What changed between the draft committee report and the plenary report

Removed:Recital 3: (3) SEPs are patents that protect technology that is incorporated in a standard. SEPs are ‘essential’ in the sense that implementation of the standard requires use of the inventions covered by SEPs. The success of a standard depends on its wide implementation and as such every stakeholder should be allowed to use a standard. To ensure wide implementation and accessibility of standards, standard development organisations demand the SEP holders that participate in standard development to commit to license those patents on FRAND terms and conditions to implementers that chose to use the standard. The FRAND commitment is a voluntary contractual commitment given by the SEP holder for the benefit of third parties, and it should be respected as such also by subsequent SEP holders. This Regulation should apply to patents that have been declared to be essential to a standard that has been published by a standard development organisation, to which the SEP holder has made a commitment to license its SEPs on fair, reasonable and non-discriminatory (FRAND) terms and conditions and that is not subject to a royalty-free intellectual property policy, after the entry into force of this Regulation.

Added:Recital 2 a (new): (2a) Good faith SEP licensing negotiations between parties occur in many cases, yet in some, SEPs become the subject of legal proceedings. This Regulation aims to provide advantages to both Union SEP holders and SEP implementers by introducing mechanisms designed to address two key issues. First, situations where SEP implementers unreasonably delay or decline FRAND licenses. Second, scenarios where SEP holders impose non-FRAND royalties due to the risk of injunction and a lack of transparency. It is essential to ensure that SEP holders and implementers act in good faith before, during and after licensing negotiations. SEP implementers using standardised technology should proactively seek to take a license from the SEP holder who owns the technology they use and SEP holders should grant a license under FRAND terms and conditions to any party seeking one, irrespective of the position of the potential licensee in the respective value chain.

Removed:Recital 4: (4) There are well established commercial relationships and licensing practices for certain use cases of standards with iterations over multiple generations leading to considerable mutual dependency and significant value visibly accruing to both SEP holders and implementers. There are other, typically more novel use cases – sometimes of the same standards or subsets thereof - with less mature markets, more diffuse and less consolidated implementer communities, for which unpredictability of royalty and other licensing conditions and the prospect of complex patent assessments and valuations and related litigation weigh more heavily on the incentives to deploy standardised technologies in innovative products. Therefore, in order to ensure a proportionate and well targeted response, certain procedures under this Regulation, namely the aggregate royalty determination and the compulsory FRAND determination prior to litigation, should not be applied to identified use cases in which there is sufficient evidence that SEP licensing negotiations on FRAND terms and conditions do not give rise to significant difficulties or inefficiencies.

Added:Recital 2 b (new): (2b) The measures introduced by this Regulation are consistent with the objectives of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the ‘TRIPs Agreement’) to promote technological innovation and the dissemination of technology to the mutual advantage of the SEP holder and the user, as well as with the principles of preventing the abuse of intellectual property rights and adopting measures for public interest reasons. In particular, according to the TRIPs Agreement, an exception to the exclusive rights conferred by a patent is justified if it does not unreasonably conflict with a normal exploitation of the patent and it does not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.

Removed:Recital 10 a (new): (10a) Patent pools, as industry-led joint patent licensing solutions, are beneficial to the market and companies across the SEP licensing spectrum, including both SEP holders and SEP implementers. They are a predictable and fair option for licensing patented technologies essential for a standard, since they allow agreement to be reached on a widely acceptable set of licensing terms and conditions between companies from across the world. Since patent pools deal with SEPs, they should also commit to FRAND terms and conditions, and they should provide full transparency with regard to the patents that are covered by their portfolio, ideally licence them to all interested licensees regardless of their position in the value chain and preferably include all the SEPs relevant to the standard.

