A Standard Essential Patent (SEP) is a patent that claims an invention which must be used when a given standard is implemented in the products. Determining which patents are essential to standard specifications developed by standard organizations such as 3GPP can be complex, so it’s not surprising that there are some common myths that pervade this area. Understanding these myths can help inform your licensing strategies to steer clear of pitfalls.
Four most common myths about Standard Essential Patents:
- All the declared patents are standard-essential
- All the standard-essential patents are declared to the standard bodies by the member companies
- All the declared patents are implemented in standard-compliant products
- You need to license the entire patent portfolio of a SEP holder if you are implementing the standard
Myths busted:
Myth: All the declared patents are standard-essential
The truth is, there is no essentiality check performed by standard bodies on the declared patents. Declarant companies can declare as many patents as they wish. Many of these declared patents are not essential to the standards. As per studies presented in Unwired planet vs Huawei judgement:
- David Cooper, the expert from Unwired planet’s side, reviewed 38 Samsung and 30 Huawei patents. He concluded that the essentiality rate of the Samsung patents (excluding optional features) was at most 15.9%. For the Huawei patents, he concluded that the essentiality rate (excluding optional features) was 9.4% at most.
- Similarly, Huawei’s expert, Apostolos Kakaes estimated the overall essentiality ratios for 4G were 35.8%. In his report, he set out a table for sixteen individual companies’ 4G essentiality ratios. They range from 18.6% for Google’s patents (338 declared, 63 deemed essential) to 82.3% for Sharp’s patents (79 declared, 65 deemed essential). Most of the companies in the table have ratios within 22%-50%. The portfolios range from 64 to 771 declared. The ratio for Huawei is 43.5% and the ratio for Samsung is 23.5%.
- Without getting into the intricacies of analysis performed by both experts, we can safely conclude from the above data that the ratio of standard essential patents to the declared patents can vary from 10%-80%.
- We also have made a similar observation at Evalueserve over the last 10 years while working on similar assignments; the ratio of standard essential patents to the declared patents that we have identified varied from 30-75%.
Myth: All the standard-essential patents are declared to the standard bodies by the member companies
In reality, there is no strict obligation on the member companies to declare all of their patents. As a result, the patent declaration trend varies significantly among companies; some companies declare their patents very actively to the standard bodies while others declare only a portion of their patent portfolio. Also, the declaration timeline varies, for example, on the ETSI IPR declaration portal. If I filter the declaration date from August 1st to August 31st of 2019, there are 12 declarations available on the portal from various companies including Huawei, Nokia, etc. This indicates that if the SEP patent portfolio analysis was performed for Huawei in July 2019 based on ETSI declared patent data, we would have missed the patents declared in the August’s declaration.
Myth: All the declared patents are implemented in standard-compliant products
The standard specification prescribes both mandatory and optional features, though patents reading on to the mandatory features are always essential, patents reading on the optional features become essential when implemented in the products. For example, carrier aggregation is an optional feature in LTE- Advance. However, when it is implemented in the products, we need to evaluate all the patents related to carrier aggregation for essentiality.
Myth: You need to license the entire patent portfolio of a SEP holder if you are implementing the standard
You only need to license the patents which are infringed on your product features. For example, if you are a modem chip manufacturer for a Smartphone, you only need to license those patents in the portfolio which are infringed on the modem features, even though the patent portfolio may include patents for the base station only or core network equipment only.
Now that we’ve busted these myths about Standard Essential Patents, what should you do when approached by SEP owners for a patent license? Find out in part 2 “How to prepare to negotiate with SEP holders for patent licenses.”
Please let us know if you’ve heard any other myths about SEPs or if you have any questions or comments!
