Want to make a standard-compliant phone or DVD player? You’ll need patents you can’t design around — Standard Essential Patents. Here’s what SEPs are, how FRAND licensing is meant to keep them fair, and why it often doesn’t.
Note: The FTC v. Qualcomm injunction discussed below was reversed by the US Ninth Circuit in 2020, which held Qualcomm’s practices didn’t violate antitrust law — a reminder that the SEP/antitrust position is jurisdiction- and fact-specific and still evolving.
What is an SEP?
A Standard Essential Patent (SEP) is a patent unavoidable for implementing an industry standard — the core innovation entire industries build on. Standards are the “basics” everyone must meet for consistency and quality, especially in tech: to make phones, computers or laptops, you must use the standardised (patented) technology.
SEPs differ from non-SEPs, which always have non-infringing alternatives. “Slide to unlock” is a non-SEP — phones can unlock many other ways. But a QWERTY keyboard (a universal standard) has no viable alternative — that’s SEP territory.
SSOs and FRAND
Standard Setting Organisations (SSOs) — federal, quasi-federal or private — develop, maintain and promote standards, lowering product-development costs. To balance the power a standard gives an SEP holder, SSOs obligate them to license on FRAND terms — Fair, Reasonable and Non-Discriminatory. India’s national SSO is the Bureau of Indian Standards; in telecom, the Telecom Engineering Centre is the recognised body, alongside private bodies like TSDSI.
FRAND is a voluntary licensing commitment — but with no authority, monitoring body or strict guidelines, “fair and non-discriminatory” means whatever the parties negotiate, and the non-disclosure of most agreements especially hurts small enterprises.
The challenges
- No proper guidelines on what “FRAND” means — inviting unfair trade practices.
- Competition law vs IP law — SEP disputes often turn into monopoly/abuse-of-dominance questions, since holders want high fees and users want low ones.
- Compulsion — businesses must follow the standard to sell, so must license from holders who may refuse or overcharge, with no scrutiny.
- Royalty base — holders often charge a royalty on the net sale price of the whole product, not just the component using the SEP — so a single SEP in a multi-component product can attract royalties on parts that don’t use it, eroding the whole idea of FRAND and squeezing users’ margins.
Key cases
- Koninklijke Philips Electronics v. Rajesh Bansal — India’s earliest SEP case. Philips’ patented DVD decoding technology (patented in India in 1995) was infringed by local manufacturers assembling standard-compliant DVD players from imported components; the court held the local manufacturers infringed.
- FTC v. Qualcomm — the FTC alleged Qualcomm abused its market power in premium LTE modem chips via excessive licensing fees and tying, violating FRAND. The district court enjoined exclusive-dealing agreements and ordered good-faith SEP licensing — but (per the update above) the Ninth Circuit reversed in 2020.
The bottom line
With rapid technological innovation and global capitalism, the gap between insufficient laws and trade malpractice is already showing. SEPs are foundational to the future of trade and innovation — but the framework governing them needs clearer guidelines and oversight.
The takeaways
- SEPs are unavoidable for standard-compliant products — unlike non-SEPs.
- SSOs require FRAND licensing — but “fair and non-discriminatory” lacks clear definition.
- The royalty base is contentious — charging on the whole product undermines FRAND.
- Competition law looms large — SEP disputes often become abuse-of-dominance cases (with outcomes that vary, as Qualcomm shows).
Frequently asked questions
What is a Standard Essential Patent? A patent that’s unavoidable for implementing an industry standard — you can’t make a standard-compliant product without using it, unlike a non-essential patent.
What does FRAND mean? Fair, Reasonable and Non-Discriminatory — the licensing commitment SEP holders make to SSOs, meant to keep essential-patent licensing fair, though it lacks clear definition and oversight.
Why is the royalty base controversial? SEP holders often charge royalties on the whole product’s sale price rather than just the SEP-using component, so users pay on parts that don’t use the patent — undermining FRAND.
What was decided in Philips v. Rajesh Bansal? That local manufacturers assembling standard-compliant DVD players from imported components infringed Philips’ patented decoding technology — India’s earliest SEP case.
Useful official resources
- The Patents Act, 1970
- Bureau of Indian Standards (BIS)