European Commission releases guidance on SEP licensing
The European Commission released its communication on the licensing of standard-essential patents (SEPs) yesterday, with the guidance being backed by both IP Europe and The App Association.
In the build up to the release, there had been a bitter row over the licensing of (SEPs) in the internet of things (IoT).
Trade body The App Association was worried that the Commission may extend use-based pricing—a practice currently used for licensing of smartphone technology—to the IoT. This is where the licence fee for an essential patented technology is based on its use.
But IP Europe, which was originally launched by Ericsson and Airbus, said it is a long-established and fundamental procedure in the area of fair, reasonable and non-discriminatory licensing (FRAND).
The Commission excluded use-based licensing from the communication.
“The Commission considers that the parties are best placed to arrive at a common understanding of what are fair licensing conditions and fair rates, through good-faith negotiations,” the communication read.
“Licensing terms have to bear a clear relationship to the economic value of the patented technology. That value primarily needs to focus on the technology itself, and in principle should not include any element resulting from the decision to include the technology in the standard.”
The communication also stated that it is necessary and beneficial to establish “a first set of key signposts on the FRAND concept, so as to provide for a more stable licensing environment, guide parties in their negotiations and reduce litigation”.
In the immediate aftermath of the communication, IP Europe labelled it a “good day for consumers around the world”.
“IP Europe’s members welcome any initiative that will lead to smoother licensing negotiations,” the group said.
“Where opportunities to find negotiated outcomes have been exhausted, our position remains that courts are the best venue to enforce IP rights, including to find remedies for growing marketplace trends such as ‘patent free-riding’ by implementers that use our innovations without taking a licence or paying royalties”.
A spokesperson from The App Association pointed to the fact that the communication excluded use-based licensing.
“I know IP Europe is also claiming victory but bear in mind that we have been pushing for the Commission to maintain the status quo in terms of the balance between SEP holders and licensees.
“Not only was it excluded, but the communication in fact stresses that licence values should be ‘irrespective of the market success of the product’.”
President of The App Association, Morgan Reed, echoed these views.
“It is a positive outcome. We appreciate the clear recognition the Commission gives to the role that SMEs and start-ups play in the innovation process,” Reed stated.
“We applaud the Commission for providing transparent and predictable conditions for SEP licensing, and preserving the value of open standards built to protect intellectual property for all.
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