EU standard-essential patent reforms could be resurrected

Earlier this year, the European Commission withdrew the draft new EU regulation on SEPs it had proposed in 2023. EU law makers in the European Parliament and the Council of Ministers were unable to reach consensus on the proposed regulation.

Now, however, Stéphane Séjourné, executive vice-president for prosperity and industrial strategy at the Commission, has said at least some elements of what had been proposed could be salvaged.

“The Commission will be looking at every possible route to allow the ideas that lie behind that text to make progress, whether it’s a new proposal or we approach it from a different angle,” Séjourné’ told MEPs on the Parliament’s Legal Affairs Committee (JURI) last week.

SEPs are patents that protect technology believed to be essential to implementing a technical standard. In other words, you cannot operate a standard-compliant device without necessarily using the patented invention. Standards are important for interoperability in industries such as telecommunications, the Internet of Things, as well as others where devices need to communicate and exchange data.

Where a patent owner considers their patents as SEPs, they will make a declaration to that effect to the relevant standardisation organisation. The European Telecommunications Standards Institute (ETSI) is one such body for ICT technologies. ETSI's intellectual property rights policy requires the SEP owner to commit to offer licences of its SEPs to implementers on terms that are fair, reasonable and non-discriminatory (FRAND). The policy sets out some features that a FRAND licence must possess. However, it does not fill in all the blanks. ETSI’s policy, therefore, envisages that the SEP owner and implementer will negotiate a licence on FRAND terms.

However, disputes over what constitutes ‘FRAND’ are common, with rights holders and implementers often then going to court to resolve their disagreements. This issue was noted during last week’s JURI meeting. Disputes have arisen in many jurisdictions over what constitutes FRAND terms, including the UK, Germany and France, as well as in the US and China.

The Commission drafted a proposed SEP regulation, which it published in April 2023. The draft legislation aimed to improve transparency and predictability in SEP licensing, improve fairness and efficiency in the licensing process, and limit costs that can arise from disputes between SEP owners and implementers.

Those proposals included new mandatory requirements for the registration and ‘essentiality’ checking of SEPs. They also envisaged aggregate royalty-setting mechanisms for technology standards, and a FRAND royalty rate determination procedure to be brought by the SEP holder at the EU Intellectual Property Office (EUIPO) before a patent owner sues in EU national courts or the Unified Patent Court. The establishment of a new Competence Centre at the EUIPO to perform these functions was also proposed. Patent law experts at Pinsent Masons noted that there was concern how the regulation’s new requirements would be carried out in practice.

The proposals were nonetheless backed by MEPs – including Séjourné, who was a member of JURI prior to the European Parliament elections last year. However, the proposals did not receive sufficient support in the Council, which is made up of representatives of the governments of EU member states. This prompted the Commission to announce the withdrawal of the draft legislative instrument in its work programme for 2025 published in February this year. That decision was criticised by some members of JURI during the session with Séjourné. The automotive sector was singled out as an example of a sector that would be negatively impacted by the withdrawal of the SEP regulation by one MEP.

Séjourné said the Commission would give both the Parliament and the Council six months to prepare opinions on the proposals with a view to informing a decision on whether and how they might be resurrected.

While not been drawn into the specific reasons for the regulation’s withdrawal, Séjourné said: “When it comes to standard-essential patents … we are stumbling somewhat on the way of making the current framework better. We still share the goals of transparency, we want to ensure more predictability, to make sure that things are not so dependent on external international competition pressure.”

“On the content [of the proposal] itself, I’d like to reassure you that the Commission is determined to look at these goals and shares these goals that lie behind the regulation. We don’t want to hinder the process. We are opening a six-month consultation period during which the Parliament will be able to express its opinion. The Commission will pay great attention to the Parliament’s position as well as the position of the Council... We do share the same end goal, the same desire. We want to find a more suitable way for Europe to remain at the forefront of technological innovation and to retain jobs and uphold its competitiveness,” he said.

Séjourné said the option of bringing forward SEP reforms as part of a new proposal is “still on the table”, though he did not rule out a “definitive” withdrawal of the plans.

“The overall aim is to have an agreement and to push the Council to adopt a position on the text,” he said. “There is a sticking point, obviously, which could possibly continue over the next few years on the text. Maybe the withdrawal appears to be rather radical as a method, but this is being done paradoxically to try to move things… All of us share the same objectives, we’re heading in the right direction, especially when it comes to transparency, simplification, and that should be at the heart of our shared objectives.”