SEPs and SSOs: Ensuring effective fairness and disclosures

SEPs and SSOs: Ensuring effective fairness and disclosures

The patents and other IP rights form an indispensable part of the core strategy of a company for achieving commercial success and acquiring market dominancy

For a patent governing the technological standards for which there are no such infringing alternatives, that patent comes under the ambit of Standard Essential Patents (SEP). These standards are reached through the consensus for setting up the 'Common technology standard' supported by the Standard Setting Organisation (SSO). The difficulty comes up with the perceived 'standard' that a patent becomes when it controls a legitimate amount of technology.

When a standard is adopted, for instance, the proprietor of a SEP will automatically have a dominant bargaining position that can be utilized to extract enormous revenues depending upon the value of the standard instead of the basic SEP; likewise, SSO might be hesitant to accept a standard in any case if the SEP owner does not license it in advance because the worth of the SEP is an element of the standard's degree of appropriation. These patents render it impossible to implement or operate standard-compliant equipment without infringement.

To reduce the risk of standardization resulting in anti-competitive outcomes as well as to prevent licensing "holdups" and ensure access to SEPs, most SSOs require owners of SEPs to commit to license them on FRAND terms to all interested parties. FRAND commitments have been widely used, but the lack of strict enforcement measures has often led to failure to achieve the desired results.

The patents and other IP rights form an indispensable part of the core strategy of a company for achieving commercial success and acquiring market dominancy. SSO is mostly responsible for setting up the standards for technological promotions. But various challenges are there which poses difficulty in the process of standard creation and adaptation.

There are various obstacles like those of screening the patents for being standard-essential patents since the company can over-declare the patent for revenue generation. The patent pools also work for mitigating the transactional cost further obstructing the policy structure of SSO. Patent pools are created to assist technology-implementing organizations in averting the risk of being sued by patent holders and offer market convenience. But there is no assurance that the essential patent holders have been included.

One of the few problems associates with the declaration policies of SSO. For example, the European Telecommunication Standards Institute (ETSI) policy statement reads "the submitted patent may be or may become essential in ETSI works". We can infer that the policy statement does not provide any such authoritative and comprehensive information about the validity and scope of the patent.

Nevertheless, the collaborative approach being undertaken by the SSO is promising for the future industry, but still, effective SEP disclosures need to be declared. Taking ETSI's 2G, 3G, and 4G telecom standards only 28 per cent, 29 Per cent and 50 per cent of patent families of the respective telecom standards were found to be essential to the standardized implementations.

It is beneficial to determine the actual value placed on the essentiality of the patent. Since the licensee ends up paying heavy royalties and there are instances when the patent that was declared was not adopted in the final version of a standard.