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  • Marta Beckwith

Legal Affairs Committee Votes to Adopt Updated Version of SEP regulations - EU Proposal – Part Six

I have previously posted in depth on the EU’s “Proposal for a Regulation of the European Parliament and of the Council on standard essential patents and amending Regulation (EU) 2017/1001” (“Proposal”).[1]  I am pleased to report that, on Wednesday (23/1/24 since we’re being European), the EC’s Legal Affairs Committee (“JURI”) adopted a modified version of the Proposal for a Regulation of the European Parliament and of the Council on standard essential patents and amending Regulation (EU) 2017/1001 (“Proposal”).  The vote was 13 votes in favor, no votes against and 10 abstentions.[2] 


I want to applaud the vote of JURI to move forward.  There already are a number of posts from SEP licensors exclaiming their “disappointment” in the move, with a few commentators making the grandiose claim that the new Proposal threatens the entire future of telecommunications leadership in Europe.[3] Notwithstanding these (unsupported) claims, nearly everyone recognizes that the current system is not working well. There is a growing consensus among courts, regulatory agencies and both net licensors and net licensees that the SEP licensing system needs to become “more transparent, efficient, and predictable.”[4] 


The Proposal’s overarching goal is to try to create a better, fairer more transparent system - a system that encourages innovation on all sides including by those that contribute to standards, and those that merely implement such standards in interesting and innovative products (and those that do both). 


Ms. Merete Clausen, Director for Investment for the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (colloquially known as “DG GROW”), who attended the meeting said it best in her remarks (which hopefully I have captured correctly):[5]


The committee has delivered a strong signal that the EU wants a fair, and efficient, and transparent SEPs licensing ecosystem that fosters innovation both upstream and downstream, benefiting the EU SEP holders and licensees alike by bringing greater transparency and predictability in a market that is currently that is characterised by substantial power asymmetries.

. . .

I think we have to look at innovation as something that happens both on the SEP holders and on the implementers side and both sides will profit from larger transparency and predictability. We need a wide innovation base in the EU, and most member states have both SEP holders and licensees in their geographies, and the current lack of transparency incentivise some unfair business practices. Under our proposal we aim to ensure that actors that have strong portfolios that innovate, effectively will profit. Lack of legal certainty and lack of transparency are poison in a sense to innovation and investment. That is what is going to make the EU an attractive place to do business and place investments, so we think that the proposal will benefit the whole ecosystem and we also have to keep in mind while currently being a net licensor, in the future might rather be a net licensee, and therefore have an interest in having a transparent system now


Director Clausen hit the nail on the head when she stated that SEP policy needs to support and incentivize implementers in addition to contributors to standardization.  These days, most of the innovation in the networking and telecommunications space is not coming from standards developers, but rather from those implementing the standards.  For example, the Long-Term-Evolution (“LTE”) portion of the 3GPP 4G cellular standard was originally released by ETSI in December, 2008.  While there has been some innovation since then to improve and update the LTE standard, what we are using today is still based on original ideas that were finalized more than fifteen years ago.[6] 


Contrast that with the absolute boom in innovation on the implementer side in the last fifteen years.  The Internet of Things (“IoT”) revolution has brought us connected cars, connected homes, smarter manufacturing, smart grids and other greener technology that use the 4G/LTE or Wi-Fi standards (or both) but include much much more than that.[7]


Fifteen years ago, the cell phones that existed were not nearly as cool (or as functional) as the ones we have now.  Over the past fifteen years, incredible technology unrelated to the LTE standard has been improved or created that is being used in today's phones (and in many other products). The screen on my current phone is crystal clear – thank you OLED and similar display technologies.  Cameras are nearly a thing of the past because cell phone cameras take such good pictures – thank you lens, optical image stabilization, computational imaging software and complementary oxide semiconductor (CMOS) technology.  And of course, the software running those phones has improved dramatically.  Fifteen years ago, the idea of using apps on your phone was in its infancy, the Apple App Store had just launched, and the Android operating system was only a few months old.[8]  


Similarly, the Wi-Fi Alliance recently announced that they have certified over 80,000 products as complying with the 802.11/WiFi standard.  The Wi-Fi Alliance certifies between 4,000-6,000 different products each year.[9] The wide-range of products certified by the Wi-Fi Alliance includes cell phones, computers and many IoT devices. The list of new and innovative products that implement such standards (but that are new and innovative because they do things other than implement those standards) just goes on and on. 


The Proposal is an attempt, at least in the EU, to fix what most people acknowledge is a system in need of fixing and to create a more balanced playing field that supports implementation, as well as standards development.  As my previous posts make clear, the Proposal is not perfect.  But, let’s be realistic.  No proposal will satisfy everyone, and no regulation is ever perfect.  Let’s not let the perfect be the enemy of the good.  We should be working with, not against, reasonable attempts to improve the system.

 

[1]          Here are links to all of the related posts:

[4]          Even companies that opposed the Proposal agreed that more information and transparency is needed.  See Feedback from: Nokia (europa.eu) (“Nokia shares the European Commissions desire for more transparent, efficient, and predictable SEP licensing”).    

[5]          You can hear her remarks here (starting around the time stamp 16:45:00): Committee on Legal Affairs - Multimedia Centre (europa.eu).

[6]          And yes, ETSI has released a new 5G standard that is being implemented in various places around the world.  But, the roll-out of telecommunications systems based on the new standard has been slow, and many of the so-called 5G networks are really 4G networks with an overlay of some 5G technology. 4G/LTE is still the most used standard for wireless telephone, i.e. cellular, communications.

[7]          The EU has a directive to encourage and support green technologies.  See my post on this: A Greener Future - EU Proposal Part Two (sepessentials.com).

[8]          Here’s what cell phones looked like in 2008.  Best smartphones of 2008 - CNET

[9]          See Interview: A bright future for Wi-Fi as Wi-Fi Alliance passes 80,000 certified products - Wi-Fi NOW Global (wifinowglobal.com).  And of course, that is just the certified products, not all products that implement the standard.

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