The UK must be more consistently pro-IP to achieve its government’s growth goals: judicial and regulatory overreach runs counter to agenda

The UK as a country faces many challenges. It is not the subject of this opinion piece to discuss Brexit, but suffice it to say that Brexit afforded the UK greater flexibility, so it was and remains an opportunity to outperform the EU while representing a risk of underperforming it. For example, raising certain taxes and abolishing the “non-dom” tax regime just led many wealthy people to leave the UK, and now it turns out that capital gains tax receipts have fallen by more than 10% (despite a higher rate).

After several Conservative governments that didn’t last long in office, the Labour government under Prime Minister Keir Starmer appears a lot more organized. Admittedly, a comparison with chaos is a rather low bar. But one example of the new government outperforming its predecessors in somew ways is the overdue sacking of the chairman of the UK Competition & Markets Authority (CMA), Marcus Bokkerink, whose regulatory philosophy was rightly considered inconducive to the country’s economic growth (January 22, 2025 Civil Service World article). Put differently, some of what the CMA was doing under Mr. Bokkerink’s leadership (or lack thereof) threatened to cause substantial economic harm. The Tories should already have recognized that the only way for the government to rein in the CMA was to use the only power it formally has over the CMA: to replace its leadership. There was no shortage of reasons to do so.

“It’s the economy, stupid” — Bill Clinton’s winning presidential campaign slogan describes the UK’s post-Brexit priority. There have been times when the Labour Party indeed implemented pro-business policies with good results: under prime ministers Tony Blair, Harold Wilson and (post-war) Clement Attlee. PM Starmer hopes — but is struggling — to resume that pro-business legacy.

The current UK government has focused too much on investment (such as in AI development) and not enough on the other side of the equation: intellectual property. Without a reasonably high level of IP protection, investments are not sufficiently protected.

Feryal Clark, the Parliamentary Under-Secretary of State for AI and Digital Government and Minister for Intellectual Property since July 2024, has focused more on administrative matters such as facilitating patent search than on strategic policy initiatives. To her credit, she made the right call by declining to take aggressive and indeliberate measures with respect to the enforcement of standard-essential patents (SEPs). By extension, the EU Commission’s intent to withdraw the EU SEP Regulation (February 11, 2025 ip fray article) validates Minister Clark’s stance on SEPs.

There are now two contexts in which the UK is going in a dangerously anti-IP direction: so-called interim licenses to SEPs and governmental price-setting for enterprise software. The first one can be addressed very briefly as this website has covered the issue before. The second one requires some more explanation, and it’s actually the easier one for the UK government to fix because it doesn’t require a legislative override of bad case law.

1. Interim licenses to SEPs undermine IP and threaten to backfire

We last discussed the problem of judicial overreach in the UK in connection with Mediatek v. Huawei (April 15, 2025 ip fray article). That dispute and Samsung v. ZTE are presently the most significant SEP matters in the UK (and there is Tesla v. InterDigital & Avanci, with a petition pending in the UK Supreme Court). Nokia v. Amazon and Lenovo v. Ericsson both settled about a month ago.

I actually like the UK’s leading patent judges. Interesting personalities, all of them. But I do take issue with some of their decisions, and that goes back to Unwired v. Huawei (where the final decision came down in 2020 and was at least as bad as the previous ones).

It is, ultimately, an honor to have been mentioned by a High Court judge at this week’s Fordham Conference — not by name, but through unique identification. Just like I voice my views, I respect others’ freedom of speech, and of course a UK judge has every right, also in a moral sense, to voice his view that I’m wrong and they’re not engaging in judicial imperialism. All along I’ve been fair enough to point out that other jurisdictions, such as Germany, also usurp jurisdiction over foreign patents. Whether someone forces a SEP holder to grant a global license or tells an implementer that they’ll be forced out of a key market unless they accept certain licensing terms on a global basis, it amounts to coercion with respect to patents over which the respective courts have no jurisdiction. And it will trigger backlash.

One problem for the UK, from an innovation policy perspective, is that some innovators holding valuable SEPs may want to avoid doing anything that gives the UK courts jurisdiction over them. Another issue is that other jurisdictions will not tolerate attempts by UK courts to shut down SEP enforcement around the globe.

All those jurisdictions should leave each other’s patents alone. So far those UK “interim license” declarations are just that: declarations. But if the UK situation gets further out of hand, legislative intervention will become necessary to put the country’s interests in a healthy innovation ecosystem over the courts’ interest in growing their dockets.

The UK courts should get many interesting patent (including SEP) cases. I really like following UK litigation. But not because its courts allow themselves to be abused by implementers of standards engaging in hold-out.

2. Governmental price-setting for software licenses: the CMA’s slippery slope

The UK’s antitrust regulator, the Competition & Market Authority (CMA), is conducting a market inquiry into cloud services (April 25, 2025 ai fray article) that would normally be in the home stretch now, with a final decision in the summer. But this may not really be the home stretch, given that a preliminary ruling indicates an inclination to fry this fish for a third time: after Ofcom (the country’s communications regulator) referred the matter to the CMA, the CMA is now thinking of letting its new Digital Markets Unit (DMU) take another look.

The market reality is that demand for cloud services is driven by AI. The most active complainant (and orchestrator of complaints), Google, is increasingly portraying its cloud services just as part of its AI stack. Yet the CMA continues to devote its scarce resources to the question of whether the licensing terms for legacy software in the cloud distort a market in which prices are falling and competition is demonstrably fierce. In a world that has moved on, they are fighting yesterday’s war (if it even was an issue yesterday, which is more than questionable).

Here comes the IP policy issue:

The whole theory of harm is about Microsoft granting discounts to customers if they license software and buy cloud services, while expecting its large (in fact, only its large) competitors to pay for an IP license if they wish to resell Microsoft’s software licenses to their cloud customers.

It’s not only that it can’t be in the interest of UK customers to deprive them of discounts unless the market threatens to tip, which is absolutely not the case based on all available market data. The IP policy issue is that the intervention Google and Amazon are seeking would be tantamount to dictating the terms on which Microsoft is allowed to license its own software. That software is protected by multiple types of intellectual property rights: copyright, patents, trade secrets, and trademarks.

Whether the CMA tells Microsoft that it must license its software to Amazon and Google on particular terms or that it must not license it to its own customer on certain terms: one way or the other, the net effect would be governmental price-setting for IP. A regulator — here, an antitrust agency — would determine license fees.

That takes us full circle back to what I said further above about the EU decision to drop the SEP Regulation vindicating Minister Clark’s hands-off approach to SEPs. One of the most strongly-criticized aspects of the EU SEP Regulation was that it would have involved governmental (or at least government-organized) price-setting. The UK should avoid that. It should focus on what really strengthens its economy and benefits its citizens. Developed high-wage countries like the UK depend on a strong innovation economy, which in turn depends on IP protection. That does not mean to say that market failures don’t sometimes have to be remedies through regulatory or other intervention. But neither the SEP licensing market nor the cloud services market is objectively in a situation warranting intervention of the most drastic kind.

The UK can do better than that. I want the UK economy to be strong. Put differently, I’m definitely not one of those who want Brexit to fail. But that’s up to the UK. It needs to focus on growth and on what incentivizes innovation. Violations of the principle of international comity and regulatory price-setting are bad for growth.