What changed

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

SHORT JUSTIFICATION

on the proposal for a regulation of the European Parliament and of the Council on standard essential patents and amending Regulation (EU) 2017/1001

IMCO fully supports the objective of the draft proposal to improve the licensing of standard essential patents (SEPs). Such improvement aligns with our European goals of fostering innovation, enhancing the digital transition, and ensuring that Europe is a frontrunner in new technologies, thereby encouraging the voluntary participation of European businesses in the European standardization process and ensuring the broadest possible implementation of standardized technologies.

(COM(2023)0232 – C90147/2023 – 2023/0133(COD))

SEPs play a pivotal role in the broader objectives of achieving a seamless single market and ensuring Europe's global competitiveness. Their central role in promoting technological innovation aligns with the emphasis on socio-economic recovery and encourages businesses to invest in the research and development of new technologies, which benefits our entire economy. At the same time we should ensure that SMEs, crucial for the Single Market, aren't left behind in the technological race, that access to these technologies remains fair, and that patent holders do not abuse their power to hinder competition.

(Ordinary legislative procedure: first reading)

Given this broader context, which underscores the importance of integrating technology, innovation, and fair competition within the European -technological landscape, it is clear that standard essential patents (SEPs) are vital in achieving these goals. The proposal's overarching objective, which is to streamline and improve the licensing of SEPs, is certainly commendable in light of these ambitions. It aligns with the larger vision of fostering a more cohesive, innovative, and competitive European Union. However, while its intentions are in the right direction, specific areas within the proposal need closer examination.

The European Parliament,

First, the scope of the Regulation should include all SEPs, present and future. Without such inclusivity, the benefits of transparency and reduced litigation will not be fully realized. They will continue to be subject to the issues this regulation seeks to address, including protracted litigation over the appropriate FRAND values for these SEPs. It is, therefore, imperative to extend the scope of application to all SEPs.

– having regard to the Commission proposal to Parliament and the Council (COM(2023)0232),

Existing SEPs should be allowed to be registered to ensure that legacy technologies remain both accessible and competitive. The current agreement should still be enforceable even if an existing SEP isn't registered. It's only upon submission to the register that all related rules should apply. Consequently, Article 24 of the proposal should be revised to eliminate penalties associated with non-registration of these SEPs.

– having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90147/2023),

Second, the processes for checking whether a patent is “essential” and determining FRAND should be improved. With the diverse importance of each SEP category in mind, we need a more comprehensive and discerning approach to inspections. Specifically, the current restriction that limits random checks to just one patent in each category should be revised. Such a limitation might overlook incorrectly registered patents. It's crucial to recognize that not all categories or SEP types carry equal weight, and their total counts can vary significantly.

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

Furthermore, both SEP holders and implementers should be able to request checks and determinations, and they should be able to do so with a lower threshold, particularly for SME implementers.

– having regard to the opinion of the European Economic and Social Committee of 20 September 2023,

In keeping our commitment to transparency and inclusivity, the SEP information database must be accessible to all without charge. While it's understandable to impose fees for specialized checks—like determining a patent's essentiality or FRAND value—the overarching costs for the database's upkeep should fall to the EUIPO. This ensures that a diverse group, from researchers to the general public, can access the information without bearing the financial burden.

– having regard to Rule 59 of its Rules of Procedure,

Lastly, the draft opinion introduces technical corrections and clarifications to the proposal. In addition to correcting the terminology, this involves clarifying that mechanisms to determine a SEP's FRAND value and essentiality are separate from the standardization process itself.

– having regard to the opinions of the Committee on International Trade and the Committee on the Internal Market and Consumer Protection,

AMENDMENTS

– having regard to the report of the Committee on Legal Affairs (A90000/2023),

The Committee on the Internal Market and Consumer Protection calls on the Committee on Legal Affairs, as the committee responsible, to take the following into account:

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Amendment 1

Proposal for a regulation

Recital 23

Or. en

Justification

1.ESOs examine standards development participants, patented knowledge and modify projects if essential patents exist. They only cite relevant patents if licenses are granted and independently verify the patented technology - 2. FRAND is defined in recital (2) - 3. Pre-existing standards that have encountered licensing issues should fall within the scope of application of the SEP regulation - 4. Clarification - The FRAND commitment does not cease to apply in the event of a change of owner of the SEPs.

