GovWire

What are Standard Essential Patents (SEPs)?

A standard essential patent is a patent that protects technology that is essential to implementing a standard.

A standard is an agreed or established technical description. It is also referred to as a technical standard or technical interoperability standard. These descriptions can cover ideas, products, services, or ways of doing things and make sure different technologies can interact and work together. For example, mobile phones, wireless connectivity, navigation systems in cars and smart meters all use technical standards.

Once a technical standard has been agreed, manufacturers are required to make their products standard-compliant.

In some cases, standards require the use of specific technologies protected by patents. A patent that protects technology which is essential to implementing a standard is known as a standard essential patent, or a SEP.

How are technical standards developed?

Technical standards are usually produced by standard development organisations (SDOs), established for the purpose of creating standards, with inputs from industry and technical experts. Trade bodies, government organisations and similar entities can also create technical standards.

Without using the methods or devices protected by technical standards and SEPs, it is difficult for a manufacturer (or implementer of the standard) to create standard-compliant products, such as smartphones or tablets.

Why is the IPO looking at SEPs?

The IPO is responsible for granting of patents, including those that end up being declared essential to a technical standard.

The IP framework plays a crucial role in enabling creativity and incentivising innovation. It creates jobs and encourages economic growth and allows the UK to maintain our position as one of the global leaders of innovation.

Technology is constantly evolving and becoming more reliant on wireless connectivity. To facilitate this, we rely heavily on technical interoperability standards. This means that implementers have no option but to use those standards, including access to the SEPs within them.

A patent holder is also incentivised to declare their patent as essential to a standard to gain access to the market and generate royalties. This could provide significant power to the SEP holder and to balance this they are obligated to offer their SEPs on fair, reasonable and non-discriminatory (FRAND) licensing terms.

To better understand if the current framework for SEPs is providing a fair balance to those involved in the licensing and implementing of SEPs, we launched a call for views on SEPs which closed in March 2022.

What did the call for views cover?

The government sought to better understand through its call for views on how the current framework for SEPs promotes innovation and whether it provides a fair balance to those involved in the licensing and implementing of SEPs, and to establish whether change is needed.

We covered a broad range of themes, and collected views on:

• the balance between innovation and consumers;
• views in respect of competition and market functioning;
• transparency?in the SEPs ecosystem;
• patent infringement actions and remedies, including the use and availability of injunctions;
• views on the licensing of SEPs; and
• views in respect of SEP litigation

As part of the process, we met with more than 60 UK and international businesses and industry representatives, who collectively represent the views of more than 400,000 members and businesses.

After the call for views concluded, the IPO published a summary of responses which gave an overview of what we heard.

The responses we received enabled us to hear a range of views around the challenges faced by industry. Some respondents said that the SEPs licensing system works well and there is no need for change. Others said that there needs to be improvement as there are barriers to innovation particularly for smaller businesses and tech start-ups. We heard about a lack of transparency in the licensing system, including in the pricing of SEPs, and uncertainty around whether a patent being licensed is essential to technical standards being relied upon. There were also respondents who said that threats of court-imposed injunctions and the potential for litigation impacted on businesses approach to licensing of SEPs.

Read our full summary of responses to the call for views.

Why are we reaching out to SMEs, small-cap and mid-cap businesses?

Through the call for views, we also heard that new entrants and SMEs often lack the experience and knowledge to enter negotiations on a level playing field. We also heard that new entrants and SMEs do not take part in the standardisation process, this may mean they have no insight into whether a patent is essential to a standard and therefore whether a licence is required.Some respondents also stated that some of these issues may cause barriers to innovation and scale up of new entrants.

We also heard various solutions put forward by respondents. Some said that government intervention may help improve these issues through changing legislation, issuing guidance, or establishing or strengthening institutions or processes.

However, although we heard limited evidence from bodies representing smaller businesses, we wish to understand the approach or issues that smaller businesses face in respect of SEPs licensing directly from UK SMEs, small-cap and mid-cap businesses, including their experiences of interacting or using technical standards when innovating.

New SEP questionnaire for SME, small-cap and mid-cap businesses

To address our lack of evidence we have launched a questionnaire specifically targeting this type of business.

We would like to invite all SMEs, small-cap and mid-cap innovators to respond to our questionnaire and share their views.

Our priority is to make the right decisions for the long-term and ensure our IP framework remains fit for the future. We will look toward continued engagement with industry, whose input has been invaluable and remains vital.