Thursday, May 4, 2023

U.S. Secretary of Commerce expressed Biden Administration's 'concerns' over EU SEP regulation proposal, also communicated them to EU Commission: Senate hearing

Not only former U.S. government officials have criticized the European Commission's proposal for a regulation on standard-essential patents (SEPs) that was formally put on the table a week ago. I've obtained a transcript of a hearing that took place in the United States Senate last week, and it's now clear that the Biden Administration--represented at the hearing by Secretary of Commerce Gina M. Raimondo--considers the proposed SEP regulation to be harmful to U.S. patent holders.

The hearing obviously had a broader focus, and when he was already running out of time for his intervention, Senator Chris Coons (D-Del.)--the new chair of the Senate's IP Subcommittee--started to talk about "China's abusive practices with respect to standard essential patents, SEPs which are critical for advances, things like 5G." In U.S. political debates, China is the preferred bogeyman, and that is a bipartisan thing. Oddly, the European Commission, too, is playing that game. The Commission brought a WTO complaint over Chinese SEP case law, and at last week's presentation of the SEP proposal, Chinese companies' increasing SEP share also came up. While U.S. politicians are consistent in terms of viewing China's role as that of an implementer--conveniently ignoring the innovation that comes out of China--the EU contradicts itself by justifying an attempt to devalue SEPs with China's strength in SEPs and at the same time accusing China at the WTO level of weakening SEP enforcement.

Sen. Coons went on to criticize the EU proposal for the very opposite reason (Chinese implementers' interests) that EU commissioner Thierry Breton gave when he presented the legislative measure (Chinese SEP holders' strength):

"I have real concerns about the European Commission's new SEP regulations, which I understand are set to publish today. And if it goes in a certain direction, that resolution will just validate China's abuse of royalty setting practices and harm our patent owners. There may be room to engage with the European Commission to discuss the unintended, let's hope, consequences of their regulation. I just wondered what your position is on this regulation and whether you'll work with me to communicate the potential harm to our global competitiveness if this is adopted by our European partners." (emphases added)

It is moderately diplomatic to suggest that the negative consequences for the U.S. are hopefully ("let's hope") not intended. Between the lines he's expressing the concern that the EU may even be implementing an anti-IP scheme that is to at least some extent designed to harm U.S. innovators.

Secretary Raimondo's response indicates that the Biden Administration essentially agrees with Sen. Coons:

"Yeah, we share your concerns. I think we very much share your concerns and I will follow up with you. I had a team in Brussels last week expressing our concerns. And I'll be in Sweden in a few weeks for the US-EU Trade and Technology Council. I will put this in our discussion. So, we should get together before that."

Thanks to that hearing transcript, we now know that

  • the U.S. government has concerns over the proposed EU SEP regulation's negative impact on patent holders,

  • U.S. diplomats relayed those concerns to the EU (presumably the Commission, but at some point they may also talk to other EU institutions), and

  • the EU-US Trade and Technology Council will meet soon (in LuleĆ„, Sweden, on May 30th and 31st), on which occasion the U.S. will bring up the proposed SEP regulation as an issue that has negative implications for the transatlantic partnership.

Later today there'll be an official presentation of two studies commissioned by the EC's Directorate-General for the Internal Market (DG GROW). I've already mentioned that three of the companies on whose input the EC primarily relied upon are actually conflicted (one because of advocacy of implementers' interests, and the other two because they just want to grow their patent data services business). The positions taken by the current U.S. government, the chair of the U.S. Senate's IP subcommittee, and previously by former U.S. government officials (Republicans and Democrats alike) suggest that whoever was working on the proposal never cared to clarify beforehand how the most important trading partner would react. In 2020, China overtook the U.S. as the EU's largest trading partner for goods, but "when services and investment are taken into account, the US remains the EU’s largest trading partner by far."