Howard Wright, a partner and patent attorney at European intellectual property firm, Withers & Rogers, explains what medtech firms need to know about standard essential patents.
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The rapid growth of the medtech sector as it aims to equip people to monitor and manage their own health conditions at home means that more innovators in the sector may be coming into contact with standard essential patents (SEPs) for the first time. Is this a risk or an opportunity, and what exactly do they need to know?
SEPs are familiar to innovative companies in the consumer electronics sector, especially in relation to mobile phone technology. SEPs are patents covering inventions which form part of a standard. Standards, such as 4G or 5G, aim to provide a standardised approach to technology, and are important for ensuring technological interoperability between devices and methods offered by different manufacturers and innovators. By law, SEP holders must be willing to offer a licence to implementers to use their SEP technology. By doing so, they will facilitate the sharing of patented technologies that are required for a product to meet a mandatory industry standard.
Without access to telecommunication standards, it would be virtually impossible for smartphone owners to communicate with other smartphone owners, regardless of which phone network or operating system they are using, wherever they are in the world. The law aims to ensure that SEP holders cannot prevent their competitors from operating according to a standard, without the competitor first being offered the opportunity to take a licence.
Whilst able to realise value from their innovations by licensing them to third parties, SEP holders must be willing to do so on fair, reasonable and non-discriminatory (FRAND) terms. If a SEP holder fails or refuses to offer to license its intellectual property rights (IPR) to a prospective licensee on FRAND terms, it could be in breach of antitrust regulations in the UK, EU, and many other global jurisdictions.
In the medtech sector, the rapid rise in innovation activity aimed at monitoring, analysing, and transferring patient data is leading to the development of technologies that require the use of smartphones and phone networks. As such, more innovators in the sector may be finding it necessary to interface with SEP owners in the telecoms sector for the first time. There is also a possibility that as this sphere of technological innovation expands, there could be a need for new standards in the future, particularly as new medtech devices are generating large amounts of data on patients that must be collected, transmitted, and analysed. It will be beneficial to both patients and medical practitioners to do this in a standardised way, to provide greater understanding of the outcomes of medical interventions, which can then feed into the development of future medical treatment preventative measures.
In the UK, the Government published a call for views to find out whether SEPs are functioning efficiently and effectively and whether SEP holders are adhering to FRAND terms. The findings show that whilst most respondents believe SEPs help to create a balanced ecosystem, some felt that there was still some imbalance, with one side benefitting more than the other. For example, there was concern that SEP holders could leverage their market power and the threat of court action to dictate excessive royalty rates. Based on these findings, it is possible that standards might tighten in the future, although it seems unlikely that the UK Government would take this action unilaterally.
Due to the largely discretionary nature of the guidance and rules relating to the use SEPs, there have been some high-profile legal disputes. Most have centred on what it means for holders to be fair, reasonable, and non-discriminatory and what enforcement rights they should have access to. For example, after considering questions raised by Unwired Planet v Huawei, the Supreme Court confirmed that a UK Court has the power to grant an injunction to prevent a SEP’s infringement and to determine the terms of a global FRAND licence agreement. Increased use of SEPs by medtech innovators could mean that more disputes are likely in the future.
The principles behind the use of SEPs are not totally new in healthcare. During the COVID-19 pandemic, innovators involved in the development of vaccines faced pressure to waive IP rights to make patented technologies available to as many people as possible, as quickly as possible. The World Health Organisation established a COVID-19 Technology Access Pool to hold patented technologies that might need to be shared quickly under licence across the global biotech and pharmaceutical industry. While patent pools are not the same as SEPs, they are rooted in the same principles, encouraging the sharing of technologies on fair and reasonable terms. A patent pool enables a third party to seek licences to multiple patents, often from multiple patent holders, in a single transaction, consequently, improving and simplifying access to the patented technologies. Patent pools may become particularly useful as medtech innovators increasingly seek to incorporate new technologies, such as communication functions, into their products and services.
For innovators working in the fields of telemetry and biometric analysis and diagnostics, it is especially important to be aware of SEPs and how to use them. Here’s some key advice to bear in mind:
- Know the patent landscape – carrying out ‘freedom to operate’ searches are important all the time, but in a sector where there could be SEPs, it’s even more important to know the patent landscape. Understanding where SEPs exist could help innovators to map their route to market. There is no point in investing in innovation activity if you won’t be able to commercialise a product or service because they infringe IP owned by another company or individual. It is therefore important to carry out due diligence early, across all technology that may be relevant to your product or service and be ready to engage with third parties where necessary.
- Look for willingness in others – having not experienced SEPs previously, a medtech innovator may not realise that a SEP holder should be willing to license their technology to third parties on FRAND terms. Innovators should aim to learn more about SEPs and how licensing is conducted so that they are ready to enter negotiations.
- Broaden your approach to patent protection – in a market where SEPs or patent pools could be required, it is especially important to seek patent protection for innovations, even those that might normally be regarded as peripheral to a product’s core functionality - for example, where a device needs to communicate with other systems or networks. This approach will put companies in a stronger position if the technology is subsequently added to a patent pool or deemed ‘standards essential’ in the future.
- Be prepared to change your mindset – Innovative tech companies are usually intent on stealing a march on their competitors by designing around their proprietary technologies and getting their product to market first. Innovating for a market where there are SEPs or patent pools will require a more collaborative approach – working with competitors may be both necessary and mutually rewarding.
- Appreciate the potential benefits – When a company files a patent, it may not think that it would ever be deemed standards essential. However, as standards develop, the business may decide to register a patent with a standards-setting agency. As a SEP owner there can be considerable commercial benefits, such as providing an income stream, as you effectively own a dominant technology, spanning the key global markets. Having an awareness, from the outset, of the different standards setting agencies that are relevant to your technology may enable you to tailor your patent strategy with a view to obtaining a SEP in the future.
- Know when to seek advice – If you think you have an invention which is likely to form part of a future standard, you should seek professional advice to ensure that your patent has the best possible chance of being considered essential to the standard. For example, often potential SEPs are filed just before a technology is disclosed to a standards meeting/committee, so timing your filing could be crucial.
