What are Standard Essential Patents and FRAND? Episode 145

Introduction to SEPs and FRAND

Today, we’re talking about Standard Essential Patents, and something called FRAND. Don’t let those terms scare you off—I’m going to make it all super clear.

Let’s start with the basics. What are Standard Essential Patents, or SEPs for short?

To explain that, let’s take a step back and talk about standards.

What Are Standards and Why Do They Matter?

Imagine you’ve got a smartphone. Your friend has a different smartphone brand. Despite that, both phones can connect to the same Wi-Fi network and talk to each other. This works because both devices follow the same set of technical rules, known as standards.

Standards ensure that different products and services can work together seamlessly. Organizations like the International Organization for Standardization (ISO) or the Institute of Electrical and Electronics Engineers (IEEE) create these standards. You may have seen those acronyms on many electronics products, and that means the product uses standard technology that’s used across similar types of products.

What Is a Standard Essential Patent (SEP)?

Now, when a company invents a new technology and wants that technology to become a standard—and they get a patent on it—that patent becomes a Standard Essential Patent.

In simple terms, if everyone making a product must follow a certain standard, and your patent is a key part of that standard, then your patent is a Standard Essential Patent.

Why is this important? Well, normally, when you get a patent, you have the right to exclude others from using that technology. For example, if you invented a new bouncing ball that bounces better and Hasbro comes to you wanting to license it, you can say no. Even if they offer you a great deal, you don’t have to license it.

But there’s a problem when your patented technology becomes part of a standard. If every product manufacturer has to use your patented technology to be compliant with that standard, you could potentially block everyone from making a compliant product—essentially monopolizing the entire standard.

Why FRAND Exists

So, what is a company supposed to do when they need to comply with a standard, but another company refuses to license the required technology?

This is where FRAND comes in. It stands for Fair, Reasonable, and Non-Discriminatory, and it’s meant to fix this problem.

Examples of SEPs in Action

Let’s look at a few examples.

Take 4G LTE technology—that’s what gives your phone high-speed internet. The 4G LTE standard includes tons of SEPs. Companies like Qualcomm, Nokia, and Ericsson own many of these SEPs. If a new company wants to make a 4G LTE-compatible phone, they must use technologies covered by these SEPs.

Another example is Wi-Fi. We use Wi-Fi every day to connect devices wirelessly to the internet. The Wi-Fi standard includes SEPs owned by companies like Broadcom and Intel.

What Is FRAND?

So SEPs are critical—but here’s the catch: when a company owns an SEP, they have a lot of power. Anyone wanting to use that standard must use their technology. To prevent abuse, many standard-setting organizations (SSOs) require SEP holders to license their patents under FRAND terms.

Let’s break FRAND down:

• Fair means the licensing terms should be equitable.

• Reasonable means the fees shouldn’t be absurdly high.

• Non-Discriminatory means the terms should be consistent for everyone—no playing favorites.

This creates a balance. Inventors are still rewarded for their innovations, but others can access the technology needed to create standard-compliant products, which encourages market entry and innovation.

Real-World Legal Battles Over FRAND

Let’s look at some famous legal cases.

One of the most well-known disputes was between Apple and Qualcomm. Qualcomm owns many SEPs related to cellular technology. Apple argued that Qualcomm wasn’t offering licenses on FRAND terms. This dispute led to multiple lawsuits and eventually a settlement. It highlighted how difficult it can be to determine what “fair and reasonable” really means.

Another example is Ericsson vs. Samsung. In 2021, Ericsson sued Samsung, claiming they weren’t paying fair licensing fees for Ericsson’s SEPs. This case also emphasized the challenges in negotiating and enforcing FRAND terms.

So What Does It All Mean?

The bottom line is: if a patent is declared essential to a standard, then the owner agrees to license it on FRAND terms. That means when others want to use the patented technology, the terms must be fair, reasonable, and non-discriminatory.

The Challenges of FRAND

While SEPs and FRAND are designed to promote fairness and innovation, they bring challenges—mainly around the question: What counts as “fair, reasonable, and non-discriminatory”?

This is subjective, and it often leads to disputes. Courts or arbitration panels are sometimes called upon to interpret what those terms mean in specific cases.

Solutions and Best Practices

So, what can be done to reduce FRAND-related problems?

One solution is for Standard-Setting Organizations (SSOs) to require patent holders to commit upfront to FRAND terms. This ensures the standard can be adopted broadly without barriers.

Another solution is to promote transparency. SEP holders can publicly share licensing terms and fees, so potential licensees know what to expect.

Finally, mediation and arbitration are often more efficient than litigation. These alternative dispute resolution methods allow parties to settle disagreements without dragging things out in court.

Conclusion

So there you have it! SEPs and FRAND are critical to making sure our devices and technologies work together while ensuring the playing field remains fair. These concepts protect inventors while allowing others to build on foundational technologies. Until next time, I’m Adam Diament—and keep on inventing!