19/08/2022
At the end of 2021, the UK IPO launched a call for views into whether the Standard Essential Patent (SEP) system in the UK was functioning efficiently or required modification. The consultation ran for 12 weeks to 1 March 2022 and received 56 written responses from a range of stakeholders, including SEP holders (innovators), implementers, law firms, and professional bodies. The initial consultation brief is found here. The findings were published earlier this month, and are available in full here.
As briefly discussed below, the UK IPO’s summary of the findings indicates little consensus between SEP holders and implementers of those SEPs, with the full report merely capturing the various different views submitted. Tim Moss, the UK IPO’s Chief Executive has noted in his report of the consultation that:
“We recognise there are many different interests to consider, which is why we began by asking broad questions to establish what the issues are. We can now narrow these down as we move forward, and ensure the IP framework is striking the right balance for the maximum benefit to UK innovation”.
“We look forward to further engagement with industry in the coming months, and will report our findings to Ministers next year”.
The findings will therefore now be reported to UK Ministers in 2023, and any significant policy changes that are contemplated will be subject to further public consultation.
The UK IPO Call for Views involved 27 specific questions focussed on 6 broad themes, including:
1) the relationship between SEPs, innovation, and competition, and what actions or interventions would make the greatest improvements for consumers in the UK;
2) competition and market functioning;
3) transparency in the system;
4) patent infringement and remedies;
5) licensing of SEPs; and
6) SEP litigation.
Both SEP holders and implementors discussed the difficulties of negotiating a licensee fee that is agreeable to both parties, with much of the tension in contentious cases arising from divergent expectations on what is reasonable or appropriate. Problems include: “hold-up”, “hold-out”, the over declaration of patents as essential, essentiality checks, and transparency generally. In sectors of the market, there is still considerable debate around pricing for example, and whether this should reflect the full market value of the services enabled by an SEP (for example resulting from connectivity to the 5G network), or whether it should instead be more closely aligned to the (lower) actual cost of the chip set. Similar issues surround whether a court appointed license should be global or national, and how to resolve questions of the appropriate jurisdiction to hear disputes.
To date, the UK courts have tried to deal with these difficulties by taking a pragmatic approach designed to resolve the dispute. According to the UK Supreme Court Decision in Unwired Planet v Huawei (discussed here) for example, the UK Court has authority to hear disputes about SEP licensing, because the determination of a global patent license on FRAND (Fair Reasonable and Non-Discriminatory) terms, and the award of a FRAND injunction if the implementer does not take the court determined license, are suitable remedies in a UK patent infringement action before the UK courts.
Difficulties with pricing are dealt with by reference to comparative licenses, on the assumption that these are suitable indications of what a willing licensee is prepared to pay to license the technology. The problem of over declaration of SEPs is recognised and factored into the finally awarded rate.
SEP holders generally regard the UK approach favourably, because it allows them (via the action in the UK court) to bring the negotiation to a close. However, a number of implementers see the UK court approach as problematic, because it deprives them of a hearing in another (more preferred) jurisdiction and because it prevents them from challenging the validity of the respective patents asserted as essential to the standard
Perhaps in response to the development of the UK framework (based on decisions like Unwired Planet v Huawei, and Optis v Apple (discussed here) there has been pushback in the form of Anti-Suit Injunctions or ASIs. These are usually commenced by an implementer in another jurisdiction where litigation is preferred, to pre-emptively prevent recourse to the courts of a third jurisdiction, like the UK. An Anti-Anti-Suit Injunction (or AASI) is then the natural pushback to parties seeking to file an ASI.
The UK IPO consultation was intended to acknowledge the importance of the telecommunication sector and SEPs, and the challenges facing the parties active in it, with the aim of producing “the optimal IP framework for the UK that will promote innovation and creativity both now and, in the future, while supporting the government’s ambitions set out in the Innovation Strategy and Diversification Strategy”.
The report also notes that: “The UK starts from a position of strength, ranked 4th in the World Intellectual Property Organization’s Global Innovation Index 2021 and 2nd in the US Chamber of Commerce Global Innovation Policy Centre (GIPC) International IP Index 2021”. The next stage is for the UKIPO to reflect on the findings and consult with ministers to determine if intervention is needed to strike “the right balance for all entities involved”.
If you would like more information, please contact our Telecommunications, Broadcasting & Standards team.
Resources
- Initial Call for views
- Summary of Findings
- Executive Summary from UK IPO CEO Tim Moss
- Unwired Planet v Huawei – with the FRAND licensing saga now concluded what have we learnt?
- Optis And Unwired Planet v Apple [2021] EWHC 2564 (Pat) – in FRAND disputes what is a willing licensee? And does Apple’s desire to “pick and choose” make them an unwilling licensee?
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.
