The European Commission has proposed Regulations on standard essential patents, compulsory licensing of patents in crisis situations, and amendments to the laws about supplementary protection certificates. These aim to create a more transparent, effective and futureproof intellectual property rights framework.
The Commission says that intangible assets like brands, designs, patents and data are increasingly important in today’s knowledge economy. IP is a key driver for economic growth as it helps companies gain value from their intangible assets. IP-intensive industries account for almost half of all GDP and over 90% of all EU exports. Between 2017 and 2019, nearly 76% of intra-EU trade was generated by patent-intensive industries.
Standard Essential Patents
Standard essential patents (SEPs) are patents that protect technology that has been declared essential for the implementation of a technical standard adopted by a standard developing organisation. Such standards relate for instance to connectivity (e.g. 5G, Wi-Fi, Bluetooth, NFC) or audio/video compression and decompression standards. To make a product that is standard-compliant, an implementer is obliged to use the relevant “essential” patents. The monopoly granted by such specific patents is balanced by SEP holders’ commitment to license these patents on fair, reasonable and non-discriminatory (FRAND) terms, allowing access to market to implementers. For many years, the current system has suffered from a lack of transparency, predictability, and lengthy disputes and litigation.
The proposed SEP licensing framework aims to create a balanced system, setting a global benchmark for SEP transparency, reduction of conflicts and efficient negotiations. It has the following two main objectives:
- Ensuring that both EU SEP owners and implementers innovate in the EU, make and sell products in the EU and are competitive on global markets.
- Ensuring that end users, including SMEs and consumers, benefit from products based on the latest standardised technologies at fair and reasonable prices.
The proposed SEP licensing framework aims to add additional transparency regarding SEP portfolios, aggregate royalty (when patents of several holders are involved) and allow for more efficient means for parties to agree on FRAND terms of their licences. The proposal introduces measures on the following aspects: a SEP register, database and essentiality checks; expert opinions on SEP aggregate royalty; FRAND determination by means of conciliation in lieu of costly litigation; SME support measures; and the establishment of a Competence centre at the EU Intellectual Property Office.
The proposed Regulation will apply to all standards that will be published after its entry into force. However, the Commission will determine which of the standards, their implementations or use cases would be excluded from the aggregate royalty setting and FRAND conciliation process, in situations where the respective SEP licencing does not pose significant difficulties or inefficiencies affecting the functioning of the internal market. Conversely, standards published before the entry into force of the Regulation will not be subject to it, unless specific market distortions due to inefficiencies in the licensing of SEPs lead the Commission to include them within its scope.
Compulsory licensing
Compulsory licensing of patents allow a government to authorise the use of a patented invention without the consent of the patent holder. The new rules foresee a new EU-wide compulsory licensing instrument that would complement EU crisis instruments, such as the Single Market Emergency Instrument, HERA regulations and the Chips Act.
Supplementary Protection Certificates
A Supplementary Protection Certificate (SPC) is an IP right that extends the term of a patent (by up to five years) for a human or veterinary pharmaceutical product, or a plant production product, that has been authorised be regulatory authorities. It is only available at national level. As a result, the current system suffers from fragmentation, which leads to complex and costly procedures, as well as legal uncertainty. The Commission is proposing a unitary SPC to complement the Unitary Patent. The SPC reform also introduces a centralised examination procedure, implemented by EUIPO, in close cooperation with EU national IP offices. Under this regime a single application will be subjected to a single examination process that, if positive, will result in the granting of national SPCs for each member state designated in the application. The same procedure may also result in the grant of a unitary SPC.
Next steps
The proposed Regulations will be discussed and agreed by the European Parliament and the Council of the European Union before their adoption and entry into force.
