Standard Essential Patents: key developments for SEPs and FRAND commitments

The competitive impact of SEPs, i.e. patents whose implementation is necessary for the realisation of a product or process conforming to a standard, is evident. These patents may in fact confer upon their holders a strengthened monopoly: one that not only covers the technology constituting the subject matter of the patent, but which also extends to the entire standard technology and to the products that incorporate it.

The exercise of the right of exclusivity (or exclusion) resulting from the ownership of an SEP may also be relevant from a competition perspective under Article 102 of the Treaty on the Functioning of the European Union (TFEU). This is because in order to regulate the monopoly held by holders of an SEP and the creation of market access barriers, SEPs must be licensed on fair terms which respect the “FRAND” regime (Fair, Reasonable And Non-Discriminatory).

The Current state of SEP enforcement in Europe and before the UPC

Some judicial guidance on how to handle and evaluate negotiations among SEPs holders and implementers, where it is possible to apply for preliminary injunctions and the determination of a FRAND Royalty, has arisen following the notable decisions of the Court of Justice for the European Union (CJEU) in Huawei v. ZTE (16 July 2015), the UK High Court in Unwired Planet v. Huawei (High Court of England and Wales, 5 April 2017) and the German Supreme Court in Sisvel v. Haier (5 May 2020 and 24 November 2020).

Furthermore, with the Unified Patent Court (UPC) opening its doors on 1 June 2023 and beginning to handle cases involving Preliminary Injunctions (PI) the question which now arises is whether the new case law of the UPC provides room for granting an injunction in urgent proceedings involving SEPs.

The EU Commission’s SEP Proposal of 27 April 2023

In light of these considerations, on 27 April 2023 the EU Commission announced its latest proposal for SEP Regulation.

The proposal provides for a more regulated approach to SEP licensing and litigation, and includes the following provisions:

• establishment of a “Competence Centre” at the EUIPO
• SEP registration and essentiality checks
• FRAND (mandatory) determination
• SEP aggregate royalty rate determination
• SME support measures

The aim of the proposed regulation is to facilitate SEP licensing by increasing transparency, reducing information asymmetries between SEP licensors and implementers, and facilitating the agreement of “Fair, Reasonable and Non-Discriminatory” (FRAND) licenses. The proposal has sparked a contentious debate with institutional bodies, industry stakeholders and scholars, especially regarding its potential effects on the European economy and technological capabilities. Nevertheless, it was approved by the European Parliament on 28 February 2024. Next step will be the approval by the European Council.

Next steps: why take note?

The economic and geographic impact of the proposed Regulation cannot be underestimated. The effect of the proposed rules will likely extend far beyond Europe in relation to standardization, patenting, technology transfer and litigation activities due to the global nature of the markets for standardized technologies and will significantly change the way in which SEPs are being licensed and litigated in the EU going forward.

It is worth recalling that the use of Standard Essential Patents is not solely confined to the mobile telecommunications industry, but extends throughout our hyper-connected society, for example in the field of the Internet of Things, in sectors such as consumer electronics, the automotive industry, and the electricity grid industry as well as the smart healthcare sector.

Clearly, the impact of SEP regulation will be felt across all major industries and consequently being up to date with the changes to the ongoing legal framework is more important than ever not only for the valorisation and management of a patents portfolio but also, from the implementers side, to avoid the risk of possible patent infringement.

Read more in our global trade secrets and patents series:

• The Unified Patent Court: emerging trends from the first nine months
• A changing landscape for AI patenting in the UK
• Supplementary Protection Certificates (SPCs): recent developments in EU case law
• The limitation of patents in ongoing revocation procedures in Spain
• What’s plausible? The UK Court of Appeal revisits the ever shifting concept
• Navigating the New Frontier: AI Patentability at the European Patent Office
• Global trade secrets update