IPO Consultation on SEPs and Innovation

Intellectual Property Office
Crown Copyright 2007 Open Government Licence v3.0


Jane Lambert

One of the talks that I gave at the Cambridge IP Law Winter School was "TMT: A SEP and FRAND Overview".   I did not choose that title so I shall try to explain what I think it means.  

  • "TMT" stands for technology, media and telecoms. TMT is a sector where there has been a lot of litigation about "SEPs". 
  • SEPs are "standard-essential patents", that is to say, patents for inventions that a telecoms equipment manufacturer has to use if it is to implement a technical standard.  Technical standards are set by standards-setting organizations ("SSOs"). An important SSO for mobile communications is the European Telecommunications Standards Institute ("ETSI").  
  • "FRAND" is short for "fair", "reasonable" and "nondiscriminatory" and refers to the terms on which SEP owners are supposed to license the use of their inventions by manufacturers seeking to implement a technical standard.  ETSI and other SSOs require SEP owners to promise to grant licences on FRAND terms in return for including their inventions in their standards.
That is how the arrangements between SSOs, SEP owners and implementers (manufacturers implementing a technical standard) are supposed to work but that does not always happen in practice.  Sometimes implementers make products that comply with standards but do not pay a licence fee on the ground that the patent is not really essential to the standard, that the patent was invalid or the implementer did not infringe the patent. SEP owners for their part require implementers to take patents for inventions that they do not need or in markets that they do not operate.

That has resulted in litigation between SEP owners and implementers.  In this country, Mr Justice Birss (as he then was) drew up a worldwide licence agreement to use a portfolio of patents held by a company called Unwired Planet International Ltd which he attached to his judgment in Unwired Planet International Ltd v Huawei Technologies Co Ltd and another [2017] EWHC 1304 (Pat), [2017] RPC 20. In that judgment, he granted an injunction restraining massive Chinese telecommunications equipment manufacturers from infringing the British patents in the portfolio unless those implementers accepted a licence from Unwired Planet on the terms that he had drawn up.  Mr Justice Birss's judgment was upheld by the Court of Appeal in Unwired Planet International Ltd and another v Huawei Technologies Co Ltd and another (Rev 1) [2018] RPC 20, [2018] EWCA Civ 2344 (23 Oct 2018) and the Supreme Court in Unwired Planet International Ltd and another v Huawei Technologies (UK) Co Ltd and another [2020] Bus LR 242, [2020] UKSC 37 (26 Aug 2020).

Many implementors objected to Mr Justice Birss's judgment on the basis that an English court does not have jurisdiction to make such orders and that even if it does this country is not the appropriate forum. They argue that they are incorporated overseas and that nearly all their business is transacted elsewhere. That point was also considered by the Supreme Court in the Unwired Planet appeal and rejected.  In TQ Delta LLC v Zyxel Communications Ltd and another [2019] EWHC 745 (Pat) (18 March 2019), the implementers submitted to an injunction and an inquiry as to damages rather than accept a worldwide licence drawn up by an English judge.

I have already reported that the European Commission has announced that it is considering legislation to regulate SEP licensing (see European Commission proposes Standard Essential Patent Licensing Regulation 15 July 2021).  A consultation document that had been expected in the third quarter of this year is now due in the first quarter of this and the Commission hopes to draw up a draft regulation in the fourth quarter of 2022 (see Intellectual property – new framework for standard-essential patents on the Commission's website).

It appears that similar legislation is also under consideration here.  On 7 Dec 2021 the Intellectual Property Office published an open consultation on SEPs and innovation and issued a call for views. The aim is to produce the optimal IP framework for the UK that will promote innovation and creativity both now and, in the future.  The questions are as follows:
  • Who are you?
  • In what capacity are you responding to this call for views?
  • In your view, are there issues in respect of market power in markets using SEPs? Examples are particularly sought on practices that create difficulties for industry or act as barriers to innovators.
  • Are you aware of evidence of circumstances where an implementer of a SEP is required to buy licences to a wider patent portfolio that is not relevant to the standard or component to which the SEP relates? Are there effective ways of resolving such issues?
  • Does the competition law framework impact the provisions in agreements between SEP owners in practice? If so, how does it do this? Is there room for improvement in order to better benefit and encourage competition and innovation?
  • In your view, what actions or steps can be taken to encourage competition and innovation in the SEPs ecosystem?
  • Is there sufficient transparency around how patents are being declared as essential to the standard? What actions do industry, including SDOs undertake to ensure essentiality is understood?
  • Are you aware of instances of under-declaration or over-declaration and what issues does this create for markets using SEPs?
  • Would the introduction of an essentiality check service by an independent party improve licensing negotiations? Who would be the appropriate independent party to undertake essentiality checks?
  • How should an essentiality check take place? Should there be a level of legal certainty given to essentiality checks and assertions of essentiality by IPR holders? If so, how?
  • As SEP portfolios are negotiated with individual implementers, in your view is there sufficient transparency around pricing available when entering into a negotiation? Is there a justification under FRAND for different SEP implementers, using the SEP for the same purpose, to be charged different rates for market access?
  • Would some form of pricing transparency be appropriate for supporting implementers in FRAND pricing negotiations? Views are sought from respondents on the role that the patent system plays in the development of SEPs and FRAND licensing and whether there are issues within current practice (including law and court judgments) that create issues for innovators. Please include case studies or worked examples, if possible.
  • As patents are territorial in nature, does the current patent regime create a fair global market? Do SEP licensing costs vary by region?
  • Are legal actions and injunctive actions taken equally against infringers of SEPs, regardless of their territorial presence?
  • Does the current framework work for you in enforcing your rights conferred by holding the patent? For example, are injunctions an effective tool? What is the impact of anti-suit injunctions by implementers?
  • In your view, how should the SEPs and FRAND licensing ecosystem adapt to new standard development for emerging technologies?
  • What if any, flexibilities exist within the IP framework that could improve the efficiency of obtaining a license for implementers?
  • Do you have any views on any other ways of improving efficiency within the licensing landscape of SEPs?
  • Would better use and access to patent pools offer improved efficiency around SEPs licensing? Or would greater use/access create barriers for innovators if there were limitations introduced i.e. cross-licensing?
  • How are patent pools best created? To what extent should States, SDOs or other appropriate entities be involved (or excluded) from setting up patent pools?
  • Are there alternative ways to address disputes on pricing mechanisms? For example, what point in the value chain provides an economic basis to calculate rates payable?
  • How could schemes where there are specific definitions of what costs are allowable (percentage limits etc.) best be utilised?
  • In your view, what are the benefits or drawbacks of national courts setting global licensing rates?
  • Is reliance on courts to determine on a case by case basis whether a licence is FRAND efficient?
  • How should industry-led approaches for specific areas of SEPs arbitration be explored further? Do you also have views on alternatives to industry-led solutions, for example, government providing alternative ways of determining and resolving FRAND licensing disputes?
  • Are there already effective alternative means of arbitration and dispute resolution away from courts in respect of FRAND licensing?
  • We also welcome any other comment or evidence that you believe the government should be made aware of when responding to this call for views.
Responses are due by 22:45 on 1 March 2022.

Anyone wishing to discuss this article may call me during office hours on 020 7404 5252 or send me a message through my contact form.


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