‘Breaking: UPC chief urges EU to rethink SEP plan’;2 this headline was reverberating on the 30 May 2023, when the inauguration ceremony of the Unified Patent Court took place. On the day when everything should have been about the shiny new forum for European patent disputes, the new head of the UPC, Klaus Grabinski, felt the need to give his insight into a matter of competing importance for many in the patent world: the Proposal of the European Commission on the Regulation of Standard Essential Patents (SEP-Reg).3 The Proposal did not go unnoticed on the other side of the Atlantic either, with a bipartisan group of former USPTO, DOJ and FTC officials writing to the Commission to express their concerns ‘regarding an apparent pivot in the European Commission’s longstanding IP policy that threatens European and American innovation leadership’.4

When the European Commission published its proposed approach to the regulation of SEP and the fair, reasonable and non-discriminatory (FRAND) obligations that typically come with SEP licensing agreements on 27 April 2023, it attracted plenty of commentary.5 Some argued that it was quite the interventionist proposition. Indeed, with European courts being the forum of choice for resolving many international SEP licensing disputes, the Commission’s Proposal was seen as a major ‘game changer’ for the global framework of SEP negotiations and litigation.6 If implemented, it was suggested it would ‘constitute the most significant change to the process of SEP licensing over the past decades’.7 However, the proposal met with quite varied responses from international SEP owners, product manufacturers and the literature.

Large European and US SEP owners, such as Nokia, Ericsson and Qualcomm, communicated their concerns regarding aspects of the proposal, whereas large US technology companies and established European automotive manufacturers that integrate these technologies into end products (hereafter ‘implementers’), wanted the proposal to go even further.8 Just over half a year later, on 11 February 2025, the Commission abruptly changed position and withdrew the proposal, citing ‘no foreseeable agreement’. This is in spite of the fact that the original European Commission proposal was approved by the European Parliament by 454 to 83 in a form that did not feature substantial changes. All that remained was for it to be approved before the third organ of the European Union legislative triumvirate; the European Council of Ministers.9 However, there was some suggestion that the Council was deadlocked, and that personnel changes at the EU Commission in the interim might also have an effect on the fate of the proposal. French ex-Commissioner Thierry Breton, one of the most vocal proponents of the SEP-Reg during its development and 2023 publication, did not stay on as a member of European Commission President Von der Leyen’s new executive team for the 2024–2029 political cycle. Moreover, Finland’s new Commissioner, Executive Vice President for tech sovereignty, Henna Virkkunen, had been critical in the past. In an early 2024 speech at the European Parliament, Ms. Virkkunen argued that the SEP-Reg could ‘have a negative impact on competitiveness’ and created ‘too much regulatory burden’.10 Whatever the reason for the about-face, during its lifetime of less than 2 years, the SEP-Reg stirred much debate.

This article will assess the SEP-Reg’s key elements and critically appraise them. It will consider whether these elements could have achieved the Commission’s objectives and brought about an overall net improvement to the global landscape of standardized technology adoption, of which SEP licensing on FRAND terms is a crucial component. It will, however, not critique the empirical evidence that was used to justify the need for the elements of the SEP-Reg, although discussion of this issue can be found elsewhere.11 After a summary of the SEP licensing/FRAND status quo (i), there will be a critical examination of the approach taken by the SEP-Reg in relation to four key aspects: the SEP Register; the setting of Aggregate Royalty Rates; the Essentiality Checks and the FRAND Determination Process (ii). Finally, there will be an assessment of some macro considerations, such as some apparent tensions between the SEP-Reg and some of the EU’s fundamental procedural rights and the possible unforeseen consequences that might have resulted from the proposal (iii). It is hoped that having considered this analysis, readers will be able to form their own view on how the title of this paper should best be interpreted: should the ill-fated SEP-Reg have been viewed as a modest and unassuming intervention that could have been appropriately referred to as a ‘little FRAND’, or—in the spirit of how Al Pacino’s Tony Montana delivered the original version of the iconic line paraphrased in the title of this paper—did it promise to deliver something altogether more dramatic and tumultuous?

Source: https://academic.oup.com/jiplp/advance-article/doi/10.1093/jiplp/jpaf048/8221809