The net tightens on the European SEP regulation | McDermott Will & Emery
The regulation of standards-essential patents (SEPs) has increasingly attracted the attention of policymakers in recent years. This includes the European Commission, which is instituting several projects to thoroughly review the SEP and EU competition law framework. Some of these European projects are still being developed, with the next public consultations due to take place in early 2022.
The EU review was undertaken primarily for two reasons. The first is that the European Commission is responsible for applying European competition law. It is this set of rules which prohibits the abuse of a dominant position in the European Union market and, at least from an EU perspective, also obliges SEP holders to offer licenses to fair, reasonable and non-discriminatory terms (F/RAND terms) . The second reason is the objective of the European Union to act as an international standard setter in the protection of intellectual property (IP).
In November 2017, the European Commission published an EU approach on standard-essential patents as part of its “IP package”. The objective was to provide a clearer framework to incentivize and facilitate access to key technologies enabling interconnection and connectivity.
These relatively narrow objectives were concretized in November 2020 with the publication of the “Action Plan for Intellectual Property”. This plan aimed to help Europe’s creative and innovative industry sector to remain a world leader. In the field of SEPs, the objective of the European Commission was to reduce frictions and disputes between SEP holders and users by relying on possible regulatory reforms – in addition to industry-led initiatives – to clarify and improve the framework for registering, licensing and enforcing SEPs. By offering incentives for good faith negotiations, the European Commission has tried to reconcile the interests of SEP holders, standards development organizations (SDOs) and users of technologies protected by SEPs.
In January 2021, the European Commission’s Expert Group on PES Licensing and Assessment published its contributions to the debate. This group, made up of academics, judges and stakeholders, proposed, among other things, a number of principles for the licensing of SEPs, namely licensing at one level of the value, a single F/RAND royalty, the passing on of F/RAND royalties downstream, and establishing licensee negotiating groups. The European Commission’s next step in terms of a new framework for standard-essential patents is an online public consultation to be held in the first quarter of 2022.
Ahead of this event, on February 2, 2022, the European Commission presented its new standardization strategy, as well as a bill amending EU Regulation No. 1025/2012, with the aim of ensuring a balanced representation of parties. stakeholders within European SDOs and to solve the problem of agility and governance in the European standardization system. This strategy and the draft law underline the priority of the European Union to defend its key position as a global standardization decision maker.
The EU PES Regulation is also affected by the revision of the EU Horizontal Block Exemption Regulation, which defines certain research and development (R&D) and specialization agreements that can be considered beneficial to the public welfare and are therefore permitted under competition rules, and the EU Horizontal Guidelines, which set out a methodology for analyzing the benefits and anti-competitive effects of horizontal cooperation. The evaluation phase of this review concluded with the publication of a ‘Services Working Document’ by the European Commission in May 2021. The evaluation established that the horizontal guidelines are overall a useful instrument for increasing legal certainty. However, some provisions were identified as lacking the desired clarity regarding F/RAND licensing conditions. The impact assessment phase, the second phase of this review, took place from July to October 2021. At this stage, the European Commission sought the views of stakeholders on various policy options. The responses showed divergent views. SEP holders are concerned about the potential anti-competitive effects of licensee bargaining groups that allow implementers to coordinate during license negotiations. SEP holders are also concerned that the new regulations will impose additional disclosure and transparency obligations on SDOs. In a SEP owner’s worst-case scenario, a court could declare the SEPs unenforceable if the patent owner fails to fulfill its disclosure obligations in a timely manner.
Practical note: Stakeholders should closely follow the next steps of the European Commission in revising the horizontal guidelines. There are signs of a stricter approach of European competition policy towards dominant positions in high-tech markets. Reaffirming the European Union’s already strict approach, the European Union launched a dialogue with the United States in December 2021 on a reorientation of competition policy in the technology sector, which revealed that the United States could return to a more open approach to addressing competitive legal concerns and reducing potential abuses by SEP holders. Another indicator pointing to a tougher European competition policy for high-tech industries is the legislative proposal for an EU Digital Markets Act, which targets major online platforms. This European Commission proposal is similar to the Intellectual Property Action Plan not only because of the publication date (end of 2020), but also because of its objective to ensure fair and open digital markets.
Current plans to review the EU framework on SEPs are broadly in line with policy review schedules in other jurisdictions. In the United States, a public consultation on a policy statement regarding the licensing of PES just ended on February 4, 2022. Similar consultations are also underway in the United Kingdom, where consultations on the effective operation of the SEP ecosystem are expected to be completed by March 1, 2022. The Japan Patent Office also plans to update its SEP trading guide in 2022.