Over-Declaration: Why Some Standard Essential Patents Actually Aren’t Essential

In brief:

  • A surprising amount of declared SEPs are actually not essential
  • There are several reasons for this over-declaration
  • Standard Setting Organisations (SSOs) may need to revise their procedures
  • In the meantime, certain data models and working assumptions can be helpful in better understanding SEPs

I must admit that when I first started looking into Standard Essential Patents (SEPs), I was shocked to discover that a surprising amount of patents that had been declared SEPs actually were not essential.

Standard Essential Patents (SEPs) are patents that are unavoidable for the implementation of a standardized technology. They represent core, pioneering innovation that entire industries will build upon. These patents protect innovation that has taken extraordinary effort to achieve. (IPWatchdog)

I came to understand that this phenomenon is known as “over-declaration,” and it is far more common than I could have imagined.

In fact, as detailed in a paper entitled “Over-Declaration of Standard Essential Patents and Determinants of Essentiality,” one European Commission report in 2017 cited evidence “suggesting that only half, or up to 90 percent, of declared patents to key technologies may be truly essential.”

The paper also mentioned another report from the IP consulting firm Fairfield Resources International, which stated that up to 80 percent of the declared SEPs in the telecommunications industry were not actually essential.

Why Is This?

To gain a better understanding of why this is happening, we have to go back to the Standard Setting Organizations (SSOs) that are responsible for setting the standards for different types of technology.

Let’s take a closer look at one of these SSOs—the European Telecommunications Standards Institute (or ETSI, for short). According to ETSI IPR Policy:

During the proposal or development of a standard, ETSI members must inform the Director-General in a timely fashion if they are aware that they hold any patent that might be essential. (ETSI)

The key here is the phrase “might be essential.”

Of course, for ETSI, such a broad definition helps it to cast a wider net, which is likely meant to help the organization to bring in any and all possible SEPs. 

At the same time, patent holders may also feel compelled to declare their patents, even if they may have some doubts about them, since failing to do so could lead to even bigger problems down the road, including losing the enforceability of a patent. 

To put it another way, if a patent holder fails to declare a patent essential in the beginning, then there will be no other chance to do so later on and the opportunity to make money from licensing that patent down the road will have been lost.  

But there are other reasons that over-declaration occurs.

Other Reasons for Over-Declaration

As the paper mentioned above describes, there are several other reasons that over-declaration occurs:

  • Dynamic technology, and changing standards. So, a patent that was initially declared essential may no longer end up being essential to the finalized standard;
  • If a patent’s scope is narrowed down during examination, it may no longer be considered essential;
  • If a patent application is rejected, it cannot be essential.

Yet, there are still some other reasons for over-declaration:

  • Unfortunately, some less scrupulous patent owners may deliberately declare many of their patents to be essential in order to gain some type of benefit or business advantage;
  • Some may want to overstate the number of SEPs they have in order to present a better picture of their business (perhaps to attract investment) or simply to present a “stronger” portfolio during licensing negotiations.

No matter what the motivations may be, the end result is over-declaration.

What Can Be Done?

Some have suggested that the current system for setting standards must be overhauled, or at least modified. 

They point to the fact that when it comes to SEPs, it is the patent holders themselves that declare the patents as essential and that there is currently no official independent process to verify this.

At the same time, since technology continues to change so quickly, updates to these standard-setting systems must be made just as quickly in order to keep pace with this rapid evolution.

Yet, realistically speaking, any changes to these established SSOs like ETSI will likely not occur all that quickly.

Data Models and Working Assumptions

So, for now, the best we can do is turn to the data, create some models, make some working assumptions, and see what this will tell us.

This is exactly what Jackson Lin and Mike Pao of Wispro have done in the latest article for their series about The Race for 5G. In the September update, Lin and Pao have created a model that uses US and CN patent data and takes into account the over-declaration phenomenon in analyzing 5G SEPs. 

This process has yielded some insights into the 5G SEP landscape, which are certainly of interest to those involved in this industry.

Conclusion

For the time being, over-declaration seems to be one part of the SEP ecosystem that won’t be going away anytime soon.

Fortunately, with the help of data models, it can now be factored in, at least in some ways and in some cases, to deliver a better picture of the SEP landscape and enable better, data-driven business decisions to be made.

Stay tuned for an upcoming article on Huawei’s 5G SEP portfolio, with data retrieved from ETSI and analyzed with Patentcloud, our cloud-based IP intelligence platform. In the meantime, read the first part of the series for an overview of the Chinese telecommunication giant’s portfolio here.