An essential patent or standard-essential patent (SEP) is a patent that claims an invention that must be used to comply with a technical standard. Standards organizations, therefore, often require members disclose and grant licenses to their patents and pending patent applications that cover a standard that the organization is developing.
If a standards organization fails to get licenses to all patents that are essential to complying with a standard, owners of the unlicensed patents may demand or sue for royalties from companies that adopt the standard. This happened for example to the JPEG standard.
Determining which patents are essential to a particular standard can be complex. Standardisation organizations require licences of essential patents to be on fair, reasonable, and non-discriminatory (FRAND) terms.