Standard Essential Patent FAQs 

What are standards?  

Standards are technological guidelines that enable various systems and/or components to work together using a common language.  

For example:

• Electrical outlets — in the U.S., electrical outlets generally are the same shape and voltage, allowing companies to make products that reach consumers universally without needing to worry about the shape or voltage of the power interface.  
• Wi-Fi 
• Bluetooth 
• HEVC 

Who sets standards?  

Standards are established and promulgated by standard setting organizations (SSOs), which are voluntary organizations of private companies and government organizations that collaborate to develop and implement standards for particular technologies. Stakeholders contribute technical ideas to SSOs to be included in standards.  

For example:

• The American Institute of Electrical and Electronics Engineers (Wi-Fi) 
• The European Telecommunications Standards Institute (cellular communications) 
• The International Telecommunication Union-Telecommunication (video compression)  

What are standard essential patents?  

Standard essential patents (SEPs) are patents that cover technologies that are necessary to implement a standard. Generally, a patent is “standard essential” if anyone who implements the standard necessarily infringes the patent. SEPs can be tremendously valuable for their owners, as anyone who uses the standard and the patents within the standard may be required to take a license to that standard’s patents to avoid infringement liability. SSOs have various disclosure requirements, including some that require members to declare any patents they own that they believe to be essential to a standard.  

What are the benefits of owning standard essential patents?  

SEP ownership can be valuable as both an offensive and defensive tool. SEPs can generate licensing revenue, support market influence, and strengthen future standard proposals at SSOs. They can also be used defensively to offset potential royalty demands.  

Generally, there are two ways to build an SEP portfolio:  

• Develop a portfolio in-house through R&D, patent prosecution, and participation in SSOs  
• Acquire an existing portfolio from another company 

SEP ownership can also create cross-licensing opportunities, allowing SEP holders to expand their product offerings to encompass other companies’ intellectual property portfolios and decrease the risk of an SEP patent infringement lawsuit. 

How do I know if I need to license SEP rights for products I’m making? 

SEPs were once mostly limited to a handful of industries, but that is no longer the case as demand for connected products accelerates. Any company dealing in standard-compliant products must consider the effects of SEPs on its business, its products, and its litigation risk. If your company’s products comply with a technical standard, there is a risk that an SEP owner or patent pool may seek a license to continue production and for past sales.  

You may need to license SEP rights (if you are not already licensed) if you are making a product that does any of the following: 

• Connects to Wi-Fi 
• Uses 5G or LTE 
• Includes video streaming  

How do I obtain the rights to use SEPs? 

Generally, there are two ways to license SEPs:  

• Bilateral licensing: Direct negotiations between an SEP owner and an SEP implementer, which may include component suppliers and/or the device manufacturer or seller 
• Patent pools: SEP implementers take a single license to a centralized collection (or “pool”) of patents that cover a standard 

Regardless of which licensing approach SEP implementers choose, most SSOs require their members that are licensing SEPs to commit to licensing their SEPs on fair, reasonable, and non-discriminatory (FRAND) terms. However, exactly what terms are FRAND and whether an offered rate complies with an SEP owner’s FRAND obligations are often hotly disputed issues between SEP owners and implementers and can vary across the globe.   

What are some SEP pitfalls I should be aware of? 

SEPs are an evolving area of law that is filled with pitfalls for the unwary, including:   

For SEP owners:  

• Failing to declare or over-declaring SEPs to SSOs 
• Failing to pursue licensing agreements in good faith with implementers 
• Failing to comply with FRAND obligations in licensing  
• Failing to enforce SEPs against alleged infringers  
• Bundling SEPs with non-SEPs or using SEPs in a way that may violate antitrust laws 

For SEP implementers:  

• Using patented standard essential technologies without a license  
• Failing to consider alternatives to patented standard essential technologies 
• Refusing to negotiate licenses in good faith with SEP owners 
• Failing to seek declaratory judgments on essentiality, infringement, and/or alleged FRAND noncompliance  

Companies operating in standards-heavy sectors can minimize SEP risks and maximize SEP rewards by working with experienced SEP counsel.