The UK IPO, like many patent offices around the world, has been grappling with the issues raised by Standard Essential Patents (SEP). The UK IPO has conducted a call for views to investigate whether the SEP system in the UK is functioning correctly, and strikes the right balance in protecting the interests of both patent owners and technology implementers. 

This call for views has been progressed against a backdrop of comments, such as those of Lord Justice Arnold in Optis v Apple (at [115]), suggesting that the current system for resolving SEP licensing disputes could be improved and that there may be room for alternative dispute resolution: 

These appeals illustrate yet again the dysfunctional state of the current system for determining SEP/FRAND disputes... The only way to put a stop to such behaviour is for SDOs like ETSI to make legally-enforceable arbitration of such disputes part of their IPR policies.

Meanwhile, the European Parliament has recently completed its first reading of the proposed new EU Regulation on SEPs (amending Regulation (EU) 2017/1001), approving the draft Regulation with some amendments. 

The draft EU Regulation aims to promote transparency and predictability in the SEP system by introducing measures which help to verify which patents are essential to a particular standard, assess the reasonable royalty payable for use of such patents, and ease licence negotiations between patent owners and implementers. 

SEP challenges

An SEP is a patent which must be used to implement a technical standard. For example, manufacturers of mobile phones, wireless devices and in-car satellite navigation systems need to comply with certain agreed standards. In some cases, those standards require the use of technology protected by an SEP. The owner of an SEP is entitled to a royalty for the use of its patent, but must grant licences to implementers of the technology on Fair, Reasonable and Non-Discriminatory (FRAND) terms.  

SEPs can be a tricky area for new entrants and smaller businesses to navigate. It can be difficult to determine if a relevant patent is truly essential, particularly for a business that was not involved in setting the standard. For any business involved in negotiating a FRAND licence, there are also often concerns about a lack of essentiality information, the available licensing terms (which may be shared only after an NDA has been signed), including the setting of rates, and the significant cost and time delay associated with litigation to resolve licensing disputes, all which may present a barrier to entry for prospective implementers and those which are new to the SEP ecosystem. 

UK IPO key objectives 

After considering the results of industry input obtained through the call for views, the UK IPO has reported its findings to Ministers, and agreed certain key objectives concerning SEPs. For the time being, the Government is focusing on the introduction of certain limited, albeit welcome, non-regulatory interventions to help achieve those objectives. 

The agreed objectives are: 

  1. helping implementers, especially SMEs, navigate and better understand the SEPs ecosystem and Fair Reasonable and Non-Discriminatory (FRAND) licensing​;
  2. improving transparency in the ecosystem, both pricing and essentiality; and ​
  3. achieving greater efficiency in respect of dispute resolution, including arbitration and mediation

The agreed interventions include the introduction of a Resource Hub to assist smaller businesses navigate SEPs, and to provide a trusted source of information about licensing, pricing, essentiality and dispute resolution. This will no doubt provide useful guidance for newcomers to the topic and is a welcome development, but it remains to be seen whether this sort of resource will assist parties in resolving the practical difficulties (outlined above) that arise during a FRAND negotiation. 

Recognising that this is a global issue, the UK IPO has indicated an ambition to increase its coordination with patent offices internationally, and to increase its engagement with the Standard Development Organisations responsible for setting technical standards. Perhaps there may be more action to come. A further technical consultation, to consider other options to improve the functioning of the SEP market, is expected to follow later in 2024/25. 

However, one option that apparently will be off the table in the next consultation is legislating to restrict the use of injunctions by SEP holders. This can be a controversial topic, with some implementers suggesting that the availability of injunctions allows patent holders to use so-called “hold up” tactics against a willing licensee to pressure them into accepting licence terms. It could also be argued that injunctions should only be available in limited cases if a patent has been declared an SEP and available to be used by all. Nonetheless, the UK IPO has confirmed the following:

After careful consideration of the evidence, operation of relevant legal frameworks and international obligations, we have concluded that we will not be consulting on making legislative changes to narrow the use of injunctions in SEPs disputes. 

Proposed EU Regulation

With the outcome of the UK IPO consultation having produced a range of views and no clear consensus on the case for statutory changes as yet, the Government’s decision to assess the position further before legislating is not surprising. 

By contrast, the draft EU Regulation (first published in April 2023) is, at this stage, much more advanced than the UK IPO proposals. If implemented, the mandatory alternative dispute resolution process at the heart of the Regulation would significantly alter the SEP landscape and the approach to resolving FRAND licence disputes in the EU. 

The key measures found in the draft Regulation include:

  • the creation of an SEP register which will be maintained by a newly appointed “competence centre” at the EUIPO (which currently manages EU trade marks and registered designs); 
  • a new system for obtaining non-binding reasoned opinions on the essentiality of any registered SEP to be administered by the competence centre; and 
  • a new mandatory FRAND determination process which must be completed before proceedings can be commenced for infringement (including for a prohibitory injunctions). 

The latest amendments to the draft Regulations approved by the European Parliament at its first reading include: 

  • checking that conciliators who will lead the FRAND determination process have the necessary qualifications and no conflict of interest (Article 27(2)); 
  • requiring the EUIPO to cooperate with other patent offices internationally with respect to SEP regulation (Article 12(2)(a)); 
  • an EUIPO methodology to verify mandatory licensing information provided by patent pools (Article 9(1)(a)); and 
  • establishing an SEP Licensing Assistance Hub to provide the following to SMEs and start-ups free of charge (Article 61):
    • identification of relevant SEPs, licensors and patent pools (for implementers); 
    • identification of SEP licensees and enforcement advice (for patent holders); and 
    • SEP training and support. 

It can be seen there are some parallels between the amendments introduced at the latest reading and the UK IPO’s agreed interventions in respect of the new UK Resource Hub and the ambition to increase coordination with international patent offices. The EU proposals in this regard are, however, more concrete legislative changes and there is currently more detail available as to what specific support will be provided by the EU SEP Licensing Assistance Hub. 

The draft Regulation will now progress to its first reading by the EU Council.