The European Union’s patent authority will oversee a new process to set fair patent royalties for technologies widely used in products like mobile phones, under a draft EU regulation aimed at reducing royalty litigation.
Standard essential patents cover technologies that devices must include to comply with international standards such as 4G, Wi-Fi and USB. Some standards contain thousands of essential patents, and their owners must offer licenses on fair and reasonable terms.
Users of the standards are typically manufacturers of telecommunications equipment, mobile phones, computers, tablets and, increasingly, manufacturers of connected cars, drones, payment terminals and other smart devices.
The royalty process to be overseen by the European Intellectual Property Office (EUIPO) aims to resolve disputes between patent owners and users of such standards.
“The FRAND determination procedure is intended to simplify and accelerate negotiations on FRAND terms and reduce costs. The EUIPO should manage the process,” said the European Commission document, seen by Reuters on Tuesday.
FRAND terms (fair, reasonable and non-discriminatory) are often used in reference to technical standards that have been developed through an industry-led standardization process.
The FRAND hiring process should be completed within nine months and is a mandatory step before patent owners can take legal action for infringement, the document said.
“This is necessary because disagreements over FRAND terms are the main reason for taking legal action,” the document said.
The draft regulation stipulates that the EUIPO will set up a register of Standard Essential Patents (SEP) and that companies will have to register if they want to collect patent fees or take legal action.
“A SEP owner shall not be entitled to receive royalties or seek damages for infringement of a claimed SEP that is subject to registration,” the document reads.
To help SEP owners determine how much they can charge, the Commission wants companies to agree among themselves on an overall royalty, ie the potential royalty for all SEPs covering a standard.
Independent experts check whether a patent is relevant to the standard.
European Commission Vice-President Margrethe Vestager is expected to announce the draft regulation on April 26, according to a Commission agenda.
The draft laws must be agreed with EU countries and the European Parliament before they can come into force.