THE EU COMMISSION’S POLICY ON DISCLOSURES OF ESSENTIAL PATENTS
The European Commission has consistently, over the years, taken an active interest in standardization and the proper functioning of SDOs. The reason for this interest is twofold: (a) the importance of standards for any modern and dynamic economy, and (b) the importance of standards for the EU, in particular. As already mentioned above, standards reduce trade barriers between EU Member States and, thus, constitute an important policy lever for the integration of the internal market of the EU.
Specifically, the EU Commission discusses standardization extensively in its Horizontal Guidelines, a non-binding, soft-law document that states the Commission’s views and priorities regarding the enforcement of Article 101 TFEU on anticompetitive agreements and concerted practices. In the Horizontal Guidelines, the Commission has provided for a safe harbor from antitrust liability under Article 101 for SDOs that (a) allow for unrestricted membership for all interested parties, (b) have in place transparent procedures for developing standards, (c) develop standards that are not mandatory to comply with, and (d) allow access to essential IPRs on FRAND terms and conditions.45 SDOs and standardization processes that satisfy these four conditions are, in principle, immune from liability under Article 101 TFEU.
The issue of FRAND declarations relates to factor (d) and in particular to an IPRs policy that ensures effective access to SEPs on FRAND terms. In the Horizontal Guidelines, the Commission expresses the view that, for an IPR policy to safeguard effective access to the standard, it must, inter alia, “require good faith disclosure, by participants, of their IPR that might be essential for the implementation of the standard under development.”46 According to the Commission, such declarations allow SDO participants to make an informed choice on which technologies to include in a given standard.47 SDO contributors could satisfy this goal by “ongoing disclosures as the standard develops and on reasonable endeavours to identify IPR reading on the potential standard.”48
Moreover, the Commission discusses the issue of disclosures at great length in its 2017 Communication on the licensing of SEPs, another policy document by the Commission touching on a broad range of issues around standardization and the licensing of SEPs.49 According to the Commission, its key principles on the licensing of SEPs are based on two objectives: (a) incentivizing development and contribution to standards of “top technologies” by ensuring a fair and adequate return for innovators, and (b) ensuring the broad dissemination and adoption of standards based on fair access conditions.50
On FRAND declarations, in particular, the Commission notes that the primary reason of declarations is to provide assurances to the SDO and third parties that SEP technology will be accessible on FRAND terms.51 The Commission further observes that SDO databases include thousands of disclosures based on declarants’ own self-assessment.52 However, the Commission expresses the opinion that there is room for improvement regarding the system of disclosures so as to facilitate the licensing of SEPs.53 In particular, the Commission advocates for more detailed information in disclosure databases, improved accessibility and user friendliness of those databases, and links to information from outside sources such as patent offices regarding issues of patent ownership and transfer.54
Moreover, the Commission takes a critical view of current SDO policies regarding disclosures, expressing its observation that those policies are “not geared towards future SEP licensing.”55 In the view of the Commission, improving transparency tools regarding disclosures “can greatly facilitate licensing negotiation.”56 Nonetheless, the Commission argues that improving transparency tools should follow the principle of proportionality, having in mind the potentially increasing costs for stakeholders.57 The Commission then goes on to provide detailed guidance to stakeholders with regard to declaration practices that it views as contributing to the efficient licensing of SEPs. The Commission advises SEP-holders to review—and, if necessary, update—their disclosures when a standard is finally adopted and when patent offices have reached a final decision regarding pending patent applications. Adding to that, disclosures should ideally include information that allows users to assess their SEP exposure, such as references to the relevant section of the standard that the declared patent reads on, link to the broader patent family, the relevant contact person for the declarer. Moreover, SDO databases could include, according to the Commission, references to SEP-litigation outcomes.
The Communication reveals the Commission’s increasing preoccupation with the issue of over-disclosure of potentially essential patents. The Commission cites reports from stakeholders to the effect that declarations allegedly create a sort of “presumption of essentiality” in licensing negotiations that “places a high burden on any willing licensee, especially SMEs and start-ups, to check the essentiality of a large number of SEPs in licensing negotiations.” Hence, the Commission advocates for a system of essentiality checks performed by an independent third party “with technical capabilities and market recognition.” As a first step in a transition to such a system, the Commission proposes essentiality certification of SEP portfolios that comply with certain transparency standards. Such certification could be performed by SDOs themselves for “modest fees.” Patent offices could also assist, the Commission argues, in improving transparency. Some questions from the industry were not answered by the Commission include: who should bear the costs which could be up to £15,000 per patent; what was considered under ‘with technical capabilities’; which would be the implication if the licensee rejects the evaluation; whether is there any liability if the essentiality assessment is later on proven by court to be inaccurate; and how long should an evaluation last (typically a claim chart analysis requires ‘multiple hours, at a minimum, and potentially a day or more’.