Context: The Internet of Things (IoT) has proven to be a difficult field for standard-essential patent (SEP) licensing. There are various IoT product categories, with connected vehicles arguably constituting an IoT segment as well. Avanci’s IoT pool, which was essentially a pool for smart meters, had some (but limited) traction (April 22, 2024 ip fray article): 45 licensors and 3 licensees. The program existed from 2016 on, but launched only in 2023, which showed how difficult it was for that pool to get off the ground in the first place.
What’s new: The link on Avanci’s website that used to lead to information on Avanci IoT has become dysfunctional. It is now a confirmed fact that the program has been discontinued.
Direct impact:
- This leaves licensors and licensees in the smart-meter space with bilateral licensing as an immediate, but less efficient, alternative. The relatively low per-licensee revenue opportunity in that field means that transaction costs (negotiation and, potentially, litigation) are disproportionate to the value of most transactions in that field.
- Avanci IoT was about LTE-Cat1 smart meters, and was therefore positioned differently from Sisvel’s licensing program for the LTE-M and NB-IoT standards.
Wider ramifications: Avanci has one of the most successful patent licensing programs in history: Avanci Vehicle. And it has expanded into other areas, such as Wi-Fi. As discussed below, the lack of success of Avanci’s smart-meter pool raises questions of collective hold-out, also called group boycott.
A paper (PDF) by industry group IP Europe on hold-out strategies discusses a “Strategy 11: Pursue coordinated hold-out strategies through industry groups” described as follows:
The European Smart Energy Solution Providers [ESMIG] stated in 2020: “Another initiative that started in 2019 was the development of a mutual approach for licensing 3G/4G Standard Essential Patents. Together with associations such as the Fair Standards Alliance, we lobby for the best economic and general solution for our industry and avoid individual settlements with patent holders”. This is an interest group, with membership overlapping that of the Fair Standards Alliance, that advocates for collusive hold-out behaviour.
The FSA, together with ACT – The App Association, was also behind the development of “CWA2” (Core Principles and Practices for Licensing SEPs). This is a set of guidelines developed by implementers that reflects their own commercial interests – and which reads in parts like a codification of hold-out behaviour. CWA2 contradicts European case law on matters such as the extent of information that SEP owners must provide to prospective licensees. It remains to be seen whether courts will interpret companies’ endorsement of documents like CWA2 as an indicator of unwillingness in SEP licensing disputes.
The following timeline is known:
- 2019: ESMIG says it began developing a “mutual approach” for licensing 3G/4G SEPs.
- It says it worked “together with associations such as the Fair Standards Alliance.”
- It says the objective was to “avoid individual settlements with patent holders”.
- The language subsequently disappeared from the ESMIG-hosted version of the report.
- In June 2021, IP Europe reproduced the wording and pointed to the Wayback archive of the original.
- ESMIG’s subsequent June 2021 position paper publicly advocated FRAND licensing of SEPs in the smart-metering sector and argued that SEP holders should not refuse licenses to willing licensees because of their position in the supply chain.
- ESMIG also currently lists “Standard Essential Patents” as a Task Force, so this wasn’t simply an isolated reference in the old annual report.
Concerns have been raised over small and medium-sized enterprises (SMEs), particularly in the IoT segment, becoming the target of rampant SEP enforcement. That was, for example, a fear stated by European Commission (EC) officials in connection with their proposed SEP Regulation. None of that has materialized.
A lesson to be learned from the fate of Avanci IoT, however, is that regulators risk disrupting the SEP licensing process if they allow licensing negotiation groups (LNGs). Here, there was no LNG in a strict sense. But there were signs of collective hold-out preventing license deals.