Who needs a license to standard essential patents?

Having recently discussed some specific court cases and hot topics, I thought it might be time for a more generic post on licensing concepts and principles. Specifically, I'd like to talk about what I call the "licensing point" for patents in general and Standard Essential Patents (SEP) in particular. Simply put, I'll try to answer the question; "Who needs an SEP license"?

By "licensing point" I mean "the entity among several entities in a product value-chain that obtains a patent license for making or selling products". We know that in the case of mobile phones, the Original Equipment Manufacturer (OEM) - the entity that puts a ready-to-use end-product on the market with a brand name belonging or licensed to it - is the SEP licensing point. In this post I'll discuss why this so, and also whether it's likely to stay that way going forward. 

Generally speaking, the licensing point is ultimately selectable by the patent holder, and could be virtually any entity in the value chain whose product encompasses the inventions covered by the licensed patents. It could be the end-product OEM, a component manufacturer or an entity in-between those. It could even be a point downstream from the OEM, like a whole-seller or a high-street- or Internet retailer. The royalty parameters just need to be properly adjusted in every case to reflect the ultimate license value to the end-product. For sure there can be practical complications in implementing some of these licensing points, but they should be perfectly permissible per se.

But that's more of a theoretical observation, now let's look at specifics. As stated, the OEM happens to be the cellular SEP licensing point. But why is that exactly? As it turns out, there are several reasons. 

We can start with a simple historical reason. Up until the end of the 1990's, the only OEMs that existed on the mobile device market were all vertical OEMs. So in fact there was only one possible licensing point.

So that was easy. But as we know today, this market structure changed a lot since then, so an interesting question is why the licensing point did not change with it. 

Indeed, the mobile device industry went through a structural change during the first decade of this century. From consisting of only a handful of vertical OEMs, it became more diverse, including a value-chain of specialized entities. This change was initially led by Qualcomm on the chipset level and further downstream by Taiwanese "notebook ODMs". 

  

However, in spite of increased specialization, some vertical or near-vertical OEMs still remained and new ones even emerged. Today there are pure mobile device vertical OEMs (Samsung, LG), pure infrastructure vertical OEMs (Alcatel-Lucent, Ericsson, Nokia) and combined mobile device and infrastructure vertical OEMs (Huawei), all doing pretty well in the marketplace. These companies have substantial in-house knowledge and control of the chain from components or chip-sets all the way down to the manufactured finalized product. So to maintain that position there's a need for these OEMs to invest rather heavily in R&D and standardization, which in turn will also generate SEP portfolios.

Now, for all such SEP-holding OEMs, an interesting question arises; would it be appropriate for the mobile device SEP licensing point to move upstream from the OEM level to e.g. the chipset manufacturer level?

While such a move might seem plausible at first glance, it could lead to complications. To understand this, let's first look at a hypothetical example scenario, but using real-world entities for ease of explanation. Take a SEP-holding mobile device OEM like Samsung. Assume that Samsung would license its SEP portfolio at a point upstream from the OEM level, let's say to chipset maker Mediatek.
Now as long as another SEP-holding OEM, for example Huawei, located downstream from Mediatek would not assert its SEP portfolio against Samsung, this would be just fine. But if it would - and it likely would because Huawei would have a FRAND commitment as an SEP holder - then Samsung might have reasons for concern. In the example scenario, while Samsung needs an SEP license from Huawei, things are not as obvious regarding Huawei's need of an SEP license from Samsung. In many jurisdictions, Samsung's license to Mediatek can be seen as inherently providing certain rights to Huawei under Samsung's patents, for products that include Mediatek's chipsets. So in effect, Samsung's license to Mediatek could limit its own defenses against an SEP portfolio assertion by Huawei against Samsung's products.

However, if Samsung would instead continue to consistently license the last point in the chain -  in this example Huawei - then no such issue would occur. Then Samsung could procure a maximally efficient SEP portfolio cross-license with Huawei because it's 100% clear that Huawei needs a full license from Samsung, regardless of what chipsets happen to reside in its products. This so-called "grant-back" issue is one reason why the cellular SEP licensing point prevails at the OEM level also in today's more specialized world.

Now those particular companies were used only as examples, and I don't know the real licensing situations among them. But the example illustrates that at least as long as there remain SEP-holding mobile and/or infrastructure OEMs - which tend to be verticals - generally healthy and successful in the global marketplace, this will be a continuing factor that tends to keep the SEP licensing point for mobile devices at the OEM level.

