SEP owners slam auto and Big Tech ‘misinformation’ after EU vote

Controversial regulation is approved despite backlash from rightsholders | Rules aim to stimulate innovation within the EU and address concerns around SEP and FRAND licensing | UK focuses on educating SMEs via an information hub with technical consultation this year.

The European Parliament has approved European Commission proposals for a new standard-essential patents (SEP) regulation, despite intense lobbying from patent owners.

The decision, made on February 28, approved the Legal Affairs Committee report adopted January 24, 2024, on new rules aimed at supporting small and medium-sized enterprises (SMEs).

A furious IP Europe, which represents SEP owners such as Ericsson, Nokia, and Qualcomm, said the European Parliament has “scored a painful own goal for European technology leadership after a massive campaign of misinformation and lobbying by the automotive industry and Big Tech.”

The proposals are aimed at stimulating innovation within the EU, and urge both SEP holders and implementers to create products using the latest standardised technologies, with a special focus on SMEs and startups.

The proposed regulation was first published on Thursday 27 April, following the leak of a draft version of the highly criticised framework, sparking mixed reactions from the international patent community.

There was also opposition from countries such as Sweden, Finland, and the Netherlands.

The UK, meanwhile, has published its own SEPs plan, promising an “SEPs Resource Hub”; emphasising international collaboration; and a technical consultation to enhance the SEP market.

Opposition and concerns

Prior to the vote, IP Europe, comprised of Ericsson, Nokia, Orange, Fractus, Fraunhofer, Philips, Sisvel, Dolby, InterDigital, Panasonic and Qualcomm, wrote a letter on February 23 to all MEPs urging them to vote against the proposals.

The global technology leaders argued that the plans were “deeply flawed” and will increase costs and administrative burdens to EU innovators, including SMEs; cause delays, uncertainties, and complexities in licensing negotiations; and violate fundamental rights, notably the right to property (including IP) and access to justice, and EU law generally.

The letter also suggested the proposal is “disproportionate” and “not backed by evidence”.

Speaking after the vote was passed, IP Europe managing director Patrick McCutcheon, said: “We understand that many member states are analysing the Commission’s proposal in detail and have raised many important technical, legal, practical, and competitiveness-related questions. This should enable a thorough understanding of the regulation’s impact on Europe’s open innovation ecosystem.

“The Parliament ignored strong objections from many top European intellectual property experts including the European Patent Office, which questioned both the need for this regulation and the radical nature of the proposed changes.

“IP Europe thanks those MEPs who tabled amendments that would have limited some of the damage that this proposal causes, and who voted against the proposal or abstained.”

Katie Coltart, partner at Linklaters, said the vote covers only the European Parliament’s position on the proposed legislation, with the European Council yet to adopt any position.

“Even if/when the council does adopt its position, the parliament and council would then have to negotiate in trilogues to agree on the final text of the legislation. The process could well stall during either of these stages,” predicted Coltart.

Proposed legislative measures

In its explanatory statement, the European Parliament highlighted the growth of SEPs and the need for a regulatory framework to address issues of litigation, lack of transparency, and challenges in deciding fair, reasonable, and non-discriminatory FRAND licensing terms.

The proposed legislation aims to address these concerns by creating an SEP register and central electronic database, SEP essentiality checks, non-binding determination of aggregate royalty for a standard, and the creation of a lime-limited out-of-court dispute resolution mechanism under guidance.

The document also proposed the creation of a competence centre at the European Union Intellectual Property Office (EUIPO), pushed for transparent patent pools, and highlighted the importance of essentiality checks and non-binding dispute resolution.

There is a need to support micro, and SMEs in navigating SEP licensing, with plans for the EUIPO to establish a SEP Licensing Assistance Hub.

This will offer free training and support to SMEs and startups, helping them in identifying essential patents and navigating the enforcement of their rights.

UK plans to educate SMEs about SEPs and FRAND

Following the August 2022 response to its Call for Views, the UK’s IPO pledged to evaluate issues involving SMEs, small-cap, and mid-cap businesses through a questionnaire.

The IPO reported the results to government ministers and, in a press release published on the eve of the EU vote, agreed key objectives concerning SEPs.

These include helping implementers, especially SMEs, navigate and better understand the SEPs ecosystem and FRAND licensing; improving transparency in the ecosystem, both pricing and essentiality; and achieving greater efficiency in respect of dispute resolution, including arbitration and mediation.

The IPO said the government is working on non-regulatory initiatives to address SEPs and FRAND licensing concerns, including launching a UK SEPs Resource Hub by May 2024, aimed at aiding resource-constrained SMEs in navigating the SEPs ecosystem.

This online hub will provide tools and guidance, with input from an “industry working group”.

Additionally, the IPO said it will focus on “international collaboration” with the intention to improve coordination on global SEP issues.

The government said it aims to engage with Standard Development Organisations to address IP rights and policies and “involve SMEs in standardisation”.

Anticipated later in 2024, the IPO has plans to launch a technical consultation on SEPs and FRAND licensing that aims to “improve the functioning of the market”.

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