Arbitration – Telecoms Industry Adrian Howes, Senior Litigation Counsel 04 March 2016 Privileged & Confidential

Introduction The mobile phone system Standards and IPR Licensing disputes Resolution – litigation and arbitration Nokia’s experience Lessons learned

The mobile phone system Mobile phones need to be able to talk to one another (i.e. interoperate) To do so requires common technology and protocols These are developed by various companies joining forces to develop common standards Usually via an intermediary called a Standards Setting Organisation (“SSO”) Examples of SSOs include ETSI and ITU

Standards and Intellectual Property Rights Standards avoid customers deciding between competing products that do not interoperate However, using a Standard may mean using technology developed and protected by Intellectual Property Rights (“IPR”) of multiple companies Therefore SSOs typically require members who contribute technology to a Standard to disclose their IPR and to agree to offer licences for using it on Fair, Reasonable and Non-discriminatory terms (“FRAND”)

Licensing Disputes Some companies own 100s or 1000s of patents “essential” to a Standard (e.g. GSM, UMTS or LTE) – so-called Standard Essential Patents (“SEPs”) Many companies simply implement Standards in their products and do not contribute to Standards Others have a few SEPs and implement Standards And a few simply own some SEPs but do not implement a Standard These differences can lead to disputes over the value of SEPs and what is a FRAND licence

Smartphone wars

Resolution – Litigation Until recently all licensing disputes involved at least one party bringing patent infringement proceedings against the other; often in various jurisdictions at the same time Yet very few ever get to the real issue of determining a FRAND licence or royalty rate The parties typically settle a licence after huge expenditure in costs and resources to both of them. And in the end to the industry as a whole The alternatives – mediation or arbitration?

Resolution – Arbitration Realistically while mediation may form part of a process it is unlikely to resolve all matters between parties due to their divergent views Arbitration is an effective means of resolving these disputes – provided that the parties can agree to it! In most cases, there is no pre-existing agreement to arbitrate. Therefore one needs to be agreed. If not, then litigation may remain the only alternative to ensure an un-licensed implementer comes to the table

Nokia’s experience Several patent licence arbitrations: Samsung – pre-existing licence governed arbitration of new royalty rates LG – arbitration agreement agreed to between parties to resolve royalty rates Sierra Wireless – dispute over construction of a licence agreement

“Arbitration can be arbitrary” Lessons learned Arbitration can be as expensive as litigation. However, time, experience and better costs management should reduce this Get the agreement right – avoid one arbitrator, except for small disputes – no appeal! Choose your counsel, experts and arbitrator(s) with care – experienced in high value disputes, with gravitas, commercial/technical? And, of course, the human element Consider the best seat – i.e. the procedural laws that will suit you and nature of the dispute (e.g. scope of disclosure, possible challenges to the Award) Manage expectations – both internally and externally “Arbitration can be arbitrary”