On 27 April 2023, the European Commission published, within the framework of its Intellectual Property Action Plan launched in November 2020, a proposed Regulation on standard essential patents (SEPs).(1)
SEPs are patents that protect technology which has been declared essential in a technical standard or specification developed by a standard development organisation (SDO).
Typically, for a patented technology to be included in a technical standard, SDOs require its holders to agree to license the relevant patents to third parties (implementers) who wish to use the technical standard. Such licences must be granted on fair, reasonable, and non-discriminatory (FRAND) conditions.
According to the European Commission, the current system of licensing SEPs has suffered for many years due to a lack of:
- transparency;
- predictability; and
- efficiency.
This has given rise to many disputes and litigation. These deficiencies are the ones that the proposed Regulation intends to solve.
The overall objectives of this proposal are, in summary, the following:
- Ensure that end users, including small businesses and consumers in the European Union, benefit from, at reasonable prices, products manufactured according to the latest standardised technologies.
- Make the European Union attractive for regulatory innovation in terms of technical standards.
- Encourage SEPs holders and implementers to innovate, manufacture and market products within the EU framework and be competitive outside the European Union.
In order to achieve these objectives, the Commission, through this Regulation, puts forth the following proposals:
- Making available, to any interested party, detailed information on the SEPs and the terms and conditions of the FRAND licensing in order to facilitate negotiations.
- Raise awareness about the importance of granting SEP licences.
- The creation of a dispute resolution mechanism, through conciliation rather than judicial process, to determine the terms and conditions of the FRAND licensing.
To this end, Commission specifically proposes the creation of a competence centre, responsible for the implementation of the proposal. The competence centre will be established at the EU Intellectual Property Office, based in Alicante, Spain, and charged with tasks including:
- setting up and maintaining an electronic register and an electronic database for SEPs;
- implementing and managing a system for evaluating the essentiality of SEPs in order to guarantee the quality of the registry and to prevent possible abuses due to lack of control in the data registry;
- establishing and managing a conciliation procedure, prior to judicial proceedings, to resolve disputes for determining the FRAND terms and conditions for obtaining a SEP licence;
- preparing and managing rosters of evaluators and conciliators;
- managing a procedure for determining aggregate royalties (total licence fees from all SEPs that would cover a technical standard);
- improving the transparency and exchange of information by implementing the following mechanisms:
- publishing the results and reasoned opinions of the essentiality controls and the non-confidential reports of the FRAND determinations;
- allowing access to case law and resolutions on SEPs, both within the European Union and third countries;
- collecting and providing non-confidential information on FRAND determination methodologies and FRAND royalties; and
- enabling access to technical standards related to SEPs from third countries;
- providing training, support and general advice on SEPs to small and medium enterprises; and
- carrying out studies and any other activity necessary to fulfil the objectives of the Regulation.
The proposed Regulation sets out its application to technical standards that are published after the date of its entry into force. Those previously published will not be subject to it unless the Commission ends up including them in its scope of application due to the existence of certain market distortions derived from inefficient SEP licensing.
This proposal, along with others that are part of the same Commission Intellectual Property Action Plan, aims to complement the Unitary Patent system that came into force on 1 June 2023. However, it still has a long way to go until its approval by the European Parliament and the Council of the European Union.
For further information on this topic please contact Antonia Torrente at Grau & Angulo by telephone (+34 93 202 34 56) or email ([email protected]). The Grau & Angulo website can be accessed at www.ga-ip.com.
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