1. Innovation and Diffusion of technology
When I went to USA 15 years ago, I was not able to charge my power drained laptop, because the shape of the plug pins of my power card was rod shape, whereas the holes of the socket of the power source at the airport were flat type. Similarly, I was not able to use my mobile phone I carried to USA, because it was incompatible with the cellular communication network in USA, in view of the CDMA Vs GSM technology.
My problem could have been solved if my power card pins were flat type as it was in USA and the technology of my mobile phone was similar to that of USA. Standards can bring uniformity, inter-operability, easy accessibility and everywhere availability of products. The technologies used in products can be protected by patent rights. Patents are granted for the novelty, inventiveness and industrial application of an invention. Patents and standards serve common objectives of encouraging innovation and diffusion of technology. However, the world of standards and patents is complex.
2. Standard Essential Patents (SEPs)
This article aims to provide an overview about standards, the nexus between the standards and the patents, the Standard Essential Patents (SEPs) and the business impact of these SEPs.
“A standard is a document that provides requirements, specifications, guidelines or characteristics that can be used consistently to ensure that materials, products, processes and services are fit for their purpose.” A few example of standards are GSM, VOIP, AR and 5G.
Patents are the rights granted to the owner of the innovation. The owner will enjoy an exclusive right for use or sale or licensing to others for a specified period. However, the ultimate objective of granting patent protection for an invention is that the society should benefit from the invention. That is the reason the invention is given protection for a limited period.
Patents are called Standard Essential Patents (SEPs), if a patent is essential for the use of a technology which has become a standard. So, SEPs are unavoidable for the implementation of a standardized technology.
A patent is an asset of the owner of that patent. The owner has the right to take decision of using, or not using, selling or licensing or refusing to license. However, in an exceptional situation, the owner can be compelled to grant license under certain conditions with the sole objective of benefit to the society.
In the case of SEPs, the product companies which use the technology of a standard, have to get license from the patent owner of that technology and if they fail to get the license, they will end up facing litigations.
3. The Standard Setting Organizations (SSOs)
The standards are evolved by a consortium of members. Such organizations are called Standard Setting Organizations (SSO). It can be private, government or nonprofit organizations. SSOs require members to disclose and grant licenses of their patents/the pending patent applications which have been essential to the standards. A few examples of SSOs are ISO, ASME and IEEE.
“When standard necessitates the use of technology protected by one or more patents, SSOs require the patentee to agree on specific licensing conditions, under Fair, Reasonable and Non-discriminatory Terms (FRAND) , though the SSOs are not involved in license agreements or in settling disputes”.
Patent pool is created by the owners of such patents. Patent pool enables the members to use the pooled patents in exchange of their patents to the use of other members and provides a standard license for non-members of the pool. A portion of the licensing fees is allocated to their members in line with the agreement with the members. Licensing arrangement should be line with the FRAND guidelines. There are plethora of legal disputes on the licensing fees and the determination of FRAND.
4. The power of Standard Essential Patents (SEPs)
According to A. Jones’ article in the European Competition Journal, 23500 patents were declared essential to GSM and 3G/UMTS standards developed by ETSI.
A look at the data released by WIPO for 2019 reveals interesting facts. The 5G standard patents are owned by the top six ICT companies including Ericsson, Nokia, and Huawei. Among them, Huawei ranked first in the number of SEPs filings. Qualcomm has submitted most contributions to all generations from Wi-Fi 5 to Wi-Fi 7. The increasing trend of SEPs is in 5G, GSM, UMTS, LTE, Wi-Fi, Bluetooth or MPEG.
The major sectors covered by Standard Essential Patents are Communications equipment (Telephone & Telegraph apparatus, Radio & TV Broadcasting), Household audio & video equipment, Communications, Computer & data processing services, Instruments & related products, Industrial machinery & equipment and Electronic component & accessories
5. The SEPs Intelligence
Every company owning SEPs or every company owning products using a Standard are required to continuously carry out patent, product and standard intelligence exercise either to assert their right for getting license fee or to protect themselves against or avoid any potential infringement claims.
One may get exposed to patent infringement litigations and suffer huge financial losses, if the SEPs are missed while implementing a technology. Potential infringement of existing patents by others can help while selling the patent assets, since proof of patent infringement can strengthens the terms of the sale.
6. No Options
Business leadership now depends on the technology leadership. Technology innovations rule the world. The technologies contributing to the standards have become a necessity in the borderless connected world. All CTOs now have no option than to understand the world of SEPs and accordingly devise strategies for their products and act accordingly for the success of their business.