UK government launches consultation on standard essential patents to support tech-driven growth

The government has launched a consultation on standard essential patents (SEPs) and potential measures to address challenges in the licensing ecosystem in the UK. The challenges identified include knowledge and information gaps between SEP holders and implementers, lack of transparency in the SEPs licensing process, assessing essentiality of patents to technical standards, and a costly and often complex dispute resolution environment.

The government has set out proposals to address these challenges, including potentially introducing a new rate determination track (RDT) to the Intellectual Property Enterprise Court (IPEC) and mandating certain information be provided to the UK Intellectual Property Office (UKIPO) on all patents disclosed as essential. The government is also seeking further information on these and various other measures and inviting other proposals before it decides on how best to proceed.

The consultation is open until 7 October and provides an important opportunity to shape the future of the UK SEP ecosystem.

Standardisation and SEPs

The SEP ecosystem revolves around the creation and implementation of technical standards – for example, the 4G standard for mobile telecommunications. It plays a key role in technological development, ensures interoperability of products and can increase competitiveness in the market. Standards span a wide range of technologies and sectors and are increasingly important in the context of the Internet of Things and the increased connectivity and interoperability of every day products.

An SEP is a patent that protects technology that is essential to implementing a standard. Without using the inventions that SEPs protect, standard-compliant products cannot be made or sold. To tackle the potential issues this creates, standard-setting organisations usually require patents that are or may be essential to a particular standard to be declared as such. As part of this declaration, the patentee agrees to license the patent on fair, reasonable, and non-discriminatory (FRAND) (sometimes referred to as RAND) terms. While many FRAND licences are agreed by companies without litigation, what amounts to FRAND terms can be a highly litigated issue. The courts of England and Wales are a common destination for those disputes.

Improving efficiency and transparency in SEP licensing

Rate determination track

The government's key proposal is the potential introduction of a RDT to IPEC to provide a simpler and more efficient approach to proceedings to determine licence rates. The scope of the RDT would be limited to cases where infringement, validity and essentiality are not in dispute and therefore only the issue of the licence rate (and perhaps other relevant licence terms) should be left to be determined by the RDT.

The aim of an RDT would be to provide a binding rate determination on the request of either the licensor or the licensee. As the proposed track would sit within the High Court, the consultation notes that there would need to be an appeal mechanism to allow the rate determination decisions to be challenged.

The government hopes that the RDT would increase efficiency through streamlined and tailored mechanisms. No details of what these might be are given. The consultation asks for feedback on whether the RDT would provide increased efficiencies over what is available elsewhere in the High Court.

Typically, IPEC imposes a cap on compensation (which can be waived by the parties), a cap on recoverable costs, and limits on the length of a trial such that it is only generally used for disputes of a certain size or level of complexity. It can be assumed, although it is not clear from the consultation, that these would apply to the RDT. This may mean that the RDT, if introduced, would be primarily targeted at small to medium-sized enterprises (SMEs) or other smaller businesses. This could limit its impact on simplifying the SEP litigation landscape, potentially leaving those who can afford to litigate outside of the RDT continuing to do so, especially where disputes involved novel or complex issues.

The consultation acknowledges that there are various rate setting methodologies. The government seeks views on whether a single methodology should be mandated for the RDT or whether the RDT should be allowed to apply different methodologies. In particular, the government requests feedback on whether certain sectors or technologies would require their own methodology and what factors should determine which methodology is used.

Searchable standard related patent information

The second main proposal is mandating or incentivising the disclosure of standard-related patent information in order to introduce an additional search function via the UKIPO's One IPO Search service. Requiring this information would not interfere with the patent prosecution process and would be published upon grant for GB patents or upon first renewal for GB designations of European Patent Office patents.

Although the consultation states that this would provide a "central, authoritative source of standard related patent information", it also states that "appropriate disclaimers to its accuracy" would also be used. This raises questions over the reliability that would be placed on the information and it is not clear what this service would offer over, for example, the World Intellectual Property Organization's PatentScope search tool, which already provides some essentiality information.

Nonetheless, the government seeks views on whether this proposal would increase transparency, what mechanisms should be put in place to ensure rightsholders submit accurate and timely information, and how to deal with non-compliance.

Improving SEP licensing and dispute resolution

Specialist SEP pre-action protocol

The government asks for views on whether a specialist pre-action protocol for SEPs disputes would offer improvements over the existing protocols. The consultation notes that the aim of a new protocol would be to reduce information asymmetry, which can lead to "licensing frictions" and the possibility of litigation. The government particularly seeks views on whether the existing protocols encourage sufficient exchange of information to reduce the need for litigation, including on SEP pricing and essentiality.

The consultation states that mandatory obligations should not be placed on the parties – for example, compelling the disclosure of commercially sensitive information – but it wants to ensure non-compliance with the protocols has consequences. It is not clear exactly how this would be achieved but feedback is encouraged on whether a specialist protocol would reduce information asymmetry and what should be included in the protocol to facilitate early disclosure of SEP information.

Essentiality assessment service

The government is looking for feedback on existing commercial essentiality assessment services and the methodologies used in providing accurate essentiality determinations to better understand the commercial market. The affordability and accessibility of market solutions will factor into the decision on whether the UKIPO needs to introduce an "essentiality" assessment service. The consultation encourages views on the potential value of an IPO service, estimated use and for what purpose, and how it could be designed to ensure accuracy, impartiality and trust in the determinations.

Remedies and ADR

Lastly, the government requests information on whether the current remedies provided in SEP litigation are adequate and looks to understand what level of awareness of alternative dispute resolution (ADR) services there is in the SEP ecosystem. In particular, it seeks views on the concerns raised by licensees that the threat of injunction is used to extract "excessive licence rates" in SEP negotiations, whether there are barriers to using existing ADR services and whether the UKIPO should expand its mediation service to support in resolving SEP disputes.

Osborne Clarke comment

Ensuring a smooth and workable SEP licensing ecosystem will be essential to the government's aims of increasing economic growth in the UK through the use of science and technology, especially as advanced connectivity technologies have been highlighted as a driver for technology-enabled growth.

Although the consultation states that the government is striving for a "balanced" SEP ecosystem, it places particular emphasis on ensuring SME implementers can better understand and navigate the SEP licensing environment. Such a focus on SMEs is unsurprising given one of the government's aims is to boost growth and productivity in small businesses; however, it does prompt questions on whether the government's eventual policy changes will favour some participants in the SEP ecosystem over others.

This wide-ranging consultation illustrates that the government is, somewhat surprisingly, considering introducing new regulatory measures, alongside bolstering existing non-regulatory measures. Although the UKIPO foreshadowed its consideration of potential policy interventions in its corporate plan for 2024-2025, the implementation of new regulatory measures cuts across the government's other ambition to streamline regulation in an attempt to help drive economic growth. This focus on efficiencies and regulatory streamlining is likely why the consultation requests feedback on the potential benefits of proposals, in particular the RDT, to allow the government to carry out an impact assessment.

The controversy and criticism directed towards the sweeping SEPs reforms proposed by the European Commission – the draft regulation was withdrawn earlier this year but could potentially be revived – might have prompted the government to follow a less interventionist path. However, this seems not to have dissuaded the government from considering more interventionist options.

Although the consultation sets out a number of key policy proposals, it is largely an information gathering exercise that prompts more questions than it answers. The proposals are only that, and it is clear that the government does not yet have a solidified plan for its next steps. As such, this consultation provides a unique opportunity to help shape reform in this area for all participants from across the SEP environment.