A move by the European Commission to kill its standard essential patent rules has alarmed companies that license connectivity technology.
How do you manage to upset carmakers, Big Tech and center-right lawmakers at one stroke?
The European Commission’s junking of its standard essential patents bill — intended to curb lengthy legal battles over patents in the telecoms sector — has been damned by a key lawmaker as a « complete mistake » and mourned by companies that license such patents as « a terrible signal to innovative businesses. »
European tech firms such as Nokia, on the other hand, which depend on licensing connectivity technology to an increasing range of connected devices, have been delighted by the bill’s demise. A Nokia spokesperson cheered what they called the end of a « flawed regulation »; the firm’s chief executive had earlier blasted the bill as a « disaster » that undermined European research.
The bill’s withdrawal was part of a larger pruning of red tape within the bloc. Unlike some other proposals that have failed to inch toward agreement, however, its inclusion on the Commission’s kill list late on Tuesday was a surprise. The European Parliament has already voted on it and EU governments were due to discuss it later this month.
Fierce lobbying had surrounded the bill, which aimed to set guardrails for legal fights over how the patents used in critical technology like the 4G mobile phone standard and wireless internet should be licensed to cars and fridges.
Patents can be cash cows, generating huge revenues from licensing technology that becomes an industry standard. Patent owners such as Sweden’s Ericsson and U.S.-based chip designer Qualcomm get paid by companies that use their technology in a growing range of smart devices.
Slap in the face
German center-right lawmaker Marion Walsmann, who steered the file through the Parliament, said the Commission had made “a complete mistake” in dropping a proposal that could have cut costs and litigation risk for smaller businesses.
“This is not just a missed opportunity, but a real slap in the face for European companies, » she said. Walsmann blamed “pressure from a small number of very influential companies, mostly from third countries,” which “has brought the Commission to its knees.”
The Fair Standards Alliance — which represents patent users such as Amazon, Apple, BMW and Ford — was “stunned by the Commission’s decision to abruptly scrap” the proposal, warning that it “sends a terrible signal to innovative businesses that depend on predictable and fair SEP licensing,” according to its secretary general, Evelina Kurgonaite.
Car parts manufacturer Continental warned that the current licensing environment forces it to « accept licensing terms for technologies such as 4G no matter how unfair. » Carmaker Volvo and Dutch electronics manufacturer Fairphone also expressed dismay.
Fairphone Chief Executive Raymond van Eck said the proposal had been a potential « lifeline for SMEs — without it, they are left defenseless in a minefield of opaque negotiations, legal threats, and exploitation by patent assertion entities. »
No foreseeable agreement
On the other side, patent holders at IP Europe — including Nokia, Ericsson, Qualcomm and Orange — welcomed the Commission efforts as « encouraging research and development, innovation, and growth, » adding that « the innovations and open standards that we champion are part of the solution. »
The Commission said Tuesday that it would withdraw the proposal in the next six months because “no foreseeable agreement” was forthcoming. It said it would assess whether to submit another proposal or find another approach.
Walsmann said the Commission’s rationale was “completely false, as the Council has already scheduled several working group meetings specifically on this dossier.”
Asked about the withdrawal at a Wednesday press conference to present the Commission’s work program, Trade Commissioner Maroš Šefčovič and the European Union’s simplification chief, Valdis Dombrovskis, drew a blank. A spokesperson promised to come back with an answer later.
Koen Verhelst and Max Griera Andreu contributed reporting to this article.
