Standard Essentials patents (SEPs) and Their Role in Modern Technology

In the world of patents, most people are familiar with the idea of a typical patent: you invent something new, and you get exclusive rights to stop others from using it without your permission. These are the everyday patents we hear about when someone protects a new drug, a clever gadget, or an improved manufacturing process. But there's a special category of patents that plays a far more invisible yet powerful role in our daily lives: Standard Essential Patents, or SEPs.

A Standard Essential Patent is a patent that protects technology which has become essential to a technical standard. These standards are the invisible rules that make modern technology interoperable. Think of how every smartphone can connect to a 5G network, or how your Wi-Fi router works regardless of the brand of your laptop. These abilities rely on standards set by groups like the IEEE (for Wi-Fi), ETSI (for mobile networks like 4G and 5G), or MPEG (for video compression). When a company develops a piece of technology that becomes part of one of these standards, and that technology is patented, the patent is declared a SEP. This means that no company can implement the standard without using the patented technology.

This essentiality changes everything about the patent's value and how it can be enforced. For a regular patent, the owner can choose to license it, keep it exclusive, or even refuse to let others use it. But for SEPs, the situation is different. Because the standard relies on that technology, the patent owner has immense power: if they refused to license the patent, they could block entire industries from implementing the standard. To prevent this, SEP holders are required to license their patents on FRAND terms – that is, Fair, Reasonable, and Non-Discriminatory. In practice, this means the patent must be available to anyone who wants to use the standard, and the licensing fee must be within a reasonable range.

This balance was not always in place. In the early days of technical standardization, particularly in the 1980s and 1990s as mobile phones, video formats, and computer networks were becoming widespread, companies began running into problems. If a patent owner waited until a standard was adopted and then demanded sky-high fees, this was known as "patent hold-up." It could paralyze markets and discourage innovation. To address this, standard-setting organizations such as ETSI (European Telecommunications Standards Institute), IEEE (Institute of Electrical and Electronics Engineers), and MPEG (Moving Picture Experts Group) began requiring members to declare any patents that might be essential to a proposed standard, and to commit to FRAND licensing.

Over time, this practice became institutionalized. Organizations like ETSI and IEEE adopted formal Intellectual Property Rights policies. Antitrust authorities, particularly in the United States and Europe, started paying close attention. Courts were asked to decide what "reasonable" licensing meant, and landmark cases shaped today’s rules. One example is the Huawei v. ZTE decision in Europe, which laid out obligations for both SEP holders and implementers, encouraging good faith negotiations and preventing abuse of dominance.

From a business perspective, SEPs can be incredibly valuable. They provide recurring revenue through licensing, offer leverage in cross-licensing negotiations, and elevate a company's position in the industry. Companies like Qualcomm, Nokia, and Ericsson have built licensing businesses around SEPs. At the same time, the obligation to license on FRAND terms limits their exclusivity. SEP owners can't block competitors or extract unreasonably high royalties, making these patents both powerful and constrained.

In today's world, where connected devices and global interoperability are crucial, SEPs play a foundational role. They ensure that technologies can work together across brands and borders, while also rewarding the innovators who contribute to these shared standards. Though they operate quietly behind the scenes, SEPs are the legal bedrock of our digital infrastructure.