Tuesday, July 13, 2021

BREAKING: European Commission preparing potential new regulation and/or directive on standard-essential patents

This is yuuuge. The European Commission just added a very important item to its list of published initiatives. The title is "Intellectual property -- new framework for standard-essential patents."

This is what the summary says:

"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, the system for licensing SEPs is not transparent, predictable and efficient.

"This initiative will create a fair and balanced licensing framework and may combine legislative and non-legislative action."

I'm sure there are many companies and other entities who would agree, as would I, that there are important issues to be addressed in connection with SEPs. It's just that some will say the current situation is unfair for licensees ("hold-out") while others will say licensors get overcompensated ("hold-up").

The "type of act" specified is "[p]roposal for a regulation." The summary refers to a potential combination of legislative and non-legislative action." I believe one possible direction this may take is an EU directive (which would then have to be transposed into national laws by the EU'S 27 Member States) on SEP licensing and enforcement.

It's not totally surprising as something like this was mentioned, inter alia, in the 2020 IP Action Plan. Now they're going to start with the public consultation (likely after the summer break) and their initial impact assessment, and they're shooting for a Commission adoption (i.e., a decision by the College of Commissioners) in the fourth quarter of next year. A Commission Regulation would take immediate effect, but if the Commission adopted a proposal for a directive, the process would just start as the EU Council and the European Parliament would then act as co-legislators.

Major SEP holders like Ericsson and Nokia have enormous political clout in Europe. If net licensees sought to capitalize on this process to weaken SEP enforcement, they'd face an uphill battle (of the kind they just lost in Germany, where the patent injunction regime is going to be the same as before, just more costly for defendants).

The outcome of this process is going to impact the case law of the Unified Patent Court, which is likely going to commence its operation sometime next year.

Just last week, President Biden signed an executive order on antitrust enforcement, which included one paragraph on SEPs. So there's a lot happening now in SEP policy on both sides of the Atlantic. And there are developments in Asia, too, particularly in Japan.

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