Added:Recital 3: (3) SEPs are patents that protect technology that is incorporated in a standard. SEPs are ‘essential’ in the sense that implementation of the standard requires use of the inventions covered by SEPs. The success of a standard depends on its wide implementation and as such every stakeholder should be allowed to use a standard. To ensure wide implementation and accessibility of standards, standard development organisations demand the SEP holders that participate in standard development to commit to license those patents on FRAND terms and conditions to implementers that chose to use the standard. The FRAND commitment is a voluntary contractual commitment given by the SEP holder for the benefit of third parties, and it should be respected as such also by subsequent SEP holders. This Regulation should apply to patents in force in one or more Member States that a SEP holder claims to be essential to a standard that has been published by a standard development organisation, to which the SEP holder or a previous holder of the SEPs in question has or has not made a commitment to license its SEPs on fair, reasonable and non-discriminatory (FRAND) terms and conditions and that is not subject to a royalty-free intellectual property policy, after the entry into force of this Regulation.

Removed:Recital 10 b (new): (10b) While competition scrutiny of patent pools already took place, uncertainty about the compatibility of licensee negotiation groups (‘LNGs’) formed by SEP implementers still remains. LNGs can streamline the negotiation process, thereby reducing the administrative burden and ensuring that the licensing terms and conditions are more uniform and equitable for all participating SEP implementers. LNGs benefit SMEs in particular. The Commission should therefore examine the competitive impact of LNGs and analyse which conditions they should fulfil in order to comply with competition law while avoiding the risk of offering ‘hold-out’ options to participating SEP implementers.

Added:Recital 4: (4) There are well established commercial relationships and licensing practices for certain implementations of standards, with iterations over multiple generations leading to considerable mutual dependency and significant value visibly accruing to both SEP holders and implementers. There are other, typically more novel implementations – sometimes of the same standards or subsets thereof – with less mature markets, more diffuse and less consolidated implementer communities, for which unpredictability of royalty and other licensing conditions and the prospect of complex patent assessments and valuations and related litigation weigh more heavily on the incentives to deploy standardised technologies in innovative products. Therefore, in order to ensure a proportionate and well targeted response, certain procedures under this Regulation, namely the aggregate royalty determination and the compulsory FRAND determination prior to litigation, should not be applied to identified implementations in which there is sufficient evidence that SEP licensing negotiations on FRAND terms and conditions do not give rise to significant difficulties or inefficiencies.

Removed:Recital 12: (12) As the agency of the European Union in charge of intellectual property rights, the European Union Intellectual Property Office (EUIPO) should perform the relevant tasks by means of a competence centre and facilitate the implementation of this Regulation. The EUIPO has extensive experience with managing databases, electronic registers and alternative dispute settlement mechanisms, which are key aspects of the functions assigned under this Regulation. It is crucial to equip the competence centre with necessary human and financial resources to efficiently perform its tasks.

Added:Recital 4 a (new): (4a) Significant difficulties or inefficiencies in the licensing of SEPs that affect the functioning of the internal market might result from, among other things, material impediments to the timely and effective deployment, development, distribution or commercialisation of a product, service, or technology, but also unreasonable delays, involving an undue postponement of the conclusion of a licence agreement. They may also result from excessive costs, multiple legal disputes, challenges or litigations involving more than one SEP holder or SEP implementer, as well as from barriers to innovation where the implementation of a standard, including any lack thereof, hinders, limits or curtails technological innovation or advancement, as compared to industry norms.

Removed:Recital 13: (13) The competence centre should set up and administer an electronic register containing information on SEPs in force in one or more Member States. The electronic register should serve as a foundational repository designed to be the primary reference point for users, providing easily accessible and basic information about SEPs free of charge.

Added:Recital 5: (5) Whereas transparency in SEP licensing should stimulate a balanced investment environment, along entire Single Market value chains, in particular for emerging technology implementations underpinning Union objectives of green, digital and resilient growth, the Regulation should also apply to standards or parts thereof, published before its entry into force where inefficiencies in the licensing of the relevant SEPs severely distort the functioning of the internal market. This is particularly relevant for market failures hindering investment in the Single Market, the roll-out or the development of innovative technologies and emerging implementations. Therefore, taking into account those criteria, the Commission should determine by a delegated act the standards or parts thereof that have been published before the entry into force of this Regulation and the relevant implementations, for which SEPs can be registered.

