〈日本知財学会誌〉Vol. 14 No. 3― 2018 : 54 64【特別寄稿論文】-

The Role of IP in Economic Growth :Looking Back, Looking Forward
David J. Kappos（Partner, Cravath, Swaine & Moore LLP）
Jessica M. Goodman（Associate, Cravath, Swaine & Moore LLP）

【Abstract】 In contemplating intellectual property（IP）policy to drive growth, it is important to understand pastexperience and use that understanding to shape future perspective. This paper will provide perspective on the IP
system’s past, specifically over the last 10 years. It will then examine the IP system today. And finally, this paper will
look forward, in an effort not to predict the future but to provide a sense for what policy makers will need to consider toalign the IP system with clear technological and economic trends, to optimally participate in global economic opportunity
as we move into the third decade of the 21st century. Though much of this paper focuses on the U.S. system, thepoints explored apply globally.
【Keywords】 IP policy

Broken IP system

Scaling back patent system

Innovation-driven worldStandards-deployed innovation1.

junction if the defendant loses, to extort billions of

Past Ten Yearsdollars from unsuspecting, risk-adverse companies through settlements or licenses.

Ten years ago, there was widespread belief that theIP system was “broken.”That was certainly true in

The pat-ent troll provides no value to the patent system,other than to line its own pockets.

Rather, it sti-the U.S., and likely in other countries as well althoughfles innovation and increases frivolous litigation.

not in Japan.

It was believed that U.S. patents were

Patent troll litigation is on the rise, and it is time

too strong.

Included in this belief was concern overfor targeted defendants to fight back.2

abuse of the patent system and fear of patent trolls,
companies which hold patents but do not actually use

In fact, concerns over trolls became so prevalent

the patented technologies to make products.1 A 2006

that they began shaping major companies’ actions.

article captured the concern over trolls and how theyFor example, cloud service providers such as Amazon,

utilize patents, describing them as :Google, and Microsoft, reshaped their agreements withusers to provide better protection against─and detera creature of opportunity.

54

Patent trolls take fullin the first place─suits by patent trolls. 3

Theadvantage of the expense facing a patent infringe-

underlying logic was that patent-holding trolls werement defendant, the inherent unpredictability ofwilling to threaten small users of these cloud services,

jury outcomes and the threat of a permanent in-

who might be unable to bear the risks involved in

ISSN 1349-421X© 2018IPAJ

All rights reserved.

The Role of IP in Economic Growth : Looking Back, Looking Forward

fighting against trolls.4

The cloud providers hoped

And the U.S. judiciary’s role in cutting patentthat by offering stronger protection to their customers

strength has not been limited to its case decisions.

and forcing trolls suing them to go up against not just

2015, the Judicial Conference heightened the pleading

small, unsophisticated entities, but also the large cloudstandards for patent cases, adding new requirements inp ro v i d e r s b e h i n d t h e m , s u c h s u i t s w o u l d b e

law suit pleadings making it more exacting for a patent

preempted, at least to a degree.

5

holder to enforce its rights against an alleged infring-

Courts and legislators, especially in the UnitedStates, heeded the concerns over the patent system
and acted in response.

In a series of cases, all within

the last 10 to 15 years, the U.S. Supreme Court has cut
away at the strength of patents.

In

The 2006 eBay

er.11
U.S. legislators have also worked during the past ten
years to scale back the patent system.

Most notable

was the 2011 passage of the America Invents Act, or
AIA.

Among other changes, the AIA introduced adecision stopped “automatic” injunctions against

post-grant review system, providing a robust new op-

patent infringement, and has resulted in fewer

portunity to invalidate granted patent rights.12 Proce-injunctions being sought and granted.6 The next year,

dures involved in one form of post-grant review, Interthe Supreme Cour t in KSR reframed how thePartes Review, reflect these goals.

“nonobviousness” requirement for patentableassessing a patent in these reviews, there is no pre-inventions is assessed, making the analysis less rigid

sumption of validity, thus making it easier to invalidate

and more exacting, and making it more difficult topatents using this system.13

7

secure patent rights.

For example, in

Other parts of the AIA

In 2014, in a decision describedmade it easier to submit prior art during patent prose-as “clearly concerned about preventing patent drafters

cution, enlarged the kinds of documents that qualify as

from intentionally injecting ambiguity into claims［,］”prior art and removed subjective elements of the U.S.

t h e S u p re m e C o u r t a l t e re d t h e s t a n d a rd f o rpatent system like its “first to invent” rule.14 It is fairindefiniteness in Nautilus, creating a “reasonable

to say the AIA was largely about addressing perceived

certainty” test and rejecting the previous standard

abuses in the U.S. patent system brought on by its ex-under which indefiniteness meant “‘not amenable totreme strength.

construction’ or ‘insolubly ambiguous.’”8That samemented on the Congressional Record during the Floor

year, its holdings in Octane Fitness and Highmark

debate on the AIA : “The America Invents Act will . . .

afforded district court judges more discretion in

improve the quality of patents that are issued ; and it

deciding whether fee-shifting is proper in patent cases,

will provide more certainty in litigation . . . . Patents ofthereby making it easier to award attorneys’ fees.9

low quality and dubious validity . . . enable patent trolls

The Supreme Court also reduced the reach of thewho extort unreasonable licensing fees from legitimate

patent system by limiting the scope of patentablebusinesses, and constitute a drag on innovation.”15

subject matter in the Mayo, Myriad, and Alice cases,
which are discussed below.

And finally, earlier thisAs one member of Congress com-

State legislatures also joined in on efforts to rein inpatent strength.

