Patents in standards: what rules should change to make it better for SMEs

The following are ideas developed by DIGITAL SME in view of our experience in standardisation with and for SMEs. These ideas contribute to the larger public debate on the treatment of intellectual property rights in standardisation.

ICT standardisation is often closely interlinked with the treatment of Intellectual Property Rights “IPRs”. Patentable solutions add substantial value to ICT standards and the use of such standards by companies and stakeholders is affected by terms and conditions of those IPRs.

The disclosure and use of proprietary technologies through standards creates technological ecosystems that allow SMEs to develop innovative solutions and grow in the global markets. Hence, the standardisation system should maintain sufficient incentives for patent holders to share their technologies through standards on Fair Reasonable and Non-Discriminatory Terms (“FRAND”). The existence and proper function of these technological eco-systems is ever more important with the raising of Internet of Things (“IoT”) technologies and products. If European SMEs are to become leaders in the new global IoT markets this will happen in standardised environments where patented technologies are made available at an affordable price to manufacturers of connected products.

On the other hand, IPR policies at SSOs’, in particular ETSI, raise certain issues that may undermine the capacity of SMEs to fully benefit the opportunities of standardisation.

IPR policies do not specify in a prescriptive way the boundaries of FRAND terms and there are no recognised commercial practices for calculation of FRAND terms. Thus, the terms for the implementation of Standard Essential Patents (“SEPs”) are often negotiated bilaterally between the patent holder and the standards user and are covered by non-disclosure agreements. This creates an asymmetry of information between SMEs, or entities with few patents and no previous experience in negotiations, and larger companies. The latter, whether as patent holders or as implementers, have typically a broader experience in negotiations on SEP licencing agreements and are in a better position to establish FRAND terms. Thus, larger companies have better chances to negotiate more favourable conditions in licencing negotiations than smaller entities.

Other problems for SMEs arise from the huge number of declarations in the SEP database, for instance at ETSI. The complexity is worsened by the fact the ETSI IPR database does not provide a unique mapping of standards to the relevant SEP declarations. Hence, such mapping has to be done at the cost of the companies that intend to use a standard. An additional cost for standards implementers is the technical analysis to confirm the essentiality of patents; such analysis becomes necessary when a licensing negotiation takes place.

All these issues together create disadvantaged conditions for SMEs. In the worse cases, the extreme difficulty in predicting the licencing costs of new products may be perceived by companies as a too big risk and actually become a barrier to investments and innovation.

Therefore, DIGITAL SME believes that ESOs should continue to improve their IPR policies to achieve greater transparency and reliability of IPR declarations. Also, ESOs should proactively engage their SME members in the definition of IPR policies and should create targeted services for informing and mentoring SMEs on IPR matters.