The US Department of Justice is studying a new regulatory policy for Standard Essential Patents.[1] The issue has implications for fifth generation (5G) communications network technology.

This analysis is made in the context of the United States’ quest to maintain its technological leadership and ability to produce technological innovations and its competitiveness worldwide. It should be noted that there is a US law on global leadership and competitiveness, including parts to ensure the Open-Ran (Radio Access Network) system in 5G network technology, the requirement of interoperability between equipment, products, and services of 5G equipment suppliers. It should be noted that the issue of standard essential patents has come to the fore with 5G technology. Paradoxically, the United States is not a leader in 5G technology; there is no US company leading in this sector globally. In contrast, China is a global leader. Huawei is a leading 5G technology supplier and a 5G standard essential patents leader. That is why there is a trade war between the United States and China on the topic of 5G. Huawei has been hit by this trade war, as it has been excluded from the US market. The United States is failing to beat the competition in 5G technology.

In light of this, the US government decided to ban Huawei, citing national security as the reason for preventing a competitor from remaining in the US market. According to the official text from the Justice Department, the US government is committed to a competitive bidding system and intellectual property. The intention here is to verify whether the sanctions applicable to infringement cases of standard essential patents are subject to the licensing commitment procedure, which demands good-faith negotiation. Usually, the licensing of patents must be non-discriminatory, fair, and reasonable. According to the text, the good-faith negotiation system promotes technological innovation, better choices for consumers, and enhanced industrial competitiveness.

The patent protection system promotes innovation and economic growth by encouraging inventors to apply their knowledge, take risks, and invest in research and development. However, there are risks with patent owners’ strategies to gain improper benefits in licensing negotiations, which can cause multiple harms, including increased costs for royalty payments and delayed introduction of new products and services.

The owner can exclude other competitors from making new inventions. The voluntary consensus on standard essential patent adopted by Standards Developing Organizations plays a vital role in the economy. Interoperability standards in product design allow for products manufactured by many different firms, including small and medium-sized entities, to function together and create innovative technologies that benefit consumers. However, applying interoperability standards to technologies covered by intellectual property rights is a complex issue. Many Standards Developing Organizations adopt intellectual property rights protection policies that allow for patent licensing in connection with standardized technologies and encourage participation in the development process by both patent holders and implementers. These policies may require participants to accept to make available licenses to their technology licenses according to non-discriminatory and reasonable practices.

According to the official text, promoting interoperability across a wide range of products makes it possible to create cheaper products for consumers. Promoting efficient patent licensing contributes to reducing litigation risks and costs, enabling good-faith negotiation between intellectual property owners and licensees.

Efficient intellectual property negotiations on essential standards will improve standardization efforts, supporting competitiveness and innovation. Negotiation is encouraged through the use of alternative dispute resolution mechanisms.

In short: geopolitical and geo-economic issues may create risks for standard essential patents owners regarding 5G and their respective business models. There are sticking points between the interests of the patent owners and the companies interested in licensing the patented products. Market solutions are being promoted to address the problem of licensing and essential patents. But, as noted, the US government has adopted regulatory practices to encourage an open-Ran and non-discriminatory negotiation system on reasonable terms. Usually, the patent owner has made billion-dollar investments in research and development to produce technological innovations. Logically, they are interested in the greater protection of their intellectual property rights.

On the other hand, other companies are interested in accessing the technology by licensing that patent. Therefore, the best strategic option is self-regulation by the market. However, governments should exceptionally intervene to ensure that conflicting economic interests are weighed in licensing standard essential patents in 5G network technology.

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Ericson M. Scorsim. Lawyer and Consultant in Regulatory Communications Law. Ph.D. in Law from the University of São Paulo (USP). Author of the book Geopolitical game between United States and China on 5G technology: impact in Brazil Author of the book Geopolitics of Communications, Amazon.

[1] United States. Patent and Trademark Office (USPTO). Draft policy statement of licensing negotiations and remedies for standards-essential patents subject to voluntary F/Rand Commitments, December 6, 2021.