UK intervention on SEPs including rate setting swims against the tide

The UK Intellectual Property Office’s 2025 consultation on standard essential patents proposes measures to improve licensing transparency and efficiency. These include searchable SEP databases, essentiality checking services, and mechanisms for aggregate rate setting to facilitate top-down approach FRAND licensing rate apportionments. While these initiatives aim to support UK innovation – particularly for SMEs – they risk undermining a licensing system that has successfully evolved through decades of commercial practice and judicial developments.

The UK’s Prime Minister and Chancellor have recently pledged to promote economic growth by slashing red tape and taking out regulators. The IPO’s proposals fly in the face of that.

In my response submission to the IPO’s consultation, I focus on interventions that could do more harm than good: essentiality checking and essentiality rate estimating, aggregate royalty setting and top-down rate apportionment. My concerns are similar to those previously raised in response to the EU SEP consultation in 2023 and 2024.

Checking essentiality – along with infringement and validity – are important and are economically achieved on handfuls of patents to reliably establish that licensing is required. Comparable licences are then the generally preferred method of determining FRAND rates. Where these do not yet exist or are unavailable, parties are best placed to determine rates through discussion and negotiation.

Estimating essentiality rates of entire patent portfolios and for all patents reading on a standard is a far more demanding and costly endeavour, even when only random samples of patents are checked. Results are inaccurate and unreliable.

Setting aggregate royalties and then apportioning them based on counts of declared essential or checked essential patents is also very problematic.

My consultation submission can be downloaded here.

Gaming the System: A Scatter-Gun Approach to 5G Declarations

While it is already widely believed that “over-declaration” of standard essentiality is due to large and excessive numbers of patents being filed in patent offices and declared to Standard Setting Organizations (SSOs), my new quantitative research suggests that over-declaration is also being pursued with claims that individual patents read on multiple Technical Specifications.

Some declare patents essential to multiple Technical Specifications

Participants in technology standard standard-setting, such as in 3^rd Generation Partnership Project (3GPP) Working Groups, are obliged to declare their patents that they believe might be or might become essential to technology standards such as 5G. For example, the Intellectual Property Rights (IPR) policy of 3GPP partner ETSI requires declarations to ensure that standards are not blocked by IPR being unavailable. Declaration practices differ among participating companies, but with all of them reasonably declaring some patents that would never actually be found standard essential if tried in litigation by courts of law.

More and more patents

However, with the increasing use of patent counts as a measure of companies’ respective patent strengths, for example in determining royalties, it is widely believed that some technology developers puff up their positions with numerous declarations in excess of what is reasonably required to protect their IPR, shield them from assertions of anticompetitive behaviour such as patent ambush and provide the commitments required by IPR policies. Over-declaration is thus commonly understood to be the filing and declaring of large and increasing numbers of low quality patents that would never be found essential in litigation. Accordingly, there has been an exponential increase in patent declarations. Rapidly approaching 80,000 patent families have been declared to ETSI including various communications standards.

With over-declaration, raw patent counts and checked-essential patent counts exaggerate patent strength. There is no essentiality checking in standard setting, such as by 3GPP or ETSI. While essentiality checking is undertaken by some specialist firms, my previous research shows that this does a poor job in correcting the inflated relative positions of companies that over-declare. Systemic bias prevails because essentiality checking is far from perfectly accurate. False positive determinations (i.e. where a patent is found essential when it is not truly essential) tend to exceed false negative determinations. And, the lower the true essentiality rate (i.e. the percentage of declared patents that are truly essential), the more bias there will be.

Throw everything at the wall and see what sticks

In addition to inflating patent counts by flooding IPR databases with increasing numbers of declared patents, my new research paper—based on patent declaration and standards data collected and processed by Dolcera—indicates that some companies are also declaring individual patents to multiple different Technical Specifications. While most major declarers declare their patents to an average of no more than 2.5 Technical Specifications, some companies declare essentiality to more than twice as many, and with individual patents declared to as many as 12 or even 18 different Technical Specifications. However, essentiality is based on whether a patent reads on any Technical Specification, not on how many of the latter are referenced.

