Essentiality assessment of SEPs and plans of the Commission

Miguel Vidal-Quadras Trias de Bes

[et_pb_section fb_built=”1″ _builder_version=”3.19.5″][et_pb_row _builder_version=”3.0.48″ background_size=”initial” background_position=”top_left” background_repeat=”repeat”][et_pb_column type=”2_5″ _builder_version=”3.0.47″ parallax=”off” parallax_method=”on”][et_pb_image src=”” _builder_version=”3.19.5″][/et_pb_image][/et_pb_column][et_pb_column type=”3_5″ _builder_version=”3.0.47″ parallax=”off” parallax_method=”on”][et_pb_post_title comments=”off” featured_image=”off” _builder_version=”3.19.5″][/et_pb_post_title][et_pb_text _builder_version=”3.19.5″]

Under the IP Action Plan, the European Commission stated in its Communication “Making the most of the EU’s innovative potential An intellectual property action plan to support the EU’s recovery and resilience” (COM/2020/760 final, 25 November 2020) that “The licensing of standard-essential patents (SEPs) is often a cumbersome and costly exercise for both patent holders and technology implementers. Given the growing importance of SEPs (for instance, there are over 95 000 unique patents and patent applications supporting 5G), there is a need for a much clearer and more predictable framework, incentivising good faith negotiations rather than recourse to litigations”. In this regard, as a policy to be implemented in the EU, it added that “easier and faster access to knowledge, data and technologies, including IP-protected ones, is crucial. A resilient, green and competitive economy needs tools to facilitate access to critical IP protected technologies in times of crisis, to facilitate license copyright and standard-essential patents, and to promote data sharing”.

On Standard Essential Patents or SEPs, which it defines as “patents for technologies incorporated into standards”, the Commission concludes that they “play a crucial role in the development of 5G and the Internet of Things (IoT)” and that “Digital integration of objects, devices, sensors, and everyday items, with applications ranging from connected cars, health, energy to smart cities requires interoperable solutions based on standards”. Accordingly, it follows that “it is essential to have stable, efficient and fair rules governing the licensing of SEPs” and that “the guidance provided in the SEPs Communication in 2017” (Communication Setting out the EU approach to Standard Essential Patents, COM(2017) 712 final, 29 November 2017) does not seem to be sufficient to avoid disputes, in which patent holders claim that their SEP has been infringed and the other party complains that the patent holder has imposed unfair conditions on a licensing agreement.

The Commission concludes that in the short term it “will facilitate industry-led initiatives to reduce frictions and litigations among players in specific sectors” and in the longer term it “will consider reforms to further clarify and improve the framework governing the declaration, licensing and enforcement of SEPs” (as an example, it is pointed out that the possible creation of an independent system of third-party essentiality checks in view of improving legal certainty and reducing litigation costs). In order to carry out these reforms, it states that they will take into account the experience with the guidance provided in the 2017 SEPs Communication as well as discussions with relevant stakeholders.

These conclusions are supported by a comprehensive study published by the Commission together with its IP Action Plan, Pilot Study for Essentiality Assessment of Standard Essential Patents, produced in 2020 by a number of authors: Rudi Bekkers, Elena M. Tur and Emilio Raiteri (Eindhoven University of Technology), Joachim Henkel and Lisa Teubner (Technical University of Munich), Byeongwoo Kang (Institute of Innovation Research, Hitotsubashi University), Wim Maas, Bram Nijhof (from the international law firm TaylorWessing), Tommy van der Vorst, Menno Driesse (from the private consultancy firm Dialogic innovation & interaction) and Arianna Martinelli (Sant’Anna University, Pisa). This study was initiated and funded by DG Grow in collaboration with the EC Joint Research Centre (JRC) and DG CONNECT.

Benefits of essentiality assessment according to the Pilot Study

The Pilot Study points out that the essentiality assessment can present attractive benefits in a society that is so dependent on developments such as IoT, Industry 4.0 or connected cars:

  • Determining the actual SEP exposure for a given product (including the knowledge about the SEPs that patent holders possess)
  • Facilitating smoother and faster SEP licensing negotiations (reducing transaction costs)
  • Reducing legal tension and unnecessary litigation and increasing legal certainty
  • Providing valuable data in the context of infringement proceedings

On the contrary, the authors of the Pilot Study conclude that maintaining an opaque environment in an increasingly complex area of technological uptake appears to bear high risks.

