Context: The EU commissioner who proposed the regulation on standard-essential patents (SEPs), Thierry Breton, has left Brussels through the backdoor (September 16, 2024 ip fray article). The likely composition of the next European Commission (EC) (“von der Leyen II”) and the mission letters the EC’s president sent to some commissioners-designate make it more of a possibility that the proposal might be withdrawn at some point (September 17, 2024 ip fray article).
What’s new: The commissioners-designate have meanwhile provided their written answers to the European Parliament’s (EP) pre-hearing questions. Of the three commissioners who will be most important with a view to the SEP Regulation and SEP policy in general, only the commissioner-designate for the Internal Market, Stéphane Séjourné, was asked to position himself on patent policy. In his written answers (PDF), he vowed to push for the expansion of the Unitary Patent System, at the heart of which there are the Unitary Patent and the Unified Patent Court (UPC), beyond the current 18 member states. He also took a politically correct position on the SEP Regulation: anything less would have posed an unnecessary risk to his confirmation by a parliament in which 74% of the votes cast at first reading supported the bill (February 28, 2024 ip fray article).
Direct impact: For the UPC, this is good news. For the SEP Regulation, it is of limited significance as the alternative would have been for Mr. Séjourné to disrespect the political will of the very parliament in which he needs a majority to support his nomination. The statement has been, and will continue to be, used by those advocating for the SEP Regulation. They can and will furthermore interpret it as an acknowledgment of issues with SEP enforcement in the EU. But as long as there is no progress, and even considerable resistance, in the EU Council, the ball is neither in the EP’s nor in the EC’s corner. The question of a withdrawal of the proposal will enter the agenda only if and when the Council has been unable for some time to adopt what is called a common position (and requires a dual qualified majority that is a reasonably high hurdle).
Wider ramifications: Next week, outside counsel for the EC’s Directorate-General for Competition (DG COMP) will deliver oral argument in the Munich Higher Regional Court in VoiceAge EVS v. HMD. DG COMP submitted an amicus curiae brief according to which the European Court of Justice (ECJ) decision in Huawei v. ZTE must be applied strictly sequentially. The positions stated in the brief, and illustrated by an unambiguous flowchart, would make it impossible to import any of the implementer’s subsequent behavior into the analysis of its willingness to take a license, and to order an injunction if willingness has been expressed but the SEP holder’s offer has not been established to be fair, reasonable and non-discriminatory (FRAND) (August 4, 2024 ip fray article). The matter may very well reach the ECJ, though it may take a further appeal to the Federal Court of Justice of Germany. The amicus brief represents a more targeted and efficient way for the EC to achieve its objective of a balanced SEP enforcement regime than the proposed regulation.
This article discusses the two policy topics – UPC and SEPs – in separate sections.
- All in on the UPC
- Playing it safe on SEPs
1. All in on the UPC
After acknowledging the importance of intellectual property as “an essential element of competitiveness,” Mr. Séjourné made the Unitary Patent System his number one priority in IP policy:
“Yet, the EU patent rulebook remains fragmented. If confirmed, my first focus will be to address that fragmentation by promoting a wider adoption of the Unitary Patent System, beyond the current 18 Member States, to reduce costs, increase legal certainty and benefit from the uniform jurisdiction of the Unified Patent Court, counting on the European Patent Office to continue with its task of issuing unitary patents.” (emphasis added)
That is a clear political commitment.
To be realistic, there isn’t much that the EC can do when some member states are hesitant to join the Unitary Patent System and, as a result, the UPC. There are typically domestic reasons for staying outside of it, such as linguistic patriotism in Spain, which is a shame given that they actually have some good patent judges, particularly in Barcelona, who would have no problem presiding over hearings in English, and knowing that the reluctance of very significant parts of Spain’s population to learn English (a disease that is much less widespread among younger generations but still far from eradicated) is one of the problems facing that country’s economy. In Ireland, the language is obviously a non-issue, and the only concern that led to a postponement of a referendum was that politicians feared the Unitary Patent System might be voted down by the populace for reasons that have nothing to do with the proposal itself, just as collateral damage caused by an overall political sentiment.
That said, it helps if the EC continues to promote accession to the Unitary Patent System.
Toward the end of the new Commission’s five-year term, the question of whether the transitional period (during which patents, except those with unitary effect, can be opted out of the UPC) should be extended will slowly but surely begin to be discussed. The EC won’t make the decision, but can influence it. ip fray believes the UPC is off to a good start and will likely be so well established by the end of the decade that there won’t be an extension of the transitional period.
