As part of its call for views process to understand whether change is needed in the current Standard Essential Patents, SEPs, framework to support innovation1, 2, the UK Intellectual Property Office, UKIPO, has now published a summary of responses to its SEPs questionnaire for SMEs.
Of note is the relatively low number of respondents involved with technical standards - only 29 - and whether this number of respondents provides a true indication of SMEs views in this area.
The questionnaire, published earlier this year, was specifically aimed at SMEs and sought their views on issues including availability of information on how an innovation relates to SEPs, fairness in the licensing and implementing of SEPs, and transparency in the pricing of SEPs. Our commentary at the time can be read here, and an overview of the summary of responses is provided below.
HOW ARE SMEs INVOLVED IN TECHNICAL STANDARDS AND SEPs?
The responses to the questionnaire indicate, among other respondent profile insights, the breadth of involvement by SMEs in technical standards and SEPs. Twenty-nine respondents:
- have operations across 61 industries, including healthcare (including connected healthcare), industrial connected machinery, and smart cities / homes / meters.
- are collectively involved (as a developer, user, innovator and/or in monitoring development of a live standard) with a range of standards, including wireless (Bluetooth and Wi-Fi), cellular (2G-5G), video (HEVC), and audio coding (e.g., AAC) standards.
- are engaged with standard developing organisations (SDO), such as IEEE and ETSI, as well as with collaborative standards projects, such as 3GPP.
HOW ARE SMEs INVOLVED IN LICENCING OF SEPs, AND LICENCING DISAGREEMENT AND DISPUTE RESOLUTION?
However, more than half of these 29 respondents (55%) are not involved in SEP licensing or negotiation of a SEP licence. Reasons include a belief they do not require a licence and the cost of obtaining a licence to be prohibitive.
Of the 12 respondents involved in SEP licensing, to which these particular questions are applicable, 83% answered that they do not have sufficient information on pricing of SEPs that they licence or may licence in the future, and 83% answered that they believe they were not offered a licence on FRAND terms (e.g., due to a refusal of SEP holders to disclose comparable rates makes it hard to determine whether licensing terms are FRAND).
On licensing disagreement and dispute resolution, of the 12 respondents involved in SEP licensing, 75% have disagreed with the terms of a licence or the rate that has been offered to them for a licence. None of the respondents that have experienced a licensing disagreement answered that there is sufficient information on whether the patent they are licensing is essential to the technical standard they rely on.
WHAT LIMITATIONS ARE SMEs AWARE OF IN THE CURRENT SEPs LICENSING FRAMEWORK?
Of the 33 respondents that answered this question: 22 detailed limitations to their company’s success in the current SEPs licensing framework; and 11 were not aware of any limitations. These limitations include (NB. not every respondent raised each limitation):
- The cost and complexity of obtaining a FRAND license leaves SMEs uncertain of the SEPs framework.
- SMEs lack understanding of how SEPs are priced and have limited resources to learn.
- Excessive SEPs pricing means smaller businesses must raise their product prices excessively, leading to loss of domestic and international sales and competitiveness.
- SMEs trading in the UK are not exempt from SEP fees. This should be considered in UK regulation, following the European Commission’s proposal for SEP Regulation.
Related to the above, 28 respondent gave suggestions in response to the question “What, if anything, could improve transparency in SEPs licensing, or otherwise make SEPs licensing more efficient?”, such as:
- Information on pricing of SEPs, including determination of FRAND terms, should be made publicly available.
- Access to comparable licences (data on who has taken a licence and what they paid), that may otherwise be hidden behind NDAs.
- Accurate information on the essentiality of patents declared to the standard.
- Greater collaboration between SMEs and SDOs; and providing education and training programs to help SMEs understand the standards development process.
- A role for the Competition and Markets Authority to, for example, enforce (FRAND) obligations and to mandate “licence to all”.
WHAT IS THE OUTLOOK FOR STANDARD ESSENTIAL PATENTS?
The UK Government wants to ensure all those within the SEPs ecosystem have an ongoing opportunity to submit views3. The UKIPO will consider the responses as part of its policy development and present its overall findings to Ministers later this year.
By actively supporting SMEs in their evidence gathering process, the UKIPO has taken a positive step to ensuring that any changes to the ecosystem surrounding SEPs, if needed, take account of the views of a wide range of stakeholders.
However, what appears to be a disappointingly low number of SMEs involved with technical standards have engaged in the consultation process (a higher number of SMEs may have been expected based, for example, on the 117 UK-based members of ETSI 4). It is unclear whether this due to disinterest in the process, lack of available resources to respond timely or simply being unaware of the call for views (which may be behind the UK Government’s decision to leave open the UKIPO’s dedicated mailbox3).
Also, concerns by SMEs on issues including collaboration, education5, and licensing transparency point to opportunities to support greater innovation by SMEs on technical standards. As noted by the European Commission, the use of standards can help SMEs reduce costs, improve their innovative capacity, and enhance their competitiveness.
Improving the innovative capacity of UK-based SMEs in the standards space may also help to close the innovation activity gap (across all technologies) with UK-based large enterprises: according to a recent UK Government survey, 58% of large businesses were innovation active in 2018-2020, compared to 44% of SMEs.
Our general article on this topic “UKIPO Publishes Outcome of Call for Views on SEPs and Innovation” can be read here.
We will report further developments on this topic as they occur. To find out more about SEPs and how intellectual property can help you create commercial value from your innovations, feel free to contact any of our electronics and computing team.
FURTHER READING
- UK Innovation Strategy: Leading the Future by Creating It
- 5G Supply Chain Diversification Strategy
- By using the UKIPO’s dedicated mailbox SEPcallforviews@ipo.gov.uk.
- A diversified pool of large and small private companies, research entities, academia, government and public organizations.
- Our white paper What are Standard Essential Patents?, which aims to provide a thorough understanding of SEPs and their significance for businesses, can be accessed here.
