Last month saw the UKIPO launch a call for views on the Standard Essential Patents ecosystem and whether change is needed. We have summarised the purpose of this call and shed light on key issues surrounding this area of intellectual property.
WHAT IS A STANDARD ESSENTIAL PATENT (SEP)?
A Standard Essential Patent, or “SEP”, protects technology which must be implemented to comply with a technical standard.
Widespread throughout the computing and telecommunications sectors1, SEPs are expected to play a major role in hyperconnected emerging technologies such as autonomous vehicles, the internet of things and perhaps even Web3.
The determination of whether a patent is ‘standard essential’ is usually made by a standards developing organization (SDO) who may operate at a national, regional, or international level. One well-known SDO is the European Telecommunication Standards Institute or ETSI.
HOW DO STANDARD ESSENTIAL PATENTS WORK?
Access to technologies protected by SEPs is crucial for the sustainability and growth of any sector that uses standardised technology to operate in their market/s.
For example, without access to a licence for such technologies, a third-party seeking to implement a technical standard (for instance, a smartphone manufacturer) risks being unable to commercialise a standard-compliant product.
Accordingly, to support the commercialisation of standardised technologies, SDOs also develop frameworks for the licensing of SEPs to third parties on fair, reasonable and non-discriminatory or FRAND terms.
Arriving at exact FRAND terms, however, is a delicate balancing act.
On one hand, proprietors of patents declared as SEPs want a fair return on their R&D investments. On the other hand, all stakeholders involved in a particular technology (e.g. smartphones) want to see its commercial success.
As such, there is a tension between allowing SEP holders to take action against allegedly infringing ‘implementers’ of the SEP technology, whilst also ensuring that those implementers get the opportunity to negotiate a FRAND licence without having access to the market restricted by the SEP holders. This has led to huge, multi-territorial litigation between major parties, including Unwired Planet, HTC, Lenovo and others.
ARE CHANGES TO THE CURRENT SEP ECOSYSTEM REQUIRED?
The time-limited exclusive right over an invention afforded by a patent provides an incentive to innovate.
SEPs, however, may be seen as stifling innovation. If we take the smartphone as an example, the end product may rely upon hundreds if not thousands of SEPs. As such, if you are seeking to innovate in respect of one smartphone component, that component must complement and remain compatible with all related components to remain interoperable. That said, this is also true of complex systems such as automotive engines or even hardware such as graphics cards within a computer system.
Against this background, the UKIPO’s call for views poses a broad question on whether the existing SEP ecosystem promotes or hinders innovation, and the interrelationship between the SEP ecosystem and competition law.
The call also seeks opinions on whether the SEP ecosystem is sufficiently transparent for SEP holders, implementers and third parties. This topic appears to come from the UK Government’s concern over the subject2, since scrutinising essentiality (for example) impacts not just the number of patents declared standard essential, but also licensing negotiations (e.g., the setting of FRAND rates).
Further topics covered by the call include:
- competition and market functioning;
- patent infringement and remedies;
- the legal framework around SEPs and FRAND; and
- licensing of SEPs and SEP litigation.
The call is broadly worded and provides an opportunity for wide-ranging comment from interested parties and those expert in the area. It is clear that within the past 5-10 years, the Courts of England & Wales have provided a forum for major parties conducting litigation in respect of SEPs, the availability of injunctive relief, and the determination of global FRAND terms, including in the Unwired Planet case.
In our view, this call may provide a springboard for the UK Government to legislate on the legal framework around SEPs, which currently exists in a sort of limbo between the policies of SDOs such as ETSI (which is governed by French Law) and jurisprudence from historic decisions in the Courts. It will be interesting to review the responses to this call and determine the appetite for change, and perhaps even legislative harmonisation of the approach in the UK.
WHAT ARE THE NEXT STEPS IN THE UKIPO'S CALL FOR VIEWS ON STANDARD ESSENTIAL PATENTS?
The UKIPO’s call for views is open until 1 March 2022 and can be responded to via this webpage.
Responses to the call will inform the UK Government’s decision on whether action or intervention in the SEP ecosystem is required as part of its efforts to produce an optimised domestic IP framework that promotes innovation and creativity.
To find out more about Standard Essential Patents and how IP can help you create commercial value from your innovations, feel free to contact any of our electronics and computing team.
1One study identified approximately 95,000 patents declared as standard essential for 5G.
2The European Commission is also seeking to improve transparency surrounding SEP licensing.