Gordon: Good day to you, wherever you may be in the world. My name is Gordon Harris, from Gowling WLG. Welcome to the fourth in our webinar series, 'The Life Cycle of a Smart Idea', in which we take a fresh look at the world of intellectual property by tracing the choices, options and steps which can occur during the lifetime of a smart idea. From the eureka moment to the steady stream of royalties, or the big payoff, and everything in between. Having covered the first choice, to patent or not to patent, the chain has crossed to a look at trade secrets law in detail and in depth look at patenting strategy of a life sciences patents. Today we arrive in the exciting fast moving world of tech innovation. If you missed any of the earlier events and would like to see them on demand you can go to our website, gowlingwlg.com, or goexcel.gowlingwlg.com, it's our new platform and find the recordings there. The world of tech patents has progressed so fast in the last 20 years that those of us involved have hardly had time to draw a breath. Not only has the technology being advancing at a phenomenal pace but the law and practice underpinning the patenting of fast moving tech has also evolved a whole new set of practices and new vocabularies to go with it. We now talk with familiarity about standard essential patents, FRAND licencing terms, hold down, Blockchain with the Internet of Things, as if they'd always been there. In fact, they're new and they've all had an impact on patenting strategy in this area. That is the topic for today's webinar. As usual, we have assembled a multi-talented and multi-national team of experts from around our global offices to guide you through this turbulent and fast moving world. Let me take a moment to introduce them to you. First, Alex Brodie. Alex is based in London. Her practice is focused on working with advanced tactics and strategic goals in the context of multi-national patent infringement and licencing disputes, usually in the standard essential patenting arena. She's Co-Chair of our global firm tech sector team and is responsible for the growth of that sector in our firm in one year. She secured a number of firsts in litigating patents on behalf of her clients, such as the first immediately enforceable injunction in a standard essential patent case, post trial, in the first findings of essentially from the UK courts. Travelling over to Canada now, we have Kevin O'Neill. Kevin works in our Ottawa office where he helps his clients draft and prosecute their patents. He works with a wide range of clients in the tech sector from startups to large telecoms. Kevin's technical experience has helped his clients get patents in difficult areas including AI, cyber security and data privacy. He is a registered patent agent in both Canada and the US. Back across the Atlantic to Germany for Jonathan Konietz. Jonathan is a senior associated based in our Munich office who advises on intellectual property law with a strong focus on patent litigation. His wide range of experience includes patent disputes in various technical fields including telecommunications, mechanics and electrical and medical engineering. Through his work on numerous site profile SEP FRAND cases, he is also developed an in depth expertise in patent related anti-trust law and cross border licencing negotiations. Finally, to China, Jason Yang is a patent attorney in our Beijing office who is responsible for the prosecution of tech patents in China. Jason entered the IP world a decade ago and is now highly experienced in various patent related work with a primary focus on the prosecution drafting in invalidity proceedings in the Chinese system. Jason has worked with clients and attorneys around the world so he understands patent prosecution from a global perspective.
Today I'm going to pose a series of questions to this great panel and through their answers and conversation we aim to give you a deeper understanding of the thinking which now underlies the strategic business of patenting in this area. We start with the premise that there has been a decision that patenting is the way forward. Sometimes in this area the use of trade secrets protection can be preferable or even copyright. We've discussed these in a previous webinar. Today we're assuming that we've moved past that choice and decided to seek patent protection. On that basis I want to start at the beginning, with the first issue in this area, is what I want to protect patentable at all. I'm going to start with Kevin and then get around the world on this one. So much of what is ... in this area is effectively represented by software. So what is the position in your jurisdiction as regards patenting software? What is the potential scope of protection for software patents? What are the key aspects to consider when drafting a software patent application? Why is patenting software maybe better than relying on copyright protection? Kevin, get us started.
Kevin: Sure. Thanks, Gordon. In both Canada and the US software is generally patentable. It can be protected as a method, a system or device, or as a computer readable memory. Regardless of the ultimate scope of protection, software patents will protect the functionality of what is done, compared to copyrights which protects the actual code or how it's done. So software patents can offer a significantly broader protection compared to copyright. Patenting software faces the same requirements as any technology. It must be useful, new, non-obvious or inventive and it must be directed to statutory subject matter. The potential scope of software patents will depend largely on the technology and how crowded the area is. With more prior art in crowded fields the claims will need to be narrower in order to overcome the novelty and obviousness hurdles, which in areas with relatively little relevant prior art, broader protection may be possible. The statutory subject requirement can be a major stumbling block for software related patents. In both Canada and the US abstract ideas, mathematical formulas among other things, are prohibited from patenting. There are particular tests in both Canada and the US for determining if a claim is directed to statutory subject matter. Unfortunately even with these tests the question of whether or not a particular software is patentable is not clear cut and has a lot of gray area. Working with startups over the years I've tried to simplify that question of whether or not their new ideas are patentable. They tend not to be interested in legal definitions or tests. l found a good question is what is the underlying technology you've developed? What is your technical solution to the technical problem you fixed? However, in the US and Canada and invention doesn't need to be a technical solution to a technical problem, I find in practice that this provides a good simple plain language understanding of what might be patentable. Have you developed some new underlying technology? As an example, let's say you've come up with a new piece of software for classifying obstacles as traversable or not, which may be particularly useful in autonomous or self-driving vehicles. If the underlying technology simply receives obstacle information, such as the height of the obstacle, and then determines if the vehicle can drive over it by comparing that height to the vehicle's clearance, this might not meet the statutory subject matter requirements since the underlying technology is basically just a mental process of comparing the height to the vehicle clearance. In contrast, if the underlying technology is a new way of processing an image in order to segment that image, and then quickly identify segments with potential obstacles and then select an optimal algorithm for further classifying each of those obstacle segments, for example a rock or person, this can provide that underlying technology to overcome the statutory subject matter hurdle. Given the subtleties in whether or not software is patentable, I think it's important to work with an agent or draftsperson that has a good understanding of the technical areas you're working in, so that they can understand what it is that distinguishes your technology. Not only will this help in overcoming statutory subject matter concerns, it can also help with ensuring that your patent broadly protects that core nugget of technology, instead of narrowly protecting a specific implementation.
