Context: The primary sponsor within the European Commission (EC) of the proposed regulation on standard-essential patents (SEPs), Thierry Breton, has left the building, but not to a crowd calling for an encore (September 16, 2024 ip fray article). He pre-empted the institution’s announcement of the new Commission by only one day.
What’s new: Today EC president(-elect) Ursula von der Leyen announced her nominees for the new Commission (EC website). Finnish conservative MEP Henna Virkkunen will be the Executive Vice President (EVP) in charge of tech sovereignty and other topics, and French minister (from Macron’s libertarian party) Stéphane Séjourné will be the EVP in charge of, inter alia, the Single Market.
Direct impact: The EC president’s mission letters to the two, as well as the plenary speech that Mrs. Virkkunen gave in the European Parliament (EP) earlier this year, suggest that the EC will, at minimum, give serious consideration to a withdrawal and/or overhaul of the proposed SEP Regulation. Given that there is significant resistance to the proposal in the EU Council, this means that misguided MEPs who never figured out (actually, some of them may even have tried to figure out) the fundamental flaws of the proposal are not going to see their version of the bill adopted in all likelihood.
Wider ramifications: While ip fray and the company running it were founded outside the EU because of a strong disbelief in the bloc’s socioeconomic future compared to the world’s dynamic economies, there is a possibility of a surprising wind of change blowing through Brussels (this allusion to a song celebrating the demise of the Soviet Union is intended) with respect to industrial policy, one major harbinger of which was the recent publication of the Draghi Report (which is right on some issues though wrong on common debt and excessive subsidies being the right way forward).
The confirmation process will take a couple of months, and changes are always possible, but the two EVP nominees mentioned above are pretty sure to be confirmed. Let’s just take a look at three text passages that sound like the potential death knells of the EU SEP Regulation in its current form.
1. EVP-designate Virkkunen’s plenary speech on the SEP Regulation proposal
Here’s what Mrs. Virkkunen said in late February in the Hemicycle (plenary hall) of the European Parliament about the importance of strong patent rights and the shortcomings of the bill that a vast majority of her colleagues adopted against better advice:
Henna Virkkunen (PPE). – Mr President, Commissioner, dear colleagues, for Europe to stay competitive we need to do more to encourage innovation. This requires continued investment in research, development and innovation. When talking about innovation, the importance of patents needs to be recognised.
Therefore, it is important to maintain a balance between the interests of patent holders and the users of standards. Reducing patent protection will increase risks as it will discourage European companies from participating in the development of global standards by undermining patent protection.
I have to say that this proposed regulation can have a negative impact on Europe’s competitiveness, especially in the development of 5G and 6G technologies, where standard essential patents play a crucial role.
We know that 5G and 6G technologies are extremely important to the EU in developing its strategic autonomy and its global competitive edge in digital technologies. If Europe wants to keep its innovative edge we need to have stable and meaningful intellectual property rights such as patent rights.
I have to say that this proposed compromise does not take into account patent protection and creates too much regulatory burden, especially to the standard essential patent holders.
2. EC president-elect’s mission letter to EVP Virkkunen
“You will be responsible for the delivery of the policy objectives and targets within your portfolio. […]”
“You will ensure that existing rules are fit-for-purpose and focus on reducing administrative burdens and simplifying legislation. […]”
“New legislation must ensure that our rules are simpler, more accessible to citizens and more targeted. You will ensure the principles of proportionality, subsidiarity and Better Regulation are respected, including through wide consultations, impact assessments, a review by the independent Regulatory Scrutiny Board and a new SME and competitiveness check. Proposals must be evidence-based […]” (emphases in original)
“You will work to promote EU digital norms and standards internationally […]” (emphasis in original)
3. EC president-elect’s mission letter to EVP-designate Séjourné
It contains the same paragraph starting with “New legislation” as shown in the previous section.
“We must ensure that innovation and research, science and technology are the heart of our economy […]” (emphasis in original)
And here’s the strongest paragraph of them all, a single sentence that runs counter to the spirit of the EU SEP Regulation:
“You will ensure our intellectual property policy continues to reward innovation and creative and step up enforcement of the current rules.” (emphasis in original)
So, it’s about stepping up and not impeding, delaying or obstructing enforcement. An extra year of hold-out for the questionable “benefit” of a non-binding opinion by a single and more or less randomly-picked person is irreconcilable with that policy goal.
ip fray promotes balanced SEP enforcement and calls for an adjustment of lopsided German case law, but applauds the EC president(-elect) for what appears to be a departure from what led to major mistakes in the past.