UK standard-essential patent reforms parked, for now

The UKIPO said that it plans to consider the feedback it has received from businesses and other stakeholders on possible measures of intervention before deciding whether to recommend changes.

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. The UK government has identified SEPs as “of growing importance to the UK economy” and to its ambition for the UK to be “a science and technology superpower and innovation hub” by 2035.

Late last year, the UKIPO opened a 12-week ‘call for views’ on potential government interventions to the SEPs “ecosystem”. It has now reported the findings from that consultation exercise, citing a lack of consensus across the 56 written responses it received over the need for reform. SEP holders and technology implementers were among those who submitted responses.

It said: “Given the breadth of issues raised and the divergence of the views on the case for government intervention, the IPO will require a further period while we assess the issues and, as appropriate, consider the merits of the proposals submitted. During this period, we will engage with businesses and others to ensure we have understood their concerns and seek further evidence where needed. We will report our findings to UK ministers in 2023 and would expect any significant policy interventions to be subject to consultation."

Patent law expert Sarah Taylor of Pinsent Masons said a range of options for government intervention had been considered in the UKIPO call for views, and that some of those options could yet be pursued.

Some respondents to the UKIPO’s consultation raised concern over the cost, uncertainty and complexity involved in SEP licensing negotiations, as well as in relation to transparency, lack of information and understanding. Views were also shared on the basis of licensing rates and on which party should be able to obtain a licence.

Taylor said “It is perhaps unsurprising that there were contradictory views expressed to the UKIPO on the need for greater transparency over the licensing rates set for SEPs to help inform licensing negotiations for other SEPs.”

The UKIPO also noted that some respondents thought there is sufficient transparency in respect of established markets, for example cellular technology, but not so for markets in new technology, but that pricing becomes transparent as markets evolve. Some raised specific concerns about the use of non-disclosure agreements in licensing terms, suggesting that this limited the availability of information about terms, made negotiation more difficult and created scepticism about whether licensees were being offered the best rate. Some suggested such restrictions should be removed.

Often, SEP holders and implementers of the underlying standardised technology disagree over what constitutes a FRAND licence. Many courts globally, including in the EU, have considered this question as well as the related behaviours of the negotiating parties – SEP holders sometimes accuse implementers of unreasonably holding out from agreeing a licence and choose to pursue an injunction for patent infringement; technology implementers sometimes claim that the licensing terms proposed by SEP holders are unreasonable and that by pursuing an injunction against them the SEP holder is abusing a dominant market position, in breach of EU competition rules.

Courts in the UK are due to rule in two FRAND disputes in the coming months in which the courts could set a reasonable royalty rate with reference to comparable licences. Taylor said “Those cases – Lenovo v Interdigital and Optis v Apple – could influence how issues of transparency are addressed in other cases going forward."

Some FRAND disputes have revolved around a SEP holders’ desire to issue global FRAND licences and what the terms of such licenses should be. Taylor said there were mixed views from industry on whether there are benefits of national courts determining the terms of global FRAND licences.

The UKIPO noted that several respondents stated that the setting of global licensing rates can be more efficient than pursuing litigation in multiple jurisdictions. Some said that global licensing decisions by the courts were reflecting industry practice of using global licences, and several SEP holders generally supported the approach of the UK courts.

“However, some, including many implementers, raised a concern about the ability of national courts to compel a party to accept a determination of global licensing terms, as seen in the UK Supreme Court’s decision in Unwired Planet,” Taylor said. The UKIPO noted that many respondents saw this as extra-territorial judicial over-reach and said the effect was to encourage forum shopping and the use of anti-suit injunctions (ASIs). 

An ASI is an order that prevents an opposing party from commencing or continuing a proceeding in another jurisdiction. Some said global FRAND determinations heightened concerns about the threat of injunctions being used to compel a potential licensee into accepting terms which are not FRAND, and undermined the ability of potential licensees to challenge patents in different jurisdictions. Some said decisions made by the UK courts could discourage innovators away from the UK market, or threaten innovation by UK businesses, including SMEs.

The UKIPO highlighted mixed views on the use of ASIs in its response to its call for views. ASIs can serve as a barrier to SEP holders obtaining injunctions against infringers of their SEPs. They prevent a party from commencing or continuing the same legal action in another or foreign jurisdiction or enforcing a judgment obtained in foreign legal proceedings. 

“Anti-suit relief has recently come back to the fore in the UK following the recent decision in the case of Philips v Oppo,” Taylor said. “The judge granted an anti-anti-suit injunction (AASI) against Oppo, which prevents Oppo from seeking any relief in China that would ‘restrain, prevent, require the withdrawal of, or seek to penalise’ Philips from pursuing or taking any steps in relation to the UK claim.”

“The court considered Oppo’s previous conduct in proceedings against Sharp, where Oppo had sought and obtained anti-suit relief in China which ended existing German patent infringement proceedings as a result of Sharp giving in under the pressure exerted on it by the order of the Chinese court. On this evidence, the court concluded that there was a sufficiently imminent threat that Oppo would seek anti-suit relief against Philips from the Chinese courts and that this would be vexatious, oppressive and unconscionable, given that it would prevent a UK court from determining infringement of a UK patent,” she said.

“This decision is favourable to SEP owners, and may lead to an uptick in applications for anti-suit relief in the UK. If it does so, it may ultimately influence any further considerations of such issues under this consultation,” she said.

The UK is not alone in considering whether the SEP ecosystem achieves the right balance between incentivising innovate and providing implementers access to standardised technologies. Earlier this year, the European Commission held a call for evidence, exploring how it can “promote an efficient and sustainable SEP licensing ecosystem”. It has indicated that it could legislate to achieve that aim.

“Some respondents to the UKIPO’s call for views suggested that international harmonisation in relation to the SEP ecosystem is required,” Taylor said. “The results of the EU’s SEP consultation could prove informative in that regard and potentially influence the UK approach. However, at this stage, full international cooperation is unlikely in the immediate term, in no small part because the US government recently decided to withdraw its national policy statement on SEPs, with the US Department of Justice and courts pledging to determine issues on a case-by-case basis.”