Gordon: Kevin, thanks very much indeed. That was really interesting and a lot of very detailed stuff in there. Thank you. Let's move to Germany now and here from Jonathan. Jonathan, what have you got to say on this?
Jonathan: Thanks, Gordon. So I'll speak a little bit about patentability of software in the EU and in Germany. It is important to know that the program, a computer program as such, is excluded from patent protection. So in order to be patentable the computer program must have a technical character. So this means that the computer program must produce a further technical effect when run on the computer. So to give you an example, a technical character's clearly there if a software, for example, controls a technical process. So think of a software in charge of controlling the anti-lock braking system of a car. To give you a current example, which is actually based on a recent decision by the board of the EPO, the European Patent Office, imagine a software recommending a shooting spot for a photo to be taken. Not that specific program allows you to specify a search for images based on criteria like a building, a mountain, lake, waterfall, forest, etcetera, in a specific arrangement and the software would then search for respective images where you could take a respective photo. So vacation for some people, the really most important thing is to take the perfect selfie back home. The EPO found that this is not a technical test so there was no technical effect here. So I really think that the question that Kevin mentioned as a test question, whether the invention is a technical solution to a technical problem, makes absolute sense from the EU perspective as well. It is actually much in line with a test question or legal standard that the German Federal Court of Justice uses in order to assess whether an invention owns the rights to a computer program such. So if the Federal Court of Justice asks in this regard is, whether the invention contains instructions which serve to solve a specific technical problem by technical means. So that's very close to the question that Kevin just raised. When it comes to drafting software patents it is really crucial to get to the bottom of what is the specific technical effect and actually just write it down in the application. This brings me to the last part of your question, Gordon, why patent software is better than relying on copyright protection. As Kevin already explained, and it applies to the EU as well, copyright can protect software code while a patent can give you a conception of protection, which means that by using multiple programming codes it can be infringed.
Gordon: Thanks very much, Jonathan. Right, Alex. Obviously Jonathan's covered much of what's said about the EU there but over to you anyway.
Alex: Thanks, Gordon and Jonathan. The UK approach to patentability takes it keys from the EPC and so all that Jonathan has just said applies equally in the UK. There may be nuances of application but the theories and principals are the same. Other key jurisdictions will ... patents, in particular, also take the cue from UK laws. So these concepts feed through. A good example of that is Indian patent law. You asked, Gordon, why patenting software is better than relying on copyright and a couple of points on that. It extends the essential field, which you mentioned earlier in your introduction, or frankly patents are all that count. You've got to prove essentiality against the standard and that positions you and ... licencing revenue. So the question of patents versus copyright in that field really just doesn't arise. But more broadly, as we all know, it's really difficult to prove ownership and substance of copyright. It does protect the code and so you have your first issue with your development team. Are they baking an open source? Are they borrowing code from elsewhere? Are they importing code that they've already produced for somebody else? It's going to give you real issues with that. Secondly, even if you can prove substance of ownership you then have to prove infringement because there's no infringement without copying. So if you want to protect your invention, your inventive concept, there really is only one answer, in my view, and that is your patent.
Gordon: Thanks very much, Alex. That's very clear. Right. It is 9:00 in the evening, or just going on, in China, so thank you very much, Jason, for joining us. Let's hear what you have to say.
Jason: Chinese patent office used to be very strict on software patents and software was usually only allowed as a method or a virtual ... function. About two years ago the patent law office changed the rules so that software can be protected in the form of medium as well. This was actually a big step forward, in my opinion, because medium is a storage of a real product, such as mobile phone or a laptop or a real device that it can touch. Meaning that it's easier for enforcement to compare if it's a method or a virtual means for which you might find hard to obtain evidence. Kevin and Jonathan have mentioned that a technical problem and technical solution are very important for determining whether the software is suitable to filing a patent. I totally agree because the same criteria also applied in China. As a patent attorney, not saying software that you mentioned is definitely patentable or not patentable, because it probably depends on how you drafted it. For example, finance related software can been seen as a technical solution if the process relate, for example, into speed up the transaction. If it appears less, if it just deal with your money, then it's very probable that the patent office will refuse it because it's not patentable subject matter. But the good news, from my experience, the Chinese patent office is currently not inclined to reject a patent application purely because there's no patentable subject matter. Instead, examiners will still rely on prior search to challenge the novelty or inventiveness for a software patent. So, at the end of the day, the two most important things you will need to bear in mind are, first, whether the software is a technical solution that solves a technical problem. Then, two, whether the software is new. Then speaking of Hongkong, it doesn't really carry out a substantive examination themselves. Instead, it relies on three other patent office for examination. That is EPO, IPO of UK and the Patent Office of China. Then to register a patent in the Hongkong one is to have a patent granted by either of the three patent office. Therefore, you don't really need to worry about software issues that would be raised in the other jurisdictions. Lastly, although I'm not a Japanese patent attorney, it's just something I was curious about the general practice in Japan. Japan, in general, has a very open attitude towards software patents as long as the submissions are performed by a machine, or hardware. Lucky, this requirement's usually met by software because software is designed to be used by physical device, anyway, and under this standard of business method coded into software you'd not have a problem in Japan.