As of May 2014, over half of U.S.

year, the Supreme Court limited the strength of patentstates had passed or introduced patent legislation, andrights in the Lexmark case, holding that the patent“ s］ome new state laws allow
it was reported that ［exhaustion doctrine─which precludes patent holders

companies to sue so-called ‘patent trolls’ in statefrom enforcing their patent rights after selling acourts, while setting tougher rules around demand let-patented product─automatically applies（and cannot

ters─such as a requirement for clear evidence that a

be circumvented）, even when the patented item is soldcompany has infringed on a patent, rather than vague

outside the U.S.10

accusations.”16
55

〈日本知財学会誌〉 Vol.14 No.3― 2018

Despite these major reforms to the U.S. patent sys-

standard. 21

Royalty stacking posits that, as SEPs

tem between about 2006 and 2011, concerns persisted.

proliferate, royalties will add up to such a high level

Prominent among such concerns was the occurrence

that the cost of the SEP-implementing products willof “patent wars.”rise to where manufacturing these products will no

The smartphone patent war, inwhich the most notable opponents were─and indeed

longer be viable. 22

remain─Apple and Samsung, became so extensive

norms are broken contends that these norms, underthat it was estimated up to $20 billion had been spent

which SSOs require that members license theiron litigating and buying patents in the course of justapplicable patents on terms that are “Fair, Reasonable,

two years.

17

And the notion that F/RAND

But the reality over the past ten years,

and Non-Discriminatory,” are failing to protect against

and much further back than that, is that patent

excessively high SEP royalties, thus detracting from

litigation is more complex than can be captured in atheir intended pro-competitive effect. 23

single dispute, or even a series of related ones.

And

these theories each sounded intimidating and plausible

even while some claimed the patent wars were a sign

ten years ago, intervening data has shown there is nolitigation remained out of control, in the last few years

evidence that hold-up, royalty stacking, and the18

at least, it has exhibited some decline.

ThoughIn addition,m a l a d i e s t h e y c l a i m t o i m p o s e o n s t a n d a rd s

history tells us that industries experiencing patentimplementers actually occur.24 Yet, even though all ofwars in the past have not only survived their wars, butthese phenomena─and, by implication, any frictions

thrived during and afterwards.

19

Nevertheless, thethey were thought to have caused─have been provenpatent “wars” of the last decade have been viewed by

non-existent, concerns persist counter-factually.

many as evidence that patents are primarily pre-These erroneous concerns have infected the global

emptive in nature and that only further legislative

discussion around IP and standards, and have remained

weakening of patent protection will avoid stifled

consequential components of calls for further reform.

innovation.

These views are perhaps best captured

Just as courts and the U.S. Congress acted in re-by influential U.S. Judge Richard Posner, who, assponse to general discontent with the IP system, anti-

reported in a 2012 article, said : “There’s real chaos”

trust regulators heeded the cries for reform by acting

and “［ t］he standards for granting patents are too

against SEP holders over the last ten years.

loose.”

20

Authori-ties in the U.S., Europe, and Asia launched investiga-

Adding to the perception that the patent system wastions and suits against standards contributors.

For

exceeding its proper bounds was the supposed friction

example, in April 2014 the European Commission

between standard essential patents and the antitrust

found that Motorola’s attempts at enjoining Apple forregime.

infringing Motorola’s SEPs violated the EU’s antitrustStandard essential patents, or SEPs, are pat-ents that standard-setting organizations, or SSOs, des-rules.25

ignate as a requirement for meeting a technical stan-

Fair Trade Commission’s（KFTC）Guidelines for Re-

The “friction” with antitrust, it was believed,view of Unreasonable Exercise of Intellectual Property

comes in the form of phenomena such as patent hold-

Rights included redefining SEPs and more broadly de-up and royalty stacking and broken F/RAND norms.

fining what constitutes abusive action by those holding

The theory of patent hold-up portends that SEP hold-

SEPs.26

ers will take advantage of their status as a mandatory

Reform Commission closed an investigation into

component of a technical standard by demanding ex-

Qualcomm’s licensing practices─including thosecessive royalties, thereby “holding up” those whopertaining to SEPs─by levying a $975 million fine on

might otherwise enter the market covered by thethe company.27 And, earlier this year, the U.S. Federal

dard.

56

Later that year, amendments to the Korea

In 2015, China’s National Development andThe Role of IP in Economic Growth : Looking Back, Looking Forward

Trade Commission sued Qualcomm, claiming that

South Korean court refused to suspend an order from

Qualcomm’s licensing practices violated antitrust law

the Korea Fair Trade Commission that required28

as well as its F/RAND commitments.

More gener-

ally, in setting aside an exclusion order from the U.S.

Qualcomm to amend its SEP licensing practices.33
Meanwhile, European courts have taken a very difIn the 2015 Huawei case, the Court

International Trade Commission against Apple forferent direction.

competition-related reasons in 2013, the U.S. Tradeof Justice of the EU placed requirements on both SEP

Representative emphasized the impor tance ofholders and implementers regarding when SEP holders“information on the standards-essential nature of thecan seek to enjoin implementers. 34

patent at issue if contested by the patent holder andwas adopted by German courts in several 2016 cases,

the presence or absence of patent hold-up or reverse

which require implementers to respond “diligently”

This approach

In addition, the［ITC］should make explicit

with acceptance or a counteroffer once SEP holders

findings on these issues to the maximum extent

make a F/RAND license offer.35 The U.K. court in Un-

possible.”29

wired Planet International v. Huawei elaborated on thehold-up.

Court cases also reflected concern over the actions

meaning of FRAND, holding that courts can look to

In the 2013 case Microsoft v. Motoro-

royalties in licenses that are comparable to the one be-of SEP holders.

la, a U.S. district court held that the “proper methodol-

fore them.36

ogy” in ascertaining what constitutes a reasonable andpointed to a recognition that implementers of standards

non-discriminatory royalty requires accounting forare just as prone to abuse as are innovators and thatpossible royalty stacking.30

Later that year, anothergood policy calls for a balance between the natural

U.S. court in Innovatio echoed the importance ofinterests of all parties to seek advantage, on the one

royalty stacking as a factor to consider in ascertaining

hand implementers seeking to cut their input costs,

what constitutes a RAND royalty, though it grounded

and on the other hand innovators seeking to improvethe concept of stacking in the “evaluat［ion of］atheir returns on investments in innovation deployedproposed RAND rate in the light of the total royalties

through standards.

an implementer would have to pay to practice thestandard.”31

All of these European decisions have

A particularly sharp example of the response─and,The next year, the Federal Circuit inarguably, the over-response─of authorities across the“ t］
Ericsson set the bar even higher, explaining that ［globe to fears of SEPs was the 2015 amendments to

he district court need not instruct the jury on hold-up

the Institute of Electrical and Electronics Engineers

or stacking unless the accused infringer presents

Standards Association（IEEE）’s patent policy.

actual evidence of hold-up or stacking.

