Changes from plenary report to adopted text

RemovedEXPLANATORY STATEMENT

Added(e) the estimated percentage of SEPs they own collectively from all SEPs for the standard;

RemovedA Standard Essential Patent (SEP) is a patent protecting a technology that has been declared essential for the implementation of a technical standard adopted by a standardisation body The interplay between patents and standards is important for innovation and growth, as these patents incentivise research and development and enable an adequate return on investment for innovative companies. Standards ensure a broad uptake of interoperable and secure technologies among businesses and consumers. Worldwide, there are around 75 000 SEPs, but these only represent a small share of patents as a whole. Essential technology standards such as 5G and Wi-Fi, photo formats (JPEG), standards for audio and video compression and decompression (e.g. MPEG, HEVC) and more are covered by such patents. SEPS play a crucial role in developments such as the Internet of Things, Industry 4.0, connected vehicles, smart cities and climate change mitigation technologies. The number of SEPs has increased sixfold over the last ten years, which is good news, given that the protection of SEPs is key to enabling innovation that helps the EU to become more sustainable and more digital.

Added(f) the implementations known to the SEP holders referred to in point (c);

RemovedAs early as November 2021, in its resolution on an intellectual property action plan to support the EU’s recovery and resilience (EP resolution on the intellectual property action plan), the European Parliament called for a European Commission proposal on SEPs, as SEPs are often the subject of litigation. The lack of transparency and legal certainty was identified as an issue. The licensing of SEPs is often a lengthy and costly exercise for both patent holders and technology implementers.

Added(g) the global aggregate royalty, unless the notifying parties specify that the aggregate royalty is not global;

RemovedOrdinary patent holders are free to decide to whom they wish to grant a licence to exploit their innovation. However, SEP holders do not have this complete freedom, as the inclusion of their patented technology in a standard gives them some degree of market power. Therefore, SEP holders are obliged to grant their licences on fair, reasonable and non-discriminatory (FRAND) terms. These FRAND terms have led to a large number of problems, which have also been the subject of court proceedings.

Added(h) any period for which the aggregate royalty referred to in paragraph (1) is valid.

RemovedOn the one hand, it is near impossible for implementers to find out whether a standard is indeed essential, how many SEPs relate to a given standard, who the corresponding SEP holders are and what the ultimate costs to achieve market entry using the relevant standard will be. Around 84% of SEP implementers are SMEs. For them in particular, the mere threat of a provisional injunction leading to a suspension of production of allegedly infringing products and the probability of legal proceedings may create pressure to agree to a licence at rates that may not be FRAND.

Added3. The notification referred to in paragraph (1) shall be made at the latest 120 days after:

RemovedOn the other hand, the SEP holder cannot enforce his legitimate interests while the implementer insists on having a licence issued on FRAND terms, with the intention of putting off the obligation to pay royalties for as long as possible. As a result, SEP holders also face lengthy and costly court proceedings, with royalties only being paid at the end of this prolonged procedure.

Added(a) the publication of a standard by the standard development organisation for implementations known to the SEP holders referred to in paragraph (2), point (c); or

RemovedIn order to provide a better factual basis for preventing, resolving and deciding on conflicts relating to FRAND terms, on 27 April 2023, the European Commission submitted a proposal with the following new measures:

Added(b) a new implementation of the standard becomes known to them.

Removed1. the establishment of an SEP register and a central electronic database for SEPs;

Added4. The competence centre shall publish in the database the information provided under paragraph (2).

Removed2. SEP essentiality checks;

AddedArticle 16 Revision of aggregate royalty

Removed3. non-binding determination of the aggregate royalty for a standard;

Added1. In case of revision of the aggregate royalty, the SEP holders shall notify the competence centre about the revised aggregate royalty and the reasons for the revision.

Removed4. the establishment of a time-limited out-of-court dispute resolution mechanism under expert guidance that can be used by SEP holders and implementers when negotiating a FRAND licence.

Added2. The competence centre shall publish in the database the initial aggregate royalty, the revised aggregate royalty and the reasons for the revision in the register.

RemovedIn general, the rapporteur supports the Commission’s initiative and the proposed measures, as the Commission has acted in accordance with the EP resolution on the intellectual property action plan.

AddedArticle 17 Process for facilitating agreements between SEP holders on aggregate royalty determinations [Am. 130]

RemovedThe rapporteur stresses the importance of increasing the proposal’s legal clarity and bridging the interests of SEP holders and implementers. Both actors play a huge role in the European economy and their interests must therefore be taken into account in the context of a well-balanced legislative act. The proposal must increase the transparency of SEPs in order to compensate for the knowledge advantage of SEP holders, yet without limiting their global competitiveness.

