4/27/2023-Statement from Mike Sax, founder and chairperson of ACT | The App Association, on the European Commission announcement regarding the licensing of standard-essential patents (SEPs) under fair, reasonable, and non-discriminatory (FRAND) terms

The App Association welcomes the European Commission’s efforts to improve transparency in the system for licensing standard-essential patents (SEPs) and for its recognition of the central role small and medium-sized enterprises (SMEs) and startups play in the innovation process and the development of the European economy. A SEP licensing ecosystem with increased transparency, predictability, and efficiency is a prerequisite to improving the competitiveness of EU businesses, especially for SMEs.

While today’s announcement reflects a clear concern by the Commission to address the lack of transparency and fairness in SEP licensing, the App Association is deeply concerned with recent changes made by the Commission in its proposed regulation. For example, our community is troubled by the Commission’s decision to remove the following from the final text:

“If a patent owner makes this promise (called ‘FRAND commitment’),
it cannot refuse to license its SEPs to a party who is willing
to agree to FRAND terms and conditions”.

A FRAND commitment plainly requires non-discriminatory treatment of licensees by licensors, meaning that any willing licensee should be able to license the technologies that are part of a standard. The Commission is well aware of this fact because it was reflected in an earlier version. By removing this text from its regulation at the last moment, the Commission is failing to reinforce a basic concept underlying the FRAND commitment, putting Europe’s SMEs at the greatest risk.

We urge the Commission to reinforce that small innovators should be able to license the technologies they need to implement standards in their products. We believe it is crucial that the current abuses of power in the context of SEP licensing are brought to light and properly addressed as part of the implementation of the SEPs legislation. This is one of a number of last-minute damaging changes we see in the regulation that indicate the Commission is choosing to pull back from creating a framework that would provide balance and make the EU more competitive. Further, the changes are at odds with the Commission’s statements that its new framework is intended to benefit SMEs.

The App Association will continue to engage in the policy discussions and engage with all stakeholders, including the European institutions, while advocating for fair equal access for SMEs to the patented technologies that are essential to implement standards.