On October 11th, 2022, Gene Quinn, patent attorney and Founder of IPWatchdog.com moderated a wide-ranging conversation about How to Navigate the Risks of SEP Licensing and SEP Litigation. The conversation was joined by…

Connectivity technology will not only connect smartphones, tablets and computers but every device or object across many industry verticals linking other vehicles, trucks, traffic lights, machines, TVs, smart metres or medical devices. Technology standards such as 4G, 5G, Wi-Fi, HEVC, VVC and many more will enable connectivity that heavily relies on standards subject to standard essential patents (SEPs). SEP-related global royalty income was estimated at over $20 billion in 2021 and will likely increase in the next years when standards subject to SEPs are implemented widely across industries. Consequently, most SEP holders will actively monetize and enforce their SEP portfolios. But what is a reasonable royalty for a SEP portfolio and how should standards implementers and SEP holders navigate the risks of SEP licensing and SEP litigation?

The discussion included the following topics:
Risk due to lack of transparency

  • There is no public information about SEP essentiality and conducting claim charts is a manual, expensive and time-consuming exercise. How does the lack of SEP data create risks for your clients and companies in the industry?
  • SEP royalties (if not provided by a patent pool program) are subject to bilateral licensing agreements which not publicly available. At the time of standard adoption, it is often unknown how much royalties the implementer will have to pay. How does the lack of information about future royalty rates create risks?
  • Licensing takes place on different levels in the value chain and especially with the implementation of standards subject to new industry verticals it is yet unknown where in the value chain standards implementers will need to pay the SEP license. How does the lack of information about where in the value chain SEPs are licensed create risks?

Risks due to the threat of litigation

  • Litigation is always a risk in any industry where patents matter but for widely adopted standards subject to SEPs litigation may be a much bigger threat, as there is no invent around option. This risk is especially high for small and medium sized businesses. But how big is the risk of SEP litigation in reality, what does the data say?
  • Even if SEP litigation is only the exception isn’t the existence of the threat of a Preliminary Injunctions creating legal risks that may create costs even without litigation?
  • What are solutions to mitigate SEP litigation risks? Join a defensive aggregator? Sign a SEP insurance? Make use of consultants early in the process? Have a seat at the table and acquire or invest in own SEP portfolios to cross-license?

The Role of Risks in Standards Adoption

  • What is the expectation for the adoption of SEP heavy standards such as 5G, Wi-Fi 6 or VVC for IoT use cases where other standards compete?
  • How does standard adoption differ across industry verticals?
  • Some of the advances of the latest standards generations such as increase bandwidth, reduced latency or higher resolutions quality are not important for connectivity of rather simple IoT devices that send a signal every hour, without video or heavy data streams. Must SEP licensing and risks associated with that consider standards competition with standards much less subject to SEP licensing or litigation such as such as Bluetooth, DECT NR+, or other mesh-networks.

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