Essentiality Checks Might Foster SEP Licensing, But Do Not Stop Over-Declarations from Inflating Patent Counts and Making Them Unreliable Measures

Abstract

Essentiality checks could help implementers determine with whom they need patent licenses. If clutches of selected patents are independently and reliably checked to establish that prospective licensors each have at least one patent that would likely be found essential by a court, these results might be used by several or many prospective licensees to determine with whom they need to be licensed for standards such as 5G.

However, essentiality checking does a poor job in adjusting for over-declaration in patent counts and will encourage even more spurious declarations. This paper focuses on the wider use of essentiality checks and sampling in patent counting. With too many patents to check them all properly, it is hoped that thorough checking of random samples of declared patents will - by extrapolation - also enable accurate SEP counts to be derived. Essentiality checks do not fix and can only moderate exaggerations in patent counts due to over-declaration. For example, false positive essentiality determinations will exceed correct positive essentiality determinations where true essentiality rates are less than 10% unless at least 90% of determinations are correct. Inadequate checking could imbue many with a false sense of security about precision while encouraging even more over-declaration by others which would further misleadingly inflate their measured patent counts and essentiality rates.

Even ignoring residual bias after improved but imperfect checking, sample sizes of thousands of patents would be required to provide even only modest levels of precision in essential patent counts (e.g. a ± 15% margin of error on the estimated patent count at the 95% confidence level) on patent portfolios and entire landscapes where essentiality rates are low (e.g. 10%) due to over-declarations.

This paper is a follow-on to my September 2021 paper entitled Essentiality Rate Inflation and Random Variability in SEP Counts with Sampling and Essentiality Checking for Top-Down FRAND Royalty Rate Setting: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3933944

Keywords: FRAND, SEP, Licensing, essentiality check