Technology standards play a great role by allowing inter-connect between various devices. They promote competition between products which comply with the standard. SEP commences when technology firms get their patented technology included as a part of an industry standard. These selected patents are termed essential for practising that standard. Thus the patent holders become SEP holders.

Technology standards come into existence in two different ways

i. A company releases technology which is adopted by other market players. It leads to the creation of a de facto standard. To illustrate, Adobe’s PDF or portable document format.

2. Sometimes standards are created by a group of organisations called SSOs or standard setting organisations. The consortia work together on a set of technical specifications or an individual product. To illustrate, the European Telecommunications Standards Institute (ETSI) has developed global standards for information communication technologies (ICT) which cover e-commerce, mobile devices, networking media content and distribution. Similarly, Institute of Electrical and Electronic Engineers (IEEE) has developed the standards for wireless local area networks (W-LAN) or Wi-Fi.

SSOs through meetings discuss on matters relating to the adoption of mutually acceptable technology rights to facilitate inter-operability.

SEP patent holders enjoy an advantage as others are keen to be licensees of SEP holders.

Patent Hold-up

An SEP holder can ask for more than the value of its patented technology. The intention is to capture the value of the standard itself. It is called patent hold-up. Companies invest lot of their resources in making their devices standard compliant. It is not easy for them to opt out of the standard.

The IP policies of SSOs are so framed that the SEP owners are encouraged to disclose patents which they consider essential before the acceptance of such standard.

FRAND

SSOs ask SEP holders to disclose all their IPR and to license their SEPs under fair, reasonable and non-discrimatory (FRAND) terms. SSOs mandate SEP holders to license their patents on FRAND terms to other SSO members and also to outside implementers. The objective of FRAND licensing is to safeguard against hold ups by EP owners after an industry has adopted a standard.

Despite FRAND, litigation arises to decide what is fair, reasonable and non-discriminatory. There may be non/incomplete disclosure by patent holders. There is non-willingness of licensees to negotiate FRAND terms in good faith.