But there are also other reasons for the OEM being the licensing point. Like the issue of "patent value apportionment". A license to an SEP portfolio needs to be priced based on the value the technical inventions therein bring to the end-product. In US law this has been made clear in e.g. the well-known CSIRO vs. Cisco and Ericsson vs. D-Link et. al. cases. And the easiest point to observe the value the inventions bring to the end-product is - not surprisingly - at the end-product level, i.e. the OEM level.

We can look at the illustrating example of the iPod Touch vs. the iPhone. These products are very much alike, with the difference largely being that one has cellular connectivity and the other one doesn't. The products have similar specs and both carry the "brand magic" of the OEM, Apple. Yet today's price difference between the two is around $250. 

As I mentioned in another post, the price difference not only illustrates the tremendous value of adding standardized cellular technology to an otherwise similar device. It also indicates the value of a license to the SEP portfolios covering it. Due to the way standards are created, the SEP portfolios covering a standard include those innovative technologies that won the competitive race to allow that particular standard to fulfil its specific requirements. Therefore the accumulation of SEP portfolios for a standard do in fact drive the value of the standard itself.

The market has established the accumulated SEP portfolio license value for a mobile device to be somewhere close to 10% of the OEM selling price of the end-product. This is a fraction of the value the standard itself brings to the end-product, but also more than the cost of a chipset. Clearly, when component suppliers don't account for SEP license costs, the component prices don't reflect the value of SEP portfolio licenses to the end-product at all. Another way of viewing this is that if the licensing point would hypothetically move to the chipset level, the chipset cost would have to increase many-fold. That may seem odd at first, but remember that this is accounting for the value to the end-product.

There are some recent and quite loud voices in the industry that - notably without rational or legal support - advocate that basing wireless SEP license royalties on end-product price is "non-FRAND", and that such royalties "must" be based on the chipset value. Actually, such calls are not always explicitly about moving the licensing point to the chipset level per se. Indeed, licensing point and royalty base are separate things. With the licensing point kept at the OEM level, a chipset value royalty base could still be possible in principle, by setting the royalty rate to some hundreds of percent. Ultimately, the royalty base is just a parameter in a certain calculation model, and what matters in the end is the value to the end-product. 

Another related factor driving the OEM licensing point is that the value of the standard may be different for different end-products. Since the value of licenses to the accumulation of SEP portfolios is proportional - but not equal - to the value of the standard, the license value can also vary between different end-products. For a mobile phone the value is very obviously large, but there are end-products for which the value might be considered smaller. For a vending machine or utility meter for example, the standardized cellular connectivity - and a license to all patented inventions therein - might for various reasons not necessarily be considered as tremendously valuable as for a mobile phone. Now if the licensing point would be moved to the chipset level, there'd be an issue with chipset tracability, or rather the lack of it. In fact, chipset manufacturers don't always know what type of end-product their chipsets ultimately end up in. Consequently it can be hard to determine the appropriate end-product license value at the chipset level. 

In this post, I've outlined some rational reasons for why SEP-holding OEMs conclude SEP portfolio licenses at the end-product OEM level. While it's certainly possible that this might change in the future, my guess is that some factors that make it rational to keep the licensing point at the OEM level will prevail for some time to come.

Follow-up on cellular FRAND royalty levels

Recently, a Fierce Wireless article by Keith Mallinson discussed the issue of cellular SEP FRAND royalty rates and in my opinion made some very good points on the cumulative level, based on a practical rather than theoretical argumentation.

In the article, there's an estimation of cumulative royalty rates, where the actual combined licensing revenues of the world's major cellular SEP licensors are basically divided by the actual number of phones sold. Based on such a calculation, it was estimated that "a total aggregate SEP royalty across all handsets worldwide is most likely to be no more than a mid-single-digit percentage". That estimation is probably quite accurate, and I find the "reality-check" approach very refreshing. Not least considering the amount of dubious theoretical argumentation one can find on this subject. 

But since I myself mentioned the figure of "around 10%" in an earlier post on cellular FRAND royalty levels, I felt that a clarification might be needed to remove any potential confusion. Mr Mallinson's calculation method gives a high-level view; a global average estimation of the cumulative royalty rate. On the other hand, my post focused on the  question: "What cumulative SEP FRAND royalty does an OEM without own basic R&D or SEP holdings have to pay?". These are two different things. Let me explain.

