SMEs and Standard Essential Patents (SEPs)

Basics of SEPs

A technical standard is a formal document that establishes uniform engineering or technical criteria, methods, processes, and practices that a product labelled as conforming to that standard meets. Such standards are established by what are called Standard Setting Bodies (SSBs) or Standard Development Organizations (SDOs). IEEE WLAN Standards 802.11, Bluetooth Standards, Blue Ray, and Universal Serial Bus (USB) related standards are well known examples of standards. International Electrotechnical commission (IEC), Institution of Electrical and Electronics Engineers (IEEE), and International Organization for Standardization (ISO pronounced as a word derived from the Greek root “isos,” meaning “equal”) are some examples of well-known SSBs.

One of the purposes of standards is to ensure interoperability. That is, if there are two devices, both conforming to a given standard, let us say a USB standard, they will be able to communicate with each other seamlessly.

SSBs

SSBs create committees to develop a standard. The members of the committees are representatives of technical experts from the leading companies or institutions that have developed related technologies, technical experts such as university professors, leading researchers in the field, and so on. The committee members deliberate over the details of the standard and propose a draft that is accepted and published as a standard.

Standards and Patents

The technical requirements, protocols, and methods that needs to be met by a device conforming to a given standard may essentially make use of one or more patents. Thus, it can be imagined that if there are two patents describing different methods or means of achieving the same result, the patentees of each of them would compete to have their patented technology be included in the standard and not the other’s. Such patents as are referred to in a standard are called SEPs. The reason for this competition is that once a standard is adopted, every manufacturer of devices conforming to the standard will be required to obtain a license from a licensee for a fee. Thus, the patentee is assured of a steady income as long as the standard and the patent remain in force.

SMEs

The question arises as to what it takes to get a patent to become an SEP. Let us look at the barriers for any company, large or small to get a patent to be an SEP.

Time and Resources

Developing a standard is a long, time consuming process. Let alone small entities, it can be a burden on large entities tooGetting to be a part of the committee that is given the task of developing a standard can be a hurdle. Unless the entity has the financial strength to sustain this effort, it is improbable that its patent will become an SEP.

Looking at it in another way this long period is drain on its engineering resources that many entities cannot afford. Many large entities have people, or even departments, dedicated to this function that smaller entities cannot afford.

Skill

Even though how these committees work is known, the skill needed to negotiate with other interested parties can be a hurdle. Successful entities have years of experience in participating in this activity that they can bank on.

How can SMEs extract value?

First to Adopt

SMEs can benefit from SEPS in other ways. The greatest asset of SMEs is agility and speed to market. By adopting a standard that has been recently set, SMEs can serve and capture niche markets. These may be high margin products and services based on them though low in volume. This can be called first mover advantage because many standards take years to be adopted widely.

An essential patent not in the standard

It may also so happen that an SME might have a patent that the adopters of a standard have to per force use/infringe. In such a case, the SME can collect royalty or sell the patent to a larger entity that can do this more effectively.

It may be easier for such an SME to sell the patent as any patentee that tries to enforce a patent has to face efforts by others to invalidate the patent. And that could be a drain on the resources of the SME.

There are entities that take on the assignment of enforcing patents for smaller entities. SMEs may look at hiring such entities, instead.

Numbers

It is more difficult to enforce an individual patent than a portfolio and to start a licensing programme for one patent. Alternatively, an SME could take part in a patent pool, which may pose its own problems too.

Conclusion

While patents can afford a level playing field for small and big players in some areas, practical considerations do not allow it in some others. With the awareness gained from this overview, SMEs may use it when an opportunity arises – if need be by consulting patent professionals with experience in these matters.


Standard Essential Patents can be valuable for a patentee. Large entities participate in Standard Setting Organisations. J L Anil Kumar, Senior consultant, LexOrbis, takes a look at the prospects of SEPs for SMEs.

1st published in IP Link.

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