Fostering Fairness in SEP Licensing: PIPLI’s Comments on the European Commission’s Proposal

Alex Moss | August 14, 2023

The European Commission (EC) recently opened the floor for comments on a ground-breaking proposed regulation concerning the licensing of standard-essential patents (SEPs). At the Public Interest Patent Law Institute (PIPLI), we see the regulation as a positive step toward a more fair and efficient SEP licensing landscape. but we also see concerning aspects that need to be changed. While the proposal may not be flawless, its potential for reshaping the SEP licensing landscape, promoting efficiency, and establishing a level playing field is well worth the work of improving it.

Here are some key takeaways from our comments:

1. Support for a SEP Information Clearinghouse

The proposal’s call for an information clearinghouse, or “competence centre,” is a much-needed step toward greater transparency. Currently, the SEP landscape is marred by an information asymmetry that disadvantages policymakers, scholars, small and medium-sized entities (SMEs). s) that can’t afford to spend millions of dollars on lawyers to get information through litigation, and members of the public who have no access to litigation at all. The proposed competence centre would alleviate such inequity, requiring SEP owners to register their rights and provide key information, for example, about fees charged for SEP licenses. Collecting this information in one place so that it can inform decisions of policymakers and stakeholders regardless of size or status would be transformative. This kind of mechanism is a critical prerequisite for reversing the current “untenable status quo rooted in unfairness,” as a former chief executive for a major SEP owner (InterDigital) has put it.

2. Support for a Centralized FRAND Determination Mechanism

We wholeheartedly endorse the idea of a centralized mechanism for obtaining determinations of fair, reasonable, and non-discriminatory (FRAND) license terms. This mechanism would foster cooperation, reduce legal costs, and provide essential clarity to all stakeholders. Making determinations available outside of litigation settings will help facilitate the flow of resources towards innovation, manufacturing, and benefits that reach the consumer—such as price reductions—instead of being consumed in protracted legal battles. It’s an especially vital tool for SMEs that need accurate cost and revenue information early in the development process, when litigation in some jurisdictions, like the U.S., is rarely possible due to standing requireements.

3. Concerns about Size-Based Restrictions on Accessing FRAND Determinations

While supporting the idea of FRAND determination mechanism, we oppose proposed provisions limiting access to this mechanism based on the proportion of SEPs or market share collectively held by entities requesting the determination. These limitations contradict the very goals of this mechanism and create insurmountable barriers for SMEs that need it most. If necessary, access restrictions should be thoughtfully based on the scale or potential impact of licensing issues so that SMEs with promising futures can get the information they need to succeed and the public can get access to essential products and services, like heart monitors with up-to-date wireless connectivity.

4. Concerns about the Exclusion of Developed Standards

The proposal’s limitation to future standards overlooks the critical need to consider already-developed standards. Developed standards need to be included for the proposed regulation to have any meaningful impact on innovation, competition, and consumers for at least the next decade. We strongly urge the EC to include developed standards, at least those in early stages of deployment, like 5G and WiFi 6.

5. Improvements to Essentiality Determination Provisions

We applaud the EC for addressing the need for verifiable essentiality determinations outside of litigation. But we believe a more efficient approach would be to make SEP owners responsible for providing evidence of essentiality at the time they register their SEPs with the proposed competence centre. If SEP owners bear the responsibility for providing corroboration of essentiality declarations before asserting SEPs in litigation, they will be encouraged to declare fewer SEPs, thereby ensuring optimal efficiency and deterring over-declaration.

The European Commission's proposed SEP regulation is an encouraging step towards a more equitable and vibrant landscape for standard-compliant devices. While we fully back the direction and objectives, we see improvements that need to made to fulfill the regulation's vitally important goals.

PIPLI remains committed to contributing to the evolution of this regulation, aiming for an outcome that genuinely serves public interest, bolsters innovation, and facilitates economic growth. Together, we can make the world of SEP licensing more fair, efficient, and effective for all.