European Commission Communication setting out the EU Approach to SEPs – Feedback

06 February 2018. The FSA very much welcomes the European Commission’s decision to issue forward-looking guidance to European industry on the licensing of Standard Essential Patents (SEPs). The guidelines are an important step towards clarifying the meaning of fair, reasonable and non-discriminatory (FRAND) licensing and the framework within which standardized technology is licensed.

1. In its introduction, the Commission highlights the importance of patents and standards, and the interplay between them for the benefit of innovation and growth. This overall statement around the promotion of innovation is key to the interest of the FSA’s membership, reflecting the R&D intensive nature of our members’ businesses.

2. In its licensing principles, the Commission emphasizes that a FRAND undertaking creates the legitimate expectations on the part of third parties that the proprietor of the SEP will in fact grant licenses on such terms. As the Commission indicates in the introduction, “once a standard is established and the holders of the SEPs have given a commitment to license them on fair, reasonable and non-discriminatory (FRAND) terms, the technology included in the standard should be available to any potential user of the standard”. This section confirms the Commission’s prior statements in the Horizontal Guidelines that “in order to ensure effective access to the standard, the [SSO] IPR policy would need to require participants wishing to have their IPR included in the standard to provide an irrevocable commitment in writing to offer to license their essential IPR to all third parties on fair, reasonable and non-discriminatory terms”. It also corresponds to the FSA’s “Key Principle” that “a license for a SEP should be available at any point in the value chain”, in relation to which the FSA also has published a White Paper. We also refer to the articles published recently by Karl Heinz Rosenbrock, former DirectorGeneral of ETSI, explaining why licensing at all levels is required under the ETSI IPR Policy once a FRAND undertaking has been given.

3. The specific licensing principles that the Commission lists for evaluation of reasonable FRAND rates are of key importance, and well aligned with the FSA’s Key Principles. We particularly welcome the following important clarifications:
(i) “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”;
(ii) The value added by the patented technology “should be irrespective of the market success of the product which is unrelated to the patented technology”;
(iii) And recognizing the concern of royalty stacking, “in defining a FRAND value, an individual SEP cannot be considered in isolation. Parties need to take into account a reasonable aggregate rate for the standard”.

Download full paper here.

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