Gordon: Thanks very much, Jason. That's very interesting the liberality of the Japanese system there. Thanks very much, panel. We now have a better idea of what we can achieve with our patenting process. Let's take a first look at one of the big issues in this area. Especially, but not exclusively, as regards patents involving connectivity and telecoms and that is the question of patent cooling and the standards bodies. I'm going to start with Alex on this one and then go around the panel. It's common for there to be a proliferation of patents protecting inventions in the tech space. Why is this? And what is the impact of that on a strategy for pooling patents with the standards bodies, or not? Is a mixed portfolio a pooled and unpooled patents preferable? Now, Alex has spent much of the last 15 years swimming in patent pools so who better to take a broad strategic view of the whole issue to get us started. Alex, over to you.
Alex: Thanks, Gordon. Well, I mean, to answer your first question there a number of patents simple because telecommunications is invention rich. If you stop and think about this, just in your own eyes, the pace of change is just phenomenal. It took between 2G launching and 4G launching over all of our phones and devices, it was just 17 years. That's less than the life cycle of a single patent. Think about to when you had a 2G phone, it was just text. No pictures, no music, no video, no online gaming, no Netflix, no ordering pizzas to the middle of a social distance gathering in your local park. Nothing. You couldn't get on an app and order a taxi in London, Delhi, New York, Boston. When you stop and think about the level of innovation in just that one area, that's the answer to your question, Gordon, as to why there are so many patents it's because there's so many inventions. You now seeing people working on the filings in 5G, on AI and clients are now working on projects, we're calling it 'fixed G' for anything better to call it at the moment, but it won't be that. But coming back to the only standardized industry, the difficulty is you need to be innovating ahead of the standard, obviously, otherwise the standards will invalidate you. You want your innovations to form part of the standard and not be rendered obsolete to a lack of adoption. But consequently you need to be innovating across a really broad range of avenues, options and possibilities and then patenting each of those innovations that you've come up with. I think that is really the answer as to why there are so many. Your other question was fixing on pools and self-licencing. Frankly, I think that's just a pragmatism point, really. Your most likely to self-licence if you can manage the size of your portfolio if you're across the sector in it's norms, you feel very confident in innovating within that sector. But if your patents are suddenly starting to cover a whole new use case, for example of communications patents in autonomous and self-driving vehicles, then you may find that you wish to put those patents or the use of those patents, into a pool to licence because they're not across that sector. You don't have standards norms. You don't have the relationships and maybe you're licencing things already stretched to the limits in dealing with what it's already dealing with. I think pool or not, pool is largely a pragmatic decision.
Gordon: Thanks very much, Alex. As we hoped for, a good overview to get us started. So, Kevin, let's move over to you and to look at the position in Canada and the US.
Kevin: Alex mentioned the pace of advancement in tech is rise to the large number of patents. I think tied to that, and this is particular to the US, is the use of continuation applications. A continuation application is very similar to what the name implies. It's another application typically filed after allowance of the parent that continues on with a new set of claims. There are various uses for them, for example, startups will often want to get patents issued quickly for investment and marketing purposes. Continuations allow that startup to accept narrower claims quickly in order to increase the number of issued patents while still pursuing a broader scope of protection in the continuation application. The continuations can also be filed to keep a pending application alive. While the claims have been issued patent are more or less set in stone but claims of continuation application can be tailored based on changing circumstances. Such as a competitors changing product or possibly a change in the focus of your business. For standard essential patents, continuations can be particularly useful since the standard may not be completed when your initial patent is allowed. By maintaining the pending application you can amend your claims within the bounds of your description to be more closely aligned with the final standard. Which may make the difference between having a standard essential patent or not. When it comes to deciding whether to have a patent declared as essential to the standard it will depend on a number of factors including, whether or not we're considering an issued patent with those set in stone claims that can be analyzed to determine if they are in fact essential to the standard, or are we talking about an application with claims that may yet be amended during prosecution so that they no longer cover the standard. Further, is the company part of the standard setting organization such as they're under an obligation to declare their patents and applications that may cover the standard. Any portfolio is necessarily going to be constrained to what has actually been invented but I think in an ideal world, at least from the patentees point of view, a portfolio would include both standard essential patents as well as patents that cover practical or nice to have features that are not part of the particular standard. However, if all you've invented is technology that is not essential as standard, then of course that is the portfolio you will have. In addition to standard essential patents, which can be basically a pool of patents that are required to implement the standard, it's possible to have patent pools that are not for a particular standard. Whether or not to include your patent in such a pool space similar considerations as standard essential patents, a pool may provide a relatively easy royalty stream and someone else is administrating the licencing, however, that royalty may be smaller than you could achieve if you were willing to negotiate each individual licence. As with so many decisions in patenting, the right decision will be dependent upon the particular facts facing the business.
Gordon: Thanks very much, Kevin. That sounds as though what you're saying is similar to Alex, that bandwidth may play quite a big part in this decision.
Gordon: Yeah. Jason, let's hear about the position in China.
