Standard essential patents and FRAND licensing: publication by the EC of the proposal for a regulation puts the EUIPO in the spotlight for the development of IoT

European Union - 04 / 27 / 2023

The European Commission has presented a proposal for a regulation that aims to promote the transparency and predictability of licensing of standard essential patents (SEPs) and that will promote the development, among other areas, of the Internet of Things (IoT).

The Proposal for a Regulation of the European Parliament and of the Council on standard essential patents and amending Regulation (EU) 2017/1001, presented on 27 April 2023, as part of the Action Plan on Intellectual Property published by the Commission.

SEPs protect technology incorporated in a technological standard, such as 5G or Wi‑Fi, developed within independent standardisation bodies, such as the European Telecommunications Standards Institute (ETSI). Today, this category of patents is highly relevant to, among other areas, the IoT space. Inclusion as part of the standard means that the technology that they cover is essential for the production or development of products and technologies that implement the standard. Therefore, SEP holders commit to license their SEPs on fair, reasonable and non-discriminatory (FRAND) terms, which has given rise to much controversy and many disputes over the years.

Dominant SEP holders must respect a series of requirements prior to bringing an action for infringement seeking an injunction prohibiting the infringement of its patent or seeking the recall of products. These requirements are set out by the EU Court of Justice in the Huawei v ZTE ruling (C-170/13). Among other things, the parties must try to negotiate a license on FRAND terms, if the infringement is accepted, with the SEP holder being responsible to make a first FRAND offer.

What are the main elements of the proposal?

1. Granting powers to the authority responsible for the implementation of the proposal, which will be established at the EUIPO, based in Alicante (Spain).

2. Promoting transparency with regard to SEP licensing.

3. Establishing a SEP registration system, as well as a procedure to check essentiality.

4. Establishing a procedure to resolve amicably SEP licensing disputes, including regarding FRAND terms.

The proposal, which will surely generate great controversy, still needs to be discussed and approved by the European Parliament and the Council of the European Union, so it will be some time before it materialises. It is possible, however, that the proposal could already influence ongoing complex negotiations regarding SEP licences. In future articles we will analyse the implications of the regulation both for SEP holders and for those who implement standardised technology.