Certainly

influential SSO, upon deciding, without any evidence,something more than a general argument that thesethat its earlier policy required change, began mandating

32

This

These

that the determination of reasonable royalty rates

decisions sent the message that U.S. courts were apt“should” account for the “Smallest Salable Patentto act against SEP holders and in favor of standards

Practicing Unit,” or SSPPU theory.37 Under this the-implementers seeking low-cost access to patented

ory, the royalty base for patent license agreements

technologies used in standards, in both instances based

should be determined by the smallest component

on what we now know to be the mistaken belief thatwithin a device that practices a given patent.38 IEEE’s

supposed abuses of SEP holders required tilting thegeneralized adoption of SSPPU theory was misguided

law in favor of implementers and against innovators.

in its failure to consider value-adding synergies andCourts in Asia have also acted against SEP-holders.

downstream complementary effects that result from

Among other instances, in September of this year, athe combination of patented technology with otherphenomena are possibilities is necessary.”57

〈日本知財学会誌〉 Vol.14 No.3― 2018

elements of a product.

But it proceeded nonetheless,fueled by calls from standards implementers to make39

looks today.

Unfortunately, though, today’s system is

not cured of all ills.

Rather, in the U.S., it is a system

In addition, the IEEE

now plagued by a new abusive phenomenon called “ef-began prohibiting SEP holders from seeking to enjoin

ficient infringement,” whereby well-funded firms sim-

infringers until after adjudication by a court andply ignore others’ intellectual property rights, relying

standards adoption less costly.

40

exhausting first-level appellate review.

This changeon the fact that litigation is unlikely to occur in today’s

represented yet another concession to implementer

weak patent system and no more expensive than tak-interests, and against the interests of the patenting a license when it does occur.46

holders participating in standards-setting efforts.

which the value of patents is so low that 30 percent of

One final approach to cutting back on the patent sys-

It is a system in

U.S. start-ups worth over $1B have no patents,47 andtem’s strength over the last decade was to restrict

where the rate at which start-ups are being created inwhat is eligible for patent protection in the first place.

the U.S. has fallen : in 2014, only about 450,000 new

In Bilski, a 2010 case in which the U.S. Supreme Court

U.S. firms were born, while 500,000 to 600,000 were

found that business methods are not necessarily pre-created “every year from the late 1970s to the mid-cluded from patent protection, the Court nevertheless

2000s.”48 Today’s U.S. IP system is one in which theheld that the claims at issue were unpatentable as an

number of patent applications grew by just 2.34

41

abstract idea.

A series of 2012-2014 Supreme Court

percent between 2014 and 2015, and 1.02 percent thedecisions were notable for more directly restricting

year before,49 as innovators increasingly elect to retain

what is eligible for patent protection.

The Court intheir innovations as trade secrets rather than disclose

Mayo v. Prometheus held that a diagnostic method, inthem to competitors in exchange for weak patent

this case a relationship between drug metabolite levels

protection. 50

and the proper dosage of the drug, was not patentable

contributed to standards is ironically worth much lessbecause it represented a law of nature.42

The next

than technology held out of standards, a system inyear, in the Myriad case, the Court held that an isolat-

which standards opt-out is a serious risk, 51 and aed human gene sequence was not patentable because

system that gives rise to outcomes that seem unfair to

it was a product of nature.43 Finally, in 2014 the Court

innovators, as captured by this 2015 example describedin Alice held that claims to using a computer toby the Wall Street Journal as follows : “the man with“mitigat[e] ‘settlement risk’” were also not patentable,

the best claim to have invented the technology in

It is a system in which technology

These cases

dispute . . . will have to settle for whatever［products］

severely constricted the U.S. patent system’s scope :［his licensee］and his own company can sell until his

between 2014 and 2015, the rate at which district

devices are driven out of the market by cheaper

courts invalidated patents grew from about 15 percent

Chinese models or crushed by patent litigation.”52

because they covered an abstract idea.

44

to over 27 percent, and the rate at which infringement

The U.S. patent system is currently alone in

was found to have taken place dropped from about 23

discriminating against software innovation, such thatpercent to 14 percent.

2.

45

Today

important innovations in this critical leadership field
can be per-se unpatentable no matter how inventive
they are.

This remains so, even while the sameinnovations readily receive patent protection in other
All of these efforts to cut down on the strength of IP

important countries from Europe to Asia.53

─those from courts, legislatures, and antitrust author-

Indeed, the U.S. patent system has now fallen to

ities worldwide─have led us to the IP system as it

tenth strongest in the world, tied with Hungary and

58

The Role of IP in Economic Growth : Looking Back, Looking Forward

well behind the strength of the patent systems in many
important countries in Asia and Europe.

54

is the role of standards-deployed innovation, or innovations that are put into the marketplace as part of

Globally, we currently know that if a party infringes

standards.

Such innovations have enabled us, fora patent in China it will be liable for perhaps a few

example, to use our now ubiquitous mobile devices tothousand dollars, perhaps a few million at the ex-quickly connect with others on different devices and55

treme, while, if a party is accused of using a patent inthrough different modes of communication, and such

China to violate the antitrust laws, it will be liable forinnovations will be even more crucial for humanperhaps $1 billion in damages.56

So we see a hugeadvancement going forward.58 Innovation-based stan-present day disparity between the positive value of thedards have emerged as the key enablers, the network

patent property right and the cost of abusing it.

building blocks that will bring IOT and FourthAnd

finally, we are faced today with a great divergence inIndustrial Revolution to life.

the treatment of standards-deployed innovation, as thetechnology era dominated progress in the second half

U.S. and Asia look at innovators with open suspicionof the 20th Century, standards-deployed innovation

while Europe on the other hand sees a need for balancemust dominate the 21st Century.

in the treatment of innovators and implementers
participating in standards development.

