Context: A couple of months ago it became known that the proposed EU regulation on standard-essential patents (SEPs) was stuck in the EU Council (December 5, 2024 ip fray article), a body in which the governments of the EU member states cast their votes and which effectively has greater legislative powers than the European Parliament (EP). The European Commission (EC) cannot adopt legislation, but has the right of initiative in the 27-member bloc: it proposes bills, it moderates potential conciliation talks beween the Council and the EP, and it also has the power to withdraw its proposals. Also, the EC is the “Guardian of the Treaty.”
What’s new: The EC has officially dropped COM(2023)232 final 2023/0133(COD), “Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on standard essential patents and amending Regulation (EU)2017/1001” due to there being “[n]o foreseeable agreement.” It is off the table, and “the Commission will assess whether another proposal should be tabled [which in British language means “to put something on the table,” the opposite of what it does in American English, where it means exactly what just happened] or another type of approach should be chosen.”
Direct impact: SEP holders and implementers know that for the foreseeable future the decision on when SEP infringement gives rise to injunctions continues to be made by the Unified Patent Court (UPC) and the national courts of EU member states without a non-binding opinion on FRAND (fair, reasonable and non-discriminatory) licensing terms provided by an expert picked by the EUIPO (the EU trademark office) from a pool of consultants.
Wider ramifications: The Commission, which delivered what appeared to be very good news the same day with a €200 billion invest in AI infrastructure (February 11, 2025 ai fray article), gains credibility as far as its plans to combat overregulation are concerned. And there is another EC initiative designed to make SEP enforcement more balanced in Europe: an amicus curiae brief filed with a German appeals court (the Oberlandesgericht München (Munich Higher Regional Court)) in a VoiceAge EVS v. HMD SEP case. A ruling was due on February 6 (last Thursday) and has been pushed back to February 20 (next week’s Thursday) (February 6, 2025 LinkedIn post by ip fray).
The wise decision, consistent with the new EC’s commitment to less regulation, became known Tuesday evening by Strasbourg (France) local time when the Commission published its updated work program (PDF). Here’s a screenshot of the relevant part, which is found on page 24 of the document:
The decision comes as a major surprise, given that there was intense lobbying going on to persuade the Polish government (which holds the rotating Council presidency during the first half of 2025) to push for progress in this legislative process. But the seemingly adamant stance of the Commission on this bill may merely have been due to the fact that officials at all levels had to support this proposal until there was going to be, potentially and now actually, a different decision.
On Tuesday, the College of Commissioners (meaning all 27 commissioners including President Ursula von der Leyen) was meeting in Strasbourg, France. Normally, the EC is based in Brussels, but this week the EP meets in Strasbourg, France, as it does 10 times a year and which is indicated by a red background in the parliamentary calendar:
In those weeks, the Commission holds a meeting in Strasbourg.
On Tuesday, the Commission adopted a “work programme” for 2025 with the following headline:
Moving forward together: A Bolder, Simpler, Faster Union
The decision to abandon the proposed SEP Regulation is consistent not only with at least the second adjective in that headline but also with the favorable take on IP protection and European participation in standard-setting that we noted in the EC’s Competitiveness Compass (January 28, 2025 ip fray article).
What makes it even more logical is the fact that the primary sponsor of the bill, former French commissioner Thierry Breton, left (September 16, 2024 ip fray article). Mr. Breton, whose stewardship of French IT company Atos is highly controversial in France as indicated by media reports, was effectively forced out after he allowed his ambition for higher office to question the political backing of President von der Leyen. The French government was presented with the opportunity to withdraw him (each member state gets to pick its commissioner) in order for the French commissioner (now Stéphane Séjourné) to be considered for a more powerful portfolio of responsibilities.
Major SEP holders were fighting the SEP Regulation aggressively, but Mr. Breton’s arrogant and unbalanced characterization of critics as “bad actors” in litigation did nothing to promote civil discourse.
While all commissioners had to respect the EP’s vote when seeking parliamentary confirmation, the EC president’s mission letters to certain new commissioners and the position taken by the new “digital czar” (Finnish center-right politician Henna Virkkunen) on the SEP Regulation while she was a Member of the European Parliament (MEP) were early harbingers of a potential reconsideration of the merits of this legislative proposal (September 17, 2024 ip fray article).
About a year ago, the EP overwhelmingly adopted the proposal (February 28, 2024 ip fray article). The very next day, ip fray started a Getting the EU SEP Regulation right series of articles.
ip fray believes that apart from the EP majority and Mr. Breton, there are many winners:
- the EC for the reasons outlined above;
- the voices of reason in the EP;
- SEP holders;
- among them, particularly, European network infrastructure makers (January 16, 2025 ip fray article);
- the Council (because it was proven once again that it is the most powerful EU institution, and it should actually have leveraged that fact to a greater extent in connection with other pieces of overregulation such as the EU’s AI Act);
- the institutions that opposed the proposal, particularly the Unified Patent Court (UPC) (whose President Dr. Klaus Grabinski was a vocal critic as we also mentioned in a December 5, 2024 article), the European Patent Office (EPO) (particularly President Antonio Campinos and policy expert Dr. Michael Froehlich (“Fröhlich” in German), the European Telecommunications Standards Institute (ETSI) and the European Association of Research and Technology Organisation (EARTO);
- the EUIPO, where some may have embraced the idea of creating another unit and expanding into areas of responsibility for which the EPO is better-suited, but which ultimately would have faced major problems implementing the bill as planned and whose non-binding opinions would have been ignored by some judges anyway (in whose courts all SEP enforcement would then have been filed); and
- counterintuitively, but not ironically: major implementers, given that their lobbying departments would have liked to claim victory if this proposal had been enacted (also for the purpose of using such a “win” to persuade lawmakers in other parts of the world to devalue SEPs and weaken SEP enforcement) but it is highly doubtful whether they would actually have saved licensing costs. Implementers, despite having spent advertising dollars on this legislative project (February 22, 2025 ip fray article), now have the opportunity to focus on better ways forward.
ip fray serves a diverse readership and has a wide range of contacts in the SEP ecosystem, ranging from totally defensive implementers who would bring offensive cases only for defensive (retaliatory) purposes to patent pool administrators (who cannot bring litigation themselves unless they go beyond pool administration and own patents) to companies that not only collect but also pay substantial amounts of SEP royalties to non-practicing entities (NPEs). We know that our articles were widely read by decision makers and stakeholders alike. ip fray opposed the proposed regulation as unhelpful. It would have meant more bureaucracy and delay as opposed to a streamlined process, yet agrees with the most important ones of the concerns raised by the EC in its above-mentioned amicus brief.
We applaud the EC for this decision and hope, in the interest not only of Europe but also a stable world economy, that even bolder and even more surprising steps will be taken. The European approach of the past has failed as is evidenced by the following chart:
The level of AI investment and the prudent withdrawal of the proposed SEP Regulation are two steps in the right direction. Europe is almost certainly not going to catch up again with the United States and China in the technology industry for more than what is usually considered the foreseeable future (February 2, 2025 ip fray article). But at least there appears to be a realization that the EU should avoid shooting itself in the foot.
Given that the Commission itself does not know whether a new proposal will be made, and what shape or form it would have, this is not the time to reflect on what might happen further down the road.
Good riddance.