Amendment 2

Proposal for a regulation

Recital 2 a (new)

Recital 4

Or. en

Justification

1. The reference to “standards for wireless communications” may imply that standards such as Wi-Fi, HEVC, and LTE (4G, 5G etc.) fall outside the scope of the SEP Regulation. Removing this reference in its entirety avoids any confusion - 2. Deletion of the recital is consistent to the deletion of Art. 1(3) and (4).

Amendment 3

Proposal for a regulation

Recital 35

Or. en

Justification

1. The regulation, and the impact assessment, lack a definition of a "use case", we suggest to delete to avoid any confusion - 2. Deleting Article 66, and its references through the text, could promote innovation and economic resilience - 3. Older versions of standards may be included, supplementing the Huawei versus ZTE process and having no impact on licenses already in force - 4. Temporary exclusion of exclusive rights may be limited. Exceptions to the exclusive rights of SEP holders would therefore be consistent with Articles 7 and 8 of the TRIPS Agreement.

Amendment 4

Proposal for a regulation

Recital 413

Or. en

Justification

SMEs are the backbone of Europe's economy and are therefore central to the EU’s twin transitions. They are essential to Europe’s competitiveness and prosperity, industrial ecosystems, economic and technological sovereignty, and resilience to external shocks.

Amendment 5

Proposal for a regulation

Recital 10 a (new)

Recital 16

Or. en

Justification

1. Technical clarification - 2. No definition of a “use case” in the Regulation and in the impact assessment. It would be more appropriate to refer to “standards”.

Amendment 6

Proposal for a regulation

Recital 10 b (new)

Recital 24

Or. en

Justification

It is not clear how the Competence Centre shall select the one patent among others in the same family. The limitation to one patent per family may limit transparency. In reality, not necessarily all patents are standard-essential merely because they belong to the same patent family of the sampled SEP and, conversely, not all of them are non-essential in case the selected SEP fails the essentiality check.

Amendment 7

Proposal for a regulation

Recital 1226

Or. en

Justification

Same justification as recital 24.

Amendment 8

Proposal for a regulation

Recital 1333

Or. en

Justification

For the sake of clarity, this recital has been amended and split into three different recitals.

1. Same justification regarding "use cases" - 2. This procedural step will significantly reduce lengthy and costly disputes and will have a significant positive impact for suppliers. Furthermore, the concept of a mandatory conciliation attempt before initiating litigation is well known and has never been considered unconstitutional or contrary to European law.

Amendment 9

Proposal for a regulation

Recital 13 a (new)

Recital 34

Or. en

Justification

The Draft Regulation provides little guidance on what “committing to comply” with the outcome of FRAND determinations means and what legal effects such commitment will have. The obligation to initiate FRAND determinations should not be detrimental to the effective protection of the parties’ rights.

Amendment 10

Proposal for a regulation

Recital 13 b (new)

Recital 35

Or. en

Justification

1. Same comment as above - 2. This Regulation seeks to enable parties to resolve issues arising in SEP disputes without the threat and expense of litigation impacting the negotiation dynamic. This provision introduces terminology that is not used in many member states and creates legal uncertainty as a result.

Amendment 11

Proposal for a regulation

Recital 1547

Or. en

Justification

Same justification about “use cases”.

Amendment 12

Proposal for a regulation

Recital 16

Article 1 – paragraph 2 – introductory part

Or. en

Justification

For the sake of clarity this recital has been amended and split into two.

Technical clarifications.

Amendment 13

Proposal for a regulation

Recital 16 a (new)

Article 1 – paragraph 2 – point a

Or. en

Justification

The current restriction may make it easier for SEP owners to obtain injunctions and distort the balanced negotiation process. By removing Article 66 and amending Articles 1, paragraphs 3 and 4, the Regulation would promote innovation and the economic resilience of the internal market.

Amendment 14

Proposal for a regulation

Recital 27

Article 1 – paragraph 2 – point b

Or. en

Justification

Same justification as above.

Amendment 15

Proposal for a regulation

Recital 29

Article 1 – paragraph 3

Or. en

Justification

There is a significant risk that this provision will render the regulation ineffective. The limited scope of the regulation could favor certain SEP owners. By amending, it would promote innovation and the economic resilience of the internal market.

