We would normally want to celebrate World Standards Day, which takes place each 14th of October.
After all, global open standards such as Wi-Fi, 4G, 5G and MPEG make it possible for people to travel the world, connect to the Internet and make high-quality, secure calls anywhere they can connect to a network. The “magic” behind those acts is actually mutually agreed global open standards that network, cellular handset and other manufacturers license worldwide on a fair, reasonable and non-discriminatory basis. That enables the products to communicate with one another, no matter who makes them. Moreover, much of the technology behind these standards is “made in Europe.”
Unfortunately, this year many of the people and companies that have contributed technological innovations to these successful global standards are living in fear. Fear that radical proposals by the European Commission would change essential aspects of how these global standards are licensed. Proposals that would undermine the economic incentives that encourage European companies to innovate. Incentives that have contributed to the development of highly successful global open standards which one individual entity never could have been developed alone.
In April, the European Commission ignored market and legal realities–and the advice of its own experts–and proposed an ill-advised overhaul of the rules governing standard-essential patents, or SEPs. SEPs are patents that cover a specific innovation that an international standards organisation has deemed necessary to deploy some aspect of a standard. For those patented technologies, the SEP owners voluntarily commit to make these patents available on a fair, reasonable and non-discriminatory basis.
Existing market and legal mechanisms incentivise private companies to contribute their innovations to the development of open standards. Standards organisations choose the best contributions from these companies for inclusion in a standard. In turn, these companies benefit from a fair and reasonable return on their investment by licensing their SEPs. That enables their inventors to continue working on next-generation innovation.
The European Commission has proposed a new, costly and unnecessary layer of SEPs regulation that would severely undermine existing incentives and introduce troubling legal uncertainties. Its proposal could lead European innovators to abandon European standards organisations in favour of organisations in other regions where SEPs are not saddled with the same burdens.
To be fair, we sympathise with the Commission’s stated goals of increasing transparency and predictability around SEPs licensing for small- and medium-sized companies. But there are already efficient, cost-effective, market-based means of achieving those goals. Those means include patent pools. For example, there is a patent pool that already covers 80% of 2G to 5G SEPs licensed to automakers worldwide.
Standard-essential patents, including those responsible for iconic technologies such as MP3, MPEG, Wi-Fi, 4G and 5G, are the building blocks upon which entire new industries have flourished.
We would have something to celebrate this World Standards Day if the European Commission would withdraw its proposed regulation. It should revisit its hypothesis in the light of the massive criticism it has received since its publication. (The Commission withdraws proposed rules more often than you might think!) Much of the regulation is flat-out unnecessary. The rest of it is ill-conceived.