Jason: Thanks. In China I experience that the wording and expression of a standard essential patent can be important. For example, when you draft a patent that might be official, the technology usually not mature at the time. You don't even know what terms or expressions will be used in the standard as a result. The difference between the claim language, standard language, can cause problems during negotiations and litigations. In addition to the continuation approach mentioned by Kevin, in China the applicant can postpone the examination by 1 to 3 years. So there's enough time to change the expression before it's granted. The claims will look more closer to the standards. On the other hand, however, a potential licencee shall also be aware that an SEP might have been test drastically during the prosecution in order to meet the standard. I would say some accountant is likely not supported by the initial disclosure. This is something you'll need to pay attention to in China, and in Europe, because numeric can be crucial in this places. Therefore, if you a potential licencee and try to challenge the SEP, my suggestion is to always to because the prosecution history to see if there's a shift or expression. Chinese company, on the other hand, have divided views on pools and standards. Big names such as Huawei and ZTE are on top as we know it, in terms of the number of SEPs, but most domestic companies are more defensive than offensive. A typical Chinese company tends to spontaneously team up with other players on the market to sell up that patent truce but they're usually not aggressive issuing orders.
Gordon: Thanks very much indeed, Jason. That's a really interesting perspective from China. But of course going forward, the UK will not be part of the European Union and some of this stuff does relate to EU anti-trust laws. Let's hear from Jonathan, in Munich, on what is happening in the EU.
Jonathan: Thanks, Gordon. So I think Kevin, Alex and Jason have already covered the most important aspects. But I would like to add one brief additional point relating to anti-trust law, as you already mentioned. When a portfolio consists of SEPS and non-SEPs you should be aware of the issue of potential unlawful bundling which can appear in particular in SEP litigation. As you know, and we'll talk about this in a bit more detail in a minute, if an SEP is asserted the SEP owner is usually required to offer a licence to the asserted SEP in order to be granted a client injunctive relief. In this case the question obviously appears how the portfolio should be structured. So should it only include the SEP in suit? Should it include all SEPs? Should it include all SEPs and non-SEPs of the patent owner? When considering this question it's important to remember that from an anti-trust law perspective there can be an issue should the court get the impression that the pressure by asserting the SEP is used to also licence other patents. In particular, when it comes when the other patents cover other technologies that might not necessarily be infringed by the patent user. The case law is still influx in this respect and very different opinions in different jurisdictions. But as a general tip when it comes to structuring the portfolio it should really always make sense from commercial perspective for both sides. It should be in line within industry practice and, in particular in litigation, it should be counterchecked by a legal expert from the relevant jurisdiction in order to avoid these issues.
Gordon: Thanks very much indeed, Jonathan. So, as we have heard the big implication of getting patents accepted as being essential and added to a pool is the issue of agreeing licence terms, which are fair, reasonable and non-discriminatory, FRAND, the expression we come to use. This issue is giving lives to complex litigation all around the world, with different jurisdictions taking a different approach to the scope of what they think they can order, in terms of FRAND licenced terms. We're still awaiting the definitive answer in the UK from the Supreme Court and unwired planet in Huawei, but so far the UK has taken an expansive view. We'll hear more of that from Alex shortly. But first of all let's have a look around the world to see how other countries are dealing with this. We're going to start in China with Jason. So what is the position in China in terms of the courts rulings on FRAND terms? Are they prepared to look outside China and make a broader order or are they tying their decisions to the Chinese market alone?
Jason: Yes, Gordon. It's relatively new. In the year of 2018 Guangdong High Court issued the working guidelines on the trial of SEP disputes. Interestingly this guideline has incorporated rules established in a number of SEP related cases, world wide, including such as Huawei versus ZTE in Europe and America, Thailand versus Huawei, as you know it in the UK, Motorola versus Microsoft in the US as well some other cases. According to the guidelines they requested to decide whether to grant injunction to a SEP holder. Of course ... who is at fault during licencing negotiations. ... the SEP implementers is at fault. The injunction might be granted. The guidelines also list some examples that may be deemed as violating FRAND for the SEP holder or implementers. You may find the guidelines from the internet and it's very detailed so you can have an idea as to whether a particular contact is at fault. More importantly, the guideline has defined some examples to decide a FRAND right including most comparable licences and market value analysis. In terms of market value analysis a top down approach is required to be applied. The US court rules in TCL versus Ericsson, the guideline also supports that application of a top down approach by referring to the claim of accumulative royalty rights as declared by the industry players. The guidelines explain that it only applies to SEP cases in the telecom industry but, at the same time, mention that they can be used by referencing in other fields as well. Therefore it's possible that the guidelines can be valuable beyond telecom center itself. The current status of the guidelines, as I know it, due to the reason of reorganization of the IP courts in China, such that all IP appeals no longer go through the Guangdong court but the guidelines remain as an instructive document regarding how the Chinese courts are likely to approach this kind of disputes. It's awfully interesting that also China's courts are relatively independently making decisions. It can be seen that they are willing to give our guidelines for interpretations by heeding important cases around the world.
Gordon: Thanks very much indeed. That is genuinely interesting, isn't it? That the Chinese courts will look outside China, in the same way that maybe the UK and American courts have looked at each other, or UK and Germany Courts. It's interesting that the Chinese are doing that now. Talking of Germany, Jonathan.
