While you may have missed it, a vital hearing on issues at the core of small business innovation took place in the final days of the 118th Congress that will shape key legislative objectives starting in 2025. On December 18, 2024, the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet convened to explore the role of standard-essential patents (SEPs) in the strategic competition between the United States and China. By highlighting the manipulation of SEP licensing by foreign actors and the urgent need to ensure fair, reasonable, and non-discriminatory (FRAND) licensing practices, the hearing tackled a key issue for U.S. small business innovators.

This wasn’t just another policy discussion. It was an inflection point for those who care about safeguarding America’s competitive edge and protecting U.S. small businesses.

Standards (e.g., 5G and Wi-Fi) underlie many technologies you recognize today—telecommunications networks, Internet of Things (IoT) devices, Wi-Fi-enabled devices, and countless others. The United States is a world leader in the global technical standards development system and hosts the most dynamic, private sector-led standards development processes in the world.

In this ecosystem, standards-setting organizations (SSOs) convene experts from private companies, governments, and non-profit entities to come to a consensus on which technologies should be included in a standard. As part of this process, stakeholders can voluntarily contribute patented technologies to be considered “essential” to these standards, and if accepted, one must exercise those patents in order to use the standard, making them standard-essential patents (SEPs). As a result, holders of SEPs are positioned to control who can and cannot use standards – and who can enter standards-driven markets entirely, raising competition concerns.

Because of this dynamic, SSOs ask that those holding SEPs in the SSO’s standards agree to license their SEPs on FRAND terms to any willing licensee. This commitment helps ensure that SEP holders cannot abuse their monopoly position and abuse good faith SEP licensees (i.e., anyone looking to use the standard). A number of bad actor SEP holders, particularly from foreign countries such as China, are systematically exploiting the standards system by making FRAND commitments only to flagrantly disregard them through means such as the seeking of injunctions. These abusive practices disproportionately harm small and medium-sized businesses (SMBs) that lack the resources to take on these abusers, thereby stifling innovation and tilting the global playing field.

Kent Baker demonstrating a representative IoT Module during his testimony on December 18, 2024

During the December 18 hearing, Kent Baker, head of IP strategy, litigation, and licensing at u-blox America, Inc., brought the small business perspective front and center in his testimony. Calling the current SEP licensing landscape a “wild west,” Baker explained how unfair practices are harming innovators and small businesses. He highlighted how injunctions on SEPs can effectively shut down operations for companies like u-blox, particularly when an SMB relies on a SEP holder’s FRAND commitments. He noted that some courts do not even bother to analyze whether a SEP owner has made a FRAND offer before issuing those injunctions, completely skipping an important step in determining whether liability should attach and, if so, which remedy is appropriate. Baker also emphasized the urgent need for clarity on both the definition of FRAND and the criteria for SEPs, describing the conduct of some SEP holders as an attempt to control both, to the detriment of fairness and competition. A few weeks after the hearing, on January 14, 2025, u-blox announced its decision to exit the cellular business, confirming the accuracy of Baker’s testimony about the adverse impact of SEP licensing abuses on SMBs.

His message was clear: without clear leadership from the U.S. federal government on standards, SEP licensing, and competition, American SMB innovation will only be further suppressed.

While perspectives differed during the hearing, there was a clear consensus among witnesses on the core principles that ensure that SEPs are licensed on fair, reasonable, and non-discriminatory terms to any willing licensee.  As Walter Copan, vice president for research and technology transfer at Colorado School of Mines (and previous head of the National Institute of Standards and Technology during the first Trump Administration), put it, SEPs are about making “an invention broadly available to those interested” under FRAND terms, which protect patent rights while ensuring that anyone who needs a SEP license, no matter where they reside in a value chain, can take one.

The hearing highlighted the urgent need for policymakers at all levels to take a strong stand against SEP abuse in order to safeguard American innovators and small businesses. As part of this effort, policymakers should urge SSOs to adopt clear definitions for what constitutes FRAND licensing. This clarity is critical to prevent opportunistic behaviors that disproportionately harm small businesses – as a notable example of this need, the notoriously ambiguous patent policy of the European Standards Telecommunications Institute is the subject of approximately three-quarters of the world’s SEP litigation!

Another important focus was appropriately limiting the use of injunctions in SEP disputes to exceptional circumstances because the “ND” in the FRAND commitment means making a license available to anyone (unlike a regular patent). Curtailing injunctive relief for SEPs would help prevent a SEP holder’s monopoly position from being abused and help ensure good faith licensing negotiations. Baker summarized the issue perfectly by pointing out that if not used correctly, injunctions would render FRAND “absolutely meaningless.” Unlike U.S. courts, he referred to how courts in some important foreign jurisdictions, such as Germany and China, do not consider the voluntary FRAND commitment when determining whether to grant injunctive relief on a FRAND-committed SEP. According to him, such default injunctive on SEPs relief “would effectively shut U.S. [small businesses] down.”

A Call to Action

The stories and insights shared by witnesses like Baker demonstrate how abusive SEP licensing practices undermine competition and are hurting those who are least equipped to fight back.

As Congress looks at ways to promote and enhance U.S. innovation, it must prioritize measures that protect small businesses and ensure FRAND principles are upheld, both in crafting legislation and in its oversight of U.S. government agencies. This isn’t just about IP policy; it’s about securing the future of U.S. innovation and economic resilience.