Standards, Innovation, and IPR: Playing Offense and Defense (SEPs, FRAND, and Patent Pools)

Board Introduction

Standards and patents are complementary codebooks for value creation. Patents protect the “how”; standards decide the “how, together.” The interaction—SEPs and FRAND commitments—creates both monetization paths and litigation risks. This article gives a board‑level framework for IPR strategy in standards‑driven markets.

1) What counts as a SEP—and why it matters

• Essentiality: A patent is essential if implementing the standard as written necessarily infringes. Essentiality can drift as profiles evolve.

• Exposure: If you implement, you are likely a licensee; if you contribute, you might become a licensor. Many firms are both.

2) FRAND basics executives must internalize

• Fair, Reasonable, and Non‑Discriminatory: A commitment to license on terms that enable implementers. The debate lives in what’s “reasonable.”

• Portfolio vs. per‑patent rates: Negotiations usually occur at portfolio level; comparable licenses and contribution counts are benchmarks.

• Injunctions vs. damages: Jurisdiction matters; some courts are reluctant to grant injunctions where FRAND is at issue.

3) Offensive uses of IPR in standards

• Contribution strategy: Target text where your claims map naturally; ensure enablement; avoid overreach that invites design‑around.

• Claim chart discipline: Maintain living charts against evolving drafts; automate change‑impact alerts.

• Cross‑licensing leverage: Use your portfolio to reduce cash outflows; structure deals around supply relationships.

4) Defensive posture and litigation avoidance

• Freedom‑to‑operate scans: Before shipping to spec; use third‑party essentiality checks for high‑risk areas.

• Design‑around playbooks: For optional features with heavy royalty stacks.

• Pool vs. bilateral: Pools simplify access (often at lower rates) but may lack coverage or speed; bilateral deals can tailor scope.

5) Open source and standards can coexist

• Reference implementations: Can accelerate consensus and reveal ambiguities; choose licenses compatible with FRAND.

• Patent non‑assert covenants: Use where community norms expect it; ensure carve‑outs for SEP licensing when necessary.

6) Governance and reporting to the board

• IPR dashboard: SEP declarations, licensing income/outflows, litigation status, and risk heat map.

• Policy adherence: Timely disclosures, FRAND templates, and joint‑defense frameworks for multi‑defendant cases.

Board Conclusion

Treat IPR in standards as a capital allocation decision. Offensive portfolios lower your cost of goods via cross‑licenses and can create annuities. Defensive hygiene prevents existential litigation risk. The board’s role is to set posture, thresholds, and accountability.

Executive takeaways

• Align contributions with claim coverage; maintain live claim charts.

• Decide pool participation early; avoid last‑minute royalty shocks.

• Make open source an asset for consensus, not a leakage point for rights.