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In the world of patent litigation, standard essential patents (SEPs) play a critical role. These patents are essential to the implementation of a particular technology standard and are often used in industries such as telecommunications, electronics, and software. While these patents can be incredibly valuable, they can also be the subject of intense legal battles between companies.
To understand the role of SEPs in patent litigation, it is important to first understand what they are. SEPs are patents that are deemed essential to the implementation of a particular technology standard. For example, a SEP may be necessary for a particular smartphone to be able to connect to a cellular network. Because of their importance to the functioning of a particular technology, companies that own SEPs have a lot of bargaining power.
In many cases, companies that own SEPs will agree to license them to other companies that need to use the technology. These licenses are typically referred to as "fair, reasonable, and non-discriminatory" (FRAND) licenses. The idea behind FRAND licenses is that the owner of the SEP will license it to others at a fair price that is reasonable for both parties. Additionally, the owner of the SEP cannot discriminate against any particular company or group of companies.
However, there are situations in which companies that own SEPs will refuse to license them, or will demand exorbitant licensing fees. In these cases, the company that needs to use the technology may be forced to either pay the high fees or develop a workaround. This can lead to legal battles, as companies may argue that the owner of the SEP is not abiding by the FRAND principles.
One example of a legal battle involving SEPs occurred between Apple and Samsung. In 2011, Apple sued Samsung for patent infringement, alleging that Samsung's smartphones and tablets infringed on several of Apple's patents. Samsung countersued, alleging that Apple was infringing on several of Samsung's SEPs. The case went to trial, and in 2012, a jury awarded Apple $1.05 billion in damages. However, the judge in the case later reduced the damages award and ordered a retrial on some of the issues. In the end, the two companies reached a settlement in 2018.
Another example of a legal battle involving SEPs occurred between Qualcomm and Apple. In 2017, Apple sued Qualcomm, alleging that the company had overcharged for the use of its SEPs. Qualcomm countersued, alleging that Apple was infringing on several of its SEPs. The case went to trial, and in 2019, a jury awarded Qualcomm $31 million in damages. However, the judge in the case later ruled that Qualcomm had violated antitrust laws by overcharging for its SEPs, and ordered the company to change its licensing practices.
The role of SEPs in patent litigation is complex, and there are many factors that can influence the outcome of a case. One important factor is the jurisdiction in which the case is heard. Different countries have different laws regarding SEPs and FRAND licensing, and this can affect the outcome of a case. For example, in China, courts have been more likely to find that owners of SEPs have violated antitrust laws by demanding high licensing fees.
Another important factor is the size and influence of the companies involved. Large, multinational companies like Apple and Samsung have a lot of bargaining power, and can often afford to engage in lengthy legal battles. Smaller companies may not have the same resources, and may be more likely to simply pay the licensing fees demanded by the owner of the SEP.
In addition, the technology at issue can also be a factor. One recent example of this occurred in India, where the government has been pushing for lower licensing fees for SEPs related to 5G technology. In 2020, the government announced a new policy that would require companies to license their SEPs on FRAND terms, and would also set a maximum royalty rate for SEPs related to 5G technology. The move was seen as an attempt to make 5G technology more affordable and accessible in India, which is one of the largest and fastest-growing smartphone markets in the world.
In addition to legal battles over licensing fees, SEPs can also be the subject of disputes over patent validity. Because SEPs are often crucial to the functioning of a particular technology standard, there can be a lot of money at stake in disputes over their validity. Companies may argue that a particular SEP is not valid, or that it is not actually essential to the implementation of the technology standard in question.