Removed:For the sake of clarity, this recital has been amended and split into three different recitals.

Added:Recital 6: (6) Because a FRAND commitment should be made for any SEP claimed to be essential to any standard intended for repeated and continuous application, the meaning of standards should be broader than in Regulation (EU) No 1025/2012 of the European Parliament and of the Council35.

Removed:Recital 13 a (new): (13a) The competence centre should also set up and administer an electronic database with a more extensive and comprehensive dataset to which access could be subject to the payment of a fee.

Added:Recital 7: (7) Licensing on FRAND terms and conditions, which are key in the development of the digital society, includes licensing royalty-free. Given that most issues arise with royalty-bearing licensing policies, this Regulation does not apply to royalty-free licensing of SEPs, except where such SEPs are part of a portfolio of patents licenses for royalties.

Removed:Recital 13 b (new): (13b) In order to raise awareness and facilitate SEP licensing for SMEs, the competence centre should offer assistance to SMEs. The setting up and administering a system for essentiality checks and processes for aggregate royalty determination and FRAND determination by the competence centre should include actions improving the system and the processes on a continuous basis, including through the use of new technologies. In line with this objective, the competence centre should establish training procedures for evaluators of essentiality and conciliators for providing opinions on aggregate royalty as well as on FRAND determination and should encourage consistency in their practices.

Added:Recital 7 a (new): (7a) Open standards are key in the development of our digital society, including the development of open source software. Open standards remove barriers to interoperability, promote choice between vendors and technology solutions and ensure market competition and innovation. This Regulation applies to open standards, whilst not discouraging SEP holders to innovate and participate in the open collaborative standards development.

Removed:Recital 15: (15) Knowledge of the potential total royalty for all SEPs covering a standard (aggregate royalty) applicable to the implementations of that standard is important for the assessment of the royalty amount for a product, which plays a significant role for the manufacturer’s cost determinations. It also helps the SEP holder to plan expected return on investment. The publication of the expected aggregate royalty and the standard licensing terms and conditions for a particular standard would facilitate SEP licensing and reduce the cost of SEP licensing. Thus, SEP implementers and SEP holders would benefit from making public the information on total royalty rates (aggregate royalty) and the standard FRAND terms and conditions of licensing.

Added:Recital 10 a (new): (10a) Patent pools, as industry-led joint patent licensing solutions, are beneficial to the market and companies involved with SEP licensing, including both SEP holders and SEP implementers. They are a predictable and fair option for licensing patented technologies essential for a standard, since they allow an agreement to be reached on a widely acceptable set of licensing terms and conditions between companies from across the world. Since patent pools deal with SEPs, they should also commit to FRAND terms and conditions and they should provide full transparency with regard to the patents that are covered by their portfolio, ideally licence them to all interested licensees regardless of their position in the value chain and preferably include all the SEPs relevant to the standard.

Removed:Recital 16: (16) SEP holders should have the opportunity to first inform the competence centre of the publication of the standard in respect of which they claim essentiality or the aggregate royalty which they have agreed upon among themselves. Except for those use cases of standards for which the Commission establishes that there are well established and broadly well-functioning licensing practices of SEPs, the competence centre may assist the parties in the relevant aggregate royalty determination. In this context, if there is no agreement on an aggregate royalty among SEP holders, certain SEP holders may request the competence centre to appoint a conciliator to assist the SEP holders willing to participate in the process in determining an aggregate royalty for the SEPs covering the relevant standard. In this case, the role of the conciliator would be to facilitate the decision-making by the participating SEP holders without making any recommendation for an aggregate royalty.

Added:Recital 10 b (new): (10b) While competition scrutiny of patent pools has already taken place, the uncertainty over the compatibility of licensee negotiation groups (LNGs) formed by SEP implementers still remains. LNGs can streamline the negotiation process, thereby reducing the administrative burden and ensuring that the licensing terms and conditions are more uniform and equitable for all participating SEP implementers. LNGs benefit SMEs in particular. The Commission should therefore examine the competitive impact of LNGs and analyse which conditions they should fulfil in order to comply with competition law while avoiding the risk of offering ‘hold-out’ options to participating SEP implementers.