Jonathan: Thank you. In Germany we've already had a lot of FRAND decisions and the prevailing view is that FRAND is actually a legal defense against a claim for injunctive relief and that legally FRAND is based on anti-trust law, namely an alleged abuse of a market dominant position. The reason for this is that the relevant European landmark decision while it was a SEP actually deals with the interpretation of the European anti-trust law provision. Namely, with a question of whether bringing an action for infringement based on an SEP seeking a claim for injunctive relief is an abuse of the market dominant position. It is worth noting though that in the Huawei case dominance was already found so that was undisputed in the national decision and the court didn't have to deal with this question. So whether the right approach to dominance was taken is up to the national litigation basically. Now it's the background of the possible abuse. By enforcing a standard essential patent it is possible to actually exclude the patent user from a relevant market because it is not possible to distribute standard defined products without using all truly standard potential patents. So therefore an SEP may cover a market dominant position and consequently it might be an abuse of a market dominant position to enforce a standard essential patent. Following this interpretation, German courts in most of the FRAND cases, as a very first step assessed whether the SEP covers a market dominant position. Interestingly, this is not automatically the case for each SEP. For example, if the SEP only covers an optional feature that can be switched up easily without affecting the marketability of the product then they might not be a market dominant position. In this case in Germany it can be possible for the SEP owner to get a quick injunction based on that SEP without going through the FRAND process. If there is a market dominant position then the court will assess whether there is an abuse of that position. In general one has to say that, during the last couple of years in most of the decisions we've seen, German courts have interpreted to apply the Huawei SEP decision in a rather patent user friendly way. I've personally been involved in a lot of FRAND litigation on both sides and in most of the cases it has really been a uphill battle for the SEP owner. Which depending, of course whether you're the plaintiff or defendant can be of course a good or bad thing, but at the end of the day, I really think that the industry is always best served with a balanced approach. Recently we've seen significant changes towards a more SEP owner friendly approach, notably the German Federal Court of Justice has recently rendered its very first FRAND decision in the case of Sisvel versus Haier and, from what we know so far, the court has significantly raised the bar for implementers to press the willingness to take a licence. Unfortunately the written judgment is not available yet but it will probably be within the next couple of days. I'll check right after the webinar and, of course, once it is published we'll make sure to publish an English summary on our website.
Gordon: Thanks very much indeed, Jonathan. Right. Kevin, let's hear about the position in Canada and the USA.
Kevin: In Canada there really haven't been any court decisions surrounding FRAND licencing terms. In the US there has been a number of decisions and guidelines that provide similar to what Jonathan noted as somewhat more friendly environment for SEP owners. The US CPO stated in her recent policy statement that standard essential patents should be treated the same as any other patents, and that when licencing negotiations fail, appropriate remedies should be available to the owners even for standard essential patent. What other remedies available? They include monetary awards from the courts or juries that can be rather substantial. As Jason mentioned these can be based on a top down approach that attempts to determine the size of the market and the contribution the patent makes to that market. Or bottom up approach that looks at licences for comparable technologies. These approaches aren't mutually exclusive and both factors can and are considered. Other remedies can include injunctions preventing the sale of the infringing product or possibly an IPC ruling barring the importation of product in the US. If the licencing negotiations fail litigation may be the only option remaining. At that point I think it's worthwhile to step back and consider the litigation, not just from a US or single jurisdictions perspective but from a global point of view on how best to achieve your litigation goals.
Gordon: Thanks very much indeed, Kevin. Now if there's one jurisdiction where we know the courts are not shy of grasping this particular nettle, and dealing with it, that is the UK. So let's hear from Alex about how things have evolved there.
Alex: Thanks, Gordon. When you're trying to decide where to litigate FRAND I think we need to just step back a bit and think, what is FRAND normally? What I suggest is an arms length negotiations. It's clear that most licensors and licencees can actually strike a deal and, almost exclusively, to strike a worldwide licence. They don't licence territory by territory for obvious pragmatic and cost effective reasons. They also tend to insist on confidentiality in those negotiations. Nobody makes their negotiations and resulting licence public unless they absolutely have to. Given that the norm is worldwide and confidential it seems to me that actually international arbitration is your obvious best answer to providing a neutral determination by a third party which is most akin to normal business practice. As litigators here at Gowling we're very fortunate to be able to work with our in house arbitration team and we've been able to bring home some really successful deals for our clients based in this sector and other ones. I genuinely believe it is the best answer. But, as we all know, you can't force someone to arbitrate if they don't want to, and nor will a court force them to. If we're litigating we've got to work to line our litigation strategy with our client's commercial goals. To do that you need to work as one team, internationally, to achieve a ... game plan. At present, the only court in the world which will determine FRAND on a worldwide basis, absent consent from both parties, is the UK. That arises from the Unwired Planet decision at a high court which was affirmed by the Court of Appeal. That case has gone appeal to the Supreme Court in the UK. It was heard in October '19 and we're awaiting the decision, literally, any moment. The reason why the UK's done this, as opposed to other courts such as those in the US or France or Germany or China, is just a basic jurisprudential point which is that we're a common law jurisdiction. Therefore our judges have the discretion to craft injunctive relief to provide for actual outcome in their view. So accordingly the injunction you'd normally get, for patent infringement which is throw you off the market, is varied because of their FRAND commitment, to say to the defendant, "Hey. You've infringed the essential valid patent. You're coming off market unless you would like to take FRAND licence. Given that you can't decide what that is, I the court, will decide for you. So what is your choice?" I think it's really important to remember that this is the defendant's choice. If you want to label FRAND licence in a context where you don't think the defendant will elect the injunction, the UK's currently the only jurisdiction to go to. But you'll probably want to consider other jurisdictions as well in your strategy in order to better protect yourself from a foreign rate. For example, where do you want to be in the US? Which district court? Would an ITC proceedings help you? Can you create additional pressure by way of an infringement finding in Germany? If you're a defendant, what about a rate setting case in China? What about a series of invalidity attacks in the key economic market such as China? Do consider other jurisdictions. We've seen a lot of interest in India recently here because of their freedom injunctions converting to a proven rate security payment of sizeable amounts. We've seen recent cases actually brought by Nokia, Ericsson and Philips and with some degree of success in driving a licence betrayal. The pools also are in active litigation and I think it's notable that Sisvel and ... Advance are both in current litigation before the UK courts.
