Home News Standard essential patents (SEPs) in the new Unitary Patent system 

Standard essential patents (SEPs) in the new Unitary Patent system 

July 20, 2023

The Unitary Patent system, which entered into force on 1 June 2023, will probably improve its legal framework by taking into account the new rules on Standard Essential Patents (SEP) proposed by the European Commission on 27 April 2023. 

Standard Essential Patents (SEPs) refer to inventions that are necessary to implement a particular standard or technical specification. For example, 5G technology requires numerous patents to be implemented, and all of these patents are considered to be standard essential. As these patents underpin the operation of these technologies, they are crucial to the success of the industry. 

These rules aim to address the current issues surrounding SEPs and their impact on innovation, competition, and consumer welfare, as well as to enhance the transparency and predictability of standard-essential patents licensing. They have been designed to set clear guidelines for the negotiation and determination of fair, reasonable, and non-discriminatory (FRAND) terms and royalties. 

The Unitary Patent system will play a significant role in implementing these new rules, providing consistent and predictable outcomes for both patent holders and potential licensees

Standard essential patents and their new regulatory framework 

The new rules will require SEP holders to provide clear and transparent information on their patents, including their essentiality and scope of coverage. This will ensure that potential licensees are fully informed about the patent landscape and are able to negotiate licenses on fair and reasonable terms. 

In addition, the new rules will tackle both ‘hold-out’, i.e. delaying tactics of SEP implementers, and ‘hold-up’, i.e. the practice of standard essential patent holders of demanding excessive royalties when the product is already on the market and locked into the standard. This will encourage licensees to negotiate in good faith and facilitate the widespread adoption of new technologies

One of the key features of the new rules is the establishment of a framework for the negotiation of SEP licenses, ensuring that all parties have access to relevant information, including the patents subject to a license, their claimed scope of protection, and essentiality status. Furthermore, it obliges SEP holders to provide potential licensees with sufficient information to enable them to assess the essentiality of the patent and the scope of the required license. 

The new SEP regulations would be incorporated into the Unitary Patent system, adding to the already extensive set of regulations governing patents. As SEPs are often involved in critical sectors, such as telecommunications and healthcare, it is important that the Unitary Patent system has clear guidelines on how to handle disputes relating to their licensing. The incorporation of the new SEP rules will bring this clarity and consistency, making the Unitary Patent system more reliable and efficient

A Competence Centre as an administering body for SEPs 

The proposed licensing framework includes the establishment of a new ‘Competence Centre’ at the EUIPO (European Union Intellectual Property Office), which would provide free advice to SMEs on licensing negotiations, monitor the SEP market, conduct studies on SEP licensing and promote alternative dispute resolution. 

EUIPO was chosen to administer the elements of the proposal through the Competence Centre because, according to the Commission, “it has vast experience with the management of an IPR registration system and has the necessary technical expertise and capacity. Moreover, it has also experience in offering alternative dispute settlement processes.”  

Evaluation and essentiality of FRAND 

However, although it is stated that the actual aggregate royalty setting, essentiality assessment and FRAND determination won’t be carried out by the EUIPO but by selected external experts, it is reasonably questionable whether the EUIPO would be adequately resourced and prepared to deal with highly complex technical disputes, as the EUIPO is not involved in patent matters.  

The proposed licensing framework will have to follow the usual legislative procedure of  amendment and adoption by both the European Council and EU Parliament, which could take years. 

Conclusion: a benefit for the unitary patent system 

Overall, the Unitary Patent system will benefit greatly from the new rules on standard-essential patents proposed by the European Commission. The changes will ensure that SEP holders and licensees are able to negotiate licenses on fair and reasonable terms, while also promoting innovation and competition in the market. As a result, the Unitary Patent system will be well positioned to support the development of new technologies and promote economic growth across Europe. 

Article by Joaquim Ferrer.

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