbackvnd@cybermedia.co.in