Fair licensing in value chains of Internet of Things: a groundbreaking solution

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Within the connected car industry, debates are escalating about who should procure the licensing rights of the technologies that connect cars to the Internet of Things and at what cost. PhD candidate Maryam Pourrahim of the Tilburg Institute of law, Technology and society (TILT) has proposed a new solution that could settle the debate once and for all: to base the licensing on the so-called Quality of Service of the component in question and set the royalty rate proportional to the component’s demand for data transmission.

When companies contribute their patented technology to a standard in the industry (a Standard Essential Patent or SEP), they commit to licensing the patents to others on fair, reasonable and non-discriminatory (FRAND) terms. This commitment ensures a level playing field and prevents a single company from monopolizing the technology market. However, it still remains unclear how the licensing should be priced and to whom in value chains such as connected cars. 

In her dissertation on SEPs and competition law Maryam Pourrahim addresses the heart of the dispute between cellular technology giants, whose products connect cars to the Internet of Things, and car manufacturers.  In short, some stakeholders advocate for licensing at the end-product manufacturing level, with royalties based on the final product’s price, and others argue for licensing at the component manufacturing level, with significantly lower royalties based on component prices.

The solution

Pourrahim proposes to shift the focus from the position within the value chain to the role of the involved parties. The crux of the argument lies in the implementation of the technology within the connected component. Whoever implements the technology in the connected component should obtain the license, according to Pourrahim. Implementation, in this context, refers to the design of the component, inclusive of all so-called Quality of Service (QoS) features. The royalty rates paid by device designers to technology developers should reflect the Quality of Service (QoS) required by the component in question. This can be achieved by setting the rate proportional to the component’s demand for data transmission, using parameters such as required bandwidth. The mobile phone industry, historically the main user of LTE (broadband) technology, serves as the reference user, with their rate serving as the benchmark for calculating FRAND rates for IoT components. 

This is a pioneering approach to royalty determination, blending functional and quantitative methodologies. The proposed framework aims to ensure fairness and clarity in the licensing of standards-essential patents (SEPs) for IoT value chains, creating a more sustainable and equitable environment for all stakeholders involved.

PhD Defense

Maryam Pourrahim will defend her PhD dissertation on February 21st, 2024, 2 p.m. in the Auditorium of Tilburg University. Title dissertation: Access to Standard Essential Patents and Competition Law. Patent pools, licensing in IoT value chains and dispute resolutions. Supervisors: Prof. G. Monti, Prof. W. Stoffel. The defense will be  livestreamed.