Hat tip to Joff Wild of the IAM Blog, for reporting on the publication this morning by the European Commission of a document titled Communication from the Commission to the Institutions on Setting out the EU approach to Standard Essential Patents. It's not terribly long (just 13 pages), but in the interests of time I'll just reproduce the bullet points as presented in the document itself while noting two things in particular that caught my attention.
First, the Commission urges an improvement in the quality and accessibility of information recorded in SDO (standard development organization) databases:
- calls on SDOs to urgently ensure that their databases comply with the main quality features described above and will co-operate with SDOs to facilitate this process;
- calls on SDOs to transform the current declaration system into a tool providing more up-to-date and precise information on SEPs and will co-operate with SDOs in order to facilitate that process;
- considers that declared SEPs should be subject to reliable scrutiny of their essentiality for a standard, and will launch a pilot project for SEPs in selected technologies with a view to facilitating the introduction of an appropriate scrutiny mechanism.
Second, the Commission sets out certain general principles for FRAND licensing terms for SEPs. Among other things, this portion of the document states (at pages 6-7) that "Licensing terms have to bear a clear relationship to the economic value of the patented technology. That value primarily needs to focus on the technology itself and in principle should not include any element resulting from the decision to include the technology in the standard. In cases where the technology is developed mainly for the standard and has little market value outside the standard, alternative evaluation methods, such as the relative importance of the technology in the standard compared to other contributions in the standard, should be considered." The part about the value not including "any element resulting from the decision to include the technology in the standard" is consistent with a principle some of the U.S. case law has adopted, but inconsistent with Mr. Justice Birss's statement in Unwired Planet v. Huawei and with an argument made by Norman Siebrasse and me in our paper The Value of the Standard. (For previous discusion of this matter on this blog, see here.) The bullet points for this section are as follows:
- There is no one-size-fit-all solution on what FRAND is: what can be considered fair and reasonable can differ from sector to sector and over time. Efficiency considerations, reasonable licence fee expectations on both sides, the facilitation of the uptake by implementers to promote wide diffusion of the standard should be taken into account.
- Determining a FRAND value should require taking into account the present value added of the patented technology. That value should be irrespective of the market success of the product which is unrelated to the value of the patented technology.
- In defining a FRAND value, parties need to take account of a reasonable aggregate rate for the standard.
- The non-discrimination element of FRAND indicates that rightholders cannot discriminate between implementers that are 'similarly situated'.
- For products with a global circulation, SEP licences granted on a worldwide basis may contribute to a more efficient approach and therefore can be compatible with FRAND.
The Commission calls on SDOs and SEP holders to develop effective solutions to facilitate the licensing of a large number of implementers in the IoT environment (especially SMEs), via patent pools or other licensing platforms, while offering sufficient transparency and predictability.
The Commission will monitor licencing practices, in particular in the IoT sector. It will also set up an expert group with the view to deepening expertise on industry licensing practices, sound IP valuation and FRAND determination.
Third, in a section titled "A Predictable Enforcement Environment for SEPs," the Commission states that "When assessing the availability of injunctive relief, courts are bound by Article 3(2) of the IPR Enforcement Directive, and notably the requirement to ensure that injunctive relief is effective, proportionate and dissuasive. Given the broad impact an injunction may have on businesses, consumers and on the public interest, particularly in the context of the digitalised economy, the proportionality assessment needs to be done carefully on a case-by-case basis. The Commission feels that considerations need to be given to the relative relevance of the disputed technology for the application in question and the potential spill-over effects of an injunction on third parties" (p.10, section 3.2). I wonder if courts within the E.U., where injunctive relief still remains the default remedy for patent infringement at least outside the SEP context, will take this as a signal that they should be somewhat less wedded to that approach in a case in which an injunction would impose disproportionate harm on the infringer or the general public? If so, I for one would welcome that development. In any event, the bullet points for this section are:
The Commission considers that the FRAND process requires both parties to negotiate in good faith, including responding in a timely manner. Injunctive relief can, however, be sought against parties acting in bad faith (i.e. parties unwilling to take up a licence on FRAND terms), but it must be used proportionally.
The Commission will:
- work with stakeholders to develop and use methodologies, such as sampling, which allow for efficient and effective SEP litigation, in compliance with the industry practice of portfolio licensing;
- further facilitate the roll-out of mediation and alternative dispute resolution tools; and
- monitor the impact of PAEs in Europe.
Finally, the last (brief) section on open source and standards concludes with a bullet point stating that "The Commission will work with stakeholders, open source communities and SDOs for successful interaction between open source and standardisation, by means of studies and analyses."