The Intellectual Property Office (IPO) has recently announced that it is seeking views regarding the Standard Essential Patents, or SEPs, ‘ecosystem’ as part of the Government’s long-term plan to deliver innovation-led growth.
The focus of this review will be the commercial relationships within the SEP ecosystem, its infrastructure, the entities involved, and the legal and regulatory environment governing SEPs.
On average, the number of SEPs has doubled roughly every 5 years between the early 1990s and 2014. In 2020, roughly 95,000 patents had been declared essential for the 5G technology standard alone. Given the prevalence of SEPs, it is positive that the UK Government is keeping them under review to ensure that the system remains fair, efficient and encourages innovation.
What are SEPs?
A patent may be considered to be a SEP if its claims overlap with the requirements of a technical standard.
In this context, ‘technical standard’ generally refers to rules as to either safety or industry-wide standardisation. In many cases, the purpose of a technical standard is to facilitate interoperability between products manufactured by different businesses. Consider, for example, mobile telephone masts – these will be manufactured by one company but will need to be able to communicate with devices manufactured by other companies.
If the functionality required by that standard falls within the scope of a patent, then this would result in infringement of that patent unless the patent is declared a SEP.
If a patent is declared a SEP, its owner will often need to licence it to ensure that others within the industry have the relevant means and knowledge to comply with the standard – if there was no such requirement, this would have the potential to stifle competition in areas where, so as to stimulate innovation, participation in standard creation is essential.
The licensing requirements vary depending on the organisation that has set the technical standard in question – some of these organisations require that the licenses issued are ‘FRAND’ (meaning that the licence should be fair, reasonable, and non-discriminatory terms). Whereas others require royalty-free licensing.
What is the IPO going to do?
At this stage, the IPO will be focusing on gathering evidence on:
- The link between SEPs, innovation, and competition;
- How the SEP market operates, specifically the relationship between licensors and licensees and whether there is an imbalance;
- Transparency within the SEP ecosystem;
- Efficiency of SEP licensing, the functioning of the patent framework, and FRAND litigation
To identify the issues within the SEP ecosystem and ensure that the UK remains one of the world leaders in innovation and technology. The IPO hopes that by listening to a wide range of views, it will be able to better understand the challenges faced by the industry and how the IP framework supports SEPs as well as ensure a fair balance between all entities involved.
This has been partly prompted by increased use in wireless technologies, (specifically 3G, 4G, and 5G) in the telecommunications and automotive industries. It is not yet clear whether Government intervention is required beyond this assessment. The call for views will end on 1 March at 11:45pm. Once it closes, the Government will assess the responses and publish a summary of them. It will then assess whether any further action is required.
The UK is already a big player in the world economy when it comes to intangible assets. From 2017 to 2018 alone, £169.2 billion was invested into intangible assets in the UK and its IP system was ranked fourth in the World Intellectual Property Organization’s Global Innovation Index 2021. IP and innovation go hand in hand, so ensuring that the SEP ecosystem is operating effectively will no doubt only strengthen the UK’s position in the global market and further encourage innovation and competition.
However, identifying issues is only part of the solution to encourage further innovation so it remains to be seen what strategies and solutions the Government comes up with once the report has been published. It may be a long time before any of the recommendations that follow the consultation are actually implemented.