One of our goals here at ACT | The App Association is preserving and promoting innovation while encouraging a healthy and robust standards ecosystem and ensuring that our members’ voices are part of the policy discussions around these topics is a crucial part of our efforts. A balanced intellectual property (IP) framework accelerates the growth of technology markets and helps our members thrive, and standard-essential patents are no exception. Our members create internet of things (IoT) products and services that enhance every aspect of our daily lives. From Blue Maestro’s remote vaccine transport monitoring to Loopcycle’s circular economy sustainability technology, our members are changing the way we live and work.

Often, their inventions integrate and build on standardised technologies (and rely on such technologies for interoperability). Thus, attaining fair, reasonable, and non-discriminatory (FRAND) licenses to the patents declared essential to those patents (standard-essential patents, or SEPs), can be crucial for App Association members. So, as small and medium-sized enterprises (SMEs) build new complex products, they will need to count on being able to license SEPs on the FRAND terms to which SEP holders voluntarily commit.

Governments around the world are increasingly paying attention to SEPs, as reflected by the recent release of public consultations on SEP frameworks by the European Commission and the United Kingdom (UK) Intellectual Property Office (IPO). In this context, the App Association responded to the IPO’s call for views on SEP licensing systems and the impact they have on businesses seeking to license SEPs. In our response, we emphasised the importance of SMEs to UK innovation and the negative impact that abusive SEP licensing practices have on SMEs’ ability to run their businesses and invest in innovation. Based on conversations with our members, we encouraged the IPO to:

  • Acknowledge the importance of SEPs for IoT innovation
  • Issue public guidance on standards, SEP licensing, the FRAND commitment, and the inconsistency of SEP abuses with UK policy
  • Align UK law with the global consensus of what the FRAND commitment means

Acknowledge the importance of SEPs for IoT innovation. SEPs are patents that companies must license on a royalty basis if they wish to use standardised technologies, e.g. wireless communication standards such as 4G and 5G. If a product connects wirelessly to the internet or uses data created by such connections, an innovator has to use SEPs. Patent holders voluntarily agree to license a patent essential to a standard on FRAND terms in exchange for a wider pool of potential licensees. Unfortunately, some SEP holders are reneging on their voluntary commitments to license in a FRAND manner while still benefitting from standardisation and their positions as a gatekeeper. Such abusive practices are anticompetitive and jeopardise the potential of established and nascent markets. For more detail on SEPs and why they are important, click here.

Issue public guidance on SEPs. SEP holders commit to licensing SEPs on FRAND terms. Due to a lack of government guidance on SEPs, we urged the IPO to provide baseline information on standards, SEP licensing, the FRAND commitment, and how SEP abuses are inconsistent with UK policy. In this guidance, the IPO should identify SEP licensing norms, express its expectations under UK law, state that licences should be available to all companies that wish to take one, and assert that SEPs should be valued on their own merits.

Further, such guidance should clarify technology contributors’ FRAND commitments, so that SMEs can understand the parameters under which they may reach a licensing agreement. If guidance on FRAND terms remains vague, SEP holders can exploit them, exposing potential licensees to abuses, such as unfairly high royalty fees or even being locked out from using the standard via injunctions.

We thus urged the IPO to align its guidance with the Core Principles and Approaches for Licensing of Standard Essential Patents (CWA 95000), a consensus views and best practices document for SEP licensing developed by industry stakeholders in an open and transparent CEN/CENELEC Workshop Agreement (CWA) process. CWAs are reference documents from the European Committee for Standardisation (CEN). An alignment with CWA 95000 would have a positive impact on SEP holders, licensees, and UK consumers who would enjoy more choices and more competitive prices.

Align UK law with the global consensus of what the FRAND commitment means. The IPO should correct the distorting decisions in the court cases Unwired Planet and Optis. Specifically, UK legislation should focus on limiting SEP injunctions and addressing the issue of global portfolio licensing by a UK court. Otherwise, the UK will find itself a further outlier in the global marketplace, severely disadvantaging the UK’s small business innovator community. Further, we suggested an amendment to Section 46 of the Patents Act of 1977 to make SEPs licenses available as a right while precluding UK courts from granting injunctions for covered patents. This way, the IPO could establish a royalty rate for SEPs on a patent-by-patent basis, considering the overall royalty stack to ensure that rates for individual patents, when totalled, do not make licensing such patents economically infeasible.

By adopting our suggestions, the IPO can reduce the risk innovative UK SMEs face from patent abuse. Our goal is to remove the grey areas which some SEP holders seek to exploit and establish a more balanced SEP ecosystem that would benefit all stakeholders.

Read more from the IPO on their call of views on their website.