Essentially, there are three categories of mobile phones sold on this planet:

1) Phones sold by OEMs with own basic wireless R&D and SEP portfolios.

Many (other) asserting SEP portfolio holders are themselves implementers, and thus need a "grantback" license to these OEMs' SEP portfolios. Therefore, this subset of phones is subject to lower SEP royalty rates due to "royalty netting". As I described in my post and is also clear from Mr Mallinson's article, this is not discriminatory, due to fair value transfer. The cumulative royalty for this category of phones is somewhere in the 0-10% interval.

2) Phones sold by OEMs without own basic wireless R&D and SEP portfolios.

Instead of doing heavy investments in cellular wireless R&D, these OEMs have chosen to focus their business efforts on e.g. design, brand management, localization, feature development, marketing or logistics. The basic cellular technology is procured through the SEP FRAND licensing regime. This is the category of phones I addressed in my post, and in my experience, its cumulative royalty is around 10%.

3) Phones sold by OEMs that are "unwilling licensees".

Due to factors such as patent hold-out and the emergence of major localized OEMs in jurisdictions with less effective IPR enforcement regimes, a number of phones sold globally today are unlicensed. That is, they constitute infringing devices and no royalty at all is payed for them.

So a new OEM has two legitimate choices: a) get into basic wireless R&D to contribute to the standards and in the longer term pay somewhere between 0% and 10% or b) let others do all that and pay around 10%. As is worth repeating, there are no free lunches.

Considering that the phones in the three categories are subject to cumulative royalties of something like 0-10%, 10% and 0% respectively, it's perfectly possible that the global average might end up somewhere around 5% as indicated by Mr. Mallinson's calculation. Having said that though, it's important - for new OEMs but also for courts and agencies - to appreciate that the global average is not necessarily a relevant reference per se for a given OEM. 

Finally, it's of course quite alarming that a subset - and probably a sizable minority - of phones sold globally are currently not covered by SEP portfolio FRAND licenses and corresponding royalty payments. Or to put it more bluntly, are sold by OEMs who "willfully infringe" other's SEP portfolios. Partly a result of the "patent hold-out" challenges discussed in a previous post, this is a grossly under-reported problem that I hope to return to in another post.

Clarifications from the Federal Circuit

On December 4, a much anticipated opinion was delivered by the US Court of Appeals for the Federal Circuit ("Federal Circuit") in the Ericsson vs. D-Link et. al. case, concerning a WiFi (IEEE 802.11) SEP portfolio license. I'm pleased to note that the Federal Circuit in several aspects aligned itself with what I've myself been expressing in recent posts under this blog.

Firstly, on the issue of "royalty stacking", the Federal Circuit rejected jury instructions on royalty stacking because the defendants failed to present evidence that there was a royalty stacking problem: “A jury, moreover, need not be instructed regarding royalty stacking unless there is actual evidence of stacking. The mere fact that thousands of patents are declared to be essential to a standard does not mean that a standard-compliant company will necessarily have to pay a royalty to each SEP holder. In this case, D-Link’s expert "never even attempted to determine the actual amount of royalties Defendants are currently paying for 802.11 patents."” This is what I opined in my earlier post on royalty stacking, i.e. damaging royalty stacking shouldn't be assumed to exist per se, but instead clear evidence to that effect needs to be presented in each case. Once again we need to remember that royalty stacking occurs per definition in wireless SEP portfolio licensing. That doesn't mean that it's automatically harmful to the market nor to any given OEM.

Secondly, on "Patent hold-up", again no evidence of such was presented: “Absent evidence that Ericsson used its SEPs to demand higher royalties from standard-compliant companies, we see no error in the district court’s refusal to instruct the jury on patent hold-up or to adjust the instructions expressly to take patent hold-up into account.” As I wrote in my post on portfolio licensing and patent hold-out, evidence of "patent hold-up" is hard to find in reality. But the key point from the Federal Circuit again being that clear evidence must be presented in each case, it should not simply be presumed to exist just because it's a theoretical possibility.