Amendment 16

Proposal for a regulation

Recital 32

Article 1 – paragraph 4

Or. en

Justification

Same justification as above.

Amendment 17

Proposal for a regulation

Recital 34

Article 2 – paragraph 1 – point 1

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

The essential character of a patent is difficult to predict ex ante. Essentiality can be confirmed or contested, depending on how the standard is applied and the ingenuity of the users. With respect to SDOs, any patent mentioned in a standard may or may not be an SEP. It is therefore appropriate to shed light on the fact that another party - a third party - took responsibility for observing this relationship.

Amendment 18

Proposal for a regulation

Recital 35

Article 2 – paragraph 1 – point 2

Or. en

Justification

Same as above.

Amendment 19

Proposal for a regulation

Recital 43

Article 2 – paragraph 1 – point 3

Or. en

Justification

Technical clarification as standardization organizations never have the power to make their deliverables compulsory, because this power belongs to the public authority. A public authority can make a standard compulsory.

Amendment 20

Proposal for a regulation

Recital 45 a (new)

Article 3 – paragraph 2 – point h

Or. en

Justification

SMEs are the backbone of Europe's economy and are therefore central to the EU’s twin transitions to a sustainable and digital economy. They are essential to Europe’s competitiveness and prosperity, industrial ecosystems, economic and technological sovereignty, and resilience to external shocks.

Amendment 21

Proposal for a regulation

Recital 46

Article 5 – paragraph 2 – introductory part

Or. en

Justification

1. Consistent with the deletion of 5(4).

Amendment 22

Proposal for a regulation

Recital 46 a (new)

Article 5 – paragraph 3

Or. en

Proposal for a regulation

Article 15 – paragraph 2 – introductory part4

Or. en

Proposal for a regulation

Article 17 – paragraph 31 – introductory part

Or. en

Justification

Proposal to make the wording consistent with art. 14 and to clarify that it is applicable not to all SEPs, but to those for which FRAND commitments have been made.

Amendment 25

Proposal for a regulation

Article 17 – paragraph 41 – point a

Or. en

Justification

Text from Article 66 (4) has been moved to Article 1, since it deals with the scope of application of this Regulation.

This gives more clarity regarding the deadline.

Amendment 26

Proposal for a regulation

Article 27 – paragraph 1 – point 1b

Or. en

Justification

The regulation provides for a procedure for registering SEPs and not standards. The standards are notified in accordance with art. 14.

Amendment 27

Proposal for a regulation

Article 28 – paragraph 1 – pointintroductory 3part

Or. en

Justification

Proposal to make the wording consistent with art. 14 and to clarify that it is applicable not to all SEPs, but to those for which FRAND commitments have been made.

Amendment 28

Proposal for a regulation

Article 29 – paragraph 1 – point 5 a (new)g

Or. en

Justification

According to article 2 (11), the patent pool is the entity. Therefore, it is redundant.

Amendment 29

Proposal for a regulation

Article 29 – paragraph 1 – point 6h

Or. en

Justification

Strengthen the disclosure requirement by including more useful details.

Amendment 30

Proposal for a regulation

Article 212 – paragraph 1 – point 7 a (new)2

Or. en

Justification

The terms "significant difficulties or inefficiencies" have to be defined since they are decisive for the scope of application in accordance with Article 1 (3) and (4).

Pre-verifying information could help to avoid overloading the database with unnecessary or obsolete information.

Amendment 31

Proposal for a regulation

Article 214 – paragraph 1 – pointintroductory 10part

Or. en

Justification

1. Technical clarification - 2. SDOs should be strictly outside of any discussion of the validity of patent claims or the valuation of licenses.

Amendment 32

Proposal for a regulation

Article 214 – paragraph 1 – point 104 a (new)

Or. en

Justification

This would allow pre-existing standards to be notified on a voluntary basis.

Amendment 33

Proposal for a regulation

Article 214 – paragraph 1 – point 115

Or. en

Justification

Some patent pools are not created by SEP holders but by a third party, those patent pools also have to be covered by this legislation.

SDOs should be strictly outside of any discussion of the validity of patent claims or the valuation of licenses.

Amendment 34

Proposal for a regulation

Article 214 – paragraph 1 – point 136

Or. en

Proposal for a regulation

Article 217 – paragraph 1 – point 16

Or. en

Justification

By removing this reference, we gain flexibility.