The Pilot Study aims to assess the feasibility of a system that ensures better essentiality scrutiny for SEPs, both from a technical (how could it be carried out?) and an institutional (which institutions could possibly set-up and implement such a system?) points of view.

The analysis was carried out from different approaches: (a) cases studies, (b) specific investigation on the potential of automated systems, (c) a landscape study on potential SEPs, (d) a pilot experiment and (e) a stakeholder workshop with 23 participants.

We will now focus on some of the key findings of the Pilot Study. In this analysis we will leave aside the key findings on AI-based and other automated approaches as well as on technical feasibility in view of their eminently technical component, which is beyond my knowledge and expertise.

A) Concept and meaning of essentiality

The Pilot Study points out that the determination of essentiality is a complex process as there is no standard degree of essentiality to rely on. Moreover, essentiality can only be considered once the standard has been definitively adopted or fixed and the patent has been granted.

An essentiality assessment should be based (a) on the normative elements of the standard only and (b) on the claims of the patent.

On the other hand, the Pilot Study points out that a distinction will have to be made among validity, enforceability and value of a given patent. With regard to infringement as well, as it will depend on the specific implementation of a standard in a certain device.

B) Case studies

The Pilot Study points out as well that essentiality assessments that are available differ widely in design, efforts and quality. The authors highlight the following aspects of interest:

  • Importance of claim charts in high-quality essentiality assessments in both: the quality of the outcomes and the efficiency of the assessment
  • The most sophisticated systems in place for independent essentiality assessment are put in place by patent pools
  • In large scale essentiality assessments differences in national patent law so not pose substantial problems
  • There are substantial differences in essentiality rates across firms and technologies
  • Commercial assessments studies vary considerably in methodology and quality
  • No formal legal status of essentiality is established in the existing assessment mechanisms
  • Technical engineers, patent attorneys and patent lawyers are usually involved in the essentiality assessment in the patent tools (ca. 5,000 to 10,000 euros per patent)

C) Institutional feasibility

As mentioned above, one of the major concerns expressed by the Commission, and which is the subject of the study, is the institutional feasibility of essentiality assessment, for which different possible scenarios are outlined. The different stakeholders share the fact that the system brings smoother and faster licensing negotiations, this reducing transaction costs for parties willing to enter into a license.

The authors point out that it would be advisable to set up a mechanism in an open manner, so it can be used in relation to any standard.

In relation to essentiality, the Pilot Study distinguishes five types of data:

  • ‘Numerator data’ (information on the actual SEPs portfolio of a specific patent owner for a specific standard)
  • ‘Denominator data’ (information on actual SEPs owned by all relevant patent owners for a specific standard)
  • ‘Validated summary claim charts’ (one-page summaries that map claims in the actual essential patents to relevant parts of specific standards documents, also considering device categories and optional normative feature)
  • ‘Detailed assessment outcomes’ (extensive information on both patents assessed to be essential and those for which essentiality was not found)
  • ‘Current ownership data’ (information on the current owner of the patent in question)

Under the study carried out, the authors identify three scenarios as the most promising ones:

  • A system in which all patents disclosed to SDOs (Standards Developing Organisations) as potentially essential for a given standard are systematically assessed (while this scenario would satisfy many expressed interests for transparent data on essentiality, it would require very significant resources in people and years)
  • A system in which assessments are initiated at the request of the patent owner, who then also provides claim charts as input to the process (while this scenario can generate rich data on essentiality, including ownership data and detailed data that may help to make patent licensing negotiations smoother and faster, it relies on voluntary participation by patent owners, and no data is generated for those parties who do not participate)
  • A system in which the key elements of the two scenarios above are combined, and assessments initiated at the request of the patent owner are complemented with an assessment of patents disclosed to SDOs (with regard to the first scenario, an amount of overhead would need to be added to the on-demand assessment, and/or (pre)financing for the sampling part would be required and in relation to the second scenario required resources are estimated to be slightly higher)

The authors of the Pilot Study point out that the current support for a specific design is uncertain. They also highlight the fact that many stakeholders embraced the principle of ‘all benefiters should pay’ and that even when a transparency system has a public benefit, it would be beneficial if the system were self-financing.

