The European Commission supports the improvement of the framework governing the inclusion of patent-protected technologies into standards and the facilitation of the licensing process for these technologies.
What is the relationship between patents and standards?
Patents provide incentives for research and development, and facilitate knowledge transfers. Standards ensure the rapid diffusion of technologies and the interoperability between products.
Many standards are based on patented technologies. For example, the mobile telecommunications industry is driven by a heavy reliance on standardisation, which comprises a great number of innovations protected by patents. 2G (GSM), 3G (UMTS), 4G (LTE), 5G and WiFi networks rely on thousands of patented technologies to work. Such communication standards are also key for the development of the 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.
Organisations engaged in standard setting have developed rules and practices to ensure the efficient licensing of patents that are essential for their standards ('standard-essential patents'). A smooth licensing environment is essential to the success of a standard. It helps to achieve broad and rapid diffusion of innovation and to give patent holders an adequate return on investment in research and development (R&D). It also gives all users of the standard fair access at a reasonable cost.
What the Commission is doing
Regulation establishing a framework protection for transparent licensing of Standard Essential Patents
On 27 April 2023, the Commission proposed a new framework for Standard Essential Patents (SEP), including
The SEP reform aims for a balanced framework, setting a global standard for SEP transparency with the following 2 objectives.
- Ensuring that both EU SEP owners and implementers innovate in the EU, make and sell products in the EU and are competitive in non-EU markets.
- Ensuring that end users, including SMEs and consumers, benefit from products based on the latest standardised technologies at reasonable prices.
The initiative aims to incentivise participation by European firms in the standard development process and the broad implementation of such standardised technologies, particularly in Internet of Things (IoT) industries.
The proposal contains the following building blocks.
- Establishment of a ‘Competence Centre’ at European Union Intellectual Property Office (EUIPO) to administer the elements below (registry, essentiality checks, FRAND determination, SME support services).
- SEP registration and essentiality checks: Establishment of an obligatory register where SEP holders record their SEPs, providing details on patent and standard. Selected SEPs are subject to an annual essentiality check.
- FRAND determination:This procedure aims to help SEP owners and implementers to agree on a FRAND licence. The FRAND determination of maximum 9 months is mandatory before a SEP owner or an implementer goes to Court thus offering a safe harbour for negotiations without the threat of litigation or delaying tactics.
- SEP aggregate royalty rate: SEP holders and also implementers may notify the expected maximum aggregate royalty to the Competence Centre. Alternatively, both SEP owners and/or implementers can ask a conciliator to recommend a (non-binding) aggregate royalty.
- SME support measures: Free advisory services. Reduced fees for registration of SEPs and for essentiality checks and access to the SEP register. Promoting more favourable FRAND terms and conditions for SMEs.
Webinar series on Standard Essential Patents
We organised a number of webinars on Standard Essential Patents (SEPs) in winter/spring 2021 to take stock of the state-of-play, share some of the ideas developed under recent actions and discuss with stakeholders potential improvements to the framework governing SEPs.
See more on the webinar series on Standard Essential Patents.
2020 action plan on intellectual property
The intellectual property (IP) action plan, ‘Making the most of the EU’s innovative potential - An intellectual property action plan to support the EU’s recovery and resilience’ of November 2020 proposes ways to improve transparency and predictability in the licensing of SEPs. These are key elements for the digital transformation of Europe's industry, such as the roll-out of connected cars and other Internet of Things (IoT) products.
Despite guidance provided in the 2017 Communication ‘Setting out the EU approach to SEPs' (see below), we observe continued friction in the uptake of SEP-protected standards. In addition, the landscape gets more complex as we move to 5G and beyond, and the number of SEPs, as well as the number of SEP holders and implementers, are increasing. Many new players are not familiar with SEP licensing, but need to enter into SEP arrangements. Navigating the SEPs landscape may pose in particular challenges for smaller players, such as SMEs and start-ups active in the IoT. The current system does not offer all the tools businesses need in order to come to fast, effective and fair SEP licensing arrangements. Licensing negotiations take a long time and may end in conflict and litigation, which undermines EU businesses on all sides (notably SEP holders and implementers).
