SSPPU vs. EMVR
Mirza Usama Baig, Ingra Marangoni and Tuğçe Özkepir Master Students, Technical University Berlin
Intellectual property is a strategic area in innovation ecosystems and especially relevant for the technology sector. Whether the innovation concerns extreme high demand features in smartphones or simple original ideas, patents usually protect innovative technologies that are likely to be implemented. Patents are important to all kind of stakeholders amongst the different fields, from start-ups and SMEs to large technological companies such as Apple, Samsung, Hewlett Packard, Nokia, Ericsson, and Panasonic. To offer consumers compatible products (like smartphones) many companies adopt technical standards which guarantee high reliable, low latency and high-speed connectivity among different devices. A patent that is required for the implementation of a standard is known as a Standard Essential Patent (SEP).
Companies negotiate with each other when licensing SEPs. One of the most frequent discussions is about the royalty fees, the calculation of which requires the use of a royalty base. In this paper, we focus on two different methodologies (for the calculation of royalties): Smallest Salable Patent-Practicing Unit (SSPPU) and Entire Market Value Rule (EMVR). We first introduce an overview of what surrounds the discussion, which institutions are involved in the patent ecosystem, as well as where the SSPPU vs. EMVR discussion arises. We then address the theoretical background of the SSPPU creation and evolution, focusing on the economic disadvantages of SSPPU. Furthermore, we list the consequences of applying a too low basis, mainly attempting to clarify the drawbacks of applying SSPPU.