The Public consultation is open up to 9 May 2022 for your feedback. Your input on Intellectual property and the new framework for standard-essential patents will be taken into account as the EC further develop and fine-tune this initiative.
Have your say and contribute to the online survey here: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13109-Intellectual-property-new-framework-for-standard-essential-patents_en
Summary of the initiative
A patent that protects technology essential to a standard is called a standard-essential patent (SEP). Patent-holders commit to licence their SEPs to users of the standard on fair, reasonable and non-discriminatory terms and conditions. However, some users have found that the system for licensing SEPs is not transparent, predictable or efficient. This initiative seeks to create a fair and balanced licensing framework and may combine legislative and non-legislative action. Indeed to ensure that Europe is well positioned in today’s competitive global environment, the Commission supports a smooth and balanced functioning of the system for standard essential patents (SEPs). This includes removing unnecessary barriers in the market for the licensing of SEPs.
Relationship between patents and standards
Patents provide incentives for research and development, and facilitate knowledge transfers.
Standards ensure the rapid diffusion of technologies and the interoperability between products.
Many standards are based on patented technologies. For example, the mobile telecommunications industry is driven by a heavy reliance on standardisation, which is made up of a great number of innovations protected by patents. 2G (GSM), 3G (UMTS), 4G (LTE), 5G and WiFi networks rely on thousands of patented technologies to work. Such communication standards are also key for the development of the hyper-connected society, for example in the field of the Internet of Things in sectors such as consumer electronics, the automotive industry and the electricity grid industry.
Political context
As underlined in the Commission’s intellectual property action plan , intangible assets are the cornerstones of today’s economy. An effective intellectual property (‘IP’) framework needs to strike a balance between promoting innovation by protecting IP on the one hand and not blocking companies’ access to IP and to the single market on the other. Of all the types of IP, patents are the most powerful. Patents are one of the most critical tools in the EU’s industrial policy toolkit and will also play a critical role in the upcoming European Chips Act. Despite the strategic importance of patents, EU patent law is fairly limited and fragmented. EU patent law therefore needs to be recalibrated to boost the resilience of our patent system and support the EU’s twin transition (digital and green). The imminent launch of the unitary patent system also makes this the perfect time to enhance EU patent law and facilitate access to critical technologies.
The Commission will therefore develop a coherent and balanced package comprising three patent–related proposals. These proposals, announced in the IP action plan, will cover supplementary protection certificates, compulsory licensing and standard–essential patents (‘SEPs’). They share common objectives such as: (i) increasing legal certainty and transparency; and (ii) reducing fragmentation and transaction costs.
Problem the initiative aims to tackle
The main problems that affect both SPE holders and SPE implementers are: inefficient licensing, including ‘hold–up’, ‘hold–out’ and ‘forum shopping’. Potential implementers, including start–ups and SMEs, may opt–out from using the standards altogether, or they may use the relevant standards without a licence, assuming any risks related to SEP infringement. These problems may slow the pace of innovation, hamper development in critical technologies, and delay the scaling up of start–ups and SMEs in the EU. These problems stem mainly from: (i) insufficient transparency and predictability; (ii) uncertainty about FRAND terms and conditions; and (iii) high enforcement costs and inefficient enforcement.
Practical need for EU action
The potential new initiative should complement the existing EU policy instruments, addressing selected SEP–related issues at EU level. SEP licensing and the value chains affected by it are usually global, while enforcement of SEPs is territorial. The EC has identified that both licensing and enforcement are inefficient and that there is a need for action at EU level. Action at Member State level could potentially result in divergent interpretations, partly depending on whether businesses in those Member States are predominantly SEP holders or implementers. The new (complementary) initiative should be developed at EU level to: (i) achieve the best balance of interests; (ii) promote uniformity; and (iii) foster single–market solutions. The entry into force of the unitary patent also requires an initiative at EU level, as initiatives at national level will not apply to unitary patents.
Likely impacts of this initiative
An improved SEP framework based on increased transparency, predictability and efficiency would improve the competitiveness of EU businesses, including start–ups and SMEs. Efficient SEP licensing may also: (i) facilitatethe development of critical technologies and the uptake of digital technologies; and (ii) foster the EU’s transition to the green economy. Many standards that rely on SEPs are essential to the success of projects in areas such as: smart manufacturing; smart grids and energy; smart mobility; smart cities; and smart agriculture. All those projects use cutting–edge digital technologies to improve sustainability, for example by fighting climate change. More predictable SEP licensing may in particular benefit the scaling up of start–ups and SMEs that may currently consider it too risky to launch products and services that rely on SEPs as well as those start–ups and SMEs that may capitalise on the incorporation of their innovations into standards.
Although SEP licensing entails significant transaction costs for all stakeholders, more transparency is likely to lead to cost–savings. This is important as transaction costs may in particular be higher for new types of implementers in the ‘internet of things’, including start–ups and SMEs.
Download the Call for evidence for an impact assessment here: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13109-Intellectual-property-new-framework-for-standard-essential-patents_en