Giustino de Sanctis

In the past couple of years, Vectis launched the JPEG XS video codec pool and, most recently, the OPUS audio codec patent pool. Vectis is clearly taking an interest in patent pools. What is your take on this?

At Vectis we have always been interested in joint licensing efforts. Personally, I find patent pools – and joint patent licensing in general – an excellent answer to patent licensing complexities in our very technological and connected world. As a young lawyer, when I started my activity in licensing, technological products were embarrassingly simple compared to modern devices. The first major licensing programme that I worked on focused on television sets, which were then just a box around a cathode ray tube for broadcast TV. No fancy codecs, added features, multimedia, internet connection, apps or wireless data capabilities. One could count on one hand the number of patent licensing programmes relevant for those products. Today, the simplest of electronic devices has more technology and relevant patents than the most sophisticated television set had 30 years ago. The natural consequence of this is the large number of one-to-one transactions that are required to secure licences for relevant patent rights. Patent pools and joint licensing programmes are the best answer to this complexity, and we answered the call from longstanding partners to work with them. 

Dolby and Fraunhofer are the patent owners in your OPUS pool. Why do you think that two of the biggest names in audio and video entrusted Vectis with the administration of such high-profile patent pools?

Our strength lies in the combination of skills and size; we offer the customer care and high professionalism that only a boutique firm can truly guarantee. Having managed successful global licensing programmes in consumer electronics and wireless tech, Vectis has built strong relationships among implementers – large and small – in many verticals. Our team is known for maintaining good relationships with industry players because of our approach to negotiation and attention to detail. Vectis listens to the market and every licensee’s needs and wants. Further, the team has decades of experience in licensing that includes management of multiple codec pools. Unlike many other companies that operate in narrow technology spaces, Vectis has deep experience in the three major pillars of tech licensing (wireless, audio and video) and this diverse resume has allowed Vectis to accumulate vast connections. This means fewer degrees of separation between Vectis and prospective licensees irrespective of technology and it opens doors that others might find closed. 

It appears that there has been a significant response to the OPUS patent pool and that many companies are engaging with Vectis to take advantage of the early licensee terms. Can you tell us more about the programme’s apparent success?

The OPUS patent pool has generated a huge industry response. Keeping up with demand and maintaining licence discussions simultaneously is not without challenges. With OPUS, many factors justify the high response rate that we are experiencing. For starters, OPUS is universally viewed as one of the best audio codecs. The credentials of the founding licensors, Dolby and Fraunhofer, are undisputed as being two of the most prominent innovators in audio and video over the past 40 years. Another factor is the prevalence of OPUS. While many outside the audio space have not heard of it, it now has multiple implementations on all sorts of consumer devices, ranging from smartphones, laptops and smart TVs to internet phones and vehicle infotainment systems. It is found in operating systems, web browsers and even apps like YouTube Music and WhatsApp.

What can you tell us about the JPEG XS pool? Did you face the same challenges as in the other pools?

We were very honoured for having been chosen to administer this very interesting pool. The major challenge here was to design a royalty structure that could encompass different business models of the very sophisticated broadcasting and video production industry. We eventually came up with an innovative and unique structure with a hybrid royalty model covering both products and services. We recognise that licensing of services is an area that many other past and present patent pools have tried to avoid. At the same time, in a market where companies are shifting resources from CAPEX to OPEX, consumers buy less products and use more services and hardware products are becoming commodities, service providers are the players that most benefit from the technological innovation without being usually requested to reward the innovators. We therefore believe that implementing a royalty model directed at service providers is a fair way to rebalance the innovation cycle.

As CEO, how do you ensure that clients receive the best service while all staff fulfil their potential?

Vectis has a small but experienced team with decades of collective licensing experience and over 1,000 licence agreements under their belts. The deep and varied experience of each of our team members gives us a collective depth and breadth of knowledge that is hard to match. The team has been together for a long time and we know one another’s minds. This allows us to speak freely, be more creative and to act as one. Each of us has different strengths and weaknesses and continuous cross-fertilisation of ideas and collaboration means that we all raise our game and perform better than we would without the team. We are also very efficient; we always act with urgency and can pivot quickly. This strong internal teamwork bond is evident to our clients and carries over into our relationships with them.

In a previous IAM Strategy 300 Global Leaders, you said that you wished the discussion around patents and licensing would change for the better, with a focus on the benefits of licensing to innovation. Twelve months on, is this coming true?

