The release of 4G in mid-2000 and the sudden increase in the number of SEPs kicked off the first wave of discussions around FRAND and SEP licenses, which have since largely overtaken the telecoms sector. Today, SEPs are widely discussed in all major industries. The main reason is that connectivity is ubiquitous and relies heavily on standards subject to SEPs. Fully connected cars that implement 3G and 4G (soon to be 5G), Bluetooth, NFC, RFID, Qi, HEVC / VVC and DVB, among others, have been on the market for over a decade now. Manufacturing companies have set up smart factories using their own private 4G and 5G networks that connect production lines, machinery, heavy machinery and entire buildings. Home appliances are fully connected and smart meters collect data on energy consumption in the cloud. Even the healthcare industry has started using fully connected medical instruments to stream live data during surgeries to devices based on standardized technologies.
New draft standards such as the Qi wireless charging standard – but also organizations outside the wireless world, such as the Society of Automotive Engineers – specify standards subject to SEP for technologies, such as charging stations. autonomous mobile refueling or recharging of inductive devices.
The growing need and large-scale implementation of standards is shaping the market for both SEP licensees and SEP holders. Today, it is not just telecommunications organizations that hold SEPs. There are automakers including Continental (Germany), Volkswagen (Germany), Daimler (Germany), Nissan (Japan), Toyota (Japan), Denso (Japan) and PSA (France), manufacturing companies such as General Electric (United States), Siemens (Germany), Bosch (Germany) and Internet companies such as Google (United States), Amazon (United States) and Facebook (United States). The number of MS holders has more than doubled over the past 10 years (see Figure 1). If we consider the holders of SEP who have self-declared at least 10 patent families in the last 10 years, the number of unique companies (considering the highest parent company of the large groups) increased from 99 in 2010 to 261 in 2020 (by a factor of 2.6x). The drastic increase in the number of new SEP holders is not only due to those who are not in the telecommunications world, but also to new entrants in the market, mainly from China, Taiwan and Korea. of the South, which develop smartphones, network devices, computer chips, semiconductors, and audio and video technology.
The increase in the number of SEP holders has been accompanied by a growing number of self-declared patents, with the number of patents increasing from 82,000 patents (12,000 families) in 2010 to around 305,000 (70,000 families) in 2021. Figure 2 shows that the number of patents declared in 10 years has more than tripled (by a factor of 3.5x).
Holders of SEP can now be found in a wide range of industries. Indeed, SEPs are essential today for almost all large companies that actively pursue R&D. To get a quantitative understanding of the importance of SEPs across industries, we took a closer look at the world’s top 50 patent holders, including the world’s largest R&D organization. If we consider the top 30 patent holders in the world, 93% hold at least 10 patent families declared to be an essential standard. In addition, among the top 50 patent holders, the number of MS holders is over 75% (see Figure 3). Companies that do not have MS are generally from the pharmaceutical, chemical and manufacturing industries.
The high share of SEP holders within the group of the world’s largest patent holders confirms the growing importance of SEP ownership. But companies don’t have SEP by accident. The patents describing an invention essential for technological standards are the result of many years of investment in R&D and contributions to standards developments carried out by organizations such as, among others, the 3rd Generation Partnership Project, the Institute of Electrical and Electronics Engineers or the International Organization for Standardization International Organization for Standardization. Standard organizations are both collaborative and highly competitive. However, due to the principle of consensus decision making, it takes considerable research and investment to make technically meaningful and compelling contributions that are accepted, endorsed and incorporated by all members. Companies can only gain credibility by regularly participating and developing the best standards specifications, which allows them to incorporate their own developed, and sometimes patented, technologies into the standard.
The growing number of SEP holders shows that companies in all major industries are increasingly contributing to the development and specification of new connectivity standards, as the standards are a must when connecting devices, vehicles, entire buildings or soon everything that will be part of the Internet of Things (IoT). We are in the midst of the next technological revolution, with IoT becoming one of the major technological advancements that is gaining prominence in regions and industries. Therefore, R&D heavy companies in any industry should have a seat at the table to influence and discuss the future of standardized connectivity technologies, as ownership of SEP provides leverage for cross-licensing negotiations. While some industries have become experts in SEP and standards development, others are just starting to get involved. There are some key considerations that intellectual property professionals and standards development managers should keep in mind:
- Future technologies that enable connectivity will increasingly rely on patented technology standards (eg, 4G and 5G, Wi-Fi, NFC, RFID and Bluetooth).
- The number of SEPs is increasing dramatically and should be taken into account when implementing connectivity technologies.
- It is expected that patent holders will actively monetize their SEPs or, in some cases, also apply their SEPs in this fast-changing, high-investment environment.
- However, not all declared patents are essential and not all essential patents are declared. The patent declaration data must be refined, filtered and determined SEP.
- Intellectual property professionals must not only consider the information extracted from patent filing data, but also better understand the implementation of standards as well as the offerings of licensing programs and patent pools.
- Intellectual property professionals should be aware that while the market for 5G and other connectivity-type technologies is relatively new, now is the time to think about what the business will need in two, five and 10 years, and along with that. , what the patent portfolio will need to support it.