Gordon: Thanks very much, Alex. That makes that very clear indeed but just how the strong the UK position is in this area at the moment. So thank you very much, panel, for that. Now of course these days everything is a computer. Your car is connected to your doorbell which is connected to your fridge which is you connected to your supermarket order. The Internet of Things is slowly but surely encroaching on every aspect of life. Add to that, financial transactions via Blockchain and wearable minute by minute diagnostic information through watches and arm bands, and the computerization of our lives is, well, it's almost complete. So what are the implications of all of this for patenting strategy and practice? Before I just ask that question, on the subject of questions, can I just say to the audience today that there is a Q&A button at the bottom of the screen. If you want to raise a question with the panel please do feel free to type it on there, and we'll try to find time to get to some of them at the end, if we can. The question arising in relation to the Internet of Things. Let's start with Jonathan and then go around the panel. Can you take us through the Internet of Things and Industry 4.0 and explain the implications for global patenting strategy? How much the motor industry adapt to the connectivity of cars, for example. Jonathan, over to you.
Jonathan: Sure. The Internet of Things, as you already mentioned, refers to the really billions of every day devices that are connected with the internet and are able to collect and share data. Just think of your Smartphone or your tablet, that is able to interact with more and more devices at home, like your TV and maybe even your oven or your fridge. You've surely heard about the term 'smart home' in this respect. If you're at work and you can't remember if you still have any fresh milk left in your fridge, just take a look, using your Smartphone that is connected with the foodcam inside your fridge. So this is easily possible, already today, and more and more devices will join the Internet of Things and the applications will become more and more complex. Now Industry 4.0 refers to the fourth industrial revolution where traditional manufacturing and industry practices use the latest smart technologies including proof, connectivity, computations, self-monitoring machines, etcetera. In this development obviously standardization becomes even more important because now your fridge and your Smartphone might be using the same ... or mobile technology because they need to be able to communicate. All of this changes the patent landscape drastically. Digital computation and computer technology have become the new leading fields in patent applications. But it also changes litigation practice which today involves more and more industry. We've seen the Smartphone patent wars in the last 10 years and we've recently seen the start of the automotive patent wars as well. In the future we will surely see other industries moving into the focus of SEP owners replaced by royalties. Let me get to the last part of your question, Gordon, how should the motor industry adapt to the connectivity of cars? We could truly talk about this the whole webinar but at the moment I think it's important to understand, and just accept that, there's still a lot of open questions that need to be resolved. For example, what is the right licence space in order to calculate an appropriate royalty payment for the use of, for example, 3G technology in a car? Should it be calculated based on the percentage of the sales price of the car? A fixed price based on the 3G chipset? Is there a prior obligation made to try to licence a supplier before the car manufacturer and may be held liable for patent infringement? There's a lot of sensitivity regarding these issues in German at the moment. You might have heard that very recently, a couple of days ago, the German Federal Corporate Office has actually intervened in one of the big cases going on in Germany at the moment. Raising concerns in particular regarding the question of who in a supply chain should be the right one to take a FRAND licence for the respective technology. There's really a lot going on in this field at the moment and although the patenting is always monitoring these developments very carefully, not only Germany but everywhere else in the world, to just be ready to come up with the best strategy for our clients at any given time.
Gordon: Thanks very much indeed, Jonathan. That's a very comprehensive answer and very good. Thank you for that. Right. Kevin, can you give us a sort of patent attorney's idea of this? The opportunities that also may be the threats and concerns of the pace of innovation.
Kevin: From someone who drafts and prosecutes patents the high pace of innovation is great. It means there's lots of innovations to patent. However, broadly speaking, this can mean that the value of an individual patent has decreased. When in the past, or in other technology areas, a single patent could cover an entire product, today's high tech products may be covered by thousands if not more of an individual patents. So the value of these individual patents can be diluted. A particular challenge for drafting patents, given the rapid pace of development, is providing patents that are relevant, not only to today's technology but that will remain relevant in the future. I think I touched on it previously but focusing your application on that core nugget of your invention, or the underlying technology you've developed, will hopefully provide a clean scope that will apply, not only today's specific embodiment but also to different applications in the future. Another challenge companies will face is dealing with third party patents. While patent pools can help provide a space an implementer or developer may be free to innovate within there is no guarantee that there aren't other patents in that area. Given the large number of patents it can be difficult to completely avoid patent infringement in the high tech space when developing a new product. One of the suggestions I give to clients is don't bring possible future problems up sooner in your timeline unnecessarily. Patent infringement may eventually be an issue but don't it stop you from developing today. Of course this isn't to say turn a blind eye. You don't want to redevelop the wheel but you can develop your own technology in patents today that can be used in cross-licencing in mitigating possible patent disputes in the future.
