The European Commission (EC) proposed a new regulation for standard essential patent licensing on April 27, 2023. According to the commission, the new regulation is necessary to make available detailed information on standard essential patents (SEPs) and existing fair, reasonable, and non-discriminatory (FRAND) terms and conditions―to facilitate licensing negotiations, raise awareness of SEP licensing in the value chain, and provide for an alternative dispute resolution mechanism for setting FRAND terms and conditions. The proposed standard essential patent licensing regulation would establish a new organization called the Competence Centre, which would reside within the European Union Intellectual Property Office (EUIPO). The Competence Centre would establish a registry and electronic database of SEPs and appoint Evaluators and Conciliators to carry out essentiality checks and make FRAND determinations.
The primary objectives of the proposal, according to the commission, are to ensure that end users, including small businesses and consumers within the EU, reap the benefits of products based on the latest standardized technologies, and to foster an environment that attracts standards innovation in the EU. The proposal also aims to encourage both SEP holders and implementers to engage in innovation within the EU, produce and distribute products within the EU, and maintain competitiveness in non-EU markets. The regulation establishes guidelines to enhance transparency regarding essential information required for SEP licensing, along with regulations governing the registration of SEPs. In addition, the proposal introduces a procedure for assessing the essentiality of registered SEPs and outlines a process for amicably resolving disputes pertaining to FRAND-associated terms and conditions. Here is an opinion piece we found of interest relating to the EC’s proposed regulation on SEPs.
The European Commission’s Proposed Ruling on Standard Essential Patents
In an opinion piece, “The European Commission’s Proposed Ruling on Standard Essential Patents,” for the Center for Strategic and International Studies (CSIS), James Andrew Lewis, senior vice president, Pritzker chair, and director, strategic technologies program, and Julia Brock, program coordinator and research assistant, strategic technologies program, discuss the June 27 roundtable hosted by the CSIS’ Strategic Technologies Program to discuss the commission’s proposed reform for standard essential patents (SEPs) with experts, officials, and members of the business community. The roundtable addressed the current state of SEP regulations, the proposal’s suggested changes to the patent regulation process, and potential complications that might arise from these suggested changes. The US and EU have been leading developers of critical technological standards for a long time, and there is broad recognition that technological leadership matters not only for innovation but also national security. Although some of the participants are critical of the proposal, others are supportive.
The authors point out that SEPs are critical to technological innovation. Standards such as 5G, LTE, and Wi-Fi serve as the technological basis for product development and interoperability. When a company files for a patent, it is establishing a baseline technology on which other companies can build. During the patent process, a company must prove that its patent represents an “essential” technology for further development. Once it obtains a patent, the SEP holder can license the technology to different companies in exchange for royalties.
Under the current process, the SEP holder and the licensing party agree on royalties as long as they follow FRAND guidelines―which are not strictly defined, leaving room for interpretation derived primarily from court cases. The EC’s proposed regulation means SEP owners would need to get a FRAND determination from the EUIPO, which under this new proposal would be assigned to manage all SEP-related questions, FRAND royalties, and patent disputes. Currently, the EUIPO manages EU trademarks and design rights, but not patents. Read the full article on Center for Strategic and International Studies.
Disclosure: Fatty Fish is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
The Fatty Fish Editorial Team includes a diverse group of industry analysts, researchers, and advisors who spend most of their days diving into the most important topics impacting the future of the technology sector. Our team focuses on the potential impact of tech-related IP policy, legislation, regulation, and litigation, along with critical global and geostrategic trends — and delivers content that makes it easier for journalists, lobbyists, and policy makers to understand these issues.
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