Context: The European Union is presently working on legislation designed to complicate and delay the enforcement of standard-essential patents (SEPs) (March 15, 2024 ip fray article). The proposal received overwhelming support in the European Parliament (EP), but the concerns of the experts in the relevant EU Council working group have not been addressed yet. On top of the legislative initiative, the European Commission (EC) is trying to persuade the German courts to adjust their SEP case law (March 26, 2024 ip fray article). And with a focus on non-SEPs, net licensees achieved that the German legislature amended the country’s Patent Act in 2021. The most controversial part of that reform inserted a proportionality test into the injunction statute, but no injunction has been denied or tailored on the basis of that new statute in the 2.5 years since it took effect.
What’s new: Emboldened by the support they received from the EC and the EP in the SEP context, net licensees are now making a new push for legislative intervention that would result in the denial or tailoring of patent injunctions. On Monday (March 25, 2024), IP2Innovate, a Brussels-based virtual association whose members include five of the world’s Big Tech corporations as well as some other (partly European) companies, made a public call on the EC to propose “targeted amendments to EU intellectual property law to ensure that European patent courts consider the proportionality of remedies in their handling of patent litigation cases.” (March 25, 2024 IP2I press release)
Direct impact: The call would be stronger if any Members of the European Parliament (who are now effectively on the campaign trail, but many are virtually certain to be re-elected) had been quoted in the press release. It would also have been stronger if other industry groups had joined the call. But it should not be underestimated. There is a possibility of IP2I already having advanced discussions with EC officials concerning an amendment to the bloc’s Intellectual Property Rights Enforcement Directive (IPRED). The call may serve the purpose of giving EC-internal champions of that cause some ammunition.
Wider ramifications: There are presently patent-related lobbying initiatives around the globe. Most of them are SEP-specific, but IP2I’s call shows that access to injunctive relief over any kind of patent is also under attack. In the U.S., there are politicians who would like to effectively overrule the Supreme Court’s eBay v. MercExchange decision on access to patent injunctions, but no such initiative has had traction thus far. There are, however, repeatedly calls for measures that would make it harder to obtain exclusion orders (U.S. import bans) from the U.S. International Trade Commission, and Apple is presently lobbying hard for such a change as the New York Times reported two weeks ago.
IP2Innovate and the Fair Standards Alliance (FSA) are independent organizations. Essentially, the membership of IP2I is a subset of the FSA’s membership, which is counterintuitive given that the FSA is more narrowly focused on SEPs while IP2I deals with patent policy in general, speaking out on SEP-specific questions only rarely.
Some more companies are indirect backers of IP2I, as CCIA and ESIA are “association members” with various companies among their individual members, though the overlap between CCIA and IP2I is very significant.
The latest call definitely overpromises where it says a more restrictive granting of patent injunctions would “spur innovation and, in turn, help to address Europe’s lagging competitiveness.” The companies primarily affected by patent injunctions in Europe are actually non-European technology companies, such as the Big Tech players behind IP2I. Whether they come under pressure occasionally to pay patent royalties is unrelated to the question of European competitiveness.
The press release then relies on data from Darts-ip, according to which 99% of European patent cases in the 2018-2020 period “saw no proportionality assessment,” though the number was even higher (99.7%) in the prior three-year period (2015-2017). And it may very well be that the few cases in which proportionality played a role were to a disproportionate extent UK cases.
IP2I says it’s still too early to reach a conclusion on whether the German reform worked, but they can’t point to a single case in which proportionality was outcome-determinative to any extent. They focus on whether defendants raised such a defense:
“Since the reform there have been at least 17 court cases where proportionality was pleaded by the defendant during a 15-month period, compared to only two cases over the preceding six-year period.”
The number of German cases in which a proportionality-based defense to injunctive relief was raised must have been far higher. It actually became pretty commonplace for defendants to German patent infringement actions to make that argument. But many cases are settled prior to a ruling, and if a patentee doesn’t prevail on the technical merits, the proportionality defense is not reached. Therefore, Darts-ip’s numbers are not too meaningful, other than indeed showing that hardly anyone even tried to raise a proportionality defense before the 2021 reform.
The bigger problem for those advocating proportionality in this context is how the courts have adjudicated those proportionality defenses. In SEP cases it consistently came down to “focus on FRAND, please.” In non-SEP cases the message from the courts has been more like “go apply for a conventional compulsory license.”
It remains to be seen how much evidence the EC is going to require this time around. The Darts-ip figures are of no evidentiary value with respect to the alleged harm. During the German patent reform debate in 2019-2021, there was only one case (albeit a major one) that proponents of a stronger proportionality test pointed to: Broadcom sued Volkswagen and/or its Audi subsidiary over a non-SEP (which came under invalidation pressure quite a while after the €500 million VW-Broadcom settlement).
It is unsurprising that IP2I looks at two EU institutions’ (EC and EP) willingness to soften SEP enforcement (though the EU Council is the most powerful one and has not yet adopted a common position) and feel they might now get from the EU what they didn’t really (just symbolically, but without any practical effect in a single case) get from the German legislature. It’s clear now that there will be some lobbying activity concerning proportionality, also in the EU Parliament, but probably not much before the late summer (when it goes back to work after the elections).
While SEP net licensees far outnumber SEP net licensors, an attack on the patent system at large faces more resistance. It involves more companies, also many small and medium-sized ones that rely on patent protection, and additional segments of the economy, such as the chemical and pharmaceutical industries.