Added1. Holders of SEPs in force in one or more Member States representing at least 20 % of all SEPs of a standard may request the competence centre to appoint a conciliator from the roster of conciliators to mediate the discussions for a joint submission of an aggregate royalty.

RemovedMore legal clarity

Added2. Such a request shall be made no later than 90 days following the publication of the standard or no later than 120 days following the first sale of new implementation on the Union market for implementations not known at the time of publication of the standard.

RemovedKnowing which use cases of standards fall under the new legislation is massively important for legal clarity. While the rapporteur agrees that the Commission should address this issue through delegated acts, she believes it is crucial that certain criteria be established already now. For this reason, the rapporteur has proposed amendments to this effect, including a definition of ‘significant difficulties or inefficiencies’.

Added3. The request shall contain the following information:

RemovedThe rapporteur has also incorporated new definitions which make the text easier to understand.

Added(a) the commercial name of the standard;

RemovedCreation of a competence centre within the EUIPO and registration

Added(b) the date of publication of the latest technical specification or the date of the first sale of new implementation on the Union market;

RemovedThe rapporteur considers that establishing a competence centre at the EUIPO is a sensible proposal, given that the European executive agency has a lot of experience in maintaining databases. It is important that this agency is equipped with sufficient staff and funds to carry out the new task efficiently.

Added(c) the implementations known to the SEP holders referred to in paragraph (1);

RemovedFurthermore, the rapporteur notes the importance of clarifying the difference between the register and the database, of ensuring the accuracy of the register and of preventing potential red tape for SEP holders.

Added(d) the names and contact details of the SEP holders supporting the request;

RemovedPatent Pools

Added(e) the estimated percentage of SEPs they own individually and collectively from all potential SEPs claimed for the standard. [Am. 131]

RemovedThe rapporteur is in favour of patent pools. If managed in a transparent manner, they provide great added value for SEP holders and implementers. It should however be ensured that this transparency is actually reflected in the information provided, including on the website. To support this, the rapporteur has put forward proposals to that effect.

Added4. The competence centre shall notify thepublish the request and invite other SEP holders referred to in paragraph (3), point (d) and request them to express their interest in participating in the process and to provide their estimated percentage of SEPs from all SEPs for the standard. [Am. 132]

RemovedEssentiality checks

Added5. The competence centre shall appoint a conciliator from the roster of conciliators and inform all SEP holders that expressed interest to participate in the process.

RemovedIn the EP resolution on an intellectual property action plan, the EP called for an independent, neutral and transparent system for third party essentiality checks. The rapporteur welcomes the fact that the European Commission has taken this on board and proposed a system for assessing the essentiality of patents.

Added6. SEP holders that submit to the conciliator confidential information shall provide a non-confidential version of the information submitted in confidence in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence.

RemovedIt should be noted that evaluators and conciliators in the FRAND determination procedure should possess the necessary and highly specialised expertise and experience while also being independent and impartial.

Added7. Where the SEP holders fail to make aan agreement regarding the joint notification submission of an aggregate royalty within 6 months from the appointment of the conciliator, the conciliator shall terminate the process. [Am. 133]

RemovedIn addition, evaluators should also be able to review prior essentiality checks if they have doubts as to their accuracy.

Added8. If the contributorsSEP holders agree on a joint notification, the procedure set out in Article 15(1), (2) and (4) shall apply. [Am. 134]

RemovedDetermination of aggregate royalty

AddedArticle 18 Non-binding expert opinion on aggregate royalty

RemovedThe non-binding determination of the aggregate royalty will help stakeholders to set efficient SEP rates.

Added1. A SEP holder or an implementer may request the competence centre for a non-binding expert opinion on a globalan aggregate royalty. An implementer may make this request, even if an agreement amongst SEP holders has already been reached, including through the procedure laid down in Articles 15 to 17. [Am. 135]

RemovedThe rapporteur believes that it should not be possible to unilaterally block this assessment and has therefore proposed amendments to this effect.

Added2. The request referred to in paragraph (1) shall be made no later than 150 days after:

RemovedTime-limited out-of-court dispute resolution mechanism

Added(a) the publication of the relevant standard for known implementations; or

RemovedIn the EP resolution on an intellectual property action plan, the Commission was also asked to provide more clarity on various aspects of FRAND, and to consider possible incentives for more efficient SEP licensing negotiations and reducing litigation. It also took this request on board, proposing a non-binding dispute resolution system, which has the potential to eliminate strategic delays caused by market participants. The rapporteur welcomes the fact that, on the basis of a third party opinion, this market participant can be asked to provide a security in a very timely manner and realistic and effective in scale.

Added(b) new implementations are first sold on the Union market.