SEPs in the City: Realizing the promise of Smart Cities requires fair licensing of standard-essential patents

The global economy is more and more dependent on wireless and digital technologies built on the interoperability afforded by technical standards. The average person encounters these standards from the moment they turn off their Wi-Fi—enabled alarm clock to their morning commute in a connected city. Standards are a tool that helps creators of new technologies develop innovative products that can reliably work together. As a result, consumers benefit from increased competition, innovation, lower prices and the easy adoption of new technologies.

A single technical standard (e.g. a cellular standard like LTE) can include many patents that are essential to implementation and may be needed by any innovator using that standard in its product. Once a standard is adopted and massive financial investments have been made to build out infrastructure and networks based on that standard, the cost of switching can be exorbitant, giving standard-essential patent (SEP) owners massive power to control the market.

To guard against abuse of this power, standards-setting organizations ask those offering their patented inventions for inclusion in a standard to voluntarily agree to license those patents on fair, reasonable, and non-discriminatory (FRAND) terms. These voluntarily made licensing commitments are critical guardrails that ensure anyone interested in utilizing a standard can license the essential patents necessary to do so. This commitment provides a level playing field for all stakeholders.

Unfortunately, some standard-essential patent owners are reneging on their FRAND licensing commitments and exploiting their market power – delaying new technologies, reducing competition and strangling innovation. These abusive practices include attempting to seek product bans to force innovators to accept [inordinate?] rates for licenses, refusal to license to certain manufacturers, and requiring companies to take on additional patent licenses they do not need.

It is increasingly critical for companies to be able to obtain licenses for patents that are needed to use these standards. Left unchecked, the abusive and rent-seeking actions by some of these standard-essential patent owners will continue to expand to affect a diverse range of industries, thereby threatening the future of competition and innovation. From automakers and medical device manufacturers to agriculture and energy companies, the more reliant industries become on wireless and digital technologies, the more destructive the impact of this abuse can be. Unless this behavior stops, these gatekeepers can hold the innovation economy hostage and inhibit the creation and use of new critical 5G applications and services including artificial intelligence, connected vehicles, AR/VR and Internet of Things (IoT)-related applications.

Save Our Standards is a broad-based coalition of innovators, associations, academics, and consumer groups dedicated to reinforcing the FRAND licensing commitment and its important role in technical standards to enable competition and innovation that directly benefits consumers. We work to educate decision-makers and stakeholders on policies that allow all innovators to thrive through pro-competitive practices and the reinforcement of fair, reasonable and non-discriminatory licensing terms for standard-essential patents. Our coalition has one goal: to promote innovation, economic growth and recovery through the fair licensing of standard-essential patents.

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