Saturday, July 29, 2023

Instead of messing up standard-essential patent licensing, EU institutions need to take their time and obtain advice from their legal services on fundamental rights, access to justice, comity

If the standard-essential patent (SEP) licensing system was in a state of acute crisis, with small and medium-sized enterprises (SMEs) going out of business and car makers being unable to obtain critical parts due to patent injunctions, no one would deny a need for swift and decisive action.

If SEPs were a topic of concern to wide swaths of the electorate, one could see why politicians believe the passage of a SEP bill into law--before the end of the current term--increases their chances of being (re)nominated, (re)elected or (re)appointed.

None of that is the case, though:

  • There are no SEP assertions against SMEs in court--or if there are any, they must be so few and far between that I've never seen any, despite keeping a close eye on SEP litigation not only but also in Europe. To the extent that the impact assessment accompanying the proposal presents "evidence" of SME-specific problems, it's anecdotal evidence at best and some lobbyists' fiction at worst.

  • Virtually the entire car industry is licensed to the Avanci 4G pool, which covers the vast majority of patents essential to the 2G-4G cellular standards. A solution for 5G is in the works. License fees are small when considering the much longer period of time that cars are in use compared to smartphones, and relative to the fees car makers charge their customers for data services after the first two or three years. Europe's automotive sector is clearly facing huge problems, but a license fee that's a minor cost of doing business equally affecting all car makers doing business in Europe is not a competitiveness issue. If anything, stronger SEP enforcement and higher SEP royalties would result in the small minority of still unlicensed car makers getting sued in Europe to put an end to infringement.

  • It's hard to imagine even a single voter who would choose a party or a candidate because of their stance on SEPs--or a single party member who would support someone's nomination over such an arcane issue where a webinar that attracts more than 300 participants is, relatively speaking, a blockbuster success.

There are enough serious issues on the European political agenda. There's no need to fabricate a sense of urgency here.

It is downright iressponsible to forge ahead with an ill-conceived proposal over well-founded objections and against stern warnings:

Policy makers must come to their senses now. There are serious issues. Even if one didn't know much about SEPS, one would just have to look at the linguistic "quality" of the proposal and the accompanying material to see that it's not a professional piece. There are countless typos and grammatical errors. I've never seen anything like that in official EU documents, not even during the early stages of the pandemic when political papers had to be cranked out under severe time constraints.

It is just not realistic to believe that a co-legislative process with numerous, potentially inconsistent or at least incoherent amendments is likely to solve the problem. The topic is complex, and the initial proposal does not serve as a starting point.

At minimum, the EU Council and/or the EU Parliament should obtain advice from their legal services.

The tasks of the European Parliament's legal service include "helping the committees with their legislative work." The legal service of the General Secretariat of the Council "gives opinions to the Council and its committees, in order to ensure that Council acts are lawful and well-drafted."

That is the kind of advice that should be obtained when voices to be taken seriously, such as the top judge of the UPC, articulate concerns over the EU's fundamental rights (access to justice, property rights), and when the EU's main international trading partner has communicated its opposition and the EU's compliance with its obligations under international treaties is called into question. Furthermore, the extent to which the proposal would leave important decisions (such as on the very scope of the regulation) to the Commission requires further analysis, unless the EU institutions want to give EU skeptics (of which there's no shortage in the European Parliament) another opportunity to criticize the EU for its democratic deficit.

The EU institutions have obtained advice from legal services on less complicated topics, with compulsory licensing being a good example of something that is difficult enough to justify the involvement of the legal services though much more straightforward than SEP enforcement with its international ramifications (i.e., international comity).

Also, it would make sense for the EU Council to ask the Commission various questions about the proposal before it can do any meaningful work on substance.

This is a time for responsible policy makers to hit the brakes.