Amendment 36

Proposal for a regulation

Article 217 – paragraph 1 – point 172 a (new)

Or. en

Justification

Addition of a provision on existing patents – without it, due to the deadline in paragraph 2, the article in practice would not apply to existing standards.

Amendment 37

Proposal for a regulation

Article 217 – paragraph 1 – point 17 b (new)7

Or. en

Justification

Clarification - The purpose of the process is to mediate the discussions for a joint submission of an aggregate royalty (paragraph 1).

Amendment 38

Proposal for a regulation

Article 217 – paragraph 1 – point 17 c (new)8

Or. en

Justification

Clarification

Amendment 39

Proposal for a regulation

Article 218 – paragraph 1 – point 18 a (new)

Or. en

Justification

No definition of "global" aggregate royalty. The addition ensures that the process for aggregate royalty determinations remains balanced, practicable and efficient. There should be sufficient safeguards that the process will yield an outcome and cannot be obstructed by any party.

Amendment 40

Proposal for a regulation

Article 318 – paragraph 2 – pointintroductory apart

Or. en

Justification

Technical clarification. There should be no time limit for seeking expert advice for SEP implementers, given that no material information is available to implementers within a timely manner of 150 days.

Amendment 41

Proposal for a regulation

Article 318 – paragraph 2 – pointa b(new)

Or. en

Justification

Addition of a provision on existing patents – without it, due to the deadline in paragraph 2, the article in practice would not apply to existing standards.

Amendment 42

Proposal for a regulation

Article 318 – paragraph 2 – point c4

Or. en

Justification

SDOs should be strictly outside of any discussion of the validity of patent claims or the valuation of licenses.

Amendment 43

Proposal for a regulation

Article 318 – paragraph 2 – point d5

Or. en

Justification

This ensures that current and future users of the standard can participate in the process, as the interests of those seeking to integrate the standard into their products or services are just as important as those currently doing so.

Amendment 44

Proposal for a regulation

Article 318 – paragraph 2 – point f6

Or. en

Justification

A small number of SEP implementers is easier to calculate and provides legal certainty. A smaller number of companies is also preferable for the same reason. The sole request from the SEP implementers must be sufficient to appoint a conciliation commission.

Amendment 45

Proposal for a regulation

Article 318 – paragraph 2 – point g8 – pointintroductory ipart

Or. en

Justification

The process for determining aggregate royalties will be more informative if it leverages input from diverse stakeholders, including SEP holders, as well as implementers and participating entities outside the process who may have valuable information to offer.

Amendment 46

Proposal for a regulation

Article 319 – paragraph 2 – point g1 – point iia

Or. en

Justification

As standards are published by ESOs, it is better to refer just to the information in Art. 14(7)

Amendment 47

Proposal for a regulation

Article 319 – paragraph 2 – point g – point iii

Or. en

Justification

SDOs should be strictly outside of any discussion of the validity of patent claims or the valuation of licenses.

Amendment 48

Proposal for a regulation

Article 320 – paragraph 2 – point g – point iv1

Or. en

Justification

Changes in line with the definition in Art. 2(1) and with Art. 1(2)

Amendment 49

Proposal for a regulation

Article 322 – paragraph 2 – point h1

Or. en

Justification

Clarification - According to Art. 22 (2), the EUIPO is the one which carries out the annual inspection.

Amendment 50

Proposal for a regulation

Article 424 – paragraph 12 a (new)

Or. en

Justification

Addition to address the issue of retroactivity. Paragraphs (1) and (2) will be applicable to existing standards only if implementers notify them according to art. 14(4)

Amendment 51

Proposal for a regulation

Article 428 – paragraph 2

Or. en

Justification

Content included in Art. 4 (1).

Evaluating the essential nature of a patent for the implementation of a standard can only be possible ex post, with full knowledge of market dynamics. This cannot be done ex ante because the potential interrelation and reciprocal impact of documents are inherently difficult to assess.

Amendment 52

Proposal for a regulation

Article 428 – paragraph 3 – point f

Or. en

Justification

It is not clear how the Competence Centre shall select the one patent among others in the same family. The limitation to one patent per family may limit transparency. In reality, not necessarily all patents are standard-essential merely because they belong to the same patent family of the sampled SEP and, conversely, not all of them are non-essential in case the selected SEP fails the essentiality check.

