How Essential are Standard-Essential Patents?

Competition Policy and Antitrust, Intellectual Property and Patents

Article Snapshot

Author(s)

Mark Lemley and Tim S. Simcoe

Source

Cornell Law Review, Vol. 104, pp. 607-642 (2019)

Summary

Standard-essential patents (SEPs) cover technologies needed to make complex products like wi-fi. Patent trolls that assert SEPs in court win few cases, often because the patent was not actually infringed.

Policy Relevance

SEPs are often over-disclosed.

Main Points

  • The Internet and telecommunications industry depend on standards to make products that work well together; in theory, standard-essential patents cover technologies without which the industry standard will not work.
     
  • Standard-setting organizations (SSOs) allow the use of SEPs, but require patent owners to license the SEPs on fair, reasonable, and nondiscriminatory (FRAND) terms.
     
  • Many lawsuits involving SEPs are brought by non-practicing entities (NPEs, or “patent trolls”), often defined as any entity that is not purely a manufacturer of products.
     
  • Because SEPs are "essential," one would expect plaintiffs to find it easy to prove that the patent was infringed, however, this is not the case.
     
    • SEPs disclosed as standard-setting might not be essential to the final standard.
       
    • Even so, plaintiffs in SEP suits lose more often than one would expect.
       
  • NPEs assert about 70 percent of patent infringement claims involving SEPs; NPEs are less likely to participate in standard-setting than product manufacturers, and usually purchase the rights to SEPs on the secondary market.
     
  • Plaintiff product manufacturers win about 72 percent of their patent infringement suits, and about 71 percent of SEP suits; NPEs win only about 13 percent of all suits and 6 percent of SEP suits, often because the court finds that the defendant did not infringe the patent.
     
  • Many of the patents disclosed as SEPs during standard-setting are not actually essential to the standard; the over-disclosure of SEPs might be beneficial, because SEPs must be licensed on FRAND terms.
     
  • Why do NPEs do so poorly in litigating patents?
     
    • NPEs might overreach, losing because they persist in bringing weak cases.
       
    • NPEs might buy "essential" patents that are not actually essential, the ones that are most likely to be for sale.
       
    • NPEs are more likely to be represented by small law firms lacking resources.
       
    • NPEs might lose because judges and juries dislike them.
       
  • Future research should focus less on SEPs and more on the question of the motivations of patent plaintiffs.
     

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