The Future of SEP Regulation in Europe: Uncertainty, Challenges, and the Path Forward
The unexpected turn of events associated with the European Commission’s decision to halt work on the EU SEP regulation had a visible impact on the discussions at the concluded conference “Regulatory and Enforcement Developments for Standard Essential Patents”.
Although the Polish Presidency of the European Council leaves hope for a return to work on the project, the vast majority of conference participants treated the project as a piece of history and moved on to find new solutions, at most considering which elements of the regulation proposal are worth preserving.
Day one focused on new regulatory frameworks and policies for SEPs
Withdrawal of EU regulation on SEPs leaves the uncertainty among the market participants. While it is agreed that regulation was getting short of the set out goal of transparency, for the majority it still is necessary to have some regulations to improve the process of SEP licensing.
From the perspective of implementers, particularly SMEs, lack of regulation is a bad news. SME’s have no access to the information on global FRAND rates, which makes process of licensing unpredictable. SME’s have to take for granted what SEP holder tells them and fear cherry picking of highest licensed rates. SMEs see SEP Holder approach as “trust me, I’m a doctor”, as they don’t know to what rates other licensees agreed to.
President Mattia Fogliacco of Sisvel has clearly indicated that patent pools have every incentive to set license rate FRAND so that the market penetration is swift and implementation of SEPs unimpacted.
SEP holders see the problem elsewhere. From their point of view, regulation proposal treated all patents as equal, while in practice they are not. Seemingly they emphasize that no regulation should lead to delaying or restricting access to the court, as this erodes the IP protection.
All parties agree that transparency and predictibility of the process are a key to any future regulation, but ultimately all the discussions on willigness of licensees (and licensors), SEP essentiality check and mediation or arbitration, are only a secondary topics to the one thing that actually matters – FRAND-rate setting.
Day two focused on dispute resolution
President of the UPC Court of Appeal, dr Klaus Grabinski, started the day with a remark that a decision to withdraw the EU SEP regulation proposal was justified due to the number of problems with it. The UPC is already dealing with the SEP cases and any regulation that would likely enter into force only years from now could be inadequate to the new challenges in licensing that occurred in the meantime.
Judge Fabian Hoffmann of Bundesgerichtshof discussed Oberlandesgericht München approach to global FRAND-rate setting, noting that Huawei v. ZTE framework ends, where actual problem begins – FRAND rate determination, particularly when parties do not agree to arbitrate.
Rt Hon Lord Justice Richard Arnold of Court of Appeal of England and Wales presented the UK approach to FRAND-rate where discussion on willingness prior to deciding what is FRAND is irrelevant, as the real question on willingness is whether the parties are willing to licence at a royalty which is in fact FRAND. Therefore to decide willingness one first has to decide what is FRAND, and only then one will find out who is willing or unwilling to license at that rate.
Justice Prathiba M. Singh of High Court of Delhi pointed out, that India is emerging as a key SEP jurisdiction and last five years have seen a spike in SEP litigaton. India does not shy away from ruling on FRAND-rate determination, while allowing in the same proceedings to rule on validity of the patents and their essentiality.
This presents a clear difference in approach to the topic of FRAND-rate setting in EU, UK, India and China. In the UK, SEP case is perceived as contractual dispute since SEP holder’s declaration gives rise to a contract between SEP holder and implementer, whereas in the EU FRAND defence is rooted in the competition law. Uncertainty of the competence prevents UPC from determining a global FRAND-rate, while German courts tend to focus on implementer’s duties. As Prof. dr Matthias Leistner summarized, the English are setting licenses, while Germans are granting injunctions.
It appears therefore that in the end some regulation is needed to give European courts the same ability to determine the FRAND-rate during the SEP infringement proceedings.
