IP Audit for SMEs: Why Do SEPs Matter?
A recent update from the UK Intellectual Property Office (UKIPO) serves as a timely reminder that understanding your IP position early by way of an IP Audit for SMEs can prevent costly surprises later on. This is particularly the case when it comes to patents linked to technology standards when, for startups and early-stage businesses, intellectual property (IP) often sits quietly in the background while attention is focused on product development, funding, and growth.
The UKIPO has published updated guidance for IP professionals conducting IP audits, with a particular focus on standards essential patents. While the guidance is aimed at practitioners delivering IP audits for SMEs under the UKIPO's IP Audit scheme, the issues it highlights are relevant to any innovative business looking to future-proof its IP strategy.
What is an IP Audit?
An IP audit is a structured review of a business's IP assets, risks and opportunities. The UKIPO's IP Audit scheme is designed to support small and medium-sized enterprises (SMEs) at an early stage of innovation by helping them understand what IP they own, what IP they rely on, and how best to protect and exploit it.
Under the scheme, the UKIPO part-funds the audit, contributing £2,250 towards a £3,000 audit, with the SME paying the remaining £750. The audit is carried out by a qualified IP professional, who will typically deliver:
- An assessment of existing and potential IP assets
- Identification of IP risks, including third-party rights
- Practical recommendations for protection and commercialisation
- Cost estimates and a prioritised implementation timeline
- A follow-up meeting to discuss next steps
An IP audit for SMEs can be one of the most cost-effective ways to get strategic tailored IP advice for new businesses.
Why are Standards Essential Patents important?
A "standards essential patent" (SEP) is a patent that protects technology required to comply with a recognised industry standard, such as 4G, 5G, or WiFi. These standards are fundamental to many modern products and services, particularly in the Internet of Things (IoT) space.
The UKIPO's updated guidance encourages IP professionals to pay closer attention to SEPs during IP audits for SMEs. This includes exploring whether a business may wish to file patent applications that could become SEPs, as well as identifying any standards embedded in products the business buys, sells, or develops.
Just as importantly, IP audits now place greater emphasis on reviewing contracts and licences relating to SEPs, and assessing exposure to third-party IP rights.
The hidden risks for SMEs
SEPs can present unique challenges, especially for smaller businesses. In some technology supply chains, SEP holders license their patents only at the end-product level and refuse licences to chipset or component suppliers. This can leave SMEs exposed to:
- Injunction threats
- Unexpected licence fee demands
- Claims covering up to six years of past use
In some cases, businesses may unknowingly pay multiple SEP licence fees for the same product through different layers of the supply chain.
An IP audit helps surface these risks early. Beyond reviewing supplier warranties and indemnities, an IP professional can flag where additional due diligence may be needed to confirm that appropriate SEP licences are in place.
Building a smarter IP strategy
For new businesses, an IP audit is not just about identifying problems; it allows business owners to make informed decisions. Understanding how SEPs and other third-party rights affect your business allows you to plan more confidently, negotiate better contracts, and avoid unpleasant surprises as you scale.
An IP audit may also prompt consideration of IP insurance, particularly where exposure to infringement claims is difficult to eliminate entirely.
In summary, the UKIPO's updated guidance reinforces that IP audits are no longer just a "nice to have." For businesses operating in standards-driven markets, they are a vital tool for managing risk, protecting innovation, and building long-term value.
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Please note the contents of this blog is given for information only and must not be relied upon. Legal advice should always be sought in relation to your specific circumstances.