Thirdly, on the topic of "Royalty base", which I touched upon in my post on cellular FRAND royalty levels, the Federal Circuit made another good clarification. On apportionment and the "Entire Market Value Rule", it stated that according to the “substantive legal rule”, the “ultimate reasonable royalty award” – that is, the result of e.g. multiplying a royalty rate with a royalty base – ”must be based on the incremental value that the patented invention adds to the end product”. The Federal Circuit confirmed that to determine a (F)RAND royalty in the wireless industry, you are definitely not mandated to use the smallest salable component such as a chipset as a royalty base. There's nothing wrong with using the entire end-user product as royalty base, as long as reasonable apportionment of value of the patented invention to the end-user product is done.

The Federal Circuit's practical approach to SEP licensing and damages is encouraging. Hopefully other courts and agencies, including those in other jurisdictions, will follow suit and move away from theoretical calculations towards a focus on real world practices and evidence.

Cellular FRAND royalty levels

What's a fair and reasonable royalty for a cellular Standards Essential Patent (SEP) portfolio license, and how is it determined? This sounds like a simple enough question, but actually it's not. In this post I'll share some of my experiences and thoughts in relation to this much debated subject.

To tackle this subject, I believe one should start by assessing values. Let's first look at the value of the cellular standard to a mobile phone. To say that the cellular standard itself is absolutely crucial for a mobile phone is hardly controversial. In fact, the cellular capability defines the phone as a commercial product: an iPhone wouldn't be an iPhone without cellular capability. Apple is able to sell its iPhone at a price of several hundred US$ more (!) than the price of its iPod, a very similar product but without cellular capability. This price difference demonstrates the tremendous value of adding standardized cellular technology to an otherwise similar device.

So yes, the cellular standard is definitely fundamental to a mobile phone. But what about a cellular SEP portfolio, what's the value of that? Before looking at a given SEP portfolio though, let's start by considering the cumulative. What's the license value of all SEP portfolios taken together. After all, that's the ultimate concern of the Original Equipment Manufacturer (OEM) selling the product. How is this "total mass" of cellular SEP portfolios related to the standard?

To address those questions, let's first assume that we'd like to create a brand new cellular 5G standard as a successor to 4G, but - for whatever reason - we want it to be completely void of SEPs. What could that correspond to in practice? Well, since patents live for up to 20 years, only standardized technical solutions older than 20 years would be completely "safe" to include. So we might actually end up selecting the first (1990) version of GSM (2G) as our 5G standard. This certainly feels like a very bad idea indeed. But why exactly? Because a 2G standard can't possibly fulfil the technical requirements placed on a 5G standard. The example might seem a bit extreme, but I want to illustrate an important point. The value of a standard strongly relates to new pieces of technology added to it. This is because a new cellular standard is subject to more harsh technical requirements - with respect to supported data rates, delay, capacity, flexibility, new services, efficient data compression and so on -  than previous standards. Having own experience from standardization, I know that these new requirements are there to make the new standard as future-proof as possible. While many consumers may accept to change phones quite often, mobile network operators make tremendous investments in infrastructure and will hardly be amused about having to replace it after only a couple of years because it's gone obsolete. In order to fulfil these tougher requirements of a new standard, brand new technological innovations are very often required, and these are also typically patented. So, while all cellular SEP portfolios together may not be strictly equivalent to the standard itself, they represent the value of the standard since they include the technologies that allow the standard to fulfil its specific requirements.

So how about the license value of all cellular SEP portfolios in terms of actual money? And who decides it for that matter? Here I'd first like to point out that the consequences of "wrong" pricing can be tremendous. If too high, then consumer demand will suffer. If too low, then incentives for standards innovation will suffer. But in fact, we can all see mobile device sales and usage expanding strongly and new state-of-the-art standards continuing to be created. So clearly, the market must have somehow managed to settle at a balanced pricing. But at what level? In my experience from working with cellular SEP licensing for quite some time, I can see an established cumulative royalty cost for all cellular standards up to 4G somewhere around 10% of the OEM selling price of a mobile phone. Note that this is not my opinion of what it "should" be. This is the reality that I see.

I'd like to make two important comments in relation to this 10% figure:

1) High-end phones often have advanced screens, cameras etc. that may be argued to be unrelated to the cellular standard. According to such argument, the percentage-principle leads to an unfairly high royalty for these products. But in reality, those attributes actually increase the usage of the cellular standard. In fact, the 3G and 4G standards were even specifically developed with the performance of such devices in mind. So the value of at least 3G and subsequent standards - and hence of all SEP portfolios relevant to those - is higher for high-end phones. Nevertheless, high-end phones are still often subject to "royalty caps" in order to address the perceived concern. Conversely, at the other end of the spectrum, the percentage-principle may cause very-low-end phones to devalue SEP portfolios. In such cases "royalty floors" may be used as well.

