Will Standard Essential Patents Change the US Patent Litigation Landscape?

Controversy concerning standard essential patents (SEPs) is not new, but recent activity in US district courts, the International Trade Commission and other governmental agencies has the potential to affect patent litigation involving not only SEPs, but patents generally, as Laura Beth Miller explains.

An SEP is a patent that is necessary in order to practise an industry standard. While adoption of a common protocol or standard across an industry or technology platform has recognised pro-competitive and pro-consumer advantages, incorporating a patent into that industry standard also has potentially anti-competitive effects.

For example, the value of the SEP may be artificially increased, while the value of competing technology is diminished; and for entities effectively forced to practise the standard to compete in the market, they must license the SEP or risk infringement claims. To minimise these potential harms, patent owners participating in standard-setting organisations (SSOs) agree to license a SEP to standard users on 'reasonable and non-discriminatory' (RAND) terms. In Europe, the obligation and expression is FRAND, which means 'fair, reasonable and non- discriminatory'. RAND and FRAND are often used interchangeably and treated as imposing the same/similar obligations.

RAND commitments can create enforceable contracts rights and obligations between the patentee and the SSO. They also have raised several questions in litigation, including:

Who can claim contractual rights or third party benefits based on RAND commitments? What constitutes a SEP? What constitutes RAND terms? What circumstances, if any, justify issuance of an injunction where infringement of a SEP has occurred? Increasing scrutiny of these RAND commitments comes at the same time as businesses and Congress are grappling with the competitive effects (both pro and con) of patent litigation initiated by patent acquisition entities (PAEs). Both conversations raise similar concerns—how to protect the stimulus for innovation that patent laws generate, without creating a 'patent holdup' in which the patentee's licensing demands are untied to the value of the innovation.

In the US, RAND commitments generally extend to and are enforceable by standard users, not just the SSO. Notably, this conclusion is contrary to a decision reached by a German court in Microsoft v Motorola, which found that there were no third party beneficiary rights under German law. However, the reach of...