Amendment 53

Proposal for a regulation

Article 429 – paragraph 3 – point h2

Or. en

Justification

It seems doubtful that a violation analysis could be carried out on the basis of such a table. The proposed approach does not take due account of difficult issues regarding the correct interpretation of claims, in particular the lack of harmonized standards of claim interpretation between different European jurisdictions.

Amendment 54

Proposal for a regulation

Article 433 – paragraph 3 – point i1

Or. en

Justification

It is not clear how the Competence Centre shall select the one patent among others in the same family and this limitation may limit transparency. In reality, not necessarily all patents are standard-essential merely because they belong to the same patent family of the sampled SEP and, conversely, not all of them are non-essential in case the selected SEP fails the essentiality check.

Amendment 55

Proposal for a regulation

Article 434 – paragraph 31 – pointintroductory jpart

Or. en

Justification

Technical clarification.

Amendment 56

Proposal for a regulation

Article 437 – paragraph 4 – point d1

Or. en

Justification

Wrong reference. Changing it makes it consistent.

Amendment 57

Proposal for a regulation

Article 538 – paragraph 12

Or. en

Justification

The Draft Regulation provides little guidance on what “committing to comply” with the outcome of FRAND determinations means and what legal effects such commitment will have. The obligation to initiate FRAND determinations should not be detrimental to the effective protection of the parties’ rights.

Amendment 58

Proposal for a regulation

Article 538 – paragraph 23 – pointintroductory bpart

Or. en

Justification

Same as above.

Amendment 59

Proposal for a regulation

Article 538 – paragraph 23 – point ca

Or. en

Justification

Same as above.

Amendment 60

Proposal for a regulation

Article 538 – paragraph 23 – point db

Or. en

Justification

Same as above.

Amendment 61

Proposal for a regulation

Article 538 – paragraph 34 – introductory part

Or. en

Justification

Same as above.

Amendment 62

Proposal for a regulation

Article 538 – paragraph 4 – point a

Or. en

Justification

Same as above.

Amendment 63

Proposal for a regulation

Article 638 – paragraph 14 – point b

Or. en

Justification

Same as above.

Amendment 64

Proposal for a regulation

Article 8 – title

Article 38 – paragraph 4 – point c

Or. en

Justification

Technical clarification.

Amendment 65

Proposal for a regulation

Article 838 – paragraph 1 –4 pointa b(new)

Or. en

Justification

The Draft Regulation provides little guidance on what “committing to comply” with the outcome of FRAND determinations means and what legal effects such commitment will have. The obligation to initiate FRAND determinations should not be detrimental to the effective protection of the parties’ rights.

Amendment 66

Proposal for a regulation

Article 938 – paragraph 1 – introductory part5

Or. en

Justification

Clarification to be consistent with all of Article 38.

Amendment 67

Proposal for a regulation

Article 939 – paragraph 1 – point g

Or. en

Justification

The entity is already covered by the new definition of patent pools in Art. 2.

Wrong reference.

Amendment 68

Proposal for a regulation

Article 947 – paragraph 1 – point h2

Or. en

Amendment 69

Proposal for a regulation

Article 9 – paragraph 1 – point i

Or. en

Amendment 70

Proposal for a regulation

Article 9 – paragraph 1 – point k

Or. en

Amendment 71

Proposal for a regulation

Article 9 – paragraph 1 a (new)

Or. en

Amendment 72

Proposal for a regulation

Article 9 – paragraph 1 b (new)

Or. en

Amendment 73

Proposal for a regulation

Article 10 – paragraph 1 – point b

Or. en

Amendment 74

Proposal for a regulation

Article 12 – paragraph 2

Or. en

Amendment 75

Proposal for a regulation

Article 13 – paragraph 2 – point d a (new)

Or. en

Amendment 76

Proposal for a regulation

Article 14 – paragraph 1 – introductory part

Or. en

Amendment 77

Proposal for a regulation

Article 14 – paragraph 5

Or. en

Amendment 78

Proposal for a regulation

Article 15 – paragraph 1

Or. en

Amendment 79

Proposal for a regulation

Article 17 – title

Or. en

Amendment 80

Proposal for a regulation

Article 17 – paragraph 3 – point e

Or. en

Amendment 81

Proposal for a regulation

Article 18 – title

Or. en

Amendment 82

Proposal for a regulation

Article 18 – paragraph 4

Or. en

Amendment 83

Proposal for a regulation

Article 18 – paragraph 8 a (new)