2) Most major SEP-holders are practicing entities, i.e. they sell standards-compliant products themselves. When such an SEP-holder offers a license to its SEP portfolio to an OEM, it typically also needs a license to the OEM's SEP portfolio. This is known as a "grant-back" license. In these cases, there will be a "royalty-netting" effect. One party pays a net royalty to the other based on their respective SEP portfolio strengths and net product sales. Therefore, SEP-holding OEMs ultimately pay a lower net cumulative royalty rate than non-SEP-holding OEMs. Importantly, this is not a violation of the Non-Discriminatory ("ND") part of FRAND since the value of a license is transferred back in place of some royalties. An OEM either makes large investments in basic R&D - resulting in innovations and patents - or pays full license fees. After all, there are no free lunches. 

Some OEMs new to the market have recently started to argue that the cumulative royalty should instead be no more than a fraction of the cost of a "baseband chip". This is a component inside the mobile phone that includes cellular connectivity functions. Such a change would actually make the cumulative royalty about an order of magnitude lower than what it is today. This argument doesn't make sense to me because it doesn't go to the value of using the cellular connectivity, but rather to the cost of a component necessary for that connectivity. Patent damages, i.e. the royalties determined by a court, are based on the value for the use made of the invention (e.g. in the US according to 35 USC 284).

As a parallel, one could look at a movie DVD. The entire component and manufacturing cost is probably no more than US$0.50. Yet nobody would seriously argue that the IPR value for the product as a whole, including the movie script, production, direction, screenplay, music, acting and so on, should be a fraction of that amount. It's the value of the IPR to the end product that's important. Arguing for a 90% de-valuation of cellular SEPs when there's been an established and well-working SEP valuation regime in place for decades seems irrational to me and would certainly disrupt the market balance, and for sure not in favour of innovation.

Having discussed the cumulative royalty at some length, I can now return to the original question: What's a fair and reasonable royalty for a given cellular SEP portfolio license, and how is it determined? Or in other words, how much should a given SEP-holder obtain within the cumulative budget and how is that fraction actually decided?

Most market participants agree that there has to be some form of proportionality at play here, in keeping with general principles of fairness and reasonableness. SEP-holders with "stronger" portfolios are entitled to larger royalty fractions. But using what metric? Counting SEPs? Valuing the SEP portfolios in terms of "innovation value"? This is not an easy question. Still, the actors in the market - the SEP-holders and established OEMs - over time "get to know" the overall value of each other's portfolios. They do this through license negotiations as well as by gaining knowledge of each others' R&D, standardization activities and patenting quality. The main challenge arises for someone who's inexperienced with this market.

Take as an example a willing licensee OEM new to the market and without standardization involvement or SEPs. It needs to allocate around 10% of its product price to cellular SEP license royalties, but how does it determine the fractions? Are there ways to find at least estimates of the distribution of those 10%? Well there are indeed some commonly discussed methods, which I'll briefly explain here:

1) ETSI IPR database declarations
Due to its apparent simplicity, it's very tempting to look at various patent holders' SEP declarations on ETSI's IPR database and to estimate royalty fractions based on them. However, such results are actually totally unreliable, since neither the declarer nor ETSI has any obligation to verify essentiality. The original purpose of the database was to ensure that there would be no hidden surprises in terms of unknown patents turning up at a later stage as SEPs. For this reason, patents "believed" to be essential could be declared, even though they might turn out not to be. As a result, significant over-declaration regularly takes place. This leads to gross over-estimates of the total SEP holdings and distorts the distribution of SEPs. So at best, this kind of study may be used to get a picture of potential SEP-holders rather than estimates of actual SEP holders' relative fractions.

2) Third party evaluations
Some instead turn to SEP evaluations performed by third parties. Unfortunately many such evaluations tend to be based on "keyword searches" in patent databases, which make them about as useful as horoscopes. More serious evaluation attempts actually try to look at the patent claims in some detail and compare them to the standard. Although those evaluations could in principle give indications of actual SEP-holder fractions, they also tend to suffer from reliability restrictions. Besides the obvious concern of bias, their accuracy is also limited due to time and cost constraints in combination with the large mass of potential SEPs to go through.

