The United Kingdom is flirting with a policy blunder that could inflict real and lasting damage on its relationship with the United States. In a public consultation that closed on October 7, the government of Prime Minister Keir Starmer floated a proposal that would embed the state directly into the process of determining royalty rates for Standard Essential Patents (SEPs) – the backbone of licensing revenues that finance innovation in telecommunications, AI, and emerging wireless technologies.
Such meddling would undercut American innovators while handing British implementers an enormous windfall. If Starmer allows this initiative to advance, Washington will rightly view it as an economic assault on par with Britain’s misguided Digital Services Tax – a measure that has already strained transatlantic trust and drawn sharp opposition from U.S. trade officials.
In the UK’s consultation document, the most alarming measure on the table is the creation of a “rate determination track” within the Intellectual Property Enterprise Court. Ostensibly, this would offer a “simpler” route to determine “the correct license rate” for SEPs. But once the government begins dictating what constitutes a fair return for intellectual property, innovation ceases to be a competitive asset and becomes a regulated commodity. As seen in other markets, such interference nearly always drives rates downward, stripping value from inventors and transferring it to domestic licensees.
The notion of state‑mandated royalty setting directly undermines one of the primary incentives for companies to invest in early‑stage research. SEPs are not abstract legal constructs – they represent thousands of hours of engineering work, billions of dollars in at‑risk capital, and the trust that parties operating in a global market can negotiate licensing terms free from state coercion. If governments start dictating those terms, the risks escalate and the rewards diminish, prompting firms to redirect investment elsewhere.
Equally troubling is the plan to mandate public disclosure of detailed SEP information in a central government database. While dressed up as transparency, it would function as an open invitation for infringement, offering implementers a roadmap to dissect portfolios, extend litigation, and exploit weaknesses in negotiation. The Public Policy Solutions telecom report warned that policies diminishing patent certainty directly weaken private-sector R and D investment – the very fuel behind advances in 5G, advanced chips, and AI ecosystems.
American companies would bear the brunt of these changes, given their dominance in the patent‑heavy sectors that power the global economy. Licensing fees collected from these patents sustain the next wave of breakthroughs, from faster mobile architectures to smarter AI systems. Channeling that revenue to British firms under the guise of “fairness” constitutes, in reality, a stealth form of industrial policy that tilts the playing field toward domestic implementers.
Even the European Union has begun retreating from this kind of protectionist overreach, abandoning its own SEP regulation and AI liability directive after fierce transatlantic backlash. For Britain to move in the opposite direction now – when both Brussels and Washington have signaled the dangers – would be an act of self‑isolation with measurable economic consequences.
Worse, it would play into China’s hands. Recent rulings from Beijing’s Supreme People’s Court allow Chinese courts to set global Fair, Reasonable and Non-discriminatory (FRAND) licensing rates for entire patent pools at the request of implementers. If London adopts judicial rate‑setting, Beijing will seize on it as validation for its own strategy to define patent prices worldwide from an authoritarian perch, undermining the global competitive framework that Western economies have spent decades defending.
President Trump’s recent state visit to the United Kingdom built a reservoir of goodwill, with trade relations seemingly on a steadier footing. But Trump has proven that he will respond swiftly and firmly to policies that target American firms – as Canada learned when its digital tax brought promises of reciprocal tariffs. If Britain were to install a government mechanism to set SEP royalty rates now, it would squander diplomatic gains and invite confrontation.
Markets, not bureaucrats, must determine the value of invention. SEPs are symbols of global collaboration, painstaking engineering, and free‑market negotiation. Britain’s flirtation with judicial royalty‑setting is not modernization; it is an economic expropriation dressed in policy jargon and billed as reform.
If Starmer wishes to preserve the goodwill his government has worked to build in Washington – and avoid becoming the poster child for Western industrial protectionism – he should scrap the proposal entirely. With the consultation having just ended on October 7, the most economically sound and diplomatically wise step Britain could take is to announce that it listened, understood the risks, and walked away.
Joe Grogan is co-founder and president of Public Policy Solutions. He is a former assistant to the president and served as director of the White House Domestic Policy Council under President Donald J. Trump from 2019–2020.