Europe floats patent overhaul, which obviously everyone's thrilled about

Industry groups and biz aren't yet sold on reforms

The European Commission late last week proposed rules governing patents on technical standards, ostensibly to ensure innovation, competition, and fair prices.

The legislative proposal covers standard essential patents (SEPs), meaning patents that protect technology relevant to common standards, like 5G telephony, Wi-Fi, and Bluetooth, as well as video and audio codecs, photo formats like JPEG, and so on. Organizations that have been granted exclusive control over essential technologies through a patent are generally obligated to offer licenses on fair, reasonable and non-discriminatory (FRAND) terms.

More than a decade ago, European countries agreed on a unitary patent system to make patent protection consistent across EU member states. That system is scheduled to take effect on June 1, 2023, and the latest SEP legislative proposal is intended to complement the latest rules.

The stated goal of the proposal is ensure: that EU owners of SEPs and implementers of that technology continue to innovate, manufacture, and sell products in the EU that are competitive on the global market; and that end users of said technology benefit from getting these products at a reasonable price.

"IP stands for Europe's Industrial Power," said Thierry Breton, Commissioner for Internal Market, in a statement that misidentifies what IP actually stands for to emphasize the value of intellectual property.

"With patented technologies, Europe's industries are at the forefront of innovation, from automotive to IoT. Today, we are modernizing our framework for standard-essential patents, making it more transparent, SME-friendly and ready for the economy of tomorrow."

The proposed SEP licensing framework aims to provide more clarity about who owns SEPs and which are actually essential, and about FRAND royalties and other terms and conditions. It also aims to make SEP dispute resolution easier and less costly.

Er, hang on a minute

But at this stage, the would-be legislation has not been well-received.

The App Association, funded largely by Apple, in a statement on Thursday said that the removal of a passage from the proposal – stating that a FRAND patent owner cannot refuse a license to an implementer who agrees to the terms – risks undermining the entire concept of FRAND.

About a week ago, Fabian Gonell, chief licensing lawyer at Qualcomm, published a post on LinkedIn arguing that the EU proposal would penalize patent holders making infringement claims outside of Europe by limiting access to EU courts, a practice similar to China's rules that the Commission has challenged.

IP Europe, a lobbying group supported by telecom companies like Ericsson, Nokia, Orange, and Qualcomm, along with groups like Dolby and research org Fraunhofer, voiced broader concerns about the "harmful and unbalanced" proposal.

The group took issue with a long list of complaints: departing from existing precedent without supporting data; turning over management of SEPs to an agency with no experience in patents or standards; "creating an unpredictable and unbalanced system" that would delay negotiations and royalty payments; ignoring prior EU commitments to intellectual property rights; and capping aggregate royalties.

The Fair Standards Alliance, a similar lobbying group representing more than 50 European and other companies, also challenged the current draft of the rules.

The SEP proposal still has to be discussed and agreed upon by the European Parliament and the Council of the European Union before it can be officially adopted. Those conversations can be expected to bring further changes to the specific rules under consideration. ®

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