Analyzing SEPs: Strategies for Prosecution & Portfolio Development

Industries worldwide have worked tirelessly for many years to establish technical standards — consistent norms that ensure products and services meet a baseline of quality, stability, and interoperability. While standards are essential for building trust among consumers, they also drive efficiency, spark innovation, reduce costs, minimize errors, and promote safety. They have also become a cornerstone of global trade, as they allow businesses to operate seamlessly across borders.

Standard setting organizations (SSOs) develop and implement standards for various technologies and are composed of companies that are interested in developing standards in particular domains. When a member of an SSO contributes to a standard, it must declare to the SSO any patents it holds on technologies that are essential to implementing that standard. Those patents are known as standard essential patents (SEPs). Most SSOs have intellectual property rights policies that require their members to commit to licensing their SEPs on fair, reasonable, and non-discriminatory terms so that other companies can use the patented technologies to build standard-compliant products.

When building an SEP portfolio through patent prosecution, a comprehensive strategy integrating early technical alignment with standards development, prescient claim drafting and portfolio management, and adaptation to jurisdiction-specific legal requirements is essential for patent validity, licensing, and enforcement.

SEP prosecution

Jurisdictional coverage strategy

One of the first things SEP applicants should consider before beginning prosecution is where to file. While there is no standard answer to that question, applicants should focus on countries that provide for meaningful enforcement (e.g., the U.S., UK, Germany, China, Korea, and Japan).

When deciding where to file, consider:

• Where is the business?
• Where is the highest volume of work?
• Which countries are more likely to afford preliminary injunctive relief?
• Are there particular pre-litigation/litigation strategies that could be beneficial to the company?
• Which countries are “pro-applicant” for those strategies?

The costs of filing and prosecuting applications in multiple countries can add up quickly, so applicants should also consider cost vs. budget. While broad coverage can look impressive, concentrated coverage in litigation hotspots can be more powerful.

Patent drafting strategies

If an applicant decides to file in the U.S., the next question is whether to file a provisional or non-provisional application. For standards that are not yet finalized, it often makes sense to file a provisional application, as the applicant preserves the opportunity to craft claims that read on the developing standard. And even for standards that are finalized, each stage of prosecution requires confirmation that the patent’s claims continue to read on the standard at issue.

Specification

Patent specifications should be consistent with the provisional application — outline the problem being solved and discuss the benefits of the invention. Applicants should ensure that no new matter is added to the specification over what they wrote in the provisional. More importantly, the terminology used in the specification and claims should also match that used in the corresponding standard.

Terminology

When choosing words, focus on standards-defined embodiments first, but also keep non-defined embodiments in mind. For example, video standards often focus on decoding operations and leave encoding operations up to implementation. For SEPs covering such standards, the initial focus in drafting may be on decoding-side claims, but there is also value in following up with encoding-side claims (e.g., in a continuation application) even if those claims may not read as strictly on the standard.

Scope

While all patent applications should be complete and detailed, drafting strategies for SEPs differ from those of other patents. In particular, SEP prosecution is unique in that narrowness is not necessarily disadvantageous. When drafting SEP descriptions and claims, applicants should keep their language as close to the language of the proposed standard as possible. Patent drafters often attempt to incorporate as many variations of the technology at issue as possible, but SEP drafting best practices counsel a narrower approach.

Claims

SEP applications should include both apparatus claims and method claims, but applicants should give priority to apparatus claims. It generally is easier for SEP owners to establish infringement for apparatus claims, as doing so requires only a showing of proof of capability. Method claims, in contrast, require a showing of proof of use. Showing proof that an accused product is merely capable of performing the claimed method is insufficient to establish infringement for method claims, and sufficient evidence of use is often challenging to establish in litigation.

Applicants should avoid claims that are directed to multiple architectural components in a given technological field. Such claims often suffer from the divided infringement problem — i.e., they may not be infringed by a single actor, making them difficult to assert. For example, in the cellular communications field, avoid drafting claims that cover more than one of UE (user equipment), BS (base station), and CN (core network) functionality. Because most companies do not make both UEs and BSs and few companies make CNs, applicants should draft claims from the perspective of only one entity. If possible, draft different claims directed to different components of the architecture in the same patent.

A common drafting convention for SEP claims is the use of the phrase “at least one of” followed by a list of items with “and” before the last item (e.g., “at least one of A, B, C, and D”). In SuperGuide Corp. v. DirecTV Enters., Inc., 358 F.3d 870 (Fed. Cir. 2004), the U.S. Court of Appeals for the Federal Circuit construed a similar claim list conjunctively such that each item in the list followed “at least one of” independently (e.g., “at least one of A,” “at least one of B,” etc.). Such constructions can make establishing infringement more challenging for SEP owners. And while the decision in SuperGuide has been interpreted narrowly, it is nonetheless good law that applicants should consider when drafting their claims.