Or. en

Amendment 84

Proposal for a regulation

Article 18 – paragraph 9 – introductory part

Or. en

Amendment 85

Proposal for a regulation

Article 18 – paragraph 9 – point a

Or. en

Amendment 86

Proposal for a regulation

Article 18 – paragraph 11

Or. en

Amendment 87

Proposal for a regulation

Article 20 – paragraph 5

Or. en

Justification

SEP holders update the technical specifications according to Article 4 paragraph 3 (c) very often. They should not be faced with additional administrative burden if there is no added value for transparency.

Amendment 88

Proposal for a regulation

Article 23 – paragraph 3

Or. en

Amendment 89

Proposal for a regulation

Article 23 – paragraph 4 – introductory part

Or. en

Amendment 90

Proposal for a regulation

Article 23 – paragraph 8

Or. en

Amendment 91

Proposal for a regulation

Article 26 – paragraph 3

Or. en

Amendment 92

Proposal for a regulation

Article 27 – paragraph 2

Or. en

Amendment 93

Proposal for a regulation

Article 29 – paragraph 1

Or. en

Justification

This addition is necessary in order to make sure shell companies and patent assertion entities cannot benefit from this exclusion.

Amendment 94

Proposal for a regulation

Article 29 – paragraph 4

Or. en

Amendment 95

Proposal for a regulation

Article 29 – paragraph 4 a (new)

Or. en

Amendment 96

Proposal for a regulation

Article 38 – paragraph 2

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

Amendment 97

Proposal for a regulation

Article 38 – paragraph 3 – introductory part

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

Amendment 98

Proposal for a regulation

Article 38 – paragraph 3 – point a

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

Amendment 99

Proposal for a regulation

Article 38 – paragraph 3 – point b

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

The FRAND determination process must remain practicable, effective and cannot be hindered. The article as it stands could allow proceedings conducted in third countries to torpedo FRAND determinations in the EU.

Amendment 10069

Proposal for a regulation

Article 3856 – paragraph 41 – introductory part

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

Addition for clarification.

Amendment 10170

Proposal for a regulation

Article 3862 – paragraph 4 – point3 a (new)

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

Benefits granted to SMEs will not be opened in case of circumvention or misuse. For example, most Non-Practicing Entities are considered SMEs, but should clearly not benefit from any exemption under the draft regulation.

Amendment 10271

Proposal for a regulation

Article 3863 – paragraph 43 – point b

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

These factors are more relevant for determining the apportionment of the fees than the sole size of these companies.

Amendment 10372

Proposal for a regulation

Article 38 – paragraph 5

Article 66

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

By deleting article 66, it would promote innovation and the economic resilience of the internal market.

Amendment 10473

Proposal for a regulation

Article 44 – paragraph 3

Or. en

Amendment 105

Proposal for a regulation

Article 46 – paragraph 1 – point a

Or. en

Amendment 106

Proposal for a regulation

Article 4667 – paragraph 1 – point b2

Or. en

Justification

The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

Deletion in accordance with the deletion of Articles 1(4) and 66.

Amendment 10774

Proposal for a regulation

Article 47 – paragraph 2

Or. en

Amendment 108

Proposal for a regulation

Article 48 – paragraph 2

Or. en

Amendment 109

Proposal for a regulation

Article 56 – paragraph 4

Or. en

Amendment 110

Proposal for a regulation

Article 61 – title

Or. en

Amendment 111

Proposal for a regulation

Article 61 – paragraph 1

Or. en

Amendment 112

Proposal for a regulation

Article 6167 – paragraph 3 a (new)

Or. en

Justification

This addition is necessary in order to exclude shell companies and patent assertion entities from benefitting from the MSMEs provisions.

Same as above.

Amendment 11375

Proposal for a regulation

Article 63 – paragraph 4

Or. en

Amendment 114

Proposal for a regulation

Article 66 – paragraph 1

Or. en

Amendment 115

Proposal for a regulation

Article 6667 – paragraph 46

Or. en

Justification

The text has been moved to Article 1 (5).

