SEP licensing refers to the process where patent holders grant others the right to use their patented technology, which is essential to a specific technical standard, such as those governing 5G networks, Wi-Fi, or video compression technologies, but as standardised technology is becoming embedded in more and more industries, the areas of application will only increase.
Central to the licensing process is the requirement to licence SEPs on fair, reasonable, and non-discriminatory ("FRAND") terms. The obligation to licence on FRAND terms, derived from commitments made by SEP holders to standard-setting organizations ("SSOs") on becoming members and thereby becoming able to play a part in developing particular standards. FRAND terms are designed to balance the interests of SEP holders, who are entitled to fair compensation, and implementers (companies using the technology), who require access to the technology without facing prohibitive costs. Globally, SEP licensing practices are shaped by case law and regulatory frameworks, and the U.K., in particular, has emerged as a key jurisdiction for SEP litigation and dispute resolution due to its courts' readiness to set FRAND terms on a global rather than jurisdiction-specific basis.
The process of SEP licensing follows a structured framework rooted in FRAND obligations and the case law that has developed around them. The principle of FRAND licensing aims to prevent "patent hold-up," where SEP holders leverage their essential patents against implementers (who are constrained to use them to use the standard) to demand unreasonably high royalties or block market entry. At the same time, the law discourages "patent hold-out," where implementers refuse to negotiate in good faith or delay licensing discussions while continuing to use the patented technology. The law has evolved to establish clear benchmarks for FRAND behaviour and requires parties to engage in good-faith negotiations and provide implementers with essential information, including proposed FRAND licensing terms, before seeking strict legal remedies like injunctions.
For businesses operating in this field, navigating SEP licensing can be complex. Typically, the process begins with the SEP holder identifying an implementer that uses their patented technology and offering a license on FRAND terms. If the implementer believes the terms are unreasonable, they can negotiate or challenge the terms in court. Courts may impose global FRAND licenses coupled with the threat of an injunction if they determine that the parties have failed to negotiate in good faith. The rules in this area can have far-reaching implications for businesses, as they can influence licensing strategies worldwide. U.K. courts take into account factors such as the value of the patented technology, comparable licensing agreements, and the geographic scope of the market when determining what constitutes FRAND. While this offers predictability, it also underscores the importance of robust legal and technical expertise during negotiations, which Marks and Clerk is very well placed to provide.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
