The Internet of Things in India: Why a balanced and flexible licensing system matters Lessons learnt from the IEEE-SA case

In the era of the Internet of Things (IoT), cutting-edge technologies are becoming increasingly available in India for the benefit of consumers. As recognized by Prime Minister Narendra Modi in his address at the World Congress on Information Technology (2018), disruptive technologies like the IoT have become “an inseparable part of people’s lives”. For India, a consumption-driven economy, high-performance connectivity will be extremely vital for the country to chart its way to the government’s goal of achieving 3 trillion-dollar economy by 2025. These (wireless) technologies that currently affect an entire economy will make complete IoT integration a real possibility as long as a sustainable standardization system is guaranteed.

Standardization is the result of massive R&D efforts and years of collaboration. Thus, while these technologies need to be accessible, a return on investment is equally needed. This is possible thanks to the so-called ‘FRAND regime’. The patents protecting innovation shared via standardization, i.e. patents essential to a standard, are typically licensed on Fair, Reasonable and Non-Discriminatory (FRAND) terms. As a result, groundbreaking technology is widely available to different sectors in a value chain, while innovators are fairly and adequately rewarded. What FRAND means is to be decided in bilateral licensing negotiations, while being flexible enough to accommodate the needs of each individual case, thus encouraging competition in the market. While the FRAND regime has proven extremely successful, attempts to define FRAND as less flexible have failed the test of innovation; a lesson the Indian government must learn while seeking to harness the full power of communication. For instance, in an attempt to strictly define RAND licensing, the Institute of Electrical and Electronics Engineers Standards Association (IEEE-SA) rewrote in 2015 its patent policy in a non-transparent, closed and unbalanced process, and in a manner that only favored technology users, leaving a trail of chaos. IEEE’s departure from the common FRAND practice has had numerous negative effects. Some of them are the following:

• It is unclear under which terms, if at all, many patents needed to implement the standard will be available. From January 2016 to the end of June 2019, out of the Letters of Assurance (LoAs) IEEE-SA received 77% (!) were negative Wi-Fi LoAs, i.e. letters under which owners refuse to assure that they will license their essential patents on RAND terms.
• IEEE-SA has come under an US Department of Justice antitrust investigation, as interpreted by the press in the announcement made by Principal Assistant Attorney General for Antitrust Andrew Finch in a January 2018 speech.
• The standard development is facing delay and chaos and, according to engineers working for IEEE-SA, a “broken” process that “appears to be not enforceable or implementable.”
• The amended IPR Policy is no longer compatible with the practice of the 3rd Generation Partnership Project (3GPP), that unites telecommunications standard development organizations around the globe (ARIB, ATIS, CCSA, ETSI, TSDSI, TTA and TTC). This makes it extremely difficult for IEEE-SA members to reference other Standard Development Organizations-developed legacy standards while developing their own.
• The American National Standards Institute disapproved the accreditation of two Wi-Fi standard (802.11ah and 802.11ai) amendments, product of years of work and the first ones submitted following the IEEE-SA controversially changes in its IPR Policy.

Recognizing the failure of its revised and non-flexible IPR Policy, IEEE-SA announced on 13 June 2019 a new limited custom LOA form for those wishing to commit to (F)RAND licensing under the pre-2015 patent policy. The Value of a flexible and balanced FRAND system As Prime Minister Modi pointed out, “India is the hot-spot of digital innovation, across all sectors”. Estimations of more than 26 billion connected devices by the end of the year will, however, only be possible if open standards that draw their ethos from ‘good faith’ are adopted and if IPR and technical decisions of Standard Development Organizations are based on the principals of ‘transparency’, ‘openness’ and ‘fairness’. It is because of the standardization and the flexible and balanced FRAND regime that India occupies the second position in the world in terms of mobile manufacturing and has emerged as the second  largest in terms of its telecommunications market. Continuing this path will allow for a ‘smart India’, so that Indian economy and Indian citizens enjoy a more intelligent use of the water and light, more efficient traffic management, a cleaner environment, connected farming, increased safety and improved health system, to name but a few of the amazing opportunities that IoT can provide. This is a partnered post written by Dr. Sheetal Chopra, General Manager – IPR Advocacy, Ericsson India. Views expressed are personal.