If the information

However, as important as standards-deployed innovations are, they also involve substantial risks, andThe pervasiveness of today’s issues gives rise to anthese risks are borne by the innovators themselves.

important question : did courts, legislatures, and anti-

By contributing to a standard, innovators limit theirtrust authorities tackling the formerly-“too strong” IP

potential income streams to royalty payments from use

system go too far ?

of the products that implement the standard.59 In oth-3.

er words, whereas other innovators might be able to

Looking Forward

alter the price of their products as a means of adjusting
their own potential for income, standards-contributing

It is against this backdrop─of a system recently

innovators are limited to income from royalty pay-

perceived as too-strong, then cut down, and now

ments.

struggling with the consequences of all the weakening

contributing their innovations to standards.

change, that we must contemplate the future of IP.

Indards-deployed innovators also must agree to license

discussing the next 10 years, this paper aims not to

on RAND terms,60 effectively setting an upper limit on

provide predictions of what will happen, but rather toroyalties they might receive, and they must disclose

highlight what must be done in light of clear trends

their technologies, further increasing the risk theythat have developed.

take on. The innovator’s value equation for contribut-

To put it simply, in planning for the future and craft-

They have given up feature differentiation by
Stan-

ing new technology to standards has always beening policies that shape it, we need to account for thetenuous.

fact that we are in an innovation-driven world.

In-

advancement have been based largely on the winner-

No coun-take-all business model that drives innovation to thetry wants to be relegated to a mere manufacturer’s

pace of a single winner in each technology area. 61

role.

Good for the single winner, but bad for everyone else.

centing innovation must be our top priority.

Everybody wants to play in the innovation

game.
Our immediate future falls within an era called theThat is why past generations of technology

Standards-deployed innovation, on the other hand,creates ecosystems that produce many winners, start-

Fourth Industrial Revolution, one likely defined by

ing with consumers of the resulting products.

“The Internet of Things”（IOT）.57 Crucial to this era

ample, as standards for mobile networks progressed

For ex-59

〈日本知財学会誌〉 Vol.14 No.3― 2018from 2G to 3G to 4G, transmission speeds increased

that hold-up is not a real-world issue and despite thatby a factor of 12,000, and from 2005 to 2013 the global

there are other mechanisms already in place to protect

average cost per megabyte of cellular data decreased

against anticompetitive outcomes in the SEP context.66

by 99%.

62

A 2015 article reported that mobile tech-

The problem with antitrust’s encroachment on IP is

nologies generated an estimated annual consumer

particularly dangerous because the outcome of such

63

All ofencroachment is not readily apparent, as it is impossi-

this is a product of the great innovation-accelerator ofble to know “what could have been,” had more innova-

the 21st century─the standards-deployed innovation

tions been incented.

business model.

Thus, to ensure that standards-

countries extra-territorially enforce their different an-

deployed innovators choose to take this risk andtitrust laws, it creates costs for those who have to deal

contribute to standards, we must actively incent theirwith multiple jurisdictions and are subject to those dif-innovation.

fering laws.

surplus of 6.4 trillion dollars in six countries.

That’s where the IP system comes in.

IP rights both reward SEP inventors by allowing

Furthermore, when different

In applying antitrust law to IP, it is also

important to heed principles of comity.

This means

them to recoup some of the value invested in past in-that countries cannot apply their antitrust laws to IP

ventions, and enable future innovation by serving as aregistered or protected under another country’s laws,

source of funds for future research and development.

nor can they issue world-wide remedies pertaining to

For the IP system to successfully incent standards-de-IP, as the KFTC recently did.67

ployed innovation, we must first be careful going for-So, keeping in mind the changes to our IP systemward not to let antitrust law impede the IP system’s

over the last 10 years, its current condition and chal-

protections, and must look beyond what the U.S. 9thlenges, and the baseline antitrust interface that should

Circuit described as “an obvious tension between theguide how we shape it going forward, and cognizant

64

patent laws and antitrust laws.”

As the Supremethat the resolution of today’s issues should not be the

Court has recognized, intellectual property law modi-

occasion to back slide into the same issues we con-fies antitrust law, not vice versa : “The patent laws

fronted ten years ago, the question is : what actions

which give a 17-year monopoly on ‘making, using, orshould be taken over the next ten years ?

selling the invention’ are in pari materia with the anti65

trust laws and modify them pro tanto.”

Where IPOne approach is already on the rise among conservative groups in the U.S. such as the Conservative Ac-

and antitrust intersect, then, we must favor innovation

tion Project.

as the source of dynamic competition over antitrust’s

contrary to that of the last ten years ; it calls forstatic competition agenda.

Unlike antitrust, IP law

strengthening the IP system on the central belief that

promotes progress in innovation by incentivizing the

IP is “property” to which inventors have an exclusive

efficient resolution of disputes and supporting poolingright just as with real property and tangible personaland cross-licensing arrangements, allowing innovators

property, and that a stronger IP system will favor inno-

to cooperate with one another rather than become

vator interests internationally and in the trade area.68

stuck in deadlock.

This approach reflects a line of thinking

Rather than offer a specific approach like that of the

Recent actions by the Korean Fair Trade Commis-

Conservative Action Project, this paper offers fivesion and the U.S. Federal Trade Commission and De-

points that should be incorporated into policies going

partment of Justice have created cause for concern on

forward.

this front.

avoid acting too quickly.

For example, driven largely by fears of pat-First, be cautious with further reform ;Second, take care to groundent hold-up, the U.S. FTC and DOJ set out to restrain

actions in evidence, rather than theory, fear, or conjec-

the enforcement of SEPs, despite, as mentioned above,

ture.

60

Third, aim to recalibrate the IP system’s cover-The Role of IP in Economic Growth : Looking Back, Looking Forward

age so as to return to the view that “anything under69

the sun that is made by man” is patentable.

acting to afford them adequate protection to continue

Fourth,innovating and contributing in light of those risks,recognize the irreplaceable importance of IP rights tosomething which is central to the fifth point as well.

incenting innovation and, in doing so, be prepared toAlso implicit in protecting standards-deployed innova-

accept some of the consequences that arise as an inevi-

tion business models is recognizing that implementerstable part of a strong IP system.

will always outnumber their counterparts in “coopeti-

Fifth, and finally,celebrate and protect standards-deployed innovation

tion,” the innovators.

business models as the highest form of coopetition yet

there is strong IP protection – there will be disputes.

devised.

