As I have documented elsewhere, Apple, for quite a long time has been engaged in a sophisticated long-term quest to devalue (p7) standard essential patents (“Essential Patents”). This strategy is aimed at reducing, if not eliminating, payment for proprietary technology that runs Apple’s products but is developed by other companies, and Apple regularly utilizes fake advocacy and hypocrisy. Indeed, in 2012, the same year when an independent WIPO study found Apple to have a “uniquely aggressive [patent] litigation history” see (p34), Tim Cook argued (presumably with a straight face) that it was “fundamentally wrong” to sue people over Essential Patents. Apple’s long play to lower Essential Patents royalties has included manipulating standards development organization rules; commissioning misleading “studies” about the total SEP royalty stack; and pouring millions upon millions in lobbying and “academic” research.
One particular strategy of Apple – dating at least as far back as 2009 (p33) – has been to take advantage of courts and regulators’ ignorance of how standardization and patent prosecution works – and to point to the lag between when a specific portion of the standard was being discussed in a standards development organization (“SDO”) working group, like those of ETSI, and when a Essential Patent holder (Nokia) declared that patent as potentially essential. Notwithstanding Nokia’s umbrella declarations that any patents that are, or become and remain essential, will be licensed on FRAND terms, Apple continued to make arguments about untimely disclosures leading to unenforceability for well over 10 years.
Apple finally got its chance in its free-riding quest in the Core Wireless S.A.R.L. v. Apple Inc, 899 F.3d 1356 (2018). In that case Apple argued that because the patent inventor prepared an invention report on November 4, 1997 which indicated that the invention was likely to be incorporated in the GPRS specification, and the corresponding patent application wasn’t disclosed to ETSI until July 2002 after the standard was frozen, the resulting patent should be unenforceable. Specifically, Apple pointed to Nokia’s failure to disclose the invention, allegedly contrary to the ETSI’s rules when: (a) Nokia participated in working group meetings between November 10 and 14, 1997 where it proposed the solution covered in the invention disclosure; and (b) Nokia filed for patent protection on November 11, 1997. According to Apple, Nokia’s July 2002 declaration to ETSI was supposedly far too late.
The main problems for SDOs (ETSI for example) that come from “late disclosures” or “late declarations” include:
- Licenses for Patents which have been disclosed late and are not available at all, or,
- Licenses for Patents which have been disclosed late and which are available, but not on Fair, Reasonable and Non-Discriminatory (FRAND) terms, i.e., the company is unwilling to make a “FRAND” undertaking/licensing declaration.
(The ETSI Guide on IPRs p5).
Apple may be ignorant because its strategy typically involves free-riding on others technology and standard development efforts, rather than contribute its own technology or efforts into open standards. However, to anyone who has been to a standardization working group meeting, been involved in the development of technical standards, overseen patent prosecution, or managed IP and standards groups in large organizations, Apple’s position is unrealistic.
There are many reasons why an ETSI member might fail to disclose or make a late disclosure of an essential IPR: administrative oversight; a belief that a particular IPR was previously disclosed; a belief that the IPR wasn’t essential; or—in contrast—a deliberate and intentional act of “patent ambush.” Only an intentional act of patent ambush could contribute to a breach of the ETSI IPR Policy: every other cause for omission would be remedied by the Director General “immediately request[ing] that the owner give within three months an undertaking in writing that it is prepared to grant irrevocable licenses on fair, reasonable and non-discriminatory terms and conditions” in accordance with Clause 6.1 of the ETSI IPR Policy. Ironically, rumor has it that it was Apple’s hold-out tradition that resulted in the Core Wireless having Nokia patents to use against Apple in the first place. Had Apple complied with its FRAND obligations and negotiated in good faith towards a license to Nokia’s patents when asked instead of litigating with Nokia for over two years, any license to Core Wireless would have been subject to that license.