To make SEPs more resilient to invalidity challenges, drafters often include a variety of dependent claims, including narrow ones. This can help ensure that, even if independent claims are invalidated in litigation or a post-grant proceeding, dependent claims may still survive. To the extent possible, draft dependent claims with nested dependencies that create hierarchies, which can offer stronger protection against findings of invalidity. Dependent claims can also be used to highlight differences from prior generations of the technology at issue.

SEP portfolio management

Royalty optimization

The first step in optimizing SEP royalties is to request a copy from the relevant SSO of a standard licensing agreement, which may outline how royalties are calculated. Some SSOs’ licensing agreements determine royalties based on the number of assets licensed, with incremental royalties starting to decrease once a certain number of assets is reached (e.g., in a particular jurisdiction or across jurisdictions for a particular family). It can be important to calculate the number of assets that will optimize royalty payments. SEP applicants can factor these calculations into their claiming strategy. For example, assume that to optimize royalties the ideal number of assets for a particular jurisdiction is eight patents. In that case, the applicant would want to consider which claim drafting strategy makes the most sense to get eight patents. The applicant could focus one patent on server claims and another on client claims, or perhaps one patent on the encoder side and another on the decoder side. Such strategies will depend in large degree on the royalty structure for the particular standard.

Litigation optimization

Preparing for future litigation begins at the patent filing stage. One of the most important considerations beyond simply obtaining SEPs is where litigation is likely to occur, as some forums have unique requirements for patent enforcement. For example, the U.S. International Trade Commission (ITC) requires claimants to establish the existence of a domestic industry in order to obtain relief. The technical prong of the domestic industry requirement requires a claimant to show that they practice the patent they are asserting at the ITC — similar to the way a patent owner would show that an alleged infringer practices the patent, except in this case it is the claimant showing that their own products “infringe” their patent. The economic prong of the domestic industry requirement requires a claimant to show that they’ve made substantial U.S.-based investments in patented products that satisfy the technical prong. Relevant evidence for the economic prong includes investments in plants, equipment, employment, labor, engineering, R&D, and licensing.

To show how these litigation requirements can inform patent filing strategy, consider the following example: Assume that your business operates in the wireless industry. You make handsets, but not the base stations with which the handsets communicate to provide access to cellular communications. Someone whose business is focused on base stations approaches you demanding that you license their technology, and they might even sue you. To avail yourself of the ITC, you must satisfy both the technical and economic prongs of the domestic industry requirement. That would require a single patent that covers both handsets and base stations – it’s not enough to show separate patents, one covering handsets and one covering base stations. Accordingly, as you’re engaging in patent prosecution, consider how you eventually will enforce them and what they need to look like in order to avail yourself of the tribunals that could be available to you.

Declarations of applications to SSOs

Most SSOs require members to declare any patents they own that could be essential to practicing the standard. The most important consideration when declaring applications is when to declare, and the answer typically depends on the standard at issue. Some SSOs prefer declarations when there is a “credible” position that a patent application will be issued as a SEP, while others prefer declarations only after a patent is confirmed to read on the standard. If it’s unclear when to declare, contact the SSO to determine their preference.

Good hygiene

It can be helpful after patents issue to create claim charts, as this can ensure that the claims do, in fact, read on the standard and can identify any deficiencies in the standards mapping. For large portfolios, or for those that grow over time, create a simple system to track which patents go with each standard. It is much easier to track this information as it develops than it is to sift through multiple portfolios to find it.

Patent marking

Patent marking is the practice of labeling products with patent information to provide constructive notice to the public that the marked product is protected by one or more patents. In the U.S., patent marking allows patentees to recover damages up to six years prior to the filing of a lawsuit rather than only from the date of actual notice to the alleged infringer. Claim charts can help patentees track which products should be marked with which patents, as well as which competitor products practice which patents. While physically marking a product is the standard method of marking, patentees may also use virtual marking, which generally involves including a link to a website that contains product and patent information. Patentees who license their patent portfolios should require their licensees to mark any of their products that practice the relevant patents.

Explore opportunities with emerging SSOs

SEP owners can expand their portfolios and potentially increase their value by keeping track of emerging SSOs. They may even be able to declare their patents across multiple SSOs. Examples of emerging standards include ETSI Network Function Virtualization, Open-RAN Alliance, and various artificial intelligence-related standards like IEEE, Open Gateway Initiative, and GSMA.