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Standard Essential Patents and Competition Law

As each new generation of technology becomes more advanced, the rate of progress of each new version and evolution speeds up too. It really is true that technology is progressing quicker than it ever has before.

Due to this increase in speed and evolution, the patenting of technical standards has become more and more important. There is an entire system that instructs companies on how to measure the quality and features of technological devices, and everyone involved in the industry must follow them.

As technology develops and merges with every industry, the legal standards and implications also have to adjust and be updated. In this article, we take a closer look at Standard Essential Patents, and how they benefit companies, as well as updates to Competition Law.

Standard Essential Patents and Competition Law

Standards and Patents

Standards ensure that technology is rapidly distributed throughout products in a set. 

Patents offer benefits to companies for research and development, and allow knowledge to be transferred.

Many Standards are based on technologies that  have been patented. We will go into more detail below. However, as an introduction, the mobile and telecommunications industry relies a lot on patent standardization. This is also true in the consumer electronics industry, automotive industry, and electricity supplier industries.

Companies must set the standards and develop the rules and codes of how they issue and license patents that  are essential for these standards. These Standard Essential Patents are, therefore, essential to the Standard itself.

What are Standard Essential Patents and How Do They Benefit Companies?

A Standard Essential Patent is a patent designed to protect an Industry Standard.

The standard could be a document that  is established by consensus and is approved by a registered body. The document sets out the requirements for a specific material, item, system, service, or which sets out guidelines and rules to describe a particular method.

The standards that make up a Standard Essential Patent (SEP) can be voluntary or can be mandated by law.

SEPs can be adopted nationally or internationally. If a company failed to obtain licenses for all of its patents that are essential for compliance with a certain standard, owners of the unlicensed patents can demand or sue for royalties from those companies that do adopt the standard.

Examples of Standard Essential Patents

Some examples of Standard Essential Patents (SEP´s) include:

  • USB 

  • Wi-Fi

  • JPEG 

  • QWERTY keyboard

For each of these SEPs, there are manufacturing standards that have been set. These standards may require companies to manufacture goods or use a standardized technology system.

SEPs are different to patents that  do not have to meet a certain standard. For example, a smartphone may have the slide to unlock feature. This feature in and of itself is a non-essential standard.

When a consumer purchases a smartphone, they do not necessarily need to have the slide to unlock feature. Many mobile phone manufacturers have developed alternative technologies to unlock a mobile phone, and doing so does not infringe on any regulations or laws.

However, in the case of an SEP, companies and manufacturers do not have the ability to create their own technology or feature as this would be an infringement of the SEP.

Standard Essential Patents and Competition Law (H3)

Owners of Standard Essential Patents now come up against much more stringent licensing requirements, which also cross international borders. As technology becomes worldwide and all-encompassing, Standard Essential Patents are becoming crucial to the patent portfolio and global intellectual property strategy of companies.

Challenges to SEPs in the realm of competition law can come under different grounds. These include:

  • No Proper Guidelines – When there are no proper guidelines as to what constitutes “fair, reasonable and non-discriminatory” terms of engagement

  • Competition Law versus Intellectual Property Law – There is usually a lot of involvement of competition law when it comes to SEPs. This is because SEP holders need to license their creation and this can be very expensive. When legal cases are brought by users of SEPs against the SEP owners, the question of whether or not competition law has been violated has to be asked. A decision can then be awarded not on the intellectual property itself, but on the aspects of competition. 

  • SEP compulsion – This occurs when the SEP owner has to obtain a license or set of licenses from the SEP holder. This can be an arduous process, which is not often regulated properly. 

  • Royalties – The royalty amount will depend on the product being licensed, and how much it is used. SEP owners can set their own royalty rate on the net sale price of the final product instead of on the part that has the use of the SEP. Royalty amounts are charged by the SEP holder.

It’s clear that being able to patent the technical standards that operate in a business is key to a company´s ability to stay relevant and protected in the competitive marketplace.

The existence of SEPs means that trade and innovation will continue to rapidly advance, and can provide a foundation for how we regulate technological innovation now and in the future.

Legal firms will have to adapt quickly to these new standards, and will need to defend and protect the interests of the SEP owners should conflict arise. 

If you are a law firm or legal department, UnitedLex can help with your SEPs and other patents.

Read more about our Intellectual Property Management Solutionshere.

Click here for litigation support services.

UnitedLex is a technology and legal services company committed to delivering full-scale Digital Legal Transformation. The world’s most forward-thinking law departments rely on the company’s expertise in over 25 global jurisdictions. Founded in 2006, the team includes 3,000 legal, engineering, and technology professionals with major operations in 18 countries. For more information, contact us.

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