In November 2017 the Commission adopted, as part of the IP package on enforcement, the Communication, 'Setting out the EU approach to Standard Essential Patents'. It provides for a clearer framework to incentivise the development of, and ease the access to key technologies that enable interconnection and connectivity. Stakeholders will have better legal certainty for the development and licensing of technologies required for the hyper-connected society. The Communication covers 3 key aspects of SEPs. It
- contributes to a more transparent environment for negotiations between SEP holders and potential licensees
- proposes common valuation principles for SEPs technology
- suggests ideas for a balanced and predictable enforcement regime
In the 2017 Communication, ‘Setting out the EU approach to Standard Essential Patents’ the Commission presented its views on SEPs with a holistic and balanced approach. It stated that sound policy relating to the treatment of SEPs should, on the one hand, incentivise contribution of best technologies to global standardisation efforts, while on the other hand, foster smooth access to standardised technologies for implementers. This approach was supported by Council Conclusions 6681/18.
The communication announced that the Commission would monitor the SEP licensing markets with a particular focus on Internet of Things (IoT) technologies. In this context, it would also set up an expert group to deepen expertise on industry licensing practices, sound IP valuation and FRAND (fair, reasonable, and non-discriminatory) determination.
The expert group was created by a Commission decision in July 2018 and was composed of 15 members. More information about the activities of the expert group can be found on the Group of experts on licensing and valuation of standard essential patents page in the register of Commission expert groups.
The members of the expert group were in particular invited to
- Look at licensing and valuation practices, and techniques that are currently applied and/or immediately available to address the identified challenges, with a particular focus on IoT
- Generate ideas looking forward to the future framework for SEPs licensing and valuation, taking into account the particular needs of small and medium-sized enterprises (SMEs). These ideas will feed into the future debate on SEPs alongside other studies and analysis.
Contributions of the expert group
- Full contribution of the Group of Experts on Licensing and Valuation of Standard Essential Patents ('SEPs Expert Group')
- Executive summary of the contribution of the SEPs Expert Group
- Aims, methods and outcome, including a dissenting opinion
- Overview of issues encountered by SEP holders and implementers in general and IoT in particular
- Analysis of key challenges and proposals for improvements for further debate
Further policy measures
The contributions of the expert group to the SEP debate do not reflect the views of the European Commission. They are intended to advise the Commission and to stimulate discussion among all relevant stakeholders. The contributions of the expert group to the SEP debate do not constitute policy positions that are binding to EU Member States or the Commission. Possible policy follow-up will be based on considerations by the relevant bodies and institutions within their respective fields of competence.
- Support study ‘Economic impact assessment on Standard Essential Patents (SEPs)’ (2023)
- Study ‘Essentiality checks for potential SEPs: A framework for assessing the impact of different policy options’ (2023)
- Pilot study for essentiality assessment of Standard Essential Patents, Joint Research Centre (JRC) study (2020)
- Landscape study of potentially essential patents disclosed to ETSI, JRC study (2020)
- Making the rules: The governance of Standard Development Organisations and their policies on Intellectual Property Rights, JRC study (2019)
- The relationship between open source software and standard setting, JRC study (2019)
- Licensing terms of Standard Essential Patents: A comprehensive analysis of cases, JRC study (2017)
- Transparency, predictability and efficiency of SSO-based standardisation and SEP licensing, CRA study (2016)
- Landscaping study of standard essential patents, commissioned by the European Commission (2016)
- Patent assertion entities in Europe: Their impact on innovation and knowledge transfer in ICT markets, JRC study (2016)
- Fair, reasonable and non-discriminatory (FRAND) licensing terms. Research analysis of a controversial concept, JRC study (2015)
- Patents and standards: A modern framework for IPR-based standardisation, commissioned by the European Commission (2014)
From October 2014 to February 2015, the Commission held a public consultation on patents and standards. This consultation allowed stakeholders interested in standards that involve patents to provide their views on
- the performance of the current governing framework
- how the framework should evolve to ensure that standardisation remains efficient and well-adapted to a fast-changing economic and technological environment