SEP is a patent granted for an invention that is vital to the implementation and functionality of a technical standard. But what does that really mean? Simply put, a standard is a set of established technical requirements or specifications that allow products, services, and systems to work together effectively, ensuring compatibility across the industry. These standards are typically set by Standard-Setting Organizations that create and maintain these technical guidelines. One of the well-known organizations is the Bureau of Indian Standards which sets the standards for the goods and services in India.
When a company contributes technology to a standard, the underlying innovation may be patented. If the patent is essential for implementing the standard, it becomes an SEP. This means manufacturers seeking to incorporate the technology into their products must obtain a license from the SEP holder. Without this license, they cannot legally use the patented technology, restricting their ability to produce compliant products.
Take, for example, electric vehicles (“EVs”). For EVs to function with public charging stations, they must adhere to standards like the Combined Charging System (“CCS”), which specifies charging protocols and connector designs. The technology underlying CCS is protected by SEPs. Manufacturers aiming to produce EVs compatible with public charging infrastructure must secure licenses for these SEPs. Without such licenses, they are effectively excluded from the market.
However, the existence of SEPs can create potentially monopolistic behaviour, as patent holders may demand exorbitant royalties or refuse licenses, stifling competition. This interplay between competition law and patent rights is addressed through FRAND terms, introduced in the late 1990s to mitigate these challenges.
