Assertion of Standards-Essential Patents by Non-Practicing Entities

December 2015

An extensive literature exists regarding the patent disclosure and licensing commitments made by participants in standard-setting organizations (SSOs), and the assertion of patents by non-practicing entities (NPEs). This study is the first to assess the degree to which NPEs have asserted standards-essential patents (SEPs), and the characteristics of these assertions. We present descriptive statistics regarding NPE and Producer assertions of SEPs pertaining to seven broadly-adopted standards in the telecommunications and networking sectors over a 16.5-year period. Twenty-six NPEs were identified as asserting SEPs pertaining to the standards studied. NPEs initiated 64% of all SEP cases and 77% of all unique patent-defendant assertion events involving these SEPs. NPEs initiated 82% of all defendant-assertion events relating to the five standards subject to FRAND licensing commitments, but only 25% of such events relating to the two standards subject to royalty-free (RF) licensing commitments. When NPEs asserted SEPs from FRAND-based SSOs, the large majority of these assertions (73%) were of unencumbered SEPs. Producers, however, generally asserted FRAND-encumbered SEPs. In the case of SEPs from RF SSOs, NPEs asserted only unencumbered SEPs, while Producers asserted both encumbered and unencumbered SEPs. And while NPE SEP assertions were resolved by settlement at approximately the same rate as Producer SEP assertions, Producer plaintiffs were almost five times as likely to prevail on the merits as NPE plaintiffs.

We conclude with a discussion of the implications of these findings for current debates regarding FRAND licensing and SSO policy limitations, particularly proposals to impose SSO-based licensing encumbrances on SEPs held by NPEs. We also observe that, while NPEs are responsible for a large number of assertions of unencumbered SEPs, the greater threat of hold-up and rent extraction, at least under U.S. law, appears to arise from assertions of unencumbered SEPs by Producers.

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