The IP system has always been controversial, because

As to the first point, learn from the mistake of theIEEE in amending its policy prematurely.

And further implicit where

it represents humanity’s long term savings plan for the

Changes tofuture, whereby we agree to pay higher prices now in

the IP system are useful and even necessary, but theyexchange for cures for disease and new products thatmust be based in reality.

will come tomorrow.

This is where the second

We must accept that if we wantpoint comes in ; instead of, for example, following theto invest for our and our children’s future, it will re-lead of those who have attacked IP rights out of theo-quire accelerating innovation, which will require strong

retical fears, or to advantage their own business mod-incentives, which will attract some level of disputes

els, policy makers must assess the reality of the situa-

and controversy.

tions they are addressing.

Look to data, not justincreased disputes, but absent those rights we are

Had those who feared hold-up and royalty

surely depriving ourselves and our children of crucial,theory.

stacking heeded this advice, they might have noticed
that between 1994 and 2013, as the price of mobile

Stronger IP rights may come with

impactful innovations.
So in the last ten years we have successfully “re-phones fell and the number of manufacturers and de-formed” IP to prevent abuse.

vices sold rose, SEP holders’ average gross margin re-need to re-fortify it to maximize innovation.

mained constant, suggesting that, as mentioned above,

champion, not punish, those who bravely sacrifice their

these fears were unfounded.

70

In the next ten, we
We musthard-won innovations to standards for broad ecosys-

Regarding the third point, the state of today’s patent

tem benefit.

We must exercise regulatory humility insystem suggests that the strategy of narrowing thethe application of antitrust laws to avoid having them

universe of patentable subject matter does not produce

discourage the very standards-deployed innovation

good results.

they should champion.

Instead, we are better off widening the

We must employ IP-based in-reach of the patent system so as not to preclude entire

centives so that the Fourth Industrial Revolution andindustries from its valuable protections.

IOT produce all the broad human benefits we know

Fine-grained

doctrines like inventive step and disclosure require-they are capable of producing.

ments are far better suited to the heavy lifting of patentability determinations, versus the over broad brushof subject matter discrimination.
As to the fourth point, recall the ways in which innovation has shaped our world thus far, and set policies
that will actively incent more innovation into the future.

Lean in for innovation and those who make it

happen.

Doing so requires recognition of the risks

that standards-contributing innovators take on, andNOTE* This article is based on a speech given by David Kappos
in November 2017. All references to time herein should
be read in reference to that date.
1 See e.g. Ashby Jones, In Fight Against‘Patent Trolls,’a
New Arrow in the Quiver ?, Wall St. J. : L. Blog（Nov. 24,
2008, 8 : 45 AM）, https://blogs.wsj.com/law/2008/11/
24/in-fight-against-patent-trolls-a-new-arrow-in-thequiver/?mg=prod/accounts-wsj.
2 John F. Luman III & Christopher L. Dodson, No Longer aMyth, the Emergence of Patent Troll : Stifling Innovation,
Increasing Litigation, and Extorting Billions, Intell. Prop. &Tech. L. J., May 2006.
61

〈日本知財学会誌〉 Vol.14 No.3― 20183

Chad Ennis and Chris Shield, It Might be a Bad Idea for
NPEs to Attack Cloud Services, Law360（Sept. 1, 2017,
1 : 00 PM）, https://www.law360.com/articles/958668/
it-might-be-a-bad-idea-for-npes-to-attack-cloud-services.
4 Id.
5 Id.
6 Kirti Gupta & Jay P. Kesan, Studying the Impact of eBayon Injunctive Relief in Patent Cases 1, 37,（Univ. of Ill.
Coll. of Law, Research Paper No. 17-03, 2016）（discussing eBay Inc. v. MercExchange, LLC, 547 U.S. 388（2006））, available at https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=2816701.
7 KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398（2007）; seealso Gene Quinn, KSR the 5th Anniversary : One Supremely Obvious Mess, IPW atchdog（Apr. 29, 2012）,
http://www.ipwatchdog.com/2012/04/29/ksr-the-5thanniversary-one-supremely-obvious-mess/id=24456/（summarizing KSR and analyzing its impact five years after the decision）.
8 James R. Barney & J. Derek McCorquindale, The Supreme
Court’s Nautilus Decision Defines the Test for Indefiniteness, Finnegan : IP Updates（June 4, 2014）, https://www.
finnegan.com/en/insights/the-supreme-court-s-nautilusdecision-defines-the-test-for.html（quoting Nautilus, Inc. v.
Biosig Instruments, Inc., No. 13-369, slip op. at 1（S. Ct.,2014）; Biosig Instruments, Inc. v. Nautilus, Inc., 715
F.3d 891, 898（Fed. Circ. 2013））.
9 Octane Fitness LLC v. Icon Health & Fitness Inc., 134
S.Ct. 1749（2014）; Highmark Inc. v. Allcare Health Management System Inc., 134 S.Ct. 1744（2014）; Russell
Cass, The Fee-Shifting Climate After Octane And Highmark, Law360（Aug. 28, 2014, 7 : 46 AM）, https://www.
law360.com/articles/568081/the-fee-shifting-climateafter-octane-and-highmark.
10 Impression Prods., Inc. v. Lexmark Int’l, Inc., 581 U.S. ___（2017）; Alex Noonan, Impression v. Lexmark : Supreme
Court Reverses Federal Circuit, Limits Scope of PostSale Patent Rights, JOLT Digest（Colette Ghazarian ed.,June 27, 2017）, http://jolt.law.harvard.edu/digest/impression-v-lexmark-supreme-court-reverses-federal-circuitlimits-scope-of-post-sale-patent-rights ; Jason Rantanen,
Impression v. Lexmark : Patent Rights Exhausted by Sale,
Domestic or Abroad, PatentlyO（May 30, 2017）, https://patentlyo.com/patent/2017/05/impression-exhausteddomestic.html ; Kyle Straughan, Lexmark Patent Exhaustion, Rutter Mills PLLC（Apr. 18, 2017）, http://ruttler
mills.com/Blog/2017/04/Lexmark-Patent-Exhaustion.
11 David J. Kappos, OPINION : Time for Congress To Leave
Patent System Alone, Law360（Mar. 28, 2016, 10 : 10AM）, https://www.law360.com/articles/774769/opiniontime-for-congress-to-leave-patent-system-alone ;  Matthew Bultman, Stricter Patent Pleading Requirements
Take Effect Dec. 1, Law360（Nov. 30, 2015, 3 : 55 PM）,
https://www.law360.com/articles/717900/stricter-pat
ent-pleading-requirements-take-effect-dec-1.
12 Leahy-Smith America Invents Act, Pub. L. No. 112-29,
125 Stat. 284（2011）（codified in 35 U.S.C.）; Summaryof the America Invents Act, AIPLA, http://www.aipla.org/
advocacy/congress/aia/Pages/summary.aspx（last visited Oct. 31, 2017）.
13 Stacy Lewis & Tom Irving, Very Few Appreciated Just
How Bad AIA Inter Partes Reviews（IPRs）Would Be forPatent Owners, Although IPR Denials Have Been, for Patent Owners, a Glimmer of Hope, 11 Buff. Intell. Prop. L. J.
28, 56-59（2015）（contrasting procedures used in Inter
Partes Review with those used by district courts）.
14 Cheryl Milone, A Powerful New Weapon Against Patent
Trolls, Forbes（Nov. 15, 2012, 5 : 21 PM）, https://www.
62

