01 May 2023

European Commission has published new EU SEP regulation, promising a boost in innovation and investment

The European Commission published their proposals for new regulations on standards essential patents (SEPs), compulsory licensing of patents in crisis situations, and revised legislation on supplementary protection certificates (SPCs). These proposals, implemented by the European Commission, will only directly affect the European Union (EU) and not the UK.

Proposed regulations on standards essential patents

Of all of these proposals, the proposed new regulation on SEPs is perhaps the most contentious, having been leaked on 24 March 2023. This was commented on widely in the press and among the global patent community, including in a letter by the European Telecommunications Standards Institute (ETSI), a post by IP Europe, and a post on LinkedIn by Fabian Gonell, Chief Licensing Lawyer at Qualcomm, who went so far as to say that the “draft regulation would upend patent rights in Europe and have a host of unintended consequences.” By contrast, Apple (an implementer) has been very active in lobbying for the current version of the draft regulation. Commentators have noted that is because the draft regulation would be pro-licensee and anti-patentee, and might well encourage ‘hold-out’ behaviour where an unwilling licensee could delay enforcement.

The proposals include assigning to the EU Intellectual Property Office (EUIPO), which currently administers community trade marks and community designs but does not yet have any patent expertise, the task of building an SEP register and a procedure for determining FRAND rates for SEPs. This also includes the option for regular checks (instigated by either implementer or SEP owner) to determine whether a sample of up to 100 patents are indeed essential – although the results of this are not legally binding. However, ETSI noted in their letter that they already maintain their own database of essentiality declarations and also technical specifications. The proposed regulations also impose an obligation on bodies such as ETSI to provide certain information to EUIPO which would place a significant burden on them, in particular relating to known implementations of the standard, which ETSI have said even they do not have the tools or resources to comply with.

With regards to determining FRAND rates for SEPs, this can be initiated upon request by an implementer or SEP owner and is to be completed within nine months and facilitated by ‘conciliators’ which shall be chosen by the parties from a group proposed by the EUIPO. However, commentators have questioned whether any imposed FRAND rate determination by two ‘conciliators’ (and without appeals available) at the EUIPO, an institution that until now has never dealt with patents before, resulting in a non-binding result in a very short timeframe, would work in practice, as it will unlikely be respected in the market.

IP Europe noted that the proposed new regulation is damaging for:

  1. departing radically from existing precedent, without sufficient data; 
  2. turning over management of SEPs to an agency with no previous experience with patents or standards; 
  3. creating an unpredictable and unbalanced system which will further delay licence negotiations and royalty payments, potentially for many years;
  4. ignoring the EU’s commitments under the World Trade Organisation’s TRIPS Agreement and TBT Agreement, and the EU’s Charter of Fundamental Rights to defend patent rights; and
  5. imposing an artificial and premature cap on aggregate royalties for implementations of a standard with a process that is open to misuse.

Compulsory licensing

The Commission notes that the new rules foresee a new EU-wide compulsory licensing instrument that would complement EU crisis instruments, such as the Single Market Emergency Instrument, HERA regulations and the Chips Act. The Commission states that in light of the COVID-19 crisis, these new rules would further enhance the EU’s resilience to crises, by ensuring access to key patented products and technologies, should voluntary agreements not be available or adequate.

Supplementary protection certificates

The proposal also introduces a unitary SPC to complement the Unitary Patent, along with a centralised examination procedure to be implemented by the EUIPO.

2023 EU SME fund

Concurrently with the proposal, the 2023 SME fund was also announced making vouchers available for SMEs to save up to €1,500 on their patent registration costs.

The European Commission’s proposals for new regulations on SEPs, compulsory licensing of patents in crisis situations, and revised legislation on SPCs have stirred up a lot of debate and commentary within the global patent community. While some, such as Apple, have actively lobbied for the proposed changes, others have expressed concerns about the potential unintended consequences of the regulations, particularly the new regulation on SEPs.

Nevertheless, the Commission argues that these new rules would boost innovation and investment within the EU, enhance the region’s resilience to crises, and support SMEs through the 2023 SME fund. It remains to be seen how these proposed regulations will be received and implemented within the EU and beyond.