New empirical evidence reveals 83% decline in essential patents contributions to the IEEE

After more than 18 months in operation, the new IEEE patent policy adopted in March 2015 appears to have resulted in an 83% decline in the average supply rate of non-duplicate LOAs to IEEE standard development activities.

During the UC Berkeley Symposium on  “Antitrust, Standard Essential Patents, and the Fallacy of the Anticommons Tragedy: Legal, and Industrial Policy Concerns” held on October 29th, Dr. Ron D. Katznelson presented new empirical data titled “The IEEE controversial policy on Standard Essential Patents – the empirical record since adoption.”  

Dr. Katznelson’s presentation (in slides 8-11) provides an analysis on Letters of Assurance (LOA) for licensing Standard-Essential Patents (SEP) pledged to the IEEE Standards Association.  It also includes the rise in “negative” LOAs (LOAs in which the submitter indicates refusal to license SEPs under the new patent policy) and the rise in “missing” LOAs (disclosed essential patent holder from whom IEEE sought but did not receive an LOA).  Since the IEEE patent policy came into effect in March 2015, the data shows an 83% decline in the net average supply rate of non-duplicate LOAs to IEEE standard development activities, when taking “negative” and “missing” LOAs as negative numbers.  The results are shown to be statistically significant.

Slides 12-13 of Dr. Katznelson’s presentation show that the standard-essential patented technology inputs are required for enhancements, revisions, and amendments to existing IEEE standards, which practically cannot be developed outside of the relevant IEEE Standards Working Groups.  Therefore, the demand for such technology inputs is dominated by manufacturers and/or implementers of IEEE standard-compliant devices.   

These findings are important because, as shown in an empirical study by Greg Sidak “Testing for Bias to Suppress Royalties for Standard-Essential Patents", the changes in the IEEE patent policy were dominated by those in favor of revisions designed to devalue SEPs and reduce licensing payments. 

If the decline in pledged LOAs is not fully explainable by other factors that changed around March 2015, and a material contributor to this decline is attributable to the change in the patent policy, the combination of the two empirical studies discussed above could constitute strong evidence for oligopsonistic behavior of a buying cartel for licensing SEPs, or at least evidence for restraint of trade.

Dr. Katznelson expressed his hope for an ultimate reversal, where IEEE reverts to the traditional FRAND definition to restore the flow of positive LOAs and allow IEEE Standards Working Groups to rely on leading-edge patented technologies.