“Overall, both SEP owners and implementers can benefit from the increased transparency these regulations bring to FRAND negotiations.”
In late March, news broke that the European Commission was drafting sweeping regulations on the licensing of standard essential patents (SEPs). Commentators predict the draft will be released in his late April.
Details of the proposed regulation
In its current form, the new regulatory framework will facilitate greater transparency of SEP licensing through several new policies and procedures. Among other things, this regulation establishes a “competence center” at the European Union Intellectual Property Office (EUIPO) to act as a kind of clearinghouse for SEP matters (technical and economic). EUIPO currently has no patent expertise. EP patents are the jurisdiction of the European Patent Office (EPO), separate from the European Union, and include non-EU members.
Competence centers have the following roles:
- Maintaining the Standard Essential Patent Register
- Maintain a database of SEP case law and a database of “fair, reasonable, non-discriminatory” (FRAND) terms and royalty determinations
- SEP essentiality assessment
- Manage Aggregation of FRAND Loyalty Decisions
- Management of individual FRAND rate decisions.
Importantly, before enforcing SEPs in European courts (including the Unified Patent Court), SEP owners must register their SEPs with the EUIPO and receive a fair, reasonable, non-discriminatory (FRAND) rate evaluation from EUIPO. (although the current draft contains loopholes that allow SEP holders to circumvent the latter requirement in certain circumstances). SEP registration is a fairly straightforward matter. However, FRAND rate determination is a formal mediation-style process presided over by two “mediators,” subject to limited discovery, written submissions, witnesses (including experts), and, in some cases, verbal Includes hearing. The draft sets a nine-month deadline for determining the FRAND rate, with costs to be borne by both parties.
EUIPO also conducts essentiality checks for some claimed SEPs. Such checks are performed by anonymous evaluators. SEP holders may propose to check the essentiality of up to 100 SEPs, and EUIPO will select a sample of SEPs from each owner and each check criteria each year. SEP owners may have multiple opportunities to submit comments and responses to third-party comments during the essentiality check process. However, the role of a third party (such as a potential implementer of the standard) is limited to submitting findings on her SEPs that have already been selected for essentiality checks and requesting a “peer evaluation” of the results. will be The SEP owner bears the cost of the essentiality check. Although not legally binding, the rules explicitly state that essentiality checks can be used as evidence in subsequent negotiations and litigation. However, essentiality checking is not a prerequisite for implementing SEP. Interestingly, the draft regulation requires EUIPO to register existing essentiality checks conducted by independent assessors.
The process of determining the total amount of FRAND royalties that apply across standardized technology is primarily determined by the SEP owners. An unspecified number of “contributors to the standard” will notify her EUIPO of the amount of royalty by submitting certain information, including the proposed amount of royalty, within 90 days after the release of the standard. can. This notice may be amended later by the SEP owner. In addition, after the release of the standard, the EUIPO mediates discussions of total royalties upon request of his 10% of all contributors to the standard within the specified period. At least 5% of the Contributors and/or 5 Implementers may request a non-binding expert opinion on the total royalties from EUIPO. Relevant standards-setting organizations and stakeholders (including SEP owners and implementers) are notified of such requests and may participate in the process (for example, by submitting information to the panel of arbitrators assigned to issue an opinion). The regulations explicitly state that the SEP owner should consider giving more favorable terms to micro, small and medium enterprises, but the terms are taken into consideration when determining his FRAND of large corporations. It will not be. In this respect, the regulation appears to contradict the commitment that FRAND licensing is non-discriminatory and that each licensee (large or small) is treated alike.For example, recently Interdigital v. Lenovo In its opinion, the UK High Court specifically dismissed as non-FRAND the unfair treatment of small businesses and large corporations by SEP holders.
impact
Overall, both SEP owners and implementers can benefit from the increased transparency these regulations bring to FRAND negotiations. Several aspects favor SEP implementers. For example, the requirement that a SEP owner must obtain her FRAND decision from her EUIPO before claiming her FRAND royalties or enforcing the SEP adds delay and risk to the enforcement process. increase. The European Commission suggests prioritizing a top-down her FRAND royalty calculation by requiring standard-essential patent holders to agree on total royalties. implement a specific standard. For these reasons, new regulations may keep SEP owners away from European venues.
That said, the draft also benefits SEP holders. The proposed nine-month timeline for FRAND fee arbitration is significantly shorter than most SEP license negotiations. Essentiality checks and total FRAND royalty determinations are primarily made by the owner of his SEP, with limited input from the implementer.
It’s an interesting development, but it’s important to remember that the draft is still in its early stages. Whether or not the amendments will go into effect is highly unpredictable. Commentators have already flagged potential constitutional issues in a draft that will need to be sorted out in the coming months (and years). Nevertheless, SEP owners and implementers appear to have already been mobilized to lobby European lawmakers to support and/or criticize the regulation.
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