Standard Essential Patents

Standard essential patents, or SEPs, are those patents that are “essential” or required because the invention itself covers a technology required to implement a technological standard that will be used by the general public. Therefore, the inventor deems it necessary to issue patent protection in the event of infringement.

But, today, those holding essential patents have found it more difficult to obtain relief for infringement. Generally, plaintiffs in a patent infringement suit can obtain injunctive relief, which essentially prevents the defendant(s) from using the invention of the plaintiff, as well as earning monetary damages for lost profit or royalty fees for profits being made by the defendant(s).

However, recently, patent litigators have stated that those plaintiffs have had a much harder time obtaining injunctive relief, particularly with SEPs that are inconvenienced with a fair, reasonable, and non-discriminatory (“FRAND”) licensing agreement. If this were the case, and the parties entered into a FRAND agreement, plaintiffs should not have the ability to go after the defendants and argue for high royalties and unfair relief when such an agreement is already in place.

Patent holders argue that a law barring injunctive relief for FRAND SEPs should be reviewed on a case by case basis, as the facts should be taken into account when determining what, if anything, the defendant owes to the plaintiff.

Court Decisions on the Matter

  • Federal District Courts can grant injunctive relief to prevent patent infringement when the ‘balance of traditional equitable factors,’ which includes the interest to the public, is in favor of granting such relief.

  • Federal District Courts in other countries also follow the same discretionary standard that is currently applicable in the United States.

  • Some courts in other countries have stated that injunctive relief is automatic once the infringement is proven by the plaintiff.

  • Most courts provide that there is a FRAND type of defense, as a defense to liability or to limit the number of monetary damages that will be due to the plaintiff. This defense, however, is dependent on the court’s discretion in actually granting or denying such injunctive relief.

  • In Germany, a statute exists stating that all patent holders (inclusive of SEPs), can apply for injunctive relief. If, thereafter, patent infringement is proven, German courts will issue the injunction as a matter of law. Therefore, the court will have no discretion. If the patent is a FRAND SEP, then the German court can limit the injunctive relief.

  • Dutch courts have stated that injunctions are granted in SEP cases; one court did, in fact, reject an injunction because it was FRAND-related.

  • In China, there is a broad FRAND type of defense that can be used if the patent holder agrees to incorporate a patented technology standard and then files for injunctive relief thereafter. If this is the case, then the FRAND defense can be used to minimize liability and reduce applicable royalty rates that will be due to the plaintiff.

  • In Japan, a recent decision was made identifying that a FRAND defense was applicable.

  • Other parties involved in prior suits have argued that, if a defendant (infringer) agrees to the licensing of a FRAND SEP, then injunctive relief is not appropriate, and would violate competition and antitrust laws.

Cross-Licensing a Patent

If you cross-license a patent, that simply means that two patent holders have access to the other’s patent portfolio. But keep in mind that each portfolio requires a royalty payment. Therefore, if you cross-license your patent with another patent holder, you both owe royalties to one another.

However, instead of having both parties pay one another, the patent holders generally take the difference of what one would owe the other. For example, if you enter into a cross-license agreement with John Smith, you may have entered into a royalty agreement in which you would pay him $20/month and he pays you $25/month. Therefore, instead of you both paying one another on a monthly basis, John Smith will pay you the $5 difference on a monthly basis.

If you need help with filing for SEP protection, or if you find yourself in the middle of a patent infringement suit, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.