The SEP licensing conundrum
Managing IP is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

The SEP licensing conundrum

Negotiations over patent licensing are tricky. One bad sign is if parties start discussing standard-essential patents in detail

Michele Herman of Metabl and Richard Taffet of Morgan Lewis staged a mock negotiation yesterday as part of the session called "The Nuts and Bolts of Licensing: Strategies for Negotiating to Yes."

Negotiations over patent licensing are tricky enough. But Herman said it's a bad sign if parties start discussing standard-essential patents (SEPs) in detail.

She said when SEPs are involved, it is typically no different than any other portfolio negotiation. The biggest exception is when parties are unable to reach agreement.

"There is a conundrum when SEPs are involved," she said. "If you are not getting to that final compromise, this is where we see SEPs specifically identified and discussed. The patent owner might want to say, 'Hey, I have standard essential patents, you better take a license.' But as soon as he does that, the potential licensee says, 'Well, you have a FRAND commitment and you are not meeting it.'"

She added, "At the end of the day, if they are talking about the specifics of SEPs, they are probably not compromising – they are getting further away from each other and toward litigation."

In addition, a license to non-SEPs may terminate, but there may be restrictions on terminating a SEP license for customary reasons such as bankruptcy, or failing to meet performance requirements or milestones. A license to non-SEPs may be exclusive, but a SEP license may not be exclusive.

The "cost" of a SEP license depends on all the terms and conditions, Herman stressed. These include: the nature and amount of non-SEPs also being licensed; the fee and/or royalty structure; and the value of early adoption, volume, grant backs and other business agreements.

Herman concluded that the value of the portfolio is based on the entirety of the deal and what the parties bring to the table. "As the parties negotiate the terms and conditions, and compromise on them, their respective views on the specific monetary terms will change. The parties generally have a greater incentive to compromise when one party alleges infringement or SEPs are involved," Herman said.

more from across site and ros bottom lb

More from across our site

AI
Tennessee has passed the ELVIS Act, a law that fights against AI models that mimic the voice and likeness of music artists
Rob Stien, chief communications and public policy officer at InterDigital, says the EU has forgotten innovators while trying to solve an issue that doesn’t exist
As Australia’s Qantm IP leans towards being acquired by a private equity company, sources discuss what it could mean for IP firms
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
Nghiem Xuan Bac Pham, managing partner of Vision & Associates, discusses opportunities created by the US-China rift as well as profitability issues facing IP practices
Douglas Leite and two of his colleagues were intrigued by Bhering Advogados’s mission to grow its patent litigation practice
Each week Managing IP speaks to a different IP practitioner about their life and career
Counsel explain how pricing flexibility, patent agents and being business partners can help them maintain profitable patent prosecution practices
We provide a rundown of Managing IP’s news and analysis from the week, and review what’s been happening elsewhere in IP
Speakers at an INTA event weighed in on why firms should create AI use policies and how they stay on top of the latest developments
Gift this article