Regulation of SEPs in Europe – where are we now?

Several significant developments in the European Union (EU) on SEPs and FRAND have arisen in the last few months, including on the proposed FRAND licensing Regulation; the Commission's view of the German courts' approach to FRAND licensing disputes; and a complaint to the Competition Commission.

EU FRAND regulation

In July of this year we reported on the European Commission's draft proposal relating to regulation of FRAND litigation and licensing in the EU. Despite passing the first round of voting in the European Parliament, with a vote of 454 to 83 in favour, the proposed Regulation now faces some obstacles as it proceeds through the EU legislative process.

One significant setback for the progress of the legislation is the resignation of the Commissioner for the Internal Market, Thierry Breton, who had been a proponent of the Regulation. Shortly after Breton's resignation Ursula von der Leyen, President of the Commission, revealed Stéphane Séjourné as his proposed replacement. Séjourné's position in relation to the SEP Regulation is not yet clear. Von der Leyen's mission statement for Séjourné specifically refers to ensuring that IP policy continues to reward innovation and she has herself acknowledged concerns raised in the recent Draghi report into the EU's competitiveness over the broadening gap between innovation in the US and Europe.,

Séjourné has previously acknowledged the role that SEPs play in the development of new technologies and the importance of a SEP licensing regime that works well for licensors and licensees alike.

It remains to be seen whether changes in personnel will impact the perceived difficulty faced by innovators looking to commercialise patented technology in the EU, one of the key concerns raised in the report by the former Italian Prime Minister, Mario Draghi.

Another notable appointment is that of Henna Virkkunen as executive vice-president for Tech Sovereignty, Security and Democracy. Virkkunen has been critical of the SEP Regulation and its impact on Europe's role in the development of global standards, particularly in the areas of 5G and 6G technologies. She has specifically identified inadequate patent protection and an excessive regulatory burden as representing significant obstacles for SEPs. This position compliments von der Leyen's mission statement, which calls for simpler, proportionate rules.

While the fate of the SEP Regulation remains unclear, it does not look set for a smooth transition from draft legislation into law.

German approach to FRAND licensing

Another interesting development in the approach to SEPs in the EU is the recent amicus curiae brief submitted by the European Commission in the Munich Higher Regional Court case, VoiceAge EVS v HMD. The brief, which was released during Thierry Breton's tenure, urges the German Court to take a more rigid approach in applying the requirements for the conduct of FRAND licensing negotiations that are set out in the CJEU case of Huawei v ZTE.

The brief criticises the German courts' application of Huawei in following the German Federal Supreme Court's interpretation in Sisvel v Haier. In Sisvel, the German Court took a flexible approach to the Huawei steps, importing the implementer's willingness to take a licence from their subsequent conduct. The Commission urges a stricter approach, assessing a licensee's willingness based on its conduct at the time it declares its willingness to take a licence.

Complaint to the EU Competition Commission

One further development to keep track of is a recent antitrust complaint Xiaomi has filed with the EU Competition Commission against Panasonic. Despite both parties undertaking to be bound by a global FRAND licence determined by the UK courts, Panasonic has continued to pursue injunctions in the UPC and German courts. Xiaomi complains of this behaviour and suggests that Panasonic is in breach of its licensing obligations as set out in the CJEU Huawei v ZTE decision.

The Court of Appeal (England and Wales) has since awarded Xiaomi an 'interim' FRAND licence pending the outcome of a full FRAND determination by the UK courts (see our report here).

It remains to be seen what will become of Xiaomi's competition complaint following the Court of Appeal's ruling. Regardless of the outcome in this case, there is a question as to whether the EU Competition Commission will become a routine addition to multi-jurisdiction, multi-forum FRAND disputes between the major SEP holders and implementers.