Gordon: Thank you very much indeed, Kevin. Alex, let's hear from you on this area.
Alex: Thank you. The new technology, I don't think, is really the issue. The bigger issue for us, whether acting as patentee or implementer, I think is the explosion of use cases. The idea as a patentee effectively maximize the value of your asset base. How do you approach the nuance of a new industry? How do you price and evaluate your patents in that new industry? As an implementer how do you assess the patent portfolios that may affect your new route to market? Especially when it may be coming from sectors that you haven't anticipated. You don't keep an eye on. How do you price and evaluate your new product and service, effectively, to take into account any royalty burden you're about to encounter. How do you patent effectively to protect your invention across this multiple situation of use cases? How can you draft a claim set that will work in all eventualities? I think it's not necessarily the new technology that's the issue. It's the new use cases that's the issue. Jonathan, quite rightly, outlined a number of them as you did yourself. Frankly, a little worried about foodcams. I think my consumption of chocolate in my fridge is entirely my own business. I do not want that on the Internet of Things. There we go. Then there is AI which is the focus of one our forthcoming seminars run by our AI team, led by Matt Hervey and ... You can patent it and what will it do to your patents if you've used it as the inventor? Is it all data and how do you protect data in any event? I know I'm answering your question but is it littering more questions in front of a panel and our audience? We do need to stop and think about this one. It's going to be hard.
Gordon: I'm sure Jason's delighted to be going next with all those questions hanging in the air. So, Jason, give us another patent attorney's view with specific reference to some drafting suggestions, maybe, to cope with the global perspective and different patent office views. Some of these new technologies.
Jason: Yeah, as a drafter the hardest part of drafting patents for filings globally is that the different patent office will treat things differently. Some patent offices have more willingness to see patent applications in these newer fields while others may be more conservative. For example, artificial intelligence has been a hot topic in recent years, in China, and the Chinese Patent Office generally place less obstacles when it comes to abstract ideas. Even if the submission mainly relates to algorithm improvements only, however, it doesn't mean the applicant would be treated at the same way in another jurisdiction. Similarly it is only okay to treat mathematical equations in claims in some jurisdictions, for example, an examiner in the US can probably reject application entirely simply because it would be seen as a mathematical method. For these newer technologies a lot of details about algorithms, software and the modeling that's often inevitable. So it's very important for us patent attorneys to generalize the concept in the right way and draft a claim suitable for most patent offices. So far patent attorneys are experienced in drafting patents for most patent offices, so you have more than welcome to come to us and show us how your technology can be protected.
Gordon: Thanks very much indeed, Jason. That's a good point to finish on. Thank you very much indeed to the panel to where we've got to so far. There we see how the tech and engineering sectors are moving ever closer along with the finance and health sectors. Everything is tech these days. I always like to close these events now by giving the panel a chance to make one key point that is relevant to their own jurisdiction. A kind of take away message for those who are looking at truly global coverage for their tech patent portfolios. So, let's do that. Let's run around the panel here and give them a chance to make one key point from their own jurisdiction. Let's start in Canada with Kevin.
Kevin: In Canada and the US, and listening to my colleagues today with around the world more broadly, I think with careful consideration and drafting at the outset, it's possible to protect software. Whether it's AI, Blockchain or any other buzzword. Unless you're buying them. Your patents are going to be dictated by what you develop. If you're developing new products or technology have some process in place for evaluating whether those new ideas are actually worth patenting. Not all of the ideas are going to be worthy of a patent application and not all the applications will become patents and not all of those patents will be monetized. So you want to ensure your funnel opening is large enough to consider all possible ideas, good and bad. You want to ensure that you capture the good idea that ends up being the money making patent.
Gordon: Thanks very much, Kevin. Alex, what's the UK's key point?
Alex: UK's creative with its relief. It will take a pragmatic and commercial approach to justice and is flexible. I think we're also blessed with a treaty expert and neutral set of patent judges. So the venue works well whether your claimant or defendant. In a way this is a bit misleading, Gordon, because the best strategy is multi-faceted and we're well placed to field a team of great ... in complex multi-national patent litigation. Frankly, that's what you need in this area.
Gordon: Thanks very much, Alex. I think it certainly is true to say that when you're sitting down with a potential patent in this area, thinking internationally is absolutely key, it's crucial to the strategy. Onward subjects, let go to Germany and hear from Jonathan.
Jonathan: In Germany I think the point to remember is that they have a lot of highly interesting and important developments with respect to FRAND lately. Including the first judgment by the highest court which might harmonize the interpretation of the Huawei/ZTE decision, in Germany, at least to some extent. So if you're involved in SEP litigation in Germany, or are considering Germany as a foreign, keep that in mind. Make sure to stay in the loop. I'm happy to help with that.
Gordon: Thanks very much indeed, Jonathan. So, let us let Jason have the last word on this one from China. Jason, what is your takeaway point from China?
Jason: In China, almost all high tech patent application can be patented if they're drafted correctly, and in general the patent office welcomes newer technologies. However, it's a market very different from Europe or North America, so the final strategy and patent portfolio in China needs to be examined differently as well. In addition, this is a unique point. Unlike most other countries China's patents needs to be maintained annually. This means the fees will increase with time and it can be substantial for the last few years. Therefore, I would suggest that you should evaluate your patent portfolio in China frequently to see what are some of the patents should be keep.
