Earlier this year, a coalition of technology industry lobbyists sent a letter to President Trump urging his administration to weaken protections for standard-essential patents (SEPs) — patents that protect innovations incorporated into common, standardized technologies like 5G and Wi-Fi. Their letter reflected longstanding false narratives about SEPs and claimed that weakening SEP rights would benefit U.S. innovation.
In reality, the opposite is true. Economic incentives as well as governing law ensure that SEPs are licensed on fair and reasonable terms, enabling the spread of these technologies while preserving incentives for innovation. Further, as global standard-setters, U.S. companies — not foreign ones — benefit most from strong and reliable SEP enforcement. And because innovation in standards drives advancements in consumer technology, strong SEPs benefit the general public as well.
C4IP recently published a rebuttal to the lobbyists’ letter, setting the record straight on the importance of SEPs. Its major clarifications are detailed below:
| Claim: SEP owners abuse their patent rights by holding technologies hostage and charging excessive fees. |
| In reality: SEP owners have a strong incentive to license their patents widely, not “hold them hostage.” The more that standardized technologies are incorporated into additional products, the more that SEP innovators can earn in licensing revenue — which means it’s in their interest to offer accessible, market-driven rates. Additionally, the internationally accepted “FRAND” framework asserts that SEP licensing rates must be fair, reasonable, and non-discriminatory. As a result, SEP licensing fees are usually very modest. Automakers, for example, pay around $30 per vehicle to permanently incorporate 5G capabilities. In turn, these reasonable royalties fund future research and development of improved standards. The real problem is not patent “hold-up,” but “hold-out“: when large corporations use patented standards while delaying or refusing to take a reasonable license. This deprives SEP innovators of rightfully earned revenue, undermining the incentive to continue developing new and improved technology standards. |
| Claim: Strong enforcement of SEPs benefits foreign companies at the expense of American firms. |
| In reality: American companies collect the lion’s share of global IP licensing revenue, which means they stand to benefit far more from strong IP enforcement than their foreign competitors. In 2023, U.S. companies earned nearly three times as much in fees from foreign licensees as they paid out. Further, looking specifically at SEPs, one recent study of seven major SEP pools found that U.S.-based licensors collected nearly 60% of total royalties. If policymakers want to support American companies, they should focus on strengthening rather than weakening methods of patent enforcement. Injunctions, which are court orders stopping infringers from using others’ patented technology, are an especially crucial remedy that has become much harder for patent holders to obtain since the Supreme Court’s 2006 decision eBay v. MercExchange. The decline of injunctions in the United States incentivizes large companies to hold out on licensing deals and forces SEP owners to seek injunctive relief abroad. Limiting access to injunctions in foreign courts, as the tech lobbyists suggest, would therefore only benefit patent infringers. To promote innovation, U.S. leaders must instead make it easier to obtain injunctions and enforce SEP rights here. |
| Claim: Weakening SEP rights by imposing limits on royalties and preventing the U.S. International Trade Commission from banning importation of infringing products would boost American competitiveness. |
| In reality: Weakening SEP enforcement would be a gift to foreign competitors — not a win for the U.S. economy. As stated previously, U.S. companies are currently world leaders in the development of many standards, and thrive under the existing FRAND system that sets SEP licensing rates based on fair negotiations that reflects market value. In contrast, rivals aiming to overtake the United States, like China, favor government regulation of SEP rates to ensure their own companies can implement SEPs without fairly compensating patent holders. Forgoing FRAND principles in favor of heavy-handed regulation of SEP rates would play right into China’s hands. Similarly, the ITC’s power to ban the importation of patent-infringing foreign products plays a vital role in bringing foreign companies who implement standards to the SEP negotiating table. Without the threat of such bans, foreign companies would be empowered to steal U.S.-developed standards with impunity while availing themselves of U.S. markets, harming U.S. innovators and America’s global competitiveness. Simply put, America needs stronger SEP rights — not weaker ones — to keep our domestic industry and innovation ecosystem strong. |