The number of new infringement actions filed with the UPC in recent months appeared relatively low, some of which may be due to seasonality as well as litigants now awaiting some more post-trial decisions and, especially, appellate rulings. It could also be that some filings just haven’t surfaced in the Case Registry yet. But in any event, the UPC has been adopted very quickly, which was not a given for a fundamentally new judicial body and a frontloaded litigation system that requires substantial upfront investments. Also, there are some first signs of UPC filings and decisions spurring settlements.
2. Playing it safe on SEPs
Mr. Séjourné went on to position himself vis-à-vis the Patent Package and addressed several legislative topics: supplemental protection certificates, compulsory licensing, the SEP regulation, and an update of the Biotech Act (patent-eligibility). The part on SEPs is indeed buried in the middle of a long paragraph, which in the language of political communications means it’s not a particularly high priority, and says this:
“A reliable and transparent framework for Standard-Essential Patents (SEP) licensing will ensure that the EU is a more attractive investment destination for licensors and licensees. In that respect, I will actively contribute to the work of the co-legislators, remedying licensing frictions in the markets critical to the Union’s competitiveness, particularly given the dawn of the Internet of Things and the change in the global balance of SEP ownership.”
The plural form in the first sentence cannot be reasonably interpreted in any other way than acknowledging that the framework for SEP licensing must be adjusted (which ip fray in fact agrees with). If Mr. Séjourné meant to describe the status quo as great, he wouldn’t say that the EU would become a “more” attractive investment destination.
What is positive is that he says the EU should become more attractive to “licensors and licensees,” which actually encourages SEP holders now to communicate their concerns to him and his staff about how the current proposal would run counter to that objective.
By promising to “actively contribute to the work of the co-legislators,” he reminds everyone of the fact that the EC made its proposal last year and it’s now up to the Council and the Parliament to reach a consensus.
He then acknowledges again a need to “remedy[] frictions” and finally points to IoT and the fact that the EU’s share in SEPs is lower (mostly because of Chinese companies having become very strong in standard-setting), which are two arguments his predecessor in office as well as the majority of the Parliament advanced.
One has to look at Mr. Séjourné’s answer regarding the SEP answer from three other angles to really understand its (limited, but non-negligible) significance:
- If the Parliament had asked him “Do you wish to commit political suicide?” and provided him with a Yes or a No box to tick, it’s obvious what he’d have done. And that’s the situation here: he knows that 74% of MEPs voted in favor of the proposal last term. The Parliament’s composition has undergone significant change as a result of this year’s elections, yet it’s a political will of an institution that he must respect. Even if he was determined to withdraw the SEP Regulation at the earliest opportunity, or if he just had some concerns over whether it’s a good idea, he couldn’t possibly say so at this point.
- So he’s now going to be politically bound by what he said, but that has limits. He can’t answer the Parliament’s questions the way he just did and then, weeks or months later, start to criticize the bill in public. But there’s no way anyone can force him to make a lot of effort to persuade the Council to decide. He can simply give the project lip service. And if the Council, after some more time, still hasn’t adopted a common position, it’s a new situation and the EC can then withdraw the proposal, with or without the promise to give it a new try after a new round of consultations.
- The statement has no bearing on what positions he will take, or what amendments he will advocate (or oppose), at the stage of a hypothetical trilogue (interinstitutional negotiations between Council, Parliament and Commission). He laid out some political objectives. More balance, less friction. Yes, we want all the good stuff. No, we don’t want any of the bad stuff. But what will that mean in practice? The only part that it would be difficult for him to distance himself from is that his written answer mentions additional responsibilities for the EUIPO. But whether SEP holders can sue immediately or have to live with an extra year of hold-out is an example of the various important questions that one can view differently while still promoting a balanced framework and frictionless licensing.
If on a scale from 1 to 10, 1 is the bare minimum to avoid an outright confrontation with the EP (the political suicide mentioned above) and 10 a political commitment of maximum strength, Mr. Séjourné’s answer concerning the SEP Regulation is a 3 or, at best, a 4. If the Council just doesn’t decide too soon, the passage of time will change everything, and he won’t be bound by what he wrote in response to the Parliament’s questionnaire.
And if the problem got solved differently, such as by DG COMP’s amicus brief, it would also be a political option to just declare victory and withdraw an ill-conceived proposal.