Give innovators the boost they need: fairness and transparency
How often have we heard about the importance of innovation for companies in Europe to stay competitive? Well, now we have a chance to make a real difference to help European industry develop new, innovative smart and sustainable products and services.
What is at stake is the little-known but hugely important issue of licensing of so-called standard essential patents (SEPs). These are the patents that large and small businesses rely on to use technical standards for technologies such as wifi, 5G or bluetooth. Innovators use these technologies to make TVs smart and cars connected. Standards enable numerous innovative devices to interoperate with each other.
As one of the largest suppliers for automotive electronics, we at Continental know there is an enormous potential for more climate protection, fewer accidents, autonomous driving and much more. But in order to achieve this, companies need more than their own innovative strength. Anyone who wants to develop networked applications needs fair access to standardized technology. In practice, they need direct licenses on fair terms or the option to purchase components from suppliers licensed for standardized technologies such as 4G, 5G and, in the future, 6G, and also wifi, ethernet, and other standards. This affects not only the automotive industry, but all manufacturers of connected goods and applications for the internet of things (IoT). This ranges from connected vehicles and smart meters to entire cities with intelligent buildings and traffic monitoring, to name just a few examples.
In theory, European industry should be able to use standardized technologies by getting licenses on fair, reasonable and nondiscriminatory (FRAND) terms — this is what SEP holders have promised. Unfortunately, there are SEP holders that don’t honor this FRAND promise any more. Instead, leveraging the threat of market exclusion — typically, by invoking easily available injunctions in German patent courts — they impose license terms on standards users that are neither fair, nor reasonable. The current licensing environment gives innovative companies in Europe little choice but to accept SEP licensing terms no matter how unfair, a problem faced by vehicle manufacturers.
Many patents for standardized technologies such as 5G are held by foreign companies. This means that it’s those foreign companies that benefit from the unfairly enforced and excessive license fees. For example, data shows that over €1 billion flowed from standardized technology licensees in Germany and France into the hands of foreign holders of SEPs in 2022. These figures are expected to increase significantly in the near future.
The European Commission’s proposed regulation on licensing of SEPs is long overdue. It is a sensible and balanced bid at making Europe’s technology licensing system more efficient. The main changes include giving a role to the EU Intellectual Property Office (EUIPO) as a central hub for information on SEPs. SEP holders will have to register their patents with the EUIPO, and the office will advise and help facilitate the finding of aggregate royalties and FRAND terms and conditions. This will bring much-needed transparency to the market. There will also be a procedure for out-of-court settlements of licensing disputes, which will save companies — especially small businesses — from major costs involved in litigating to obtain the SEPs licenses they need.
We hear those who benefit from the status quo claiming that the Commission’s proposal will destroy a well-functioning system, lead to all sorts of bottlenecks in the SEP licensing process and more, not less, costly litigation. In contrast, we appreciate the Commission’s proposal is a modest intervention in the currently highly-unbalanced and inefficient system that would facilitate good faith negotiation on an equal footing with necessary information rather than litigation. The Commission’s proposal merely seeks to increase transparency and predictability.
European consumers stand to benefit from an improved SEP licensing system that will help bring new technologies to market faster, by making it easier for companies to gain the fair access to the SEPs they need to develop innovative products and services. European companies will benefit from easier access to SEPs on FRAND terms so that they can be applied across an ever-widening range of products and services.
For the sake of all those who stand to benefit from improved SEP licensing, consumers and the vast majority of European companies, we ask the members of the European Parliament to support the Commission’s proposal for a regulation. This is a vote for fairness and transparency in Europe.
Gilles Mabire is the chief technology officer of automotive technologies at Continental