More importantly, Apple’s position fails to understand how standardization works. Submissions to SDOs are evaluated based on technical merit. Working groups are not allowed to discuss license terms or to make decisions as to which contribution to select based on licensing terms. The only instance in which working groups consider commercial issues is when essential IPR is unavailable for license on FRAND terms. Under any other circumstances, it would be improper for working groups to consider commercial issues, as the IPR Policy expressly instructs them to select the best technical solutions. (See Clause 3.1) Given that Nokia had issued blanket declarations (p4) this was never an issue in the Core Wireless case.
Notwithstanding the practical problems created by Apple’s creative disclosure arguments, and the fact that they ignore how SDOs work in practice, in what seems to be a trend with these kinds of arguments, they were adopted in part by the Federal Circuit on the facts of that case. Based on information unveiled in the Core Wireless case, some 88% of all IPR declarations are filed after a technical standard is frozen and published (p15) it would seem that the vast majority of declarations are not in line with the creative Apple standard.
With respect to the 3G and 4G standards developed through ETSI – which are of greatest relevance to the Core Wireless case – based on studies submitted to the Federal Circuit (p6-7) – 86% of the disclosures were “late” and only 14% were “timely” under the Apple world view. For 3G-focused releases, 72% of the measurable disclosures were “late”; for 4G-focused releases, 93% of the measurable disclosures were late. This supposed lack of timeliness spanned more than a decade during the years of both 3G and 4G standards development.
Interestingly, Apple’s own declaration practice also fails to follow its legal arguments both at ETSI and in other SDOs. With respect to ETSI, the same data submitted to the Federal Circuit shows (p11-12) that Apple’s average patent family was disclosed timely only 12% of the time, and disclosed “late” 88% of the time. For individual declarations, the numbers are worse: only 6% (102) timely, and 94% (1,751) “late”. The reason for different “Family Averages” and “Individual Disclosures” scores is that, at a family level, Apple’s late technical specification declarations tend to occur more often within families that were disclosed to a greater number of technical specifications. So, each late declaration has a smaller effect on Apple’s “Family Averages” score than if the reverse were true (which it is, for some companies). In sum Apple submitted 1,751 late declarations to ETSI. (Addendum 2)
Apple’s behavior with other SDOs can be seen in its submissions to IEEE-SA. Thus, in late 2019, after already having taken the aforementioned position in the Core Wireless litigation, Apple filed at least three letters of assurance with IEEE-SA for standards adopted over two years prior. Indeed, one of the filings was for a standard published more than seven-and-a-half (!) years before the Apple declaration. Since development of ICT standards takes years, one can assume that the working group meeting in which the technology was discussed may have taken place nine or ten years before the declaration. See information in the table below.
The timeline of Apple’s declaration proves the obvious – that contrary to its position in litigation, the longtime industry practice, including Apple’s own practice, has been for FRAND declarations to occur way after the technical working group meetings. For example, in December 2019, Microsoft was even later than Apple in submitting a letter of assurance on IEEE 802.11ac nearly 6 years after the final adoption of the standard, which is likely 7 or 8 years after the working group meeting that discussed the technology . Although a significant lag between WG discussion and filing is to be expected, these Apple and Microsoft LOA filings probably set world records in tardiness of disclosure. Quite ironic coming from two companies who spend so many billions advocating about hold-up.
In any event, by the logic of Apple’s arguments in Core Wireless, Apple’s patents reading on at least 802.11ac and 802.11-12 and those covered by the 1,751 “late” declarations to ETSI should be unenforceable. If Apple had the courage of its convictions Apple would issue a statement to that effect. At the very least, in confidential, SEP cross-licensing negotiations, Apple should agree to severely discount any royalty it may be due since Apple would surely admit that its patents are unenforceable. But that is unlikely from the company that argued (and won) that a single patent for rectangle with rounded edges should be worth more than a major licensors entire SEP portfolio. Instead, we are left with Apple’s double standard, and true to form, Core Apple hypocrisy.