Context: The European Commission’s (EC) proposal for an EU regulation on standard-essential patents (SEPs) that was presented last year by then-commissioner Thiery Breton, who incredibly said on stage that those criticizing the proposal were “bad actors” among SEP holders.
What’s new: Bye bye, Breton! This morning, he published his resignation letter on X (formerly Twitter) (link), explaining that the French president originally proposed him for the new Commission, but EC president Ursula von der Leyen, behind his back, asked the French government to replace him, which is now going to happen. He blames this on “personal” reasons that have nothing to do with his record.
Direct impact: The EC has a first-rate opportunity now to revisit the flawed SEP Regulation proposal. The primary backer at the EC level was Mr. Breton, and this is a bad part of his legacy. There was limited (if not lukewarm) support from Mrs. Vestager, who for entirely different reasons and on a far more positive note (in fact, a triumphant one with respect to the Apple-Ireland tax dispute) is leaving the EC as well. What’s really important is that the Munich Higher Regional Court will hear outside counsel for the EC’s Directorate-General (DG) for Competition (DG COMP) on October 31 with respect to a badly-needed realignment of German SEP case law with EU law. A more balanced approach by German courts (if all else fails, as a result of a referral of the matter to the European Court of Justice (ECJ)) could effectively obviate the need for the EU SEP Regulation.
Wider ramifications: There was a good side and a bad side to “Bretonism” (meaning his particular approach to EU politics). The positive part was that he very much realized in how bad a shape the EU is with respect to global competitiveness. America and Asia are eating Europe’s lunch. The numbers are clear, whether it’s growth rates or the fact that software engineers earn several times (!) more on the other side of the Atlantic. Mr. Breton wanted to take bold actions to strengthen the EU. But the bad side was the limited depth of his understanding of the “solutions” he proposed coupled with the unrestrained ambition to position himself as Europe’s greatest shaker and mover. As a result, he prioritized speed and quantity over the quality of the legislative initiatives he backed. That applies not only, but also to the EU SEP Regulation. Another example is the AI Act, which is actually going to weaken the EU and comes with a lot of flaws that could have been avoided by taking the necessary time to do a good job.
Theoretically, the EC’s “services” (the DGs) are independent, but in practice, the commissioners in charge exercise a lot of control. The EU SEP Regulation is not a strategic cross-DG initiative. It was designed by people with good intentions but a lack of understanding of how SEP licensing and enforcement work, and those people were basically in one unit of DG GROW (Internal Market; until yesterday, Mr. Breton’s remit) and in Mr. Breton’s cabinet.
Mr. Breton did some positive things, but with respect to the EU SEP Regulation: good riddance!
DG GROW was already jumping the gun by commissioning a study on a piece of legislation that may never be enacted, or at least not in the current form (July 11, 2024 ip fray article).
As ip fray already explained more than six months ago, shortly after the European Parliament vote on the SEP Regulation (March 1, 2024 ip fray article), the allegedly EU-wide SEP enforcement problem is purely one of unbalanced case law in Germany, first and foremost the intellectually dishonest Sisvel v. Haier decision. It would be plausible if a solid majority of all implementers who get sued were enjoined, considering that companies will be more inclined to sue unwilling than willing licensees, but it doesn’t make sense that not a single implementer has ever mounted a successful FRAND defense in Munich, which is where most of those cases are brought (August 5, 2024 ip fray article). There also hasn’t been any successful FRAND defense in any other German court in several years with the sole exception of a set of Dusseldorf cases involving a single patent pool-related question that represents an outlier.
If German courts heed DG COMP’s guidance that the ECJ’s Huawei v. ZTE framework must be applied strictly sequentially (August 4, 2024 ip fray article), and if the Unified Patent Court (UPC) never makes the mistake of adopting Sisvel v. Haier (which is unlikely, given that DG COMP has masterfully and authoritatively discredited that aberration), who needs an EU SEP Regulation?
Even Mr. Breton won’t be pushing for it anymore, at least not as an EU commissioner.
The EU is in terrible shape, not only but especially economically, and the way in which Mr. Breton has just resigned doesn’t reflect favorably on the horse-trading in Brussels that hardly ever has anything to do with the actual qualifications of candidates. This is not a good day for the EU. But the most positive thing that could come out of it would be the withdrawal of the ill-conceived proposal for a SEP regulation.