Same as above.

Amendment 116

Proposal for a regulation

Article 70 – paragraph 1 a (new)

Or. en

Amendment 117

Proposal for a regulation

Article 70 – paragraph 3

Or. en

Amendment 118

Proposal for a regulation

Article 70 – paragraph 4

Or. en

EXPLANATORY STATEMENT

A Standard Essential Patent (SEP) is a patent protecting a technology that has been declared essential for the implementation of a technical standard adopted by a standardisation body The interplay between patents and standards is important for innovation and growth, as these patents incentivise research and development and enable an adequate return on investment for innovative companies. Standards ensure a broad uptake of interoperable and secure technologies among businesses and consumers. Worldwide, there are around 75 000 SEPs, but these only represent a small share of patents as a whole. Essential technology standards such as 5G and Wi-Fi, photo formats (JPEG), standards for audio and video compression and decompression (e.g. MPEG, HEVC) and more are covered by such patents. SEPS play a crucial role in developments such as the Internet of Things, Industry 4.0, connected vehicles, smart cities and climate change mitigation technologies. The number of SEPs has increased sixfold over the last ten years, which is good news, given that the protection of SEPs is key to enabling innovation that helps the EU to become more sustainable and more digital.

As early as November 2021, in its resolution on an intellectual property action plan to support the EU’s recovery and resilience (EP resolution on the intellectual property action plan), the European Parliament called for a European Commission proposal on SEPs, as SEPs are often the subject of litigation. The lack of transparency and legal certainty was identified as an issue. The licensing of SEPs is often a lengthy and costly exercise for both patent holders and technology implementers.

Ordinary patent holders are free to decide to whom they wish to grant a licence to exploit their innovation. However, SEP holders do not have this complete freedom, as the inclusion of their patented technology in a standard gives them some degree of market power. Therefore, SEP holders are obliged to grant their licences on fair, reasonable and non-discriminatory (FRAND) terms. These FRAND terms have led to a large number of problems, which have also been the subject of court proceedings.

On the one hand, it is near impossible for implementers to find out whether a standard is indeed essential, how many SEPs relate to a given standard, who the corresponding SEP holders are and what the ultimate costs to achieve market entry using the relevant standard will be. Around 84% of SEP implementers are SMEs. For them in particular, the mere threat of a provisional injunction leading to a suspension of production of allegedly infringing products and the probability of legal proceedings may create pressure to agree to a licence at rates that may not be FRAND.

On the other hand, the SEP holder cannot enforce his legitimate interests while the implementer insists on having a licence issued on FRAND terms, with the intention of putting off the obligation to pay royalties for as long as possible. As a result, SEP holders also face lengthy and costly court proceedings, with royalties only being paid at the end of this prolonged procedure.

In order to provide a better factual basis for preventing, resolving and deciding on conflicts relating to FRAND terms, on 27 April 2023, the European Commission submitted a proposal with the following new measures:

1. the establishment of an SEP register and a central electronic database for SEPs;

2. SEP essentiality checks;

3. non-binding determination of the aggregate royalty for a standard;

4. the establishment of a time-limited out-of-court dispute resolution mechanism under expert guidance that can be used by SEP holders and implementers when negotiating a FRAND licence.

In general, the rapporteur supports the Commission’s initiative and the proposed measures, as the Commission has acted in accordance with the EP resolution on the intellectual property action plan.

The rapporteur stresses the importance of increasing the proposal’s legal clarity and bridging the interests of SEP holders and implementers. Both actors play a huge role in the European economy and their interests must therefore be taken into account in the context of a well-balanced legislative act. The proposal must increase the transparency of SEPs in order to compensate for the knowledge advantage of SEP holders, yet without limiting their global competitiveness.

More legal clarity

Knowing which use cases of standards fall under the new legislation is massively important for legal clarity. While the rapporteur agrees that the Commission should address this issue through delegated acts, she believes it is crucial that certain criteria be established already now. For this reason, the rapporteur has proposed amendments to this effect, including a definition of ‘significant difficulties or inefficiencies’.

The rapporteur has also incorporated new definitions which make the text easier to understand.

