How to prepare to negotiate with SEP holders for patent licenses

As we explained in our previous post about SEP myths, a Standard Essential Patent (SEP) is a patent that claims an invention which must be used when a given standard is implemented in the products. Determining which patents are essential to standard specifications developed by standard organizations such as 3GPP can be complex, so it’s important to be aware of the intricacies and steps involved when approached by a SEP owner for a patent license. What does your team need to do to ensure you are proceeding in an effective and efficient manner to comply with the law?

Three steps to take when approached by SEP owners for a patent license

1. Conduct due diligence. When a company is approached by SEP owners for a patent license, the legal counsel or patent attorneys should coordinate with the product development team or the R&D team to identify:

  • All products that are compliant to standards
  • What standards are implemented to generate a list of all standards implemented by the company
  • All the features of standard that are implemented in the products, and the standard features which are under development and would be implemented in the coming time.
  • A list of all the countries in which the products are being sold.

2. Identify the complete patent portfolio of the SEP owners. Note that SEP holders may have more patents in their patent portfolios which are either not declared or may get declared in the coming months. We need to identify such patents.

  • The best practice is to use the ETSI patent declaration data, supplementing it with the patent data extracted from commercial patent databases using search strategies developed for capturing the target standards such as LTE, LTE-Advanced, 5G, etc.
  • Once the SEP holder’s entire patent portfolio is identified, proceed to the next step.

3. Conduct the essentiality check of the identified patents. This step is the most important and cumbersome as we explain below.

Because of the limited availability of people in the IP department of product companies who understand the standards and the intricacies of the patent claims, an effective essentiality check can be difficult to achieve. The subject matter of a patent that is truly essential to a standard and one that is merely related to a standard is very similar, therefore it is extremely difficult even for experts to differentiate between them. In addition, if SEP holders have a huge patent portfolio of more than 1000 patents, the essentiality evaluation will take a significant amount of the IP team’s time.

Another factor to consider is that there is inherent bias when you know you will pay more royalty if more patents are identified as essential. This becomes the important factor when deciding on the essentiality of the patent cases where claim construction matters; one interpretation means essential and the other one mean not-essential.

The best practice is to have an objective third-party view the standard essentiality of patent portfolios of the SEP holders. This not only eliminates bias, but is cost-effective as it will free up the valuable time of patent attorneys in the IP department.

How to conduct standard essentiality checks on a SEP patent portfolio

Given these challenges, how should you conduct standard essentiality checks on a SEP patent portfolio? The following steps can be used to evaluate the SEP patent portfolios to derive meaningful data to be used in licensing negotiations:

  1. Identify the granted and alive patents in the jurisdictions of interest by using ETSI data extraction and data cleaning
  2. Mining patents using commercial patent databases which are potentially essential and not declared on the IPR declaration databases
    • TIP: One strategy to identify undeclared SEPs is to search for backward citations. SEPs generally contain the prior versions of the standard or a meeting document in the backward citation. This strategy may work well for RAN (Radio Access Network) related patents to identify an additional 70-80% of undeclared patents. It may not work well for the SA (Service Aspects) related patents.
  3. Filtering patents implemented on user devices, base stations, and core network equipment based on patent claim scope.
    • TIP: Beware of multi-party patent claims. For example, there are patents in which some claim steps are performed by a modem, while remaining steps are performed by a base station. Such patents may not be completely infringed by the modem.
  4. Filtering patents which are related to features of the standards not implemented in the products
    • TIP: To check the implemented features, we also need to consider the deployment location. For example, LTE TDD is implemented in China and LTE FDD is implemented in the USA.
  5. Filtering essential and non-essential patents based on claim term interpretations and extent of overlap with the standard specifications.
  6. Filtering patents related to technology 5G, LTE, LTE-Advance, UMTS and GSM including filtering of patents on optional and mandatory features prescribed in the standards.

The standard essentiality evaluation analysis must be performed manually by the analysts with a good understanding of both patent claims and 3GPP standard specifications to achieve the required accuracy. 

Note: Though this blog is written by keeping in mind the 3GPP standards, these observations will equally apply to other standards such as HEVC, MPEG, IEEE, etc.

Please contact us if you have any questions or comments about your particular case.

Sushil Kumar
Sushil Kumar
Manager, IP and R&D Solutions Website Posts

Sushil leads a team of patent searchers for clients in the Hi-tech domain. He constantly strives hard to improve the processes by which valuable patents can be efficiently identified from big patent portfolios. He also helps clients in assessing standard essential patents (SEPs). To give them the best support, he constantly keeps himself updated with the latest changes in patent law and technology and he is especially passionate about wireless standards. Additionally, Sushil is a registered Indian patent agent and obtained two bachelor’s degrees, one in law and one in electronics and communication engineering. In his free time, he watches English Premier League Football, closely following his favorite team Chelsea FC.

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