Roughly two months ago, on 27 April 2023, the European Commission published its much-anticipated patent package, including a proposal for a regulation on standard essential patents (SEPs) and their enforcement in the European Union (EU).
Following the publication of the European Commission’s proposal, it is now for the European Parliament and the Council to discuss and amend the proposal in parallel with the aim of forming their respective positions.
In the Council, the Swedish Presidency has not discussed the proposal in detail given it was only published during the very late stages of its mandate. Sweden has now passed on the baton to Spain, which assumed the rotating Council Presidency on 1 July 2023 and will take the lead on finding a compromise among the positions of Member States. In the European Parliament, the proposal has been allocated to the Committee on Legal Affairs (JURI) which will take the lead on discussing and amending the European Commission’s proposal taking into account the opinion of the Committee on Internal Market and Consumer Protection (IMCO). Just last week, the European Parliament appointed Marion Walsmann, a German MEP and member of the European People’s Party to be the lead rapporteur on this file. Ms Walsmann, a previous member of the Landtag of the state of Thuringia, Germany (Thüringen) and a member of different administrations of Thuringia, for which she served as State Minister of Justice, State Minister of Finance, Head of the State Chancellery and also as State Minister for European Affairs between 2009 and 2013, was elected into the European Parliament in 2019. During the current mandate, Walsmann has shown interest in intellectual property issues. In fact, in 2021, she was the rapporteur for the European Parliament’s report on an intellectual property action plan to support the EU’s recovery and resilience, which so far has been her most notable public contribution on SEPs and patents in general.
A core element of the proposed regulation is the so-called FRAND determination (title VI of the proposal), a kind of conciliation / arbitration procedure that the European Commission would like to see precede national court proceedings. Before two parties fight in court about FRAND terms for a license, these parties would, according to the ideas of the European Commission, go through the conciliation procedure. Ideally, as the Commission sees it, the so-called conciliator would submit a proposal for FRAND terms at the end of this FRAND determination which would then help appease the licensing dispute and make litigation unnecessary. While rate-setting proceedings before national courts have taken quite some time for courts to come up with FRAND terms, and in certain cases already the fist-instance of such proceedings has taken multiple years, the European Commission envisions something faster. The current proposal sets out that the FRAND determination shall not exceed nine months unless both parties agree upon a different timeframe.
Since the patent package was published in April 2023 and many industry stakeholders were closely following it, a lot has been said and published in relation to its content and its potential effects. For instance, there are many perspectives on whether the regulation would endanger Europe’s role in standard setting or incentivize innovation by downstream industries implementing standardized technologies, especially in the IoT sphere. The FRAND determination, and the decision to install a mandatory conciliation procedure that the parties would have to go through, before they can turn to courts, has in many cases been at the centre of the (legal) debate. Some argue that there would be no need for changes to the European legal framework to enforce SEPs at all, and that the impact assessment published by the European Commission would lack sufficient evidence of market failure or aberrations. On the other hand, some members of the judiciary have called for very similar legal changes to those now proposed by the European Commission. In a two-part paper only available in German (GRUR 2022, 446 and GRUR 2022, 513), three judges of the Regional Court of Munich I,
sometimes labelled to be the hotspot of SEP enforcement in Europe over the last years, outlined why they believe that patent infringement actions seeking injunctions and the current legal framework to enforce individual SEPs are inadequate and inappropriate to properly address and solve SEP licensing dispute covering entire portfolios. Ultimately, the three judges, Axel Walz, Sebastian Benz and Tobias Pichlmaier, call for legislative intervention (something that certain stakeholders have claimed to be unnecessary) and urge the legislator to consider a mandatory conciliation proceeding for SEP licensing disputes modelled after similar proceedings in German copyright law. Interestingly, the judges propose a timeframe of twelve months, or even eighteen months if the conciliation board decides to extend the term and urge the legislator that throughout that timeframe infringement lawsuits before national courts should be inadmissible. In that sense, the European Commission’s proposal does not go as far as these members of the bench have been advocating.
The negotiating team at the European Parliament, consisting of lead-rapporteur Ms Walsmann and the shadow rapporteurs from the other political groups, as well as the IP attachés from the Council will now kick off their work, and will need to consider the very different reactions to the proposed regulation from different stakeholders. We shall expect the co-legislators to form their respective positions by the end of this year, paving the way for interinstitutional negotiations (trilogues) to commence in early 2024. If this timeline is followed, we might know whether a final agreement on this piece of legislation could be reached before the European elections, which will take place in early June 2024. Whether the ideas voiced by the three Munich judges will still be part of the proposed regulation by then will be something to look out for as we closely watch the legislative process of this proposal. In case you have questions regarding the proposed regulation or the status of the legislative process, please get in touch with a member of our Patent Litigation team or our EU Regulatory and Public Affairs team.