EU Patent Modification: Enhancing Competitiveness, Yet Demanding Further Ambition
The European Union (EU) is taking a significant step towards ensuring a competitive and innovative auto industry by proposing reforms for Standard Essential Patents (SEPs). These patents are crucial for implementing specific industry standards, and in the auto sector, they are typically related to cellular connectivity standards for vehicles.
The push for connected vehicles is accelerating, and the EU's auto industry finds itself at a critical juncture. Equitable access to essential technologies is essential to safeguard a competitive European auto industry. However, over four-fifths of 5G patents are held by non-European companies, with China, South Korea, the US, Japan, and the EU owning 33%, 27%, 14%, 9%, and 17% respectively. This dominance by non-European regions, especially from the US and Asia, reflects a broader EU innovation gap compared to these regions.
Disagreements between SEP licence holders and implementers often lead to costly court proceedings. To address this issue, the EU's SEP proposal aims to increase transparency and provide implementers with more information about SEPs. The proposal includes database registration, essentiality checks, and aggregate royal determination. This will help in reducing burdensome litigation.
The new procedure will provide parties with a binding ruling after a maximum of nine months. This timely resolution will significantly reduce the financial and time costs associated with litigation. However, it's important to note that the proposal does not currently oblige SEP holders to offer licenses on FRAND terms to any willing licensee, regardless of their position in the supply chain.
Sigrid de Vries, a noted expert, has emphasised the proposal's importance for ensuring equitable access to essential technologies. She notes that it is crucial for the European auto industry to maintain its competitiveness.
To level the playing field further, the EU should allow SEP implementers to set up "licensing negotiation groups" for collective discussions with SEP holders. This would enable implementers to negotiate more effectively and ensure fair royalty payments.
The reform proposal offers much-needed transparency and fairness in the SEP landscape, crucial for leveling the playing field between SEP implementers and holders. A guide titled 'SEPs Decoded: Six essential FAQs' is available to learn more about the benefits of SEP reforms.
It's worth mentioning that SEP holders may demand higher royalty payments that exceed the true value of their invention. In some cases, they may even threaten vehicle manufacturers with injunctions to force excessive royalty payments. The proposed fair, reasonable, and non-discriminatory (FRAND) determination procedure will help address these issues.
In the auto sector, SEP holders often refuse to provide licenses for the use of wireless communication standards to auto suppliers. This refusal can hinder innovation and competition. The EU's SEP proposal aims to address this issue by providing implementers with more information about SEPs.
The EU currently lacks comprehensive legislation governing SEPs, causing legal uncertainty. The proposed reforms aim to address this issue and provide a more stable environment for innovation and competition in the auto industry.
In conclusion, the EU's SEP proposal is a significant step towards ensuring a competitive and innovative auto industry. By increasing transparency, providing fair royalty determinations, and offering a timely resolution to disputes, the proposal aims to level the playing field between SEP implementers and holders. This will help safeguard the competitiveness of the European auto industry in the era of connected vehicles.
