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Letter to the European Commission's proposal for a Regulation on standard-essential patents

On 27 April 2023, the European Commission proposed a new framework on standard-essential patents (SEPs) titled "Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on standard essential patents and amending Regulation (EU) 2017/1001". This page documents ESP's submission to the Commission's call for feedback.

There are two parts to this proposed Regulation. The first one concerns the creation of a SEP register and the second one defines a new procedure for defining FRAND terms. ESP's letter focuses on the SEP register, as it believes it can greatly help with determining which standards are encumbered by software patents. Among others, ESP's major proposed change is the inclusion of SEPs with royalty-free policy, as this can help the software industry adopt standards that are free of restrictive terms imposed by SEP holders.

End Software Patents letter

9 August 2023

Position of End Software Patents on the European Commission’s proposal for a Regulation of the European Parliament and of the Council on standard essential patents and amending Regulation (EU) 2017/1001

End Software Patents ("ESP") is a global initiative of the Free Software Foundation advocating for policy changes that will help abolish all adverse effects posed by software patents to software developers, and ultimately, abolish software patents themselves.

ESP welcomes the proposal by the European Commission for a Regulation of the European Parliament and of the Council on standard essential patents and amending Regulation (EU) 2017/1001 ("SEP Regulation").

The SEP Regulation introduces a much needed pillar of transparency to standard-essential patents ("SEPs"). In particular, the creation of the SEP register and SEP database will help narrow the gap between the economically powerful SEP holders and the software projects and companies (hereinafter referred to as "implementers") who lack the resources to evaluate the effect of SEPs on their products. ESP proposes the following changes.

1. Inclusion of SEPs with royalty-free policy

Article 2 stipulates that the SEP Regulation does not apply to SEPs subject to royalty-free policy. ESP believes that this is a missed opportunity to create legal clarity in the SEP landscape and reduce the harms caused by SEPs to implementers.

A patent poses no danger to an implementer when the implementer knows that the patented subject matter is available under a royalty-free licence. If the patent is available under a royalty-free licence, but the implementer is not aware of this, then the patent continues to contribute to the general legal uncertainty that the SEP Regulation aims to resolve.

To really provide legal certainty, the royalty-free status of those SEPs should be documented publicly. This could be in the SEP register, albeit with a much lighter procedure, or by other means. This would reduce legal costs and improve interoperability because it would avoid the situation where implementers are hesitant to use common interfaces or data formats due to fear of patents, without knowing that these patents pose no danger as a royalty-free licence is available.

In addition, a very large portion of software is made available under free software licences. Given the steps that the EU has already taken towards strengthening free software (as well as commons and interoperability), royalty-free licences should be given higher priority in proposals that strive for further transparency, such as the SEP Regulation.

Free software licences grant permission for all users to use, study, share copies and distribute modified versions of the software without requiring any negotiations with rights holders. This low-friction model has enabled massive innovation and interoperability. When copyright holders distribute their work under free software licences, they grant all necessary permissions under copyright and patent law. This model is greatly harmed by SEPs that require negotiating FRAND terms, because 1. they are almost certainly incompatible with free software licences, and 2. they threaten to block distribution of the implementers’ software. Without question, the promotion of standards with royalty-free policy is in the interest of the entire software industry.

Finally, a requirement to include SEPs with royalty-free licences is expected to incentivise SEP holders to refrain from tactics that allow them to not disclose their full SEP portfolio, initiate submarine attacks and strategically accept the penalty of non-enforcement.

Due to the fact that royalty-free SEPs do not require an involved process for determining FRAND terms, it is expected that the fee to which they are subject could be much lower than that of non-royalty-free SEPs being added to the register.

All in all, we encourage legislators to adopt an approach that favours speed and minimum friction in the market. Royalty-free SEPs already achieve this goal and should be promoted by the SEP Regulation as the easiest and most straightforward solution. We believe that excluding them from the SEP Regulation is a missed opportunity to promote standards that are not encumbered by royalty fees, licence incompatibilities and legal uncertainty.

2. Widening application to standards published before entry into force

According to Articles 1(2b) and 66(2), the SEP Regulation only applies to future standards published after the entry into force of the SEP Regulation. Article 66(4) sets a particularly high bar for these existing standards to be brought into scope, since the Commission must find that "the internal market is severely distorted due to inefficiencies in the licensing of SEP".

ESP believes that excluding already established standards from the SEP Regulation will severely undermine the legislators’ efforts to create legal clarity. Standards such as Wi-Fi, 4G and 5G should be subject to the SEP Regulation. Other previous standards, including those subject to royalty-free policy, should also be included.

3. Improving penalties in absence of registration in the SEP register

Article 24 provides that the penalty for not registering a SEP in time is the loss of royalties before the SEP is registered. ESP is concerned that this penalty will allow SEP holders to leave the registration until after the adoption of a standard in the market. To discourage this behaviour, ESP recommends a stricter penalty, such as rendering the SEP unenforceable for some years after the registration. We invite the legislators to place great emphasis on the penalties of the SEP Regulation, as they can be the determining factor for the efficiency of the SEP register.

4. Enabling input from the public to facilitate essentiality checks

The question of whether a patent is essential to a standard and thus eligible to be included in the SEP register is of paramount importance. While we welcome the SEP Regulation’s procedure for evaluating the essentiality of SEPs, ESP recommends the creation of a platform that will enable all interested third parties to submit input that can help evaluators with the essentiality examination procedure.

The issue of essentiality is a layer of complexity that is added on top of the entire patent system. Crucial input from the public can potentially prevent mistakes in the judgment of evaluators and peer reviewers. Apart from facilitating evaluators’ work, this would also prove beneficial to patent offices and courts examining SEPs.

5. Enabling full gratis access to certain organisations

The SEP Regulation’s Explanatory Memorandum states that “[m]ost of the information will be available free of charge to the public”, but “[s]ome specific detailed information, for example, on particular SEPs or on reports from FRAND determinations will be available only on registration and for a fee”. ESP recommends providing complete, free of charge access to certain third and fourth sector organisations. For example, standards development organisations and nonprofit consortiums related to the adoption of standards should be granted this type of access. These organisations should also have sufficient permissions to share information with implementers.

6. Improving usefulness of the SEP database

The SEP Regulation does not specify the licences that will apply to the information offered by the SEP database. Creative Commons Attribution version 4.0 (CC BY 4.0) or Creative Commons Attribution-ShareAlike version 4.0 (CC BY-SA 4.0) would be appropriate licences.

Releasing the source code of software deployed for the SEP register (especially client-side JavaScript code) under a free software licence, such as the European Union Public Licence version 1.2 (EUPL 1.2), would also greatly increase the transparency of the project and potentially improve the quality of search algorithms. Further, a public repository for the underlying program would enable users to submit feedback and contribute code improvements.

ESP also recommends the creation of an API that would allow third parties to work with the database.

Concluding Remarks

We believe that the SEP Regulation is a step in the right direction for the European Union’s patent system and industrial policy. The changes proposed above have the potential to increase legal certainty and significantly reduce costs for all parties involved in software development and distribution. Of the above, ESP considers publishing information about royalty-free SEPs and enabling public input to be of utmost importance.

In the event that the FRAND determination procedure meets pushback from SEP holders, we would like to urge the legislators to adopt the part of the SEP Regulation that concerns the SEP register.

Yours sincerely,

Panos Alevropoulos,

Administrator, End Software Patents

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