IPR – The Weakness of Essential (part iv)

The latest EU ruling weakens the case for using SEPs for protection.

• The strength of standard essential patents (SEP) has taken another hit as the EU has found that Motorola has been abusing its position as a SEP holder.
• SEPs are patents that have been used to implement a technology standard such as 3G or LTE.
• They reason they are so powerful is that they have to be infringed in order to implement a standard.
• Hence, anyone who makes a LTE device will have infringed any patent that is standard essential to LTE.
• Therefore it is very much easier to prove infringement of an SEP than it is for any other patent.
• However, there is a catch.
• When the standard is created, those that hold the patents agree to licence their technology on a fair, reasonable and non-discriminatory basis (FRAND).
• The holders of these patents are also not supposed to seek injunctions but Germany is a territory that has historically allowed injunctions on SEPs.
• This is why the vast majority of patent infringement lawsuits in Europe are tried in Germany as it is the most plaintiff friendly.
• However, this may all change, as the EU finding is clearly frowning on the practice of seeking injunctions for SEP infringement.
• This is going to make life difficult for anyone trying to defend themselves using SEPs.
• This is basically everyone except Apple and Microsoft who have had considerable success in prosecuting non-essential patents.
• With non-essential patents, there are no rules covering the terms under which they may be licenced making them much more powerful once infringement has been proved or admitted.
• What most of the industry has done is to buy as many SEPs as they can get their hands on and then try and use those to defend themselves against the predations of Apple and Microsoft.
• This ruling from the EU (albeit a preliminary one) is likely to set a precedent which could scupper attempts to seek injunctions as a remedy for SEP infringement.
• This is a real problem as the threat of injunction is one of the few remedies that will get an opponent to cave in.
• Hence, I suspect that days of usefulness of SEPs are numbered which is going to make life increasingly difficult for the Android community in particular.
• The winners here are Microsoft and Apple both of whom offer good value for investors even if the shorter term outlook looks difficult.