The New UPC Agreement, the Regulation and Standardization

Now European Patent with unitary effect finally got the final blessing, it is time look into  some of the details of the EU Regulation “Implementing Enhanced Cooperation in the area of the Creation of Unitary Patent Protection” 1257/2012 (UnitaryPatent Regulation – UPR). We do not mean the unfortunate referral to national law within Art. 5 of the UPR that has previously been called Epic Fail in this blog. Even more interesting is – in particular with respect to a subject we covered many times – “Standardization” – the coming role of the EPO. UPR art. 9 (1) lit.c assigns a new task to the EPO,  receiving and registering licensing commitments undertaken by the proprietor of the European patent with unitary effect in international standardisation bodies. What is it all about?

Standardization is both a blessing and a curse. A blessing, because standardization fosters the worldwide dissemination of unitized technology and thus creates a basis for an extremely vital and successful competition process. A curse, because the frequently unavoidable inclusion of technology protected by IPRs in a standard causes a very unclear liability risk for any implementor of the standard. One refers to an essential IPR if it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally available at the time of standardization, to implement the standard without infringing that IPR. The proprietor of this essential IPR is therefore able to enjoin any implementor from the use of the standard, even if its patent only reads on a tiny fraction of that standard. That is one of the reasons for the vast number of current IPR disputes in the mobile telecommunications sector.

The Standard Setting Organizations (SSOs) have early introduced the so-called FRAND licensing commitment to overcome this issue. With making this commitment the proprietor of an essential IPR commits oneself to any interested party to license its IPR on fair reasonable and non-discriminatory terms. However, the desired conflict avoiding effect of this commitment has never appeared because of the lack of common rules for determining what FRAND actually means. Thus the proprietor of an essential IPR is further able to make use of the thread of an injunction in order to impose excessive royalties upon the implementors of a standard, without  any substantial hindrance  and without infringing on its own FRAND obligation.

This background sheds another light to the task assignment in UPR Art. 9(1) lit. c), because UPC Art. 9(1) lit c) sets the registering of the FRAND-Commitment in an immediate connection to the legally binding statement on licenses of right provided by UPR Art. 8 (1). According to that rule an IPR proprietor may file a statement with the EPO to the effect that the proprietor is prepared to allow any person to use the invention as a licensee in return for appropriate consideration. From this statement it follows that a (contractual) license will come into effect only by a notification against the proprietor and the commencement of making use of the invention. Though, to be clear, such license is not on a royalty free basis rather the licensee must pay a reasonable royalty. But, and that is the crucial point in that matter, the proprietor who made such a statement is no longer entitled to achieve an injunction against the user of its IPR. He is rather limited to the legal enforcement of a reasonable royalty.

Having said that, it is not claimed that the FRAND licensing commitment shall – from now on – have an identical effect like the licensing statement according to UPR Art. 8 (1). It just lacks of a legal basis for doing so. But the immediate and textual connection within the UPR Art. 9 shows that the legislator regards both instruments as similar and thus wants that both instruments are at least similar treated — although only with respect to the register. That could be interpreted as a first step to help the FRAND licensing commitment achieve more effectiveness on a legal basis.

Stephan Dorn