Gordon: Thanks very much indeed and I think, to be honest, that's good advice wherever you are in the world but thank you very much, Jason, for that. Now then, we actually do have a bit of time to consider some of the questions. So if you'll bear with me a moment I'm going to peer downwards at my screen and see what we've got from our audience. Okay. Somebody's asking here, you've talked about the issue of statutory subject matter with regard to software patents, are there any other concerns you see in drafting these types of patents? Kevin.
Kevin: Sure. I think one of the issues with drafting software related patents, in addition to what we discussed today, is with regard to getting the right level of detail to ensure that there's the support you need. You want to make sure that you're not so broad that you're just giving an abstract description of what you've done and you don't want so much detail that you're providing your actual code base. I think what you do want is multiple different levels of sort of abstraction down to a detail level that's possibly, again going back to that core nugget of your technology, if it's appropriate that you have some pseudo code description or something along those lines to provide that really detailed support. I think that's one of the bigger issues for drafting software patents.
Gordon: Thanks very much indeed. A very interesting question from the audience. We discussed a number of patents in the mobile phone space. Does this make it almost impossible to economically review them? So how does one deal with the cost of reviewing a standard essential patent or other portfolios of, say, 200 patents? That's crying out for Alex.
Alex: It's really hard. If you were going to take each individual patent, and subject it to unique individual assessment and then try and collate the results of a 200 patent portfolio, that would take you a lot of time and cost and I think isn't simply not practical. The way we would normally approach this is either, if you're the patentee side of this debate, you will probably have a good understanding of the patents that you think are particularly significant, and you might take a look at those. You will probably, whether you're patentee or defendant, be taking a look at the portfolio in the context of the wider portfolio that would come to bear on a product. So the portfolio is a third party. In that respect there are a number of really good data sources out there, from third party assessors who have looked at the royalty stack, looked at the share of the stack attributable to any given patentor. By consulting two or three of these you can start to get a good feel for where you are in terms of, I've heard it referred to by other people as a zip code or a post code, of the royalty range. So you know roughly where you're at. You might not know which house you're in but you roughly where you're at.
Gordon: That's great. Thank you very much indeed, Alex. Another question here. How do patents in the growing digital world affect the geographical scope of patent protection and licencing? Jonathan, let's share it around. You go next.
Jonathan: I think Alex has already explained that a global licence, where a licence is already the standard, in particular in that field and if you think about software patents, those kind of things don't open borders. You can download software anywhere in the world. The importance of a wide patent protection and global licences will get even more important in the future. Which stresses the point that we've discussed also that's it really important to work with an international team and to have an international approach from the beginning.
Gordon: Thanks very much indeed. Sorry?
Alex: I was going to say I think as well maybe the questions directed to a consideration of economic markets, because if you're looking at patent protection and licencing, you clearly want good coverage in significant economic markets. That might be the market of manufacture of the products in question or it might be the key sales markets of the products in question. I think a good understanding of market share and economics of individual jurisdictions will help with that decision making process.
Gordon: Thanks very much indeed, Alex, for your contribution. I've got one more question which is really my own to a certain extent. As may people know here I've been involved in work in China for a long time and one of the things that we used a great deal there, in addition to full patents, were utility models. So, Jason, can you just touch on the question of utility models and of which there are many, many filed in China each year. Just explain a little bit about how that system works.
Jason: Actually the utility model is not unique in China. The Chinese Patent Office actually learned the utility model from Germany. It protects new structures or configurations of a product that doesn't allow methods. The good thing about the utility model is that it doesn't need the substantive examination and can be granted very quickly. If you only want to invest a little in China for your IP I think the utility model is a good choice and here is why. In my experience there are many foreign clients working with Chinese manufacturers, to make their products in China, but unfortunately I know many of them who do not register their IP in China at all because they don't want to sell in China because of time consuming work. But their Chinese partners probably will secretly file utility models misclassed product device and eventually come back to and sell the client if the relationship breaks up. So my suggestion is, even if you don't want to sell in China and just want to make your products manufactured there, you really need to think about it, to file utility models as early as possible so that if you have something on hand to defend when necessary.
Gordon: Thanks very much indeed. That's very interesting, the notion of using utility models as defense mechanism, effectively, against a potential dispute with a manufacturer in China. Right. Well, thanks to everyone who has attend this event today. We really appreciate your interest and we hope we've been able to give you some real food for thought on this remarkable and fast moving topic. I've got a few takeaway messages of my own. Tech patents are everywhere and, from my litigator's perspective, you need to have eyes in the back of your head or, to put it more in relevant terms, a really good global searching system because you never know where there might be a patent lying in wait. Conversely, you never imagine that you're software based invention is not patentable. There are experts out there who can find patents affecting getting a patent over their line. Another message from today is that the previously evolving patent systems have evolved. Alex talked about India and we've heard direct from Jason about China. The Chinese systems works as well and effectively as most others. It would be pennywise and pound foolish, as we say here in the UK, to ignore the patenting options in China. Right. In the next webinar in this series, in 2 weeks time, we're returning to the world of trade secrets and a lot more besides. Moving from the current format, we're taking a scenario based look at the pursuit of a trade secrets thief around the world, to show what tricks are available to capture thief, as they say, in various jurisdictions and destinations. So look out for the invitation for that one which will be coming shortly. In the meantime, a recording of today's event will be appearing on our website and at goexcel.gowlingwlg.com very shortly, if you would like to watch again or, perhaps more relevantly, share it with your colleagues. So thank you once again for your very kind attention today. We look forward to seeing you again at one of our next events in this series and this broadcast will close automatically in just a few moments. Thank you very much indeed.