3) Accepted standards contributions
A newer method, originally explored by Ericsson, is not to look at patents at all (!), but instead at "accepted standards contributions" to the 3GPP standardization process. That essentially refers to technical solution proposals accepted into the standard. It's assumed that this metric has a strong correlation with SEP-ownership over time and that significant standards contributors all have similar "patenting rates" and "patenting quality". Since these assumptions are actually quite reasonable and the contribution data is all publicly available, this method is potentially accurate. Interestingly, it also aligns itself with incentivizing technical contributions to the standard. However, with this method becoming more widely used, its accuracy may suffer in the longer term since some standards-participants can be tempted to make numerous proposals on relatively trivial technical solutions solely to increase their "accepted contribution rate".

In practice though, these kinds of estimations are mainly used only as tools to roughly gauge the SEP portfolio landscape. Our new OEM will obtain the most accurate information about the SEP-holders' portfolios and FRAND royalty requests simply by conducting licensing negotiations with different SEP-holders in parallel. In this way the OEM can scrutinize the different SEP portfolios down to whatever detail it sees fit. This may be done through examining and discussing so-called claim-charts detailing the patents' relation to the standard in question. If needed, OEMs sometimes even employ external experts for such evaluations. Over time, these negotiations typically do result in a fair and reasonable royalty partitioning.

In this context I'd also like to point out that OEMs don't always fully appreciate the restrictions that the non-discriminatory ("ND") part of FRAND places on the SEP-holder. Many SEP holders have a multitude of already signed SEP portfolio license agreements in place and simply can't discriminate against existing licensees in favour of a new OEM. It's also inappropriate for a new OEM to compare itself with unwilling licensees - i.e. those essentially not wanting to pay anything - in terms of how much royalty it should pay. Doing so further exacerbates the "patent hold-out" problem discussed in my previous post.

In this post I've tried to describe the realities surrounding cellular SEP royalty levels for mobile phones, based on my own SEP licensing experience. Under the FRAND regime, I believe that the market has managed to strike a balance between innovation value and consumer value and established a cumulative royalty rate at around 10% of the mobile phone OEM selling price for all cellular standards up to 4G. I'm aware that some still believe that cumulative royalty rates are too high, that there's too much litigation going on and that radical changes to the system are urgently needed. I'll end this post by addressing these issues one by one.

Are cumulative royalty rates "too high"? I can't really tell for sure, but at least I don't see any obvious support for that notion. As I mentioned in an earlier post, consumer choice and new future-proof cellular standards hardly seem to be lacking. Also, among the top-10 global mobile phone OEMs of today, virtually none of them had sold a single mobile phone only a decade ago, and some of them didn't even exist a that time. So at least entry barriers are low. Margins may be getting lower for some OEMs, but that can be an effect of fierce global competition thanks to those low entry barriers (!) and perhaps partly even the result of patent hold-outs, i.e.some other OEMs paying  - ironically - too low (i.e. zero) cumulative royalties.

Is there "too much litigation"? Well, with some high-profile litigation cases going on in recent times, one might think that most cellular SEP portfolio license negotiations end up in court. But actually, this is a classic example of an availability error - "if you see it, it must be common". The truth is that most such negotiations are successfully concluded in good faith, far from the limelight, and only a small fraction end up in court. Actually, the most visible litigation case, Apple-Samsung, is fundamentally not about SEPs at all but rather about Apple's attempts to protect its proprietary smartphone user interface functions.

Are changes to "the system" needed? Well no system is perfect, so improvements are always needed. For example, new ideas for improving the transparency of the various fractional ownerships of the total SEPs could be welcomed, especially by new OEMs.  But I can't see an obvious need for any radical changes, since the FRAND technology sharing regime largely works the way it's supposed to work. Policies should continue to encourage successful cellular SEP portfolio licensing through good faith FRAND negotiations, which is still the norm today as it has been for decades. It's important that the cumulative rate and SEP portfolio proportionality principles are respected by all market participants. Any policy adjustments should work within the current framework and in a balanced way continue to make sure that it's difficult for individual SEP-holders to seek too much royalty as well as for OEMs to hold out for too little royalty.