UK considers standard-essential patents system shake-up

The measure is one of several potential government interventions to the standard-essential patents “ecosystem” indicated in a ‘call for views’ opened by the UK Intellectual Property Office (IPO).

Patent law expert Mark Marféof Pinsent Masons said: “The IPO’s paper highlights the importance of interoperability and the ability for products developed by different manufacturers to communicate with one another to enable consumer functionality. This is increasingly important in an age of the internet of things (IoT) and artificial intelligence, which are often reliant on wireless communication standards, such as 5G, which are protected by standard-essential patents.”

A standard essential patent (SEP) is a patent that protects technology believed to be essential to implementing a technical standard. In other words, you cannot operate a standard compliant device without necessarily using the patented invention. As a result, the bodies through which businesses collaborate to develop standards – such as ETSI in the context of telecoms standards – require SEP rights holders to make SEPs available for others to use by way of a licence on fair, reasonable and non-discriminatory (FRAND) terms.

However, the UK government said that “there can be a lack of certainty as to which patents are essential to a standard, or whether certain patents are essential to the standard at all” and that this risks added costs and complexity for implementers of technology standards. The IPO has asked for views on whether the establishment of an independent “essentiality check service” would improve licensing negotiations, who should undertake such checks, and how should they take place – including whether the outcome of essentiality checks should deliver “a level of legal certainty”.

A system of independent essentiality checks for SEPs was endorsed in a report published earlier this year by a group of experts established by the European Commission. The group, which comprised figures from industry, academia, law and the judiciary, said the move could help speed up the SEPs licensing process and reduce the volume of litigation associated with those types of patents.

The introduction of independent essentiality checks is just one of the measures the UK government is considering to address transparency concerns relating to SEPs and whether such patents are a barrier to the diversification of the technology ecosystem. The IPO’s paper highlighted how SEP licensing and FRAND pricing negotiations “take place in the private sphere” and the lack of public information about what is agreed. This, it said, “can make it difficult to know how FRAND pricing rates have been agreed which can have implications for other negotiations”. It is seeking views on whether “some form of pricing transparency” should be delivered to support implementers in FRAND negotiations. 

Marfé said: "Efforts to provide greater transparency as to licensing of SEPs are very welcome. This can only benefit the SMEs and new entrants to the complex IoT ecosystem. These businesses will be required to license standardised technologies and need to understand how such licences will impact their bottom line."

The IPO’s wide-ranging call for views, trailed in the UK government’s innovation strategy published earlier this year, also seeks views on the link between SEPs, innovation and competition and how these interrelate with each other, as well as input from SEP holders on the current framework for enforcing their SEP rights and obtaining remedies for infringement. It also highlights possible initiatives to encourage disputes over SEPs to be resolved via arbitration or mediation rather than litigation in the courts.

“A potential benefit of more widespread use of arbitration or mediation could be reduced costs and lower barriers to entry for innovators,” the IPO said. “The government seeks views on how best to encourage and promote greater use of arbitration and whether government should intervene. The government recognises that careful consideration would be needed in respect of any requirement on parties to enter into arbitration that could also be considered alongside voluntary approaches.”

Views on “the benefits or drawbacks of national courts setting global licensing rates” are also being requested by the IPO, with courts in the UK having shown a willingness to support SEP holders in their request for global licences from technology implementers.

The IPO said the purpose of its call for views is to get feedback on “whether the standard essential patents (SEPs) ecosystem (i.e. the enabling participants, commercial relationships, infrastructure, and legal and regulatory environment) surrounding SEPs is functioning efficiently and effectively and striking the right balance for all entities involved”, and to therefore “help assess whether government intervention is required”.

The IPO’s paper noted the importance of global collaboration on issues around SEPs. Marfé said it was therefore significant that the US Department of Justice (DOJ) has also this week issued a new draft policy statement which promotes good faith licensing negotiations and considers remedies in SEP disputes, and for which views are sought. The European Commission is carrying out a similar exercise in respect of SEPs as noted in its IP action plan.

The IPO’s call for views is open to feedback until 1 March 2022. The DOJ consultation closes on 5 January 2022.

Sarah Taylor of Pinsent Masons said she expects the feedback received to the IPO’s call for views to form the basis of a more focused consultation on possible interventions to the SEP framework. Taylor highlighted the consultation the IPO has opened on potential reforms to UK intellectual property laws to account for developments in AI as a recent example where the IPO had proposed some targeted reforms on the basis of feedback received from an earlier call for views exercise. “The call for views is open for 12 weeks, which will hopefully allow a wide range of views from respondents from both sides of the fence,” she said.