Standard Essential Patents: Myths & Realities

July 22, 2022
- Intellectual Property (IP)
- Standard Essential Patents (SEP)

Standard Essential Patents protect an invention that must be used to comply with the industry’s standard. It forms the core technology of the industry and its usage becomes imperative in developing and selling related products. It is this very fact that gives Standard Essential Patents (SEP) supreme importance and lends to their complex and controversial nature. There are several myths surrounding SEPs that may incorrectly influence the IP strategy of businesses. In the ensuing paragraphs we bust a few such myths of SEP.

Benefits of Standards

By refining market coordination and reducing transaction costs, Standards serve the important purpose of improving market efficiency.
In industries like telecom, standards are helpful in offering interoperability to businesses.
Intra-industry international trade is aided by the presence of standards.
Product quality and performance are made uniform across the industry due to standards.

Standard Developing Organisations

Under 42 USCS § 1320d (8), SDOs are defined as a standard-setting organization accredited by the American National Standards Institute, including the National Council for Prescription Drug Programs, that develops standards for information transactions, data elements, or any other standard that is necessary to, or will facilitate, the implementation of this part [42 USCS §§ 1320d et seq.].

SDOs or SSOs are involved in developing, amending, revising, managing, and maintaining the standards. In most SSOs (Standard Setting Organisations), standards are selected by voting by members.

Four SEP Myths v/s Realities

1. Any declared patent is deemed standard-essential

It is not common knowledge but companies tend to err on the patent declaration. This is because there is no essentiality check performed on the declared patent to assess its essentiality rate. This phenomenon wherein a patent is declared ‘essential’ when it may not be the case, is termed as ‘over-declaration’. Over-declaration may occur due to the following reasons:

Businesses may feel bound to declare their patents even before being approved as not doing so may lead to other problems in the future and might even hinder the enforce ability of their patent.
Due to the fast-evolving tech landscape, some patents may lose the status of being essential as new innovations come to the forefront.
The narrowing down of the scope of a patent may limit the parts that make it essential.

Rejection of the patent means that it can no longer be essential.
Unethical practices by some businesses to gain an advantage in the market by declaring their patent as essential.
While it is difficult to determine the ‘essentiality’ of a patent, there are few tools like data models, AI, etc which can help in performing the task.

Since they are born within the organization., protecting these ideas at the initiation stage is possible and increases the IP security.

2. Companies declare their Standard Essential Patents to Standard Bodies (SSO)

Standard Setting Organisations are responsible for setting and managing the industry standards. They require member companies to disclose SEPs and are also responsible to assist in licensing the SEPs based on FRAND terms. While it is required by companies to declare their SEPs to the Standard Setting Organisations, it is not obligatory. Since there is no rule mandating this, companies sometimes reveal only a portion of their SEP or defer from disclosing any information.

3. All standard-compliant products implement the standard patent

A standard patent includes optional as well as mandatory features. While patents leaning on mandatory features come under essentials, the optional features are important only if applied in products.

4. The entire SEP portfolio needs to be licensed for implementation in product

This is a common concern faced by licensees. Truth is that only the patents that infringed on the features of your product need to be licensed. If you do not intend to use all the patented features in a SEP then those are not required to be licensed either.

Conclusion

Standard Setting Organizations (SSOs) declare some patents as SEP in order to curb monopolization by the patent holders. Assigning the SEP status to patents helps in keeping a check on anti-competition practices, high royalty fees, or refusal to license by companies. FRAND (Fair, Reasonable and Non-discriminatory) rules are put in place to handle all licensing agreements and ensure fair practice. Overall, SEPs help in the creation of uniform consumer products and services that the market can greatly benefit from.

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