As human and automated checks have to assess each declared patent’s essentiality against every Technical Specification referenced, the more of those that are referenced the higher the probability of false positive determinations while the probability of false negative determinations cannot increase even to partially offset the above. Assessing any additional Technical Specification can, therefore, only increase the possibility that a patent is found essential. This means that the systemic bias inflating essentiality rates found in checking will be higher than if declarations for each patent were more diligently focused on only one or two Technical Specifications. Costs also increase with the expanded workload in checking more Technical Specifications.

My full new research paper analysing patent essentiality declarations to multiple Technical Specifications can be downloaded here and from SSRN.

Essentiality checks might foster SEP licensing, but they won’t stop over-declarations from inflating patent counts and making them unreliable measures

 Essentiality checks could help implementers determine with whom they need patent licenses.  However, essentiality checking does a poor job in adjusting for over-declaration in patent counts and will encourage even more spurious declarations.

We await a new policy framework from the European Commission (EC) with its Impact Statement regarding the Fair Reasonable and Non-Discriminatory (FRAND) licensing of Standard Essential Patents (SEPs). The EC is considering instigating checks on patents disclosed—to Standard Setting Organization (SSO) Intellectual Property Rights (IPR) databases as being possibly standard essential— to establish whether they are actually essential to the implementation of standards such as 5G. Objectives for essentiality checking are to:

1.      enable prospective licensees to determine with whom they need to be licensed

2.      correct for over-declaration and only count patents deemed essential; and

3.      use such figures in FRAND royalty determinations.

If clutches of selected patents are independently and reliably checked to establish that prospective licensors each have at least one patent that would likely be found essential by a court, these results might be used by several or many prospective licensees to determine with whom they need to be licensed.[1] But such checks would be of limited and questionable additional use to existent court determinations. Checks have already been made on some patents for all major licensors and many others in numerous SEP litigation cases over many years. Greater legal certainty is provided in court decisions where many patents have been found standard essential, infringed and not invalid.

My full paper on this topic, which can be downloaded here, focuses on the wider use of essentiality checks and sampling in patent counting. With too many patents to check them all properly, it is hoped that thorough checking of random samples of declared patents will—by extrapolation—also enable accurate SEP counts to be derived. However, essentiality checks do not fix and can only moderate exaggerations in patent counts due to over-declaration. For example, false positive essentiality determinations will exceed correct positive essentiality determinations where true essentiality rates are less than 10% unless at least 90% of determinations are correct.[2] Inadequate checking could imbue many with a false sense of security about precision while encouraging even more over-declaration by others which would further misleadingly inflate their measured patent counts and essentiality rates.

My empirical analysis also shows that declared essential patents are too numerous, and bias in checking and random errors in sampling are too great to provide even the modest precision expected and that should be required for patent counts to determine FRAND royalties without very thorough and highly accurate checks on thousands of patents per standard.

Even ignoring residual bias after improved but imperfect checking, sample sizes of thousands of patents would be required to provide even only modest levels of precision in essential patent counts (e.g. a ±15% margin of error on the estimated patent count at the 95% confidence level) on patent portfolios and entire landscapes where essentiality rates are low (e.g. 10%) due to over-declarations.

The dangers in not recognizing the sources and extent of bias and other errors and in not designing studies with sufficient scale and precision (e.g. for a court setting a royalty rate) is that far from increasing transparency, information provided will be imprecise, distorted and unreliable. Ignoring analytical errors, and mistakenly implying or pretending otherwise is even worse.

This new paper, also available on SSRN, is a follow-on to my previous research on essentiality checking and patent counting in 2011, 2017 and 2021.

---

[1] This ignores validity and actual infringement in any specific product, which also determine whether licensing is required under patent law and FRAND conditions. These are also important issues.

[2] The essentiality rate is the number of essential patents divided by the number of declared essential patents. An estimated or found essentiality rate will differ from the true essentiality rate due to inaccuracies.