Experts warn that the EU’s proposed Standard Essential Patents regulation could stifle innovation and harm Europe’s global competitiveness. The proposal has drawn sharp criticism at a recent Euractiv event where stakeholders from key institutions cautioned that the regulation could undermine Europe’s ability to innovate in key technologies, such as 5G and 6G.
Standard Essential Patents 101
Access to Standard Essential Patents (SEPs) has been crucial in advancing mobile connectivity. Innovators voluntarily contribute their key inventions to standards development, which they also protect by patents. When these inventions become essential to a standard, the patents are designated as SEPs. Once the standard is adopted by an open standard development organization, the technology becomes accessible and SEPs can be licensed on fair, reasonable and non-discriminatory terms. The revenue generated from SEPs licensing is reinvested into R&D, further propelling the evolution of wireless technology and key inventions.
In April 2023, the European Commission proposed a regulation aimed at streamlining the SEPs licensing framework. By February 2023, the European Parliament had adopted an amended version of this regulation in its First Reading, which is now under consideration by the Council.
However, experts across the intellectual property ecosystem have raised concerns about the far-reaching consequences of the proposed regulation for innovators. They warn that the regulation could have the opposite effect, increasing complexity and regulatory burdens, undermining fundamental R&D incentives, and multiplying potential disputes, thereby harming Europe’s innovation potential.
On December 5th, Euractiv, in partnership with Qualcomm, hosted a debate on this topic.
Questioning the need for the draft SEPs regulation
The European Commission initiated the debate with a presentation by Markus Kicia, Legal Officer at the Directorate-General for Internal Market, Industry, Entrepreneurship, and SMEs (DG GROW). The Commission aims to enhance the transparency of SEPs ownership, facilitate the identification of essential patents, shorten the duration of licensing negotiations, and minimize litigation. Kicia highlighted that the lack of transparency in SEPs licensing has deterred SMEs from adopting standardized technologies.
MEP Adrián Vázquez Lázara then spoke, leveraging his experience as former shadow rapporteur during the Parliament’s review of the draft. He questioned the necessity of the regulation, noting that he had not encountered any SMEs advocating for it. András Jókúti from the United Nations’ World Intellectual Property Organization (WIPO) supported this view, stating that “it is debated whether this is a market failure that requires regulatory intervention”.
MEP Vázquez Lázara also criticized the expedited six-month legislative timeframe imposed on the European Parliament. He pointed out that the regulation’s impact on the competitiveness of European companies had not been thoroughly assessed. He raised further concerns about the EUIPO’s capability to manage key aspects of the legislation, given its limited experience with technology patents. Additionally, he noted the significant costs associated with effectively implementing the regulation. Patrick Hofkens, Head of IPR Policy at Ericsson, echoed these concerns.
The proposal to create a centralized SEPs database under the regulation also sparked discussions. While the database aims to clarify patent ownership and essentiality, Hofkens emphasized the potential costs and inefficiencies of establishing yet another SEPs database.
Incompatibility with the new Unified Patent Court
The proposed regulation appears at odds with the new Unified Patent Court (UPC), which was created to strengthen and harmonize patent protection throughout Europe, including for SEPs. The UPC simplifies patent disputes through a centralized judicial system and its success is evidenced by the 42,000 unitary patents registered since the system began in only June 2023.
Klaus Grabinski, President of the UPC Court of Appeal, explained that the SEPs regulation threatens access to justice and hampers the UPC’s operations. The proposal includes a mandatory determination of FRAND rates, requiring parties to undergo a nine-month process before pursuing any court action. President Grabinski warned that this delay would likely extend to a year: “If European courts in the future have to wait one year due to FRAND determination, the effect will be that cases will be decided outside the European Union,” thereby weakening the influence of European courts. To prevent the regulation from undermining the UPC’s legitimacy, President Grabinski suggested allowing parallel court proceedings during FRAND determination.
Michael Fröhlich, Director of Patent Development at the European Patent Office (EPO), concurred with President Grabinski, emphasizing the importance of “not undermining the UPC we have worked so hard to establish.” Fröhlich recommended relying on the existing EPO and UPC systems, including the UPC’s Patent Mediation and Arbitration Centre (PMAC), which offers alternative dispute resolution mechanisms for SEPs. He questioned the rationale behind introducing additional mechanisms through the EUIPO, given that the UPC framework is tailored to the complexities of patent disputes.
Outdated SEPs Regulation A Glimpse into the Past
European Commission President von der Leyen aims to address Europe’s productivity and resilience challenges by promoting investment in foundational technologies, reducing regulatory compliance burdens and boosting the competitiveness of European companies in global markets. However, the Euractiv debate highlights that the draft SEPs regulation conflicts with these priorities. Fröhlich even believes the SEPs regulation should be reconsidered in its entirety, and the current draft withdrawn.
The draft regulation is complex, rushed, and lacks a proper impact assessment on some of Europe’s most innovative technology players. Members from leading European institutions and bodies have expressed concerns about the burdensome obligations on SEPs holders, the involvement of the EUIPO—an organization with no expertise in patents—the significant human and financial resources required to implement the regulation effectively, and the regulation’s relationship with the unitary patent system. These are some of the issues that the Council must now address to ensure that Europe puts innovation first.
The article follows the policy debate “The Future of SEPs and Innovation in Europe”, supported by Qualcomm.