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The European Commission has proposed new rules to address inefficiencies and lack of transparency in Standard Essential Patent (SEP) licensing, impacting technologies such as 5G, Wi-Fi, Bluetooth, and JPEG. The proposal outlines five policy options, ranging from voluntary guidance to establishing a SEP clearing house. The goal is to ensure end users benefit from the latest standardised technologies at reasonable prices, make the EU attractive for innovation and standards development, and ensure EU SEP owners and implementers are competitive globally. However, the proposal faces criticism from various industry groups and businesses, arguing it undermines FRAND (Fair, Reasonable, and Non-Discriminatory) terms and penalises patent holders making infringement claims outside Europe. The SEP proposal awaits further discussion and agreement from the European Parliament and the Council of the European Union before official adoption, with changes expected.

A centralized Competence Centre

A key aspect of the proposed SEP regulation is the establishment of a centralized Competence Centre within the European Union Intellectual Property Office (EUIPO). The Competence Centre would be responsible for setting up and maintaining SEP and knowledge databases to enhance transparency, as well as being directly involved in royalty determination through a FRAND determination procedure. This initiative is designed to level the playing field for start-ups and medium-sized enterprises, while also ensuring transparency and information necessary to set fair royalties on SEPs and reduce litigation regarding royalty disputes. However, this has been met with criticism from stakeholders, who argue that the Competence Centre’s tasks may go beyond providing a centralized knowledge and data center and could potentially interfere with the results of disputes in courts.

Finding balance in the patent ecosystem

The proposed rules from the European Commission aim to bring much-needed clarity and structure to the SEP licensing process, addressing the imbalance of power between SEP owners and implementers. SEPs are crucial for the development and implementation of industry standards, which are vital for the interoperability of various technologies. These standards cover connected devices including smart TVs, connected cars, smart meters, as well as energy conservation initiatives.

The proposal outlines five policy options, with each adding new elements to the preceding one. The options range from offering non-binding guidance on SEP licensing to establishing a one-stop-shop SEP clearing house for implementers to acquire licenses. A mandatory conciliation process and aggregate royalty determination for SEPs are also among the policy options. The proposed rules aim to benefit end users and ensure that EU companies remain competitive in the global market, making the EU an attractive place for innovation and standards development.

Industry concerns and criticisms

Despite the European Commission’s intentions, the proposal has received criticism from various industry groups and businesses. The App Association, which is largely funded by Apple, expressed concerns about the removal of a passage that could undermine FRAND terms, which are designed to prevent abuse of power by SEP owners. Fabian Gonell, chief licensing lawyer at Qualcomm, argued that the EU proposal penalises patent holders making infringement claims outside Europe, limiting their access to EU courts and creating a system similar to China’s rules.

IP Europe, an organisation supported by Ericsson, Nokia, Orange, Qualcomm, Dolby, and Fraunhofer, also expressed concerns about the “harmful and unbalanced” proposal. Their list of complaints includes departing from precedent without data, handing SEP management to an inexperienced agency, creating an unpredictable system that delays negotiations and royalty payments, ignoring EU commitments to intellectual property rights, and capping aggregate royalties. The Fair Standards Alliance has also challenged the current draft, further highlighting the need for a balanced approach that considers the interests of all stakeholders.

What’s next for the SEP proposal?

It is important to note that the proposed SEP regulation is still in its early stages, and the European Council and European Parliament will have their say on the Commission’s idea during the legislative procedure. This is expected to involve controversial parliamentary debates and further changes to the proposal, taking into account the concerns and criticisms of stakeholders from various industries. As the European patent landscape undergoes major upheavals with the launch of the Unified Patent Court (UPC), the SEP regulation will play a crucial role in shaping the future of intellectual property rights and innovation within the European Union.