Sadly, no. It is still a game of cat and mouse with patent owners and implementers distrusting the other – to the detriment of innovation. There are exceptions to the rule, of course, but the default position for implementers is generally that patent owners are engaged in hold-up, while the default position for patent owners is that implementers are engaged in hold-out. Having said that, the parry and trust of patent owner/implementer licence discussions achieves a result without recourse to the courts in most cases. There are efficiencies that could yet be implemented, for sure, but do we the need the proposed regulatory intervention that we have seen in Europe in the past year? Unfortunately, this is the result of the real problem for our industry: the desire of some well-resourced and powerful implementers to tear down the patent system that has seen innovation flourish for hundreds of years. Their relentless lobbying has been undermining the patent system in the United States and Europe for over a decade and their influence over the mainstream media and political infrastructure continues to grow. As I have said many times, patent owners need to push back and be more vocal. Patent advocacy must grow if we are to take back control of the narrative and protect innovation.

There is increasing talk about how arbitration might be used to settle SEP/FRAND disputes. Are you seeing much appetite for alternative dispute resolution in this space, and what is your take on this?

Arbitration can be polarising. Those that have had success with it continue to endorse it, but it is usually patent licensors in favour and implementers against. The former reasons that a guaranteed and timely outcome is better than a drawn out and costly war of attrition, while the latter wonders why they should pay when they may not have to – with little or no penalty for delaying as long as possible.

Vectis continues to believe in balance between innovators and implementers and this is reflected in the terms and conditions of our programmes. This balance helps to reduce friction with prospective licensees, which in turn seem more amenable to amicable discussions and less willing to wage international wars. Even when we fail to reach an agreement and need to escalate, we see little inclination towards arbitration and prefer solving it through traditional dispute resolution routes.

How would you characterise the licensing landscape in the United Kingdom at present? And what are your predictions for the future?

After Unwired Planet v Huawei, it seemed that the United Kingdom was well on its way to take the lead in SEP jurisprudence and become the go-to venue for patentees seeking to set a global FRAND rate. However, with recent decisions being widely criticised in the patent owner community, UK courts no longer appear to be viewed as the go-to jurisdiction them. In addition, the UPC (which the United Kingdom has taken a step back from) now represents a crucial new collective forum that should help to more efficiently decide global patent disputes. My sense is that SEP licensors will be more inclined to take on implementers with international presence at the UPC rather than in UK courts. So, the United Kingdom’s importance to global licensing has diminished. It appears to have missed a big opportunity to influence the global licensing landscape in the years to come.

You are a frequent speaker at universities. What would be your top piece of advice for aspiring IP professionals?

Much like virtual meetings can never replace in-person interactions, theory can never replace experience in the field. Qualifications will only get you so far and negotiation skills can only be honed with time on the clock and learning from failures. Knowledge, attention to detail and critical thinking are all key attributes for IP professionals. However, at the end of the day, people skills are always the difference between success and failure in licensing, and practice makes perfect. So, my advice is: try to get as much first-hand experience as possible and choose an employer that works primarily in the office rather than remotely. I know that remote working is appealing to young professionals, but there is nothing better than learning the ropes by working next to somebody with experience. You cannot do that remotely, no matter how hard you try.

You and your team are “leading the way to licensing 2.0”. What does this strategy look like?

The principle is relatively simple and focuses on service industries that have recently become highly technology dependent by licensing companies for the use of the technology. The business model relies on granting licences for large patent portfolios on a subscription basis. The thought is that by enlarging the number of licensees, it is possible to offer licences at much more competitive prices while still creating a revenue model of interest for patent holders. The reaction of players in the verticals that we have focused on has been quite enthusiastic, but progress is much slower than we had expected and we are still working to launch our first licensing 2.0 programme. Then again, nothing really disruptive is easy. Perhaps the difficulties that we have been experiencing are proof that what we are trying to do is even more disruptive than we thought. Hopefully, we will have interesting news to share with the industry soon enough. 

Licensing is commonly international. How do you handle international issues and clients?

Vectis is a global company with a global mindset. We do not see borders, but we do recognise and respect cultural differences. The universal global licensing language is English, but for some jurisdictions (eg, China) there is a need for local representation, especially given cultural sensitivities.

It is unfortunate that we live in a world where geopolitical forces are stronger than they were 10 years ago. Tensions between the United States and China – two powerhouses for patent owners and implementers – is certainly not helping to make licensing easier. With both sides fighting for tech domination, intellectual property has become a strategic battlefront. Being European, Vectis is fortunate to be in a neutral position and this continues to open doors for us with clients and prospective licensees worldwide.