Removed:For the sake of clarity this recital has been amended and split into two.

Added:Recital 12: (12) As the agency of the European Union in charge of intellectual property rights and in order to facilitate the implementation of this Regulation, the European Union Intellectual Property Office (EUIPO) should perform the relevant tasks by means of a competence centre. The EUIPO has extensive experience with managing databases, electronic registers and alternative dispute settlement mechanisms, which are key aspects of the functions assigned under this Regulation. It is crucial to ensure that the competence centre has the necessary means, including human and financial resources to effectively perform its tasks.

Removed:Recital 16 a (new): (16a) SEP holders and/or SEP implementers should be able to request the competence centre for a non-binding expert opinion by an independent third party on an aggregate royalty. When such a request is made, the competence centre should appoint a panel of conciliators and administer a process in which all interested stakeholders are invited to participate. After receiving information from all of the participants, the panel should provide a non-binding expert opinion for an aggregate royalty. The expert opinion on the aggregate royalty should contain a non-confidential analysis of the expected impact of the aggregate royalty on the SEP holders and the stakeholders in the value chain. In this respect, it would be important to consider factors such as, efficiency of SEP licensing, including insights from any customary rules or practices for licensing of intellectual property in the value chain and cross-licensing, and impact on incentives to innovate of SEP holders and different stakeholders in the value chain.

Added:Recital 12 a (new): (12a) SEP licensing may cause friction in the value chains that have so far not been exposed to SEPs. Therefore, it is important that the competence centre raises awareness concerning SEP licensing in the value chain through any of the tools at its disposal, including through a meaningful engagement of stakeholders. Other factors would include the ability of upstream manufacturers to pass the cost of a SEP licence and any potential impact of existing indemnification clauses downstream within a value chain. The framework provided for in this Regulation should promote the EU´s technological leadership in innovation.

Removed:Recital 27: (27) Any assessment of essentiality of SEPs conducted by an independent entity prior to the entry into force of the Regulation, for example through patent pools, as well as essentiality determinations by judicial authorities should be indicated in the register. Those SEPs should not be re-checked for essentiality after the relevant evidence supporting the information in the register is provided to the competence centre unless the evaluator has sufficient reason to believe that the prior essentiality check was inaccurate.

Added:Recital 13: (13) The competence centre should on the one hand set up and administer an electronic register containing detailed information on SEPs in force in one or more Member States. The electronic register should serve as a foundational repository designed to be the primary reference point for users, providing basic information about SEPs free of charge. On the other hand, the competence centre should also set up and administer an electronic database providing easily accessible information in a more extensive and comprehensive dataset to which access could be subject to the payment of a reasonable and proportionate fee. Public authorities, including courts, should have access to the information in the database free of charge. Academic institutions should also be able to request access to the information free of charge under certain conditions. The electronic register and the electronic database should offer a high level of legal certainty.

Removed:Recital 29: (29) The competence centre would publish the results of the essentiality checks, whether positive or negative, in the register and the database. The results of the essentiality checks would not be legally binding. Thus, it should be possible to address any subsequent disputes with regard to essentiality before the competent court. The results from the essentiality checks, whether requested by a SEP holder or based on a sample, may, however, be used for the purpose of demonstrating essentiality of those SEPs or other relevant criteria in negotiations, in patent pools and in court.

Added:Recital 13 a (new): (13a) In order to raise awareness and facilitate SEP licensing for SMEs, the competence centre should offer assistance to SMEs and start-ups. The setting up and administering of a system for essentiality checks and processes for aggregate royalty determination and FRAND determination by the competence centre should include actions improving the system and the processes on a continuous basis, including through the use of new technologies. In line with this objective, the competence centre should establish training procedures for evaluators of essentiality and conciliators for providing opinions on aggregate royalty as well as on FRAND determination and should encourage consistency in their practices.

