Election dynamics: boosting UK digital trade with SEP reform
As more than half of the world’s population heads to the polls in 2024, the implications of policy changes on international trade and domestic policy are profound. In the UK, growing the economy must be a priority for the next government. Central to this strategy is the reform of standard-essential patent (SEP) licensing, a critical factor for empowering the small and medium-sized enterprises (SMEs) that represent more than 50 percent of the UK’s tech sector.
Standards, SEP licensing, and SME challenges
Standards, developed by industry participants, provide an interoperable baseline that technology developers use to innovate across markets. Technical standards, such as 4G, 5G, and Wi-Fi, are essential for the functionality of technologies that form the internet of things (IoT) ecosystem and drive digital trade.
SEPs are patents contributed to these standards, making it ‘essential’ for the operation of technology to adhere to that standard. As a result, developers who build products based on these standards are required to take a license from relevant SEP holders. This requirement gives SEP holders significant market power, affecting all industries that rely on these standardised technologies.
Unfortunately, the UK’s current SEP licensing regime is not fit for that purpose and provides no way to enforce or measure whether a SEP holder is adhering to their voluntary commitment to license their SEP on fair, reasonable, and non-discriminatory (FRAND) terms without resorting to costly litigation, which SMEs simply cannot afford.
Negative consumer effects
In addition to SMEs suffering, the UK consumer also bears the costs of SEP abuses, as inflated licensing costs are passed on to them. For example, Which?, a UK-based consumer group, is currently seeking around £480 million in consumer damages from Qualcomm, a U.S.-based SEP owner, for SEP licensing practices that have caused British consumers to overpay for their smartphones in violation of UK competition law. Unless the UK system can be improved, consumers will increasingly experience less choice and higher costs.
The future of SEP licensing reform
The UK Intellectual Property Office (IPO) has recognized that SMEs are disadvantaged under the current SEP licensing landscape. Recent UK court cases like InterDigital v. Lenovo and Apple v. Optis[CI1] , found SMEs were routinely overcharged for accessing SEPs, leading to artificially inflated market rates. There is a critical need for reform to ensure SMEs can access SEPs at fair and transparent rates.
Following the European Union’s (EU) efforts to refine the SEP licensing ecosystem, the next UK government can position the country as a leader in SEP licensing and digital trade by implementing SEP reforms that ensure SMEs can compete effectively on a global scale. The reforms should focus on:
- Transparency on cost – Establish a publicly accessible database that allows SMEs to access basic pricing information to assess if the deals offered are in line with FRAND commitments.
- Essentiality checks – Implement mechanisms to verify that SEPs are genuinely essential to the standards, reducing the over-declaration of patents that burdens tech companies with unnecessary costs.
- Protection from frivolous injunctions – Prevent the use of injunction threats as a tactic to pressure SMEs into accepting unfair royalty rates and agreements.
The strategic importance of SEPs and digital trade
SEP reform is more than a regulatory adjustment; it is a strategic necessity that directly impacts the UK's ability to engage in digital trade. As we consider the future landscape the next government will navigate, it is clear that SEP licensing reform is a quick win that aligns with the national interest, supports the growth of the digital economy, and enhances the UK's position in international trade.
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