forbes.com/sites/forbesleadershipforum/2012/11/15/
a-powerful-new-weapon-against-patent-trolls/#1f903bc1
d282 ; Summary of the America Invents Act, supra note12.
15 157 Cong. Rec. S936-53（statement of Senator Leahy）.
16 Ruth Simon & Angus Loten, States Revise Laws to Curb
‘Patent Trolls’: New Legislation Sets Tougher Rules
Around Demand Letters, Wall St. J.,（May 21, 2014）,
https://www.wsj.com/articles/states-revise-laws-to-curbpatent-trolls-1400716539.
17 Charles Duhigg and Steve Lohr, The Patent, Used as a
Sword, N.Y. Times（Oct. 7, 2012）, http://www.nytimes.
com/2012/10/08/technology/patent-wars-among-techgiants-can-stifle-competition.html.
18 Press Release, Lex Machina, Lex Machina’s FourthAnnual Patent Litigation Year in Review Report Shows
22 Percent Decline in Patent Filings in 2016（Mar. 2,
2017）.
19 See Adam Mossoff, The Rise and Fall of the First
American Patent Thicket : The Sewing Machine War of
the 1850s. 53 Arizona L. Rev. 165, 170, 211（2011）（discussing sewing machine war）.
20 Duhigg and Lohr, supra note 17.
21 See, e.g., Alexander Galetovic & Stephen Haber, The
Fallacies of Patent-Holdup Theory, 13 J. Competition L. &Econ. 1, 3- 4 （2017）（f i r s t q u o t i n g C a r l S h a p i r o ,Navigating the Patent Thicket : Cross Licenses, Patent
Pools, and Standard Setting, 1 Innovation Pol’y & Econ.
119, 126（2000）;  also quoting Mark A. Lemley & Carl
Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L.
Rev. 1991, 2012（2007））; Mark A. Lemley, Ten Things
to do about Patent Holdup of Standards（And One Notto） 48 B.C.L. R e v . 149, 154 （2007）; Benjamin E.
Hermalin & Michael L. Katz, Information and the Hold-Up
Problem（Apr. 16, 2009）, available at http://faculty.
haas.berkeley.edu/hermalin/hermalin_katz_7706_rr4.
pdf ; Roger G. Brooks, Patent “Hold-Up,” StandardsSetting Organizations and the FTC’s Campaign Against
Innovators, 39 AIPLA Q. J. 435, 441-42（2011）（citation
omitted）.
22 See, e.g. Damien Geradin, Anne Layne-Farrar & A. Jorge
Padilla, The Complements Problem within Standard
Setting ; Assessing the Evidence on Royalty Stacking,
14 B.U. J. Sci. & Tech. L. 144, 145（2008）.
23 Yann Ménière, Fair, Reasonable and Non-Discriminatory（FRAND）Licensing Terms, European Commission Joint
Research Centre, Institute for Prospective TechnologicalStudies, Science and Policy Report（2015）, available at
http://publications.jrc.ec.europa.eu/repository/bitstream/
JRC96258/jrc96258.pdf.
24 See, e.g., J. Gregory Sidak, The Antitrust Division’s Deval­uation of Standard-Essential Patents, 104 Geo. L.J.
Online 48, 61 n.49（2016）（listing 21 articles which
demonstrate that“more than two dozen economists andlawyers had disproved or disputed the numerous assumptions and predictions of the patent-holdup and royaltystacking conjectures.”）.
25 European Commission Press Release IP/14/489, Anti­trust :  Commission Finds that Motorola Mobility Infringed
EU Competition Rules by Misusing Standard Essential
Patents（Apr. 29, 2014）. The EC also found that Sam­sung’s commitments regarding the seeking of injunctions
were not in violation of antitrust laws. See European
Commission Press Release IP/14/490, Antitrust :  Com­mission Accepts Legally Binding Commitments by Sam­sung Electronics on Standard Essential Patent Injunc­
tions （Apr. 29, 2014）. EC Vice President Joaquín
Almunia’s statement that, through these two decisions,

