SEPs drive economic growth in EU and globally, and the UPC is now a major factor in deciding fair licensing rates worldwide, the EPO says

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Standard Essential Patents (SEPs) are key drivers of economic growth and industrial competitiveness, the European Patent Office said recently as it launched a new study into the link between technology standards and patents.

The study, Standards and the European patent system, published in May 2025, was based on an analysis of the EPO’s extensive prior art databases, which include over 5.5 million documents from standards development organisations (SDOs), a unique collection curated through close collaboration over the past two decades.

The study also analyses recent European case law on SEPs, including decisions from the Unified Patent Court (UPC) which the EPO suggests has significantly reduced the time taken to resolve legal disputes over SEPs.

The EPO claims:

“Legal disputes over SEPs have long been fragmented in Europe, with time-consuming and expensive parallel court actions in multiple jurisdictions. But in just 19 months, the UPC has heard 23 SEP-related disputes, accounting for more than one third of all SEP-related disputes with decisions in Europe – a sign of its growing influence and efficiency. This shift is helping to avoid parallel litigation and to enhance legal certainty.”

What are SEPs and FRAND, and why do they matter?

SEPs are patents that protect technology which has been declared essential in a technical standard or specification developed by a Standard Development Organisation (SDO) or Standard Setting Organisation (SSO).

The idea behind them is to ensure that devices in a sector such as telecoms and mobile phones are capable of communicating with each other. Without SEPs, for example, mobile phone networks would not exist in their current form and every manufacturer would have to create its own network.

Obviously, owning an SEP can give a company a lot of power in its marketplace. To reduce the likelihood of abuse or price-gouging, SDOs/SSOs will usually ask patent holders to commit to licensing their IP on Fair, Reasonable and Non-Discriminatory (FRAND) terms as a condition of having their patent named as an SEP.

FRAND licensing agreements are supposed to mean SEP holders get fair compensation for the value of their patents, while also reducing the likelihood of SEP holders engaging in anticompetitive behaviour or over-charging.

It is not uncommon, however, for disputes over what fees should be paid for SEPs to end up in the courts in different legal jurisdictions. Indeed, there is something of a competition between countries at the moment to establish which jurisdictions should be effectively setting FRAND licensing rates.

For example, the UK Court of Appeal recently published its ruling in the long-running court battle between Texas-based IP owner Optis Cellular Technology and Apple, upholding a 2022 UK High Court ruling that Apple had infringed two of Optis’ 4G patents.

The Court of Appeal has also significantly increased the amount Apple will have to pay Optis from the High Court’s $56.4m to $502m, which with interest could end up around $700m.

This latest decision in the Optis v Apple battle is, as far as the UK judges involved are concerned, applicable worldwide.

But China is also becoming a major player in both national and global SEP and FRAND decisions, as an article titled The New SEP Powerhouse: How China is Shaping Global Patent Disputes published by the Center For Strategic and International Studies in May 2025 explains.

A November 2023 ruling on an SEP royalty dispute between mobile technology companies Oppo and Nokia from the First Intermediate People’s Court of Chongqing Municipality ruled on global licence rates for the relevant SEPs, in what was apparently first court judgment anywhere in the world to decide on the aggregate royalty rate for 5G standard which should be levied globally.

The UK government has published a guide to SEPs here.

How are patents granted in Europe and what is the UPC?

European patents are granted by the EPO under the European Patent Convention (EPC) of 1973. While 39 countries, including all those in the EU, are signatories to the EPC, these European patents have to be registered in each individual EPC jurisdiction, assuming the patent owner wishes to do so. This has meant that legal cases over a patent in one EPC country have historically had no impact in other countries.

This was seen as a possible barrier to harmonisation of EU trade and the establishment of the internal market, as it could mean different legal ruling on the same patent in different member states.

Hence the move to create the ‘European patent with unitary effect’, more commonly known as the Unitary Patent, and also the Unified Patent Court (UPC), an international court set up by participating EU Member States to deal with the infringement and validity of both Unitary Patents and European patents, with 18 EU member states currently recognising its decisions.

The EPO administers the Unitary Patent application process, so it could be seen to have an interest in the success of the UPC.

How important are SEPs and Frand to international business?

The EPO cites figures from the European Commission, which says over 85% of mobile communication standards depend on SEPs, and also Orbis data which in 2022 identified around 47,500 manufacturing firms globally that potentially use standards under FRAND (“Fair, Reasonable and Non-Discriminatory”) licensing terms.

Of these firms, approximately 3,800 firms (8%) were based in the EU, collectively employing 2.2 million people. Their combined turnover reached approximately €600 billion, with 88 firms reporting €26 billion in R&D investment.

The EPO study introduces a new dataset which the EPO says,

“reveals with greater clarity than ever before how standards documentation is used in the examination of European patent applications, and also how often the resulting patents go on to be declared essential to widely adopted technology standards… the proportion of patents that cite documents from SDOs is rising, which highlights the importance of patents for the development of those technologies regulated by standards.”

EPO President António Campinos said at the launch of the study:

“Technology standards are the backbone of our digital economy, driving innovation and growth, and ensuring seamless connectivity across devices and platforms. As we look to the future, similar standardisation efforts will be crucial for emerging technologies like artificial intelligence and quantum technologies. With five decades of experience, the EPO stands ready to support a balanced and transparent system for Standard Essential Patents – providing the expertise needed to strengthen Europe’s technological leadership and secure its digital future.”