Protecting Europe’s Internet of Things Innovators

Morning debate on Standard Essential Patents policy that can unlock a Trillion Euro Market. Below you can read my speech:

In Europe, patents are granted by national patent offices and the European Patent Office (EPO). Once a minimum of 13 EU countries ratify the Agreement on a Unified Patent Court, the EPO will be able to grant patents with direct validity in all participating countries. Standards are developed in formal Standard Setting Organisations (SSOs) as well as in less-formal fora and consortia.

Among the formal standardization bodies are the three European SSOs, that is the European Committee for Standardization (CEN), the European Committee for Electrotechnical Standardization (CENELEC) and the European Telecommunication Standards Institute (ETSI). European SSOs are governed by the EU acquis and are regularly mandated by the European Commission to produce certain standards known as European Norms (ENs). All standardization bodies have to comply with competition law. In particular, the Guidelines on Horizontal Cooperation Agreements comprise specific guidance for standardization 

– In view of the unique implications of standard-essential patents for widespread innovation, interconnectivity and the maximization of social welfare, the fair balance of interests among SEP holders and implementers has become a central notion in recent case law and antitrust intervention;

SEP protects technology that is essential to standards such as those for 4G (LTE) and WiFi networks, which rely on hundreds of patented technologies to work. 68% of SEPs are subject to FRAND (fair, reasonable and non-discriminatory) terms,

– Over 70% of worldwide SEPs are declared at ETSI (European Telecommunication Standards Institute), underlining the importance of the European market. However, for key technologies in Europe, companies in Asia and the USA hold more SEPs and younger patent portfolios than European companies.

– European firms Nokia, Ericsson and Siemens file a large amount of SEPs, but American and Asian companies such as Qualcomm, InterDigital, Samsung, Huawei, Google and LG are also file heavily in Europe.

– To ensure fair licensing conditions, the need for a balanced framework for negotiations between right holders and implementers of SEPs is advocated in the context of the European Digital Single Market (DSM), one of the Commission’s ten priorities that aims to generate up to EUR 250 billion of additional growth in Europe before 2020;

– In the digital economy, SEPs are an increasingly important feature in standardization and a key element of the business model for many industries eager to monetize their investment in research and innovation;

– In July, before summer I questioned Commission about conditions for promoting a balanced licensing system for Standard Essential Patents (SEPs) which ensures fair access for all market players;

– I asked about concrete steps, which has to be taken to ensure that anti-competitive licensing practices do not harm the European market as well as how The Commission can respond to any acquisitions of SEP licensing practices?

– The Commission so often emphasize that the owners of SEPs must commit to licensing them to all third parties on fair, reasonable and non-discriminatory terms. But If not…how to react???

FRAND is not “broken” nor should it be “fixed”. It would be more accurate to say that it needs to reflect the current market diversity and dynamics within an enlarged circle of stakeholders;

– All partners are keen to commit to ensuring that there is a balanced environment for the licensing of Standard Essential Patents (SEPs). Those who contribute intellectual property to standards need to obtain reasonable remuneration for doing so, whilst those who implement standards should be able to obtain access on fair terms

– It would be more accurate to say that it needs to reflect the current market diversity and dynamics within an enlarged circle of stakeholders. It also confirms that FRAND as a range has been able to accommodate various business models while facilitating worldwide access to standard-compliant products and services for millions of consumers and households;

– Therefore, I welcome the Commission efforts to propose by the end of 2017 the communication providing guidance on the licensing framework for SEPs, which in particular I believe identify possible measures to:

– improve accessibility and reliability of information on patent scope, including measures to increase the transparency and quality of standard essential patent declarations;

–  clarify core elements of an equitable, effective and enforceable licensing methodology around FRAND principles;

– facilitate the efficient and balanced settlement of disputes;

– The European Parliament adopted  in July resolution on  European Standards for the 21st century where Parliament  call for open, inclusive, transparent and primarily market-driven European standardisation system open to all actors – businesses, public authorities, standardisation bodies and other interested parties;

Governance in the 5G markets

– We need a standards in the area of 5G, cloud computing, IoT, data and cybersecurity domains, as well as for connected and automatic driving and intelligent transport systems, smart cities, smart energy, ehealth initiatives and beyond;

– Development and deployment of 5G means that we will have to work in tandem. In view of the next generation of mobile standards, standard setting on a global scale and market-led, policies will determine the success of innovation;

– A well-coordinated relationship between 5G players and these actors will confirm the viability of standard setting governance and render 5G infrastructure a booster for all players on the markets;

– In this context, FRAND obligations are subject to reasonable access to increasingly important standards related to 5G and Internet of Things technologies that amplify the benefits for competition and consumers globally.

– If competition and antitrust policies will continue to be shaped at a regional level, global advocacy and the ongoing dialogue between European policymakers and their counterparts in the US, China and the rest of the world could counteract the potentially distortive effects of domestic policies by exploring common ground and identifying best practices that safeguard the interests of society as a whole;

– European policy action should encourage more clarity and flexibility in the definition of FRAND. Articulating a common set of criteria and guidelines for practice – anchored in a clear definition of FRAND – could facilitate private negotiations, enhance due diligence on behalf of the parties, limit the need to seek a third-party determination of a FRAND rate and help courts set convergent standards while allowing for flexibility on a case-by-case basis;

Summarise, two key issues:

Firstly, I believe policymakers should take into account all incentives, the whole picture, in order to promote healthy competition at the micro level with beneficial impact at the macro level.

Secondly, we need to secure transparency in the respect of SEPs licensing. Transparency is crucial at two moments in time: Before adoption of the standard it allows standardization participants to make an informed choice. After adoption of the standard it forms the basis of clear licensing agreements.