The Role of IP in Economic Growth : Looking Back, Looking Forward
the EC“provides legal clarity on the circumstances inwhich injunctions to enforce standard essential patents
can be anti-competitive[,]”demonstrates that the EC in2014 was paying careful attention to antitrust and SEPs.
European Commission Press Release IP/14/489.
26 Yoon & Yang LLC, Korea Fair Trade Commission amends
Guidelines for Review of Unreasonable Exercise of Intellectual Property Rights, L exology （Jan. 14, 2015）,
https://www.lexology.com/library/detail.aspx?g=99282
eed-0435-4acc-9d4e-bc9d69c47988.
27 Melissa Lipman, FTC Sues Qualcomm Over Standard-Es­
sential Patent Licenses, Law360（Jan. 17, 2017, 4 : 27PM）, https://www.law360.com/articles/881729/ftcsues-qualcomm-over-standard-essential-patent-licenses ;  
Benjamin C. Li, The Global Convergence of FRAND Li­
censing Practices : Towards Interoperable Legal Stan­dards, 31 Berkeley Tech. L. J. 429, 448（2016）.
28 See Lipman, supra note 27.
29 U.S. Tr. Rep., Opinion Letter on Disapproval of the U.S.
International Trade Commission’s Determination in the
Matter of Certain Electronic Devices, Including WirelessCommunication Devices, Portable Music and Data Processing Devices, and Tablet Computers, Investigation
No. 337-TA-794（Aug. 3, 2013）; United States Trade
Representative Issues Rare Disapproval of U.S. International Trade Commission’s Order Excluding Apple Products Based on Infringement of Samsung Standards-Essential Patent, Wilson Sonsini Goodrich & Rosati（Aug. 5,2013）, https://www.wsgr.com/WSGR/Display.aspx?
SectionName=publications/PDFSearch/wsgralert-presi
dent-apple-samsung.htm（quoting U.S. Tr. Rep., supranote 29）.
30 Richard J. Stark, The Royalty Stacking Supposition, CPI
Antitrust Chron.（March 2015 at 4）（quoting Microsoft
Corp. v. Motorola, Inc., No. C10-1823JLR, 2013 WL
2111217, at *12（W.D. Wash. Apr. 25, 2013））.
31 Id.（quoting In re Innovatio IP Ventures, LLC, No. 11 C
9308, 2013 WL 5593609, at *10 （N.D. Ill. Oct. 3,2013））.
32 Ericsson, Inc. v. D-Link Systems, Inc., 773 F.3d 1201,
1234（Fed. Cir. 2014）.
33 Why South Korea Just Hit Qualcomm with a Record$854 Million Fine, Fortune（Dec. 27, 2016）, http://fortune.com/2016/12/27/qualcomm-korea-antitrust/ ;  
South Korean Court Rejects Qualcomm’s Request to
Suspend Antitrust Body’s Order, Reuters（Sept. 4, 2017）,
https://www.reuters.com/article/us-qualcomm-antitrust/south-korean-court-rejects-qualcomms-request-to-sus
pend-antitrust-bodys-order-idUSKCN1BF10D.
34 Huawei Technologies Co. Ltd. v. ZTE Corp., ZTE Deutsch­
land GmbH（Case C-170/13）, July 16, 2015.
35 Hetti Hilge, German FRAND Update, Kluwer Patent Blog
（June 28, 2016）, http://patentblog.kluweriplaw.com/
2016/06/28/german-frand-update/（discussing Sisvel
Wireless Patent Portfolio v. Qingdao Haier Group, 15 U
65/15（Oberlandesgericht Düsseldorf Jan. 13, 2016））;  
see also Christa Brown-Sanford & Bethany R. Ford, PostHuawei FRAND Licensing of Standards-Essential Patents, Baker Botts（June 2016）, http://www.bakerbotts.
com/ideas/publications/2016/06/ip-report-post-huaweifrand-licensing（also discussing Sisvel v. Haier）;  Sisvel :Düsseldorf Court of Appeal Hands Down First Decisionon FRAND, B usiness W ire（Jan. 22, 2016, 7 : 03 AM）,
h t t p:/ / w w w . b u s i n e s s w i r e . c o m / n e w s / h o m e / 2 0 1 60122005397/en/Sisvel-D%C3%BCsseldorf-Court-Ap
peal-Hands-Decision-FRAND.
36 Birss J, Unwired Planet v. Huawei（[2017] EWHC 711（Pat）[806（10）], 5 Apr. 2017]

37

IEEE Standards Association, Standards Board Bylaws, §6.1. As the U.S. Department of Justice pointed out inits business review letter of the amendments, the amended bylaws specified that the determination of reasonableroyalty rates“need not be limited to”the factors set
forth in the bylaws. The DOJ read this language as indicating that the amendments“do[] not mandate any specific royalty calculation methodology or specific royalty
rates.” Business Review Letter from Renata B. Hesse,
Acting Assistant Att’y Gen., U.S. Dep’t of Justice, Antitrust Division, to Michael A. Lindsay, Esq., Dorsey & Whitney LLP 1, 12（Feb. 2, 2015）（quoting Letter from Michael A. Lindsay, Esq., Dorsey & Whitney LLP, to the Hon.
William J. Baer, Assistant Att’y Gen., U.S. Dep’t of Justice
Ex. B at 2（Sept. 30, 2014））.
38 Richard Stark, Debunking the Smallest Salable Unit
Theory, 7 CPI Antitrust Chron., July 2015, at 2.
39 Roy E. Hoffinger, The 2015 DOJ IEEE Business Review
Letter : The Triumph of Industrial Policy Preferences OverLaw and Evidence, 3 CPI Antitrust Chron., Mar. 2015, at
6 ; J. Gregory Sidak, Testing for Bias to Suppress Royalties for Standard-Essential Patents, 1 Criterion J. Innova­
tion 301, 301, 330-31（2016）; IEEE Standards Associ­ation, supra note 37, at § 6.1-6.2.
40 IEEE Standards Association, supra note 37, at § 6.2. ;  
Sidak, supra note 39, at 301（citation omitted）.
41 Bilski v. Kappos, 561 U.S. 593（2010）.
42 Mayo Collaborative Servs. v. Prometheus Labs, Inc., 566
U.S. 66（2012）.
43 Ass’n for Molecular Pathology v. Myriad Genetics, Inc.,
569 U.S. 576（2013）.
44 Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347
（2014）.
45 Kappos, supra note 11.
46 See David Kappos, Richard Ludwin & Marc Ehrlich, From
Efficient Licensing to Efficient Infringement, 255 New
York L. J.（Apr. 4, 2016）.
47 Id.
48 Heather Long, Where Are All the Startups ? U.S. Entre­
preneurship Near 40-Year Low, CNN M oney（Sept. 8,
2016, 10 : 10 AM）http://money.cnn.com/2016/09/
08/news/economy/us-startups-near-40-year-low/index.
html.
49 U.S. Patent and Trademark Office Patent Technology Moni­
toring Team, U.S. Patent Statistics Chart Calendar Years
1963 – 2015（2016）.
50 See Michael P. Kahn & Matthew B. Weiss, Trends in Pat­
ents and Trade Secrets Change Landscape of Innovation,
N. Y. L. J., June 30, 2016（noting that（before 20142015）Myriad“is reported to have responded to the lossof several of its patent claims in a § 101 challenge, bymoving toward the use of trade secret protection”（citation omitted））.
51 See Joshua D. Wright, Commissioner, Fed. Trade Comm’n,
SSOs, FRAND, and Antitrust : Lessons from the Economics of Incomplete Contracts, Remarks at the Center for
the Protection of Intellectual Property Inaugural Academic Conference, George Mason University School of Law
26-31 （Sept. 12, 2013）（“Imposing more restrictive
terms can undermine key players’incentives to join SSOs
and/or contribute technology[.]”）; Maureen K. Ohlhausen,
Commissioner, Fed. Trade Comm’n, Antitrust Oversight ofStandard-Essential Patents : The Role of Injunctions, Address at 2015 IP and Antitrust Forum, China Intellectual
Property Law Association（Sept. 12, 2015）at 10（discussing opt-out“not . . . as a general case, but . . . to illustrate the danger of absolutes”）.
52 Christopher Mims, How‘Hoverboards’Epitomize Our Bro­63