Recommendations of the Pilot Study

Among the recommendations of the authors of the Pilot Study, we highlight the following:

  • It is recommendable that a system for essentiality assessments is developed and implemented
  • The engagement of all stakeholders in the whole process is important, as acceptance by stakeholders is a key success factor
  • The three most promising scenarios that have been identified should be considered
  • The various business and licensing models of SEP owners should be taken into account and the specific situation of SMEs should be recognised
  • It would also be important to strive for a self-financing system for essentiality assessments
  • The European Commission should arrange a small, supervising body to design and define the procedures, oversee the system, harmonise internationally with the different regions/countries concerned, and have overall responsibility for quality and performance.

Apart from the above, the authors of the Pilot Study recommend all the stakeholders (patent owners, implementers, patent offices, patent pools and SDOs) consider their role in the implementation of a system for essentiality assessments and how it can benefit them, and they can contribute to support or facilitate it.

Case study on court cases

The Pilot Study identified up to 20 court cases and competition agency rulings that involved determining patent essentiality in the context of technical standards and finally focused on 3 of those cases. It is interesting to highlight the most salient facts of these cases, which are outlined below:

  • Unwired Planet v Huawei, [2017] EWHC 711 (Pat) Case No: HP-2014-000005 (High Court of Justice, Canchery Division, Patents Court April 5, 2017).

    Unwired Planet asserted six patents against Huawei, Samsung and Google. Five of these patents were claimed to be an SEP. Two were led valid and essential and two invalid.

    A set of 18,938 potentially essential patent families was identified and of these 11,384 were selected that included at least one issued and non-expired patents (1,525 for GSM standard, 5,158 for UMTS standard and 7,077 for LTE standard).

    One criticism resulting from that case is the overestimation of essential patents, due to the approach of the patentee experts that in case of doubt, a patent was consider essential, what led the Court under its own calculations to pick up a number halfway the results of the different analyses used by the parties.

  • TCL v Ericsson, (2017) 8:14-CV-00341 JVS-DFMx (United States District Court, Central District of California December 22, 2017).

    TCL, a large handset manufacturer, was sued by Ericsson in several jurisdictions for  patent infringement and TCL filed an action against Ericsson for not having offered FRAND rates, focusing the case in the calculation of the FRAND license for ericsson’s portfolio.

     7,106 patent families were selected as active families published in English and potentially essential for user equipment. They were divided into 2G, 3G and 4G and of 235 of the patent families contended to be essential for 2G, 3G and 4G by Ericsson 192 claim charts of had been provided by the company and these were the ones selected for essentiality assessment by the TCL experts.

    The court criticised that the experts who performed the essentiality assessment had failed to read the entire patent specification and therefore probably they had included too many patent families.

  • Innovatio (2013). In re Innovatio IP Ventures, MDL Docket No. 2303 Case No. 11 C 9308 (Northern District Court of Illinois, Eastern Division September 27, 2013)

    Innovatio sued a large variety of users that applied the Wi-Fi standard for violation of 23 of its patents. A number of device manufacturers sought a declaration that their products did not infringe Innovatio’s patents, which in turn accused the manufacturers.

    444 patent claims were asserted. The defendants contended that they were essential and therefore covered by a FRAND obligation. The patentee alleged that only 276 of those patent claims were essential and the rest not, allowing the company to request a higher royalty-fee for instance.

    The court, which performed its own essentiality analysis as it had to rule on each and every individual patent claim whether it was essential or not, ruled that the burden of proof should rest with the defendants, and thus their analyses were subject to the most scrutiny.


Although this is an analysis of a proposal that is at a very early stage and conditioned by the European Commission’s request to analyse the possibility of determining an effective system of essentiality assessment, the Pilot Study has the virtue of analysing in depth the elements that make this process complex. It also analyses the different interests at stake and the difficulties inherent in such an assessment, highlighting the analysis of the concept and meaning of essentiality as well as the practical aspects of interest in this process.

This is why the dissemination and analysis of the Pilot Study is of general interest, and the criteria that it suggests should be taken into account when implementing an eventual essentiality assessment system. In any case, the practical difficulty of implementing it arises from all this, given the high cost of adopting a system that confers a degree of certainty and exhaustiveness in the analysis of standard essential patents. And even if a high degree of certainty is achieved, this does not imply either the validity or the infringement of the patents analysed in any case.