Patents: a New Resource Hub on Standard Essential Patents in May and HMG's other Proposals on FRAND Licensing
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A standard essential patent ("SEP") is a patent that has to be worked in order to comply with a technical standard. Organizations that set such standards (known as standards-setting organizations or SSOs) require SEP proprietors to promise to license the use of their patents to businesses that want to make or distribute products that comply with those standards ("implementers") on fair, reasonable and non-discriminatory ("FRAND") terms as a condition for including their patents within the standards.
On paper, this looks like a very fair arrangement and in theory, it should work very well but in fact, it doesn't. One problem is that implementers use a standard without paying any royalties or licence fees to the SEP owners arguing that their patents are invalid or not essential for compliance with the patent. Another is that SEP owners and implementers have very different ideas on what amounts to fair, reasonable and non-discriminatory terms.
On paper, this looks like a very fair arrangement and in theory, it should work very well but in fact, it doesn't. One problem is that implementers use a standard without paying any royalties or licence fees to the SEP owners arguing that their patents are invalid or not essential for compliance with the patent. Another is that SEP owners and implementers have very different ideas on what amounts to fair, reasonable and non-discriminatory terms.
Disputes between SEP owners and implementors have given rise to a lot of litigation around the world. In this country, they take the form of "technical trials" to decide which if any of the patents that are incorporated into a standard are valid and essential. If the court finds that at least one such patent is valid and essential to the standard, there is a further trial known as a "FRAND" trial to determine the terms of the FRAND licence. Those who want to read the case law will find a summary and links to some of the leading cases in IPO Consultation on SEPs and Innovation which I posted on 19 Dec 2021.
As such litigation is very expensive and time-consuming governments around the world have been consulting on ways to avoid or limit it. I mentioned the IPO's consultation in the above article. That consultation closed on 1 March 2022 and a Summary of Responses to the Call for Views was published which I noted in Consultation on SEPs and Innovation: The Responses on 11 Aug 2022. On 21 March 2023, the IPO announced a questionnaire on standard essential patents for SME small-cap and mid-cap businesses which I mentioned in IPO Consults SMEs on SEP Licensing on 24 March 2023. The IPO received 47 responses to that questionnaire including one from me. It published the outcome of that consultation on 5 July 2023 (see SEPs questionnaire for SME, small-cap and mid-cap businesses: Summary of Response) which I mentioned in Responses to the Questionnaire for SME, Small-Cap and Mid-Cap Businesses on 12 July 2023.
On 27 Feb 2024, the IPO published a guidance document entitled Standard Essential Patents: 2024 forward look in which it announced that it had reported its findings to Ministers and had agreed the following key objectives concerning SEPs:
- "helping implementers, especially SMEs, navigate and better understand the SEPs ecosystem and Fair Reasonable and Non-Discriminatory (FRAND) licensing;
- improving transparency in the ecosystem, both pricing and essentiality; and
- achieving greater efficiency in respect of dispute resolution, including arbitration and mediation,"
The guidance announced that the IPO is aiming to launch an online SEP Resource Hub by May 2024 which will be a repository of tools, guidance and other material designed to help SMEs navigate what the IPO calls "the SEPs ecosystem." Guidance may include signposting to dispute resolution procedures, information on patent pools, and court processes in the event of disputes.
The IPO also promises international collaboration and enhanced engagement with SSOs. Such collaboration appears to be "an increase in the pace and visibility of our discussions with other patent offices on global ecosystem challenges."
Other proposals to help improve SEP licensing would require yet another consultation later in 2024 By that time there may well be a change of government.
The sanction on implementers that refuse to accept a FRAND licence is an injunction to restrain them from working the relevant SEPs in this country. As the UK is not a large market in comparison to the USA, China or the EU several implementers have decided to quit the country rather than accept licences drafted by a British judge that increases their costs of selling to those larger markets. According to the guidance, HM government had considered legislation to narrow the use of injunctions in SEP disputes but "after careful consideration of the evidence, operation of relevant legal frameworks and international obligations" it has decided not to do so.
The sanction on implementers that refuse to accept a FRAND licence is an injunction to restrain them from working the relevant SEPs in this country. As the UK is not a large market in comparison to the USA, China or the EU several implementers have decided to quit the country rather than accept licences drafted by a British judge that increases their costs of selling to those larger markets. According to the guidance, HM government had considered legislation to narrow the use of injunctions in SEP disputes but "after careful consideration of the evidence, operation of relevant legal frameworks and international obligations" it has decided not to do so.
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