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53

54

55

56

57

58

59
60
61

64

ken Patent System, Wall St. J.（Dec. 20, 2015）https://www.wsj.com/articles/how-hoverboards-epitomize-ourbroken-patent-system-1450674060.
See Ania Jedrusik & Phil Wadsworth, Patent Protection
for Software-Implemented Inventions, WIPO Magazine, Feb.
2017.
U.S. Chamber of Commerce Global Intellectual Property Cen­ter, U.S. Chamber International IP Index : Patents（2017）,
available at http://www.theglobalipcenter.com/ipindex
2017-chart/.
See Ropes & Gray LLP, Patents in China, Lexology（Sept.
4, 2017）, https://www.lexology.com/library/detail.aspx?g=244758d0-c12a-42fe-a29a-4d70fca53e0a（notingthat statutory damages for patent infringement currently
range from Rmb10,000 to Rmb1 million and that, under
an amendment to the Patent Law which is currently
under review, this range will instead be Rmb100,000 to
Rmb5 million）; Chofn Intellectual Property, Highest
Damages Ever Awarded by Beijing IP Court and Stronger
Patent Protection in China, L exology（July 21, 2017）,
https://www.lexology.com/library/detail.aspx?g=a31
bfaf8-c489-41f4-b109-df4c2dd75f97
As previously discussed, China’s National Development
and Reform Commission levied a $975 million fine on
Qualcomm in 2015. Lipman, supra note 27 ; Li, supranote 27.
See, e.g. Sayyidul Arafat, The Dawn of the Fourth Indus­
trial Revolution, IBM : I nternet of T hings B log（Dec. 6,2016）, https://www.ibm.com/blogs/internet-of-things/
dawn-of-the-fourth-industrial-revolution/（predicting that
the Internet of Things will play a large role in the fourthindustrial revolution）.
Kirti Gupta, Technology Standards and Competition in the
Mobile Wireless Industry, 22 G eo . M ason L. R ev . 865,
（citations omitted）; David J. Kappos,
865-66（2015）
Innovation-Based Technology Standards Are Under
Threat, MIT Sloan Mgmt. Rev., Feb. 2, 2018, available athttps://sloanreview.mit.edu/article/innovation-basedtechnology-standards-are-under-threat/.
Kappos, supra note 58.
Id.
See Robert H. Frank, Winners Take All, but Can’t We Still, https://www.nyti
Dream?, N.Y. Times（Feb. 22, 2014）
mes.com/2014/02/23/business/winners-take-all-butcant-we-still-dream. html（discussing the winner takeall theory’s“venerable history”and stating“19th-century
advances in transportation enabled the best producers toextend their reach[,]”but noting that“[i]n practice, . . .
）.
winner-take-all effects still appear to dominate”
62 Julio Bezerra, Wolfgang Bock, Francois Candelon, et al.,The Mobile Revolution : How Mobile Technologies Drive a
Trillion-Dollar Impact, Boston Consulting Group（2015）;  
but see Mark Hulbert, Investing in a‘Winner Takes All’
Economy, Wall St. J.（Apr. 9, 2017）, https://www.wsj.
com/articles/investing-in-a-winner-takes-all-economy1491790561（citing the smartphone industry as ans growth）.
example of the winner-take-all model’
63 Bezerra, supra note 62.
64 U.S. v. Westinghouse Elec. Corp., 648 F.2d 642, 646（9th Cir. 1981）.
65 Simpson v. Union Oil Co. of Cal., 377 U.S. 13, 24（1964）.
66 See, e.g. Complaint at 19, 25-26, 28, In re Motorola Mo­
bility LLC and Google Inc., FTC Docket No. C-4410（2013）;  Renata Hesse, Deputy Assistant Att’y Gen.,
U.S. Dep’t of Justice, Six“Small”Proposals for SSOs Before Lunch, Remarks as Prepared for the ITU-T Patent
Roundtable 5, 9（Oct. 10, 2012）.
67 See Koren W. Wong-Ervin et al., Extra-Jurisdictional Rem­y Int’
ledies Involving Patent Licensing, Competition Pol’
（forthcoming George Mason University Law & Economics
Research Paper Series）; Reuters, supra note 33.
68 Economic Competitiveness and the Defense of Intellectu­,
al Property, Conservative Action Project（Oct. 17, 2017）
http://conservativeactionproject.com/economic-competi
tiveness-and-the-defense-of-intellectual-property/.
69 Diamond v. Chakrabarty, 447 U.S. 303, 309（1908）（quoting S. Rep. No. 1979, 82d Cong., 2d Sess., 5（1952）;  H.R. Rep. No. 1923, 82d Cong., 2d Sess., 6（1952））.
70 Alexander Galetovic & Kirti Gupta, Royalty Stacking andStandard Essential Patents : Theory and Evidence fromthe World Mobile Wireless Industry 1, 5（2017）, https://ssrn.com/abstract=2790347.