EU Commission pitches rules for patents ‘essential’ for standards

The European Commission presented on Thursday (27 April) a legislative package including measures to facilitate access to patents needed to comply with technical standards.

The main part of the package focuses on Standard Essential Patents (SEPs), patents covering technologies that are key for implementing a technical standard adopted by a standardisation body.

Technical standards are key for technological compatibility, ensuring, for instance, that a product can connect to a Wi-Fi or 5G network. The EU executive wants to ensure those with a monopoly over these SEPs do not impose unreasonable terms such as overcharging royalty fees.

“Today, we are modernising our framework for standard-essential patents, making it more transparent, SME-friendly and ready for the economy of tomorrow,” said Internal Market Commissioner Thierry Breton in a statement.

For the Commission, the current licensing scheme for standard essential patents creates uncertainty for technological investments in the EU, an imbalance that affects SMEs operating in the emerging field of the Internet of Things the most.

Scope

While the regulation will apply to all technical standards once it goes live, the Commission might decide to exonerate specific standards or use cases from the aggregate royalty setting and FRAND conciliation process if the EU executive considers it does not affect the internal market.

Conversely, if a standard was published before the new rules entered into force but creates significant distortion in terms of licensing, the Commission might include it in the regulation’s scope.

Registration

The proposal intends to streamline and centralise the registration process for national patent certificates via a single application to be assessed by the European Union Intellectual Property Office (EUIPO), an EU agency, and national examiners.

The SEP register will detail the relevant standards, used products, owners’ royalty policies, information about the patent holder and reasoning behind the classification as essential.

Essentiality checks

The EUIPO’s new competence centre will also administer the essentiality check, to be conducted by an approved evaluator. Compared to an early version seen by EURACTIV, the draft law now allows the patent holder to request a peer review.

The centre will then conduct sample checks on these essentiality checks, except for patents held by micro and small enterprises. Even building a representative sample for these checks might prove a daring task. For example, over 50,000 patent families are estimated as essential for 5G alone.

Detractors also stress that while EUIPO has handled trademarks and registered designs in the past, it has no experience in patents.

FRAND determination

Determining how the FRAND conditions apply to the Standard Essential Patent can be initiated voluntarily by a patent holder or organisation that wants to use the patent or via court case.

When the two parties cannot agree, a conciliator will be appointed to propose an agreement within nine months. This procedure is intended to settle disputes avoiding costly litigation in court.

The proposal states that FRAND determination would concern a global license unless specified otherwise.

The results of the determination procedure should be disclosed within six months to the competence centre, which will include in an electronic database. Upon request, this information will be made available to public authorities, including national courts.

Aggregate royalties

The Commission wants to make public aggregate royalties, which include the potential total royalties for all the SEPs covering a standard. When a standard is published, patent holders should inform the competence centre about the aggregate royalty they have agreed upon.

If there is no agreement, patent holders representing SEPs accounting for at least 20% of a standard can request the competence centre to appoint a conciliator to discuss an aggregate royalty. The percentage was increased from the 10% of the previous version.

“The Commission is contemplating the EUIPO assessing global aggregate royalty rates, and terms for worldwide FRAND licences. It has also introduced measures seemingly to encourage parties to agree to be bound by the FRAND determination,” Andrew Sharples, an attorney at the law firm EIP, told EURACTIV.

“So it appears the Commission is looking to set the EU up as a (if not the) global determiner of FRAND rates,” Sharples added.

A non-binding opinion can be requested on an aggregate royalty, for which the competence centre would appoint a panel of three experts.

Compulsory licensing

Another part of the package is a proposal introducing compulsory licensing provisions that allowing the authorisation of the use of a patent without the patent holder’s consent.

Whilst licensing agreements are normally voluntary, EU countries have national compulsory emergency licensing schemes.

The Commission’s idea is to create a compulsory license applicable to the whole bloc on top of the national systems, which will remain in place. The tool complements other EU instruments for supply chain crises like the Chips Act and Single Market Emergency Instrument.

Supplementary Protection Certificates

The third strand of the package relates to Supplementary Protection Certificates, which allow extending the patent’s terms for pharmaceutical products and plant protection products for up to five additional years.

These schemes only exist at the national level at the moment. Hence, the Commission wants to streamline them at the EU level with a unitary Supplementary Protection Certificate obtained via a centralised examination procedure managed by the EUIPO.

[Edited by Alice Taylor]

Read more with Euractiv

UK regulator blocks Microsoft-Activision merger

The UK’s antitrust authority has blocked Microsoft’s proposed $69 billion acquisition of gaming company Activision Blizzard, dealing another blow to the troubled merger.