Europe’s proposals on SEPs: the story so far

The European Commission (EC) published a proposal for a regulation on standard essential patents (SEPs) on April 27, 2023.

This draft regulation aims to encourage European companies’ involvement in the standard development process and the widespread adoption of standardised technologies, especially in Internet of Things (IoT) sectors.

Since its publication, the proposal has sparked hot discussions, particularly within the technology and telecoms industries.

So far two draft opinions on the proposal have been published—first by the Committee on International Trade (INTA) on October 2, followed by the Committee on the Internal Market and Consumer Protection (IMCO) on October 9.

Contrasting views

While the EC’s draft regulation was widely seen as advantageous to implementers (those who use the technology) and punitive to SEP owners (those who own the technology), INTA’s opinion is regarded a strong counter to the proposal and favoured by SEP owners.

In contrast, IMCO is largely supportive of the proposals.

In its opinion, INTA suggests an intention to dilute the impact of the reforms to an extent that would render the regulation of limited effect.

For example, INTA’s proposed amendments, if accepted, would mean the regulation would apply only to future standards and use cases, and not to standards published before entry into force of the regulation.

Moreover, the regulation would not apply where significant difficulties or inefficiencies are not observed as any intervention in the markets must be evidence-based. On this point, INTA notes in its opinion that “current evidence is inconclusive”.

‘Watered down’ provisions

Additionally, a majority of the draft regulation's provisions are erased or watered down in INTA’s draft opinion.

The amendments remove the requirement for SEP holders to undertake a mandatory fair, reasonable and non-discriminatory (FRAND) determination before initiating infringement proceedings in national courts on the basis that access to courts should remain available to parties.

The amendments delete the requirement for SEP holders to register SEPs before collecting royalties or damages for use of that SEP. INTA states that such provision would not be compatible with the right to damages under the Charter of Fundamental Rights of the European Union.

Limitations of the EUIPO

Furthermore, according to INTA’s draft opinion, an assessment by the European Union Intellectual Property Office (EUIPO) that a patent is not essential may not result in the SEP being removed from the register. This, INTA says, is because the EUIPO is not a court and cannot render a patent unenforceable.

Similarly, several provisions are deleted on the basis that it would be “wholly disproportionate” to render patents unenforceable as a result of the SEP holder not providing the correct information to the EUIPO’s registry.

IMCO, on the other hand, states that it “fully supports the objective of the draft proposal to improve the licensing of standard essential patents”. Significantly, IMCO states in its draft opinion that it is “imperative” that “the scope of the regulation should include all SEPs, present and future”.

Indeed, IMCO’s draft opinion suggests that it intends for the regulation to extend in scope, deleting the exception that certain provisions should apply, “except for those use cases of standards for which the Commission established that there are well-established and broadly well-functioning licensing practices of SEPs”.

What happens next?

According to the EC’s proposal, the regulation would not take effect until 24 months after legally entering into force. In any event, the proposed regulation must obtain European Parliament approval to become part of European law.

It is up to the Committee on Legal Affairs (JURI) to respond and reach an agreement on suggested amendments. The Commission may also defend its position and answer questions to the committees during this period.

MEPs will then vote on the amendments, and after the report is adopted, it proceeds to the full Parliament for a vote.

Parliament has its first reading and will adopt its position. The approved text of the proposal is put to the Council for a first reading, and the Parliament’s language will be adopted or amended by the Council and sent back with reasons for the changes.

Neither the Parliament’s nor the Council’s first reading has a time limitation, hence it could be years before the draft regulation is adopted and comes into force.

SEP owners and implementers may continue to lobby their positions throughout the process, and it is unclear what the final regulation will look like.

Businesses that operate in the EU that encounter standardised technologies as either net licensees or licensors may find short to medium-term comfort to remain business-as-usual concerning the impact of the Commission’s draft regulation.