“Under no circumstances should the EU create a regulatory SEP monster”

Fair and equal access to technology is an essential feature of a standard. Whether patent holder or implementer, whether SME or global player, whether Chinese, American or European, everyone should have access to the relevant technology. Transparency of information on SEPs guarantees fair conditions; the EU Commission’s newly drafted rules focuses on greater transparency for such patents. Well done, EU Commission!

“Standards mean all relevant companies should have fair and equal access to technology”

On 28 February, the EU Parliament approved the main parts of the commission’s proposal at first reading by a large majority. Now the EU Council must vote on the proposal. This gives the EU member states a historic opportunity to create a new system and global standard for setting fair SEP licences.

The old system for mobile communications standards has been in crisis for years. While the founders had developed a good method for converting patents into standards, they had simply forgotten to include a procedure for SEP holders and implementers to achieve licence rates that meet FRAND conditions. Since then, the groups involved have been looking for new answers to the core question of what exactly is FRAND.

“Patent holders and implementers are dissatisfied with the lack of clear FRAND rules”

The great SEP divide

Neither patent holders nor implementers are satisfied with the current system and its lack of clear rules for FRAND rates. In turn, this leads to many costly court proceedings.

For example, just nine months after the Unified Patent Court’s launch, its number of SEP lawsuits is rising. But only the UK High Court has so far dared to set a global FRAND rate. The commission’s proposal seeks a way out of the impasse and proposes unusual solutions, such as a competence centre under the umbrella of the European Union Intellectual Property Office (EUIPO). The draft has shaken up everyone involved. Once again, well done EU Commission!

But the often-vehement industry reaction indicates that the draft is a long way from being a game changer. There are concerns as to whether the EUIPO really has the technical competence to set FRAND rates; SEP holders complain the draft violates fundamental rights. For example, what if they cannot start litigation during the EUIPO’s nine-month period of mandatory FRAND determination? Such concerns should make the EU member states suspicious.

“Industry concerns should make the EU member states suspicious”

If the EU truly does aim to “strengthen EU SEP holders’ position in global markets”, as various representatives of its parliament have repeatedly emphasised, then the EU states must listen carefully to the concerns of Nokia, Ericsson, Sisvel, and co. On the other hand, the European automotive industry is forthcoming with its positive comments. But that many implementers are cheering the commission’s draft should signal to the EU states that it has not yet struck a balance.

EPO gives sharp criticism

Also noteworthy is that, shortly after the EU Parliament vote, the European Patent Office president intervened in the discussion once again. António Campinos told euronews that, at this stage, the EPO “is not convinced that the proposed measures are proportionate, or indeed necessary”, claiming the proposal failed to meet the commission’s own procedural ‘better regulation’ standards. This was “namely legislation that is evidence-based and built on transparent consultation of all stakeholders and thorough impact assessments”.

Campinos suggested pushing the pause button “in light of all these doubts and uncertainty”. Campinos is correct that the key players must properly reconsider the measures. But putting everything on hold is not the answer. A longer pause would, above all, give the industry group another opportunity to get their lobbying muscles going. It would bombard decision-makers with facts and arguments that have long been on the table.

Campinos also fails to mention that his office could contribute significantly to solving the problem. A major criticism of the current SEP system is that bad mobile communications patents, which are not genuine inventions, are flooding the market. Experts claim the standards are suffering from over-declaration. And the five largest applicants to the EPO are Huawei, LG, Qualcomm, Samsung and Ericsson, known heavyweights in the mobile communications sector.

Listen to experts, not industry

EPO statistics show the number of applications in mobile communications, telecommunications and computers is constantly increasing. The office does not wave through all applications by any means. But if the EU Commission and the EU Parliament are right that “in 5G almost 85% of the standard essential patents are in fact non-essential”, it would help if the EPO were to apply an ever-stricter standard when examining inventive step. Demands from parts of the industry for higher-quality granted patents are already on the table.

For years, key industry players have proposed a solution to the SEP problem, which involved hours, days, weeks, months of discussing, supporting and criticising. Another round in which the industry in particular presents its arguments is not needed. It has had its chance. Now the politicians must talk to myriad independent experts in Europe: at the EPO, at the UPC, and in academia.

“Now it is up to the EU politicians to find a solution”

In the EU Council’s upcoming negotiations, EU member states’ politicians must find a solution that serves to balance all interests. After all, if it is ultimately about answering the simple question of what is FRAND, then the solution must also be simple.

Above all, however, it must be fair. Fairness is the spirit of FRAND. Under no circumstances should the EU create a regulatory monster.