Creation of a competence centre within the EUIPO and registration

The rapporteur considers that establishing a competence centre at the EUIPO is a sensible proposal, given that the European executive agency has a lot of experience in maintaining databases. It is important that this agency is equipped with sufficient staff and funds to carry out the new task efficiently.

Furthermore, the rapporteur notes the importance of clarifying the difference between the register and the database, of ensuring the accuracy of the register and of preventing potential red tape for SEP holders.

Patent Pools

The rapporteur is in favour of patent pools. If managed in a transparent manner, they provide great added value for SEP holders and implementers. It should however be ensured that this transparency is actually reflected in the information provided, including on the website. To support this, the rapporteur has put forward proposals to that effect.

Essentiality checks

In the EP resolution on an intellectual property action plan, the EP called for an independent, neutral and transparent system for third party essentiality checks. The rapporteur welcomes the fact that the European Commission has taken this on board and proposed a system for assessing the essentiality of patents.

It should be noted that evaluators and conciliators in the FRAND determination procedure should possess the necessary and highly specialised expertise and experience while also being independent and impartial.

In addition, evaluators should also be able to review prior essentiality checks if they have doubts as to their accuracy.

Determination of aggregate royalty

The non-binding determination of the aggregate royalty will help stakeholders to set efficient SEP rates.

The rapporteur believes that it should not be possible to unilaterally block this assessment and has therefore proposed amendments to this effect.

Time-limited out-of-court dispute resolution mechanism

In the EP resolution on an intellectual property action plan, the Commission was also asked to provide more clarity on various aspects of FRAND, and to consider possible incentives for more efficient SEP licensing negotiations and reducing litigation. It also took this request on board, proposing a non-binding dispute resolution system, which has the potential to eliminate strategic delays caused by market participants. The rapporteur welcomes the fact that, on the basis of a third party opinion, this market participant can be asked to provide a security in a very timely manner and realistic and effective in scale.

At the same time, the rapporteur believes that while proceedings are still ongoing, the parties should not yet be obliged to make a binding decision on whether or not they should comply with the outcome of the procedure. The parties should be able to make such a decision only after learning the outcome of the dispute resolution mechanism.

In addition, the rapporteur believes that parallel proceedings should only lead to the termination of the dispute resolution mechanism if the other party so wishes. This is to prevent the procedure from being stopped on account of legal action in a third country.

Micro and small and medium enterprises

In some future-oriented SEP sectors, such as the Internet of Things, 85% of companies are MSMEs. MSMEs usually have limited human and financial resources and therefore the rapporteur strengthens the Commission’s proposals in this regard. She proposes the establishment of a one-stop shop for MSMEs within the competence centre. MSMEs that are SEP implementers should be offered free information on what licences they need for their products or services and how to obtain them. MSMEs that are SEP holders should be offered free information on how to better identify potential licensees and how to effectively enforce their rights. However, this help should only benefit MSMEs whose business models are not solely based on asserting patents.

Assessment of the new instruments

These proposed instruments have the potential to make SEP licensing significantly more efficient. They can reduce inefficiencies and transaction costs in licensing, thereby facilitating licensing negotiations, speeding up their outcomes and reducing costly and laborious litigation procedures. This would make the EU single market a more attractive location for industry standard-setting innovation. However, as the proposed measures also have an impact at global level, the rapporteur believes that the impact on the competitiveness of European SEP holders at global level and on innovation in Europe should also be examined in more detail. If the outcome of this review indicates a negative impact, the Commission should propose appropriate amendments where necessary.

ANNEX: LIST OF ENTITIES OR PERSONS FROM WHOM THE RAPPORTEUR HAS RECEIVED INPUT

IP Europe

InterDigital

Fraunhofer Institut

European Association of Automotive Suppliers (CLEPA)

Philipps

Nokia

Ericsson

ACT The App Association

Qualcomm

Xiami

Volkswagen/ Audi

European Commission DG Grow

Tholos Foundation

Public Interest Patent Law Institute

OpenForum Europe

Fair Standards Alliance

European Patent Office

European Automobile Manufacturers´Association (ACEA)

BMW

CEN CENELEC Business Europe Eurocommerce

Marconi (Avanci platform)

Permanent Representation of Germany

Permanent Representation of Spain

Verband Deutsche Automobilhersteller (VDA)

Continental

CISCO

4IPCouncil

Ingenico

European association of smart energy solution providers (ESMIG)

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