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A standard essential patent (SEP) is a patent that claims / protects an invention that must comply with an industry standard, or in simple terms, patents protecting innovations that are crucial for respective industries are called standard essential patents. Generally, industry bodies that define and set such industry standards are known as SSOs or Standard Setting Organizations.
The role of SSOs is to coordinate and facilitate a standard setting process with the involvement of various stakeholders. Standards can be adopted at a worldwide scale, or only at a regional scale or even national scale. It is usually in the interest of industrial players to create products that comply with standards. Products that use non-standardized technologies are generally commercial failures because consumers want their devices to interact with those of other people.
Examples of Standard Essential Patents
Patents covering 3G, WiFi, Bluetooth and USB standards can be termed as standard essential patents. It is not uncommon for SEP owners to demand excessive royalties and hold-up the technologies by making them inaccessible. To prevent such hold-ups, SSOs make it mandatory to disclose SEPs and commit sharing / licensing of such patents at fair, reasonable and non-discriminatory terms.
FRAND Patent Licensing Terms
In India, no dedicated provisions are provided in the Indian Patents Act that define either SEPs or the FRAND terms. Hence, determination of FRAND is subjective to the interpretation of concerned parties and is usually driven by the market demand for patented technology. Situation becomes complicated when patented technology becomes industry standard and is essential for market growth. Patentee or the patent owner is required to license the patented technology on FRAND terms to ensure fair competition and prevent abuse in the market due to its dominant position.
Competitors or the Patent Licensees mostly object to exorbitant patent royalty demands by patent owners alleging exploitation of patentee’s dominant position in the market.
SEP Patents and FRAND Litigation
Many disputes pertaining to SEPs and FRAND reach court and the court’s role during litigation is to ensure that patent owners don’t abuse dominant market position but get reasonable royalty at FRAND licensing terms.
Standard Essential Patents and FRAND in India
The department of industrial policy and promotion, DIPP, published a discussion paper on STANDARD ESSENTIAL PATENTS AND THEIR AVAILABILITY ON FRAND TERMS, which can be seen here.