Context: The EU Parliament debated the proposal for an EU regulation yesterday (February 27, 2024 ip fray article). Based on how the plenary debate went, ip fray expected overwhelming support for the proposal.
What’s new: The plenary vote was just held. The proposal has been adopted in the form in which it came out of the Legal Affairs Committee (JURI), with more 454 votes out of 615 (74%) in favor, 83 (13%) against and 78 (13%) abstentions.
Direct impact: For SEP holders, this is a devastating but not decisive defeat, and for their opponents it’s a glorious but not definitive victory. It is highly unlikely that the experts in the EU Council’s working group will agree with the EP position 100%. The process is therefore set to continue, and a “trilogue” (EU lingo for back-room negotiations between representatives of Council, Parliament and Commission) will take place further down the road to reach an interinstitutional agreement.
Wider ramifications: Four weeks ago, the Wall Street Journal published an article according to which “Europe Regulates Its Way to Last Place” (January 31, 2024 WSJ article). Today’s vote in the EP suggests that this trend continues, as the proposal reflects incompetence and regulatory zeal. There is no pressing need for legislative intervention, yet the EU appears determined to harm whatever little is left of its mobile telecommunications industry. Other jurisdictions will take note of the outcome of today’s vote, though sophisticated policy makers in other jurisdictions will understand that the EP’s first reading is not the end of the process.
For those opposing the bill, the situation has deteriorated substantially since the vote in the lead committee. In JURI, there was an unusually high number of abstentions. If there had been a similar outcome in the plenary, rapporteur Marion Walsmann MEP would have had a weak mandate in future inter-institutional negotiations (January 24, 2024 ip fray article).
The message from today’s vote is that critics of the proposal have not managed to build substantial support for its rejection. Even a Euronews interview with the president of the European Patent Office did not sway MEPs. A vast majority voted in favor of the Commission proposal. There may have been a stronger interest in some of the amendments that sought to mitigate the impact (February 22, 2024 ip fray article). But the overall message is that the EP wants something materially consistent with the Commission proposal to be adopted.
It is correct that there are issues to be addressed, and ip fray has said so repeatedly (and has proposed a way to help small and medium-sized enterprises with a view to SEP licensing). The problem is only that the text adopted by the EP today amounts to little more than red tape and hold-out, without tackling the excesses of German case law that have mobilized the automotive industry and others to push for legislative change.
Today’s vote in the EP was a vote against the way German courts have decided certain SEP cases. The reason for the EU Commission to take this legislative initiative had nothing to do with judicial decisions in countries like France and the Netherlands. The root cause of the problem is that German patent judges hate to deal with numbers and with economic logic, that in the build-up to the UPC there was a race to the bottom with different courts trying to attract as many patent infringement complaints as possible, and that a couple of key SEP decisions were made by the Federal Court of Justice of Germany under a presiding judge who was utterly unbalanced. The primary victim of German judicial excess was OPPO, against which some courts made decisions that were wholly unreasonable.
There is, however, one major reason for which today’s first-reading vote in the EP does not make it a foregone conclusion that anything along the lines of the Parliament’s position will be passed into law at the end of the process:
While there are issues, there is no acute crisis that warrants indeliberate action. The patent policy experts in the governments of the EU member states know that the EU doesn’t need a SEP Regulation (which no other jurisdiction has in place) at all costs. If this was a subject where everyone agrees that some kind of legislative measure is urgently needed, or if there was simply a strong political desire to take action, then the Council would be under pressure to agree, and to meet the EP more or less half-way. Here, however, no senior politician is going to care if the process takes longer. The mainstream media won’t care. Most companies and 99.99% of citizens won’t care.
If there was as much of a need for this bill as its supporters argue, there would already be legislation in place, or at least legislative processes underway, outside the EU. Just this week, the UK government outlined a roadmap that may or may not involve a legislative proposal, but only after further consultations (UK government webpage) and without the objective of “making legislative changes to narrow the use of injunctions in SEPs disputes.”
The Council can take its time to find a common position. In the meantime, there’ll be EU elections.
In the Council, a qualified majority is needed to adopt any proposal. This means that theoretically only a few member states (if they’re collectively large enough) have a blocking minority.
It is doubtful that SEPs will be a high priority to the next governments that will preside over the Council. It’s a rotating presidency, with Hungary being in charge during the second half of this year, followed by Poland in the first half of 2025, Denmark and Cyprus.
Those supporting the proposal will urge the Council to agree, and to enter into interinstitutional negotiations as soon as possible. But it could take longer than they hope, given the complexity of the subject. In the EP, complexity wasn’t an issue, but the Council is unlikely to take its chances with a view to fundamental rights and the EU’s international obligations.
This may or may not become a marathon, but it definitely isn’t a sprint.