Essentiality and Standards-Essential Patents
Cambridge Handbook of Technical Standardization Law - Antitrust, Competition and Patent Law (Jorge L. Contreras, ed., 2017 Forthcoming)
26 Pages Posted: 27 Apr 2017 Last revised: 15 Jun 2017
Date Written: April 26, 2017
Most standards-development organizations (SDOs) have adopted policies requiring that participants either disclose and/or license patents that are essential to the implementation of the SDO’s standards. Licenses of these standards-essential patents (SEPs) must generally be royalty-free or royalty-bearing on terms that are fair, reasonable and non-discriminatory (FRAND). Conversely, patents that are not essential to such standards need not be licensed on reasonable terms, and in theory may be withheld entirely from the market. Accordingly, a key element of SDO disclosure and licensing polices is how patents (or patent claims) are classified as “essential” to a standard, and what essentiality entails in practice. This chapter addresses the interpretation of the term “essential” within SDO patent policies, focusing both on policy language and variants, as well as regulatory and judicial rulings that have considered this question.
A number of common themes emerge in the interpretation of essentiality requirements. One such theme is the economic equation of essentiality with non-substitutability that has arisen in the context of patent pools. Another is the blurred divide between commercial and technical essentiality. A third is the practical necessity of assessing essentiality when hundreds of potentially essential patent claims are at issue. These issues, coupled with the recognized phenomenon of over-declaration, suggests that more efficient, rapid and cost-effective methods for assessing essentiality may be called for. Moreover, when strict legal interpretation of policy language is likely to yield undesirable results - as when a patent is deemed non-essential because a theoretically equivalent, but impractically costly, alternative exists - the norms and expectations of the relevant SDO participants should be taken into account.
Keywords: standards, patent, SEP, FRAND, essential, commercially essential, technically essential, SDO, SSO
JEL Classification: K00, K12, K21, L96, O34
Suggested Citation: Suggested Citation