What is a standard essential patent?

Standard essential patents (SEPs) are patents which cover technology that is essential to a technical standard. SEPs play a critical role in enabling the development and implementation of interoperable products and services. However, the licensing of SEPs is often a complex and contentious issue.

Patents are considered “standard essential” if one or more of their claims reads on the technical specification of a standard, such as Wi-Fi or 5G. In practice, this means that these patents must necessarily be practiced in order to comply with the standard.  This gives those who own SEPs leverage to exclude competitors or seek excessive royalties. To reduce these competition concerns, SEP holders generally commit to license their SEPs on “fair, reasonable, and non-discriminatory” (FRAND) terms so that standards are not used for anti-competitive purposes.

However, when SEP holders do not live up to their FRAND commitments, they make the system unfair, unpredictable and non-transparent.

Why we need fair access to SEPs

Businesses, large and small, across a variety of industries and different supply chain levels use standard essential technologies to bring innovative new solutions to European consumers. However, in the absence of clear and consistent guidelines, SEP owners can use their market power to demand unfair, unreasonable, and discriminatory licensing terms from licensees of standard technologies. This results in fewer innovative products for European consumers, at higher prices.

To address these challenges, regulation is needed to ensure that SEPs are licensed on fair, reasonable and non-discriminatory (FRAND) terms. The European Commission has put forward a proposal for an SEP regulation which aims to set the global standard for SEP transparency. The FSA supports the ambition laid out in the regulation to remedy the current status quo in the SEP licensing market.