This is a transcript from a section of the course “Patents 340 – Invention Rating Checklist,” which is available here at IP.Education.
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Standards Essential Patents
Standards essential patents are – in some respects – the holy grail of patents.
Standards essential patents are those inventions that are so good or so important that everybody needs to use the technology.
Examples of standards essential patents are WiFi (which is technically an IEEE standard 802.11), BlueTooth, USB, JPEG, and many others.
These are industry standards, which are set up by standards bodies.
These have sophisticated licensing pools, royalty calculation and distribution, and all sorts of other complexities.
Other standards-like inventions are inventions that are so good that everybody will need to use it.
One example might be an API for a software platform.
Any third party that builds a plugin for your software ecosystem would have to use your API.
In a sense, that API would be a standard that other companies would use to build their products.
If your software ecosystem was used by everybody in the industry, that API would be a defacto standard.
The proprietary connectors and protocols used by Apple, for example, are defacto standards.
By having a patent on the connectors and protocols, Apple can enforce licenses to all accessory manufacturers.
Enforcement may come in several flavors.
In a nasty flavor, Apple can keep a monopoly on making accessories and forbid anyone from making certain accessories.
In a nicer flavor, Apple can ensure that there is a minimum level of quality.
Apple could approve and then brand licensed products – and keep a licensing fee on the way.
Other inventions are just so innovative and powerful that everybody will wind up using it.
For example, a process that produces fuel that is 90% cheaper than the closest alternative would be so powerful that it would decimate the competition – and the competition might be forced to license it from us.
A level 1 score is that the invention is not expected to be used by competitors.
At this level, you might want to rethink whether or not to even get a patent.
A level 2 score is that the market has no preference for the invention over competing options.
A level 3 score is that some competitors may adopt the invention.
Level 4 is that most competitors are likely to adopt.
Level 5 score is that the invention is likely to become standard in all competing products.
Standards-essential patents are the holy grail of patents.
These are the most valuable patent assets there are, and they generate huge amounts of money for the patent holders.
Statistically speaking, the likelihood that your invention is an industry standard is very low.
When you do find something that is, however, it could be extremely valuable.