Standard Essential Patents: Why are they important?

Patents are very important in protecting intellectual property rights for inventions. They give the inventor exclusive rights to the use of the invention for a period. While patents promote innovation, there are instances where the general patent rules could be exploited and limit the diffusion of technology. This is where Standard Essential Patents come in.

To understand what a Standard Essential Patent is, you first need to know what a standard is. For your Samsung device to connect with your friend’s iPhone, or for both of you to access the internet the same way from different devices, there has to be some consistency amongst all the device manufacturers. Those specifications that are common across all devices from different manufacturers are what make up the standard. A recognized body compiles consistent rules, patterns or specifications that all products of a certain type should follow. This consistency helps create order and greatly aids technology diffusion. When these standards are set by an official standard-setting organization, compliance is compulsory for all manufacturers of the product.

Standards are cool, but they can’t be effective without patents. The methods and specifications that formed the standard are created by people with exclusive rights to their innovation. If the standard-setting organisation makes it compulsory for everyone to use certain tech in their products, it gives the owner of the invention a lot of space to overprice his license to his invention. Asides from economic exploitation, the patent owner, could be discriminatory in granting licenses to use his patent. Since this invention is essential to developing a product, such behaviour could slow down the development and diffusion of this technology. Thankfully, standard essential patents fix this.

Standard Essential patents are the patents for innovations that are part of the standard for a product. To put it simpler, they are the patents for those parts of a product that are essential for the product to be consistent with other similar products. These types of patents are a bit different from regular patents because while they must protect the inventor’s right, they must also make the technology easily available for others to use to create more products. Here is how standard essential patents achieve this goal.

We have seen that a standard usually includes inventions that are essential to meeting the requirements for exploring a product. Before the standard-setting organisation publishes some technology as part of the standard, it needs to have an agreement with the patent owner to grant licenses to their patents to others. Most of the time, this agreement is already binding on member organisations of the standard-setting organisation. Thus, when a member has patent rights to an invention that is part of the standard for the product, they are required to grant licenses to other members.

You can already imagine how the patent owner for the innovation included in a standard can easily exploit this position to get paid a lot more than is necessary for a license. To prevent this, the agreement that the standard-setting organisation has with the inventor for standard essential patents has an interesting requirement. Any such licenses must be made under FRAND terms. FRAND here means Fair, Reasonable and Non-Discriminatory. Essentially, this limits the patent owner from exploiting a license for a standard-essential patent because they are bound to license it out under fair and reasonable terms and must not be discriminatory in handing out licenses. With this, other organisations that want to develop this product can easily enter agreements for licenses to use essential technologies that have become part of the standard for the product.

IP rights aim to foster innovation and protect the rights of creators to their works. In the case of inventions, strictly protecting the rights of inventors could slow down the development and spread of new technologies. Standard essential patents find the right balance between protecting the rights of the inventor and still accelerating technology diffusion.

Oluwasegun Samuel,

Research Team.

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