Removed:Recital 32: (32) The FRAND determination should simplify and speed up negotiations concerning FRAND terms and conditions and reduce transaction costs for all stakeholders. The EUIPO should administer the procedure. The competence centre should create a roster of conciliators that satisfy established competence and independence criteria, as well as a repository of non-confidential reports (the confidential version of the reports will be accessible only by the parties and the conciliators). The conciliators should be impartial persons with extensive experience in dispute resolution and substantial understanding of the economics of licensing on FRAND terms and conditions. There should be rules and procedures defining conflicts of interests and mechanisms for addressing any such conflicts that might arise.

Added:Recital 14: (14) The competence centre should be the subject to Union rules on access to documents and data protection. Its tasks should be designed to increase transparency by making existing information relevant to SEPs available to all stakeholders in a centralised and systematic way. Therefore, a balance should be made between the free public access to basic information and the need to finance the functioning of the competence centre.

Removed:Recital 34: (34) Where a party does not reply to the FRAND determination request, the other party should be able to request either the termination or the unilateral continuation of the FRAND determination. Such a party should not be exposed to litigation during the time of the FRAND determination. At the same time, the FRAND determination should be an effective procedure for the parties to meet on a neutral level, such as before a conciliator, and reach agreement before litigation or to obtain a determination to be used in further proceedings. Therefore, the party or parties that duly engage in the procedure should be able to benefit from its completion.

Added:Recital 15: (15) Knowledge of the potential total royalty for all SEPs covering a standard (aggregate royalty) applicable to the implementations of that standard is important for the assessment of the royalty amount for a product, which plays a significant role for the manufacturer’s cost determinations. It also helps SEP holders to plan expected return on investment and SEP implementers to estimate the cost of standard integration in their products. The publication of the expected aggregate royalty and the standard licensing terms and conditions for a particular standard would facilitate SEP licensing and reduce the cost of SEP licensing. Thus, SEP implementers and SEP holders would benefit from making public the information on total royalty rates (aggregate royalty) and the standard FRAND terms and conditions of licensing.

Removed:The parties should be able to wait until the outcome of the FRAND determination procedure in order to decide if they want to be bound by the result.

Added:Recital 16: (16) SEP holders should have the opportunity to first inform the competence centre of the publication of the standard in respect of which they claim essentiality or the aggregate royalty which they have agreed upon among themselves. Except for those implementations of standards for which the Commission establishes that there are well established and broadly well-functioning licensing practices of SEPs, the competence centre may assist the parties in the relevant aggregate royalty determination. In this context, if there is no agreement on an aggregate royalty among SEP holders, certain SEP holders may request the competence centre to appoint a conciliator to assist the SEP holders willing to participate in the process in determining an aggregate royalty for the SEPs covering the relevant standard. In this case, the role of the conciliator would be to facilitate the decision-making by the participating SEP holders without making any recommendation for an aggregate royalty.

Added:Recital 16 a (new): (16a) SEP holders and SEP implementers should be able to request that the competence centre provides a non-binding expert opinion by an independent third party on an aggregate royalty. When such a request is made, the competence centre should appoint a panel of conciliators and administer a process in which all interested stakeholders are invited to participate. After receiving information from all of the participants, the panel should provide an expert opinion on the aggregate royalty. The expert opinion on the aggregate royalty should contain a non-confidential analysis of the expected impact of the aggregate royalty on the SEP holders and the stakeholders in the value chain. In this respect, it would be important to consider factors such as efficiency of SEP licensing, including insights from any customary rules or practices for licensing of intellectual property in the value chain and cross-licensing, and impact on incentives to innovate of SEP holders and different stakeholders in the value chain.

Added:Recital 17: (17) In line with the general principles and objectives of transparency, participation and access to European standardisation, the electronic register should make information regarding the number of SEPs applicable to a standard, the ownership of relevant SEPs, and the parts of the standard covered by the SEPs publicly available. The register and the database will contain information on relevant standards, products, processes, services and systems, which implement the standard, SEPs in force in the EU, standard SEP licensing FRAND terms and conditions or any licensing programmes, collective licensing programmes and essentiality. For SEP holders the register will create transparency with regard to the relevant SEPs, their share of all SEPs declared to the standard and the features of the standard covered by the patents. SEP holders will be in a better position to understand how their portfolios compare with other SEP holders’ portfolios. This is important not only for negotiations with implementers but also for the purpose of cross-licensing with other SEP holders. For implementers, the register will provide a trusted source of information on the SEPs, including with regard to the SEP holders from whom the implementer may need to obtain a licence. Making such information available in the register will also help shorten the length of technical discussions during the first stage of the SEP licensing negotiations.

Added:Recital 19: (19) In order to ensure transparency of about SEPs, it is appropriate to require from SEP holders to register their patents which are essential to the standard for which the registration is open. SEP holders should register their SEPs within 6 months following the opening of the registration by the competence centre or the grant of the relevant SEPs, whichever is first. SEP holders may collect royalties even if their SEP is not registered, but they should only be able to claim damages for uses and infringements that happened before the registration in case of timely registration, provided that the amount thereof has been established in accordance with the FRAND determination rules set out in this Regulation.

Added:Recital 20: (20) In case of failure by SEP holders to register within the indicated time limit, the competence centre should notify the SEP holder that, in case of further delays in registering its patents, following a grace period of 1 month, the SEP holder should not be able to bring a claim in relation to its patent until the registration is completed.

Added:Recital 22: (22) SEP holders should ensure that their SEP registration(s) are updated. Updates should be registered within 6 months for relevant status changes, including ownership, invalidation findings or other applicable changes resulting from contractual commitments or public authorities’ decisions. In case of failure to update the registration, the competence centre should notify the SEP holder that in case of further delays in updating its registration, following a grace period of 1 month, its SEP may be suspended.

Added:Recital 23: (23) A SEP holder may also request the modification of a SEP registration. An interested stakeholder may also request the modification of a SEP registration, if it can demonstrate that the registration is inaccurate based on a definitive decision by a public authority. A SEP can only be removed from the register at the request of the SEP holder, if the patent is expired, was invalidated or found non-essential by a final decision or ruling of a competent court of a Member State or found non-essential under this Regulation. To ensure transparency, a record of any modifications to the SEP registration should be made publicly available.

Added:Recital 23 a (new): (23a) It is necessary to ensure that the registration and the obligations provided for in this Regulation are not circumvented by removing a SEP from the register. When an evaluator finds a claimed SEP non-essential, only the SEP holder can request its removal from the register and only after the annual sampling process has been completed and the proportion of true SEPs from the sample has been established and published.

Added:Recital 24: (24) To further ensure the quality of the register and avoid over-registration, essentiality checks should also be conducted randomly by independent and impartial evaluators selected according to objective criteria to be determined by the Commission. Only one SEP from the same patent family should be checked for essentiality.

Added:Recital 26: (26) SEP holders may voluntarily submit their SEPs for essentiality checks to the competence centre prior to registering their patents. After the registration, SEP holders or implementers may also designate annually up to 100 registered SEPs for essentiality checks. If the pre-selected SEPs are confirmed essential, the SEP holders may use this information in negotiations and as evidence in courts, without prejudicing the right of an implementer to challenge the essentiality of a registered SEP in court. The selected SEPs would have no bearing on the sampling process as the sample should be selected from all registered SEPs of each SEP holder. If a preselected SEP and a SEP selected for the sample set are the same, only one essentiality check should be done. Essentiality checks should not be repeated on SEPs from the same patent family.

Added:Recital 27: (27) Assessments of essentiality of SEPs conducted by an independent entity prior to the entry into force of the Regulation, for example through patent pools, as well as essentiality determinations by judicial authorities should be indicated in the register. Those SEPs should not be re-checked for essentiality after the relevant evidence supporting the information in the register is provided to the competence centre unless the evaluator has objective reasons to believe, based on sufficient evidence, that the prior essentiality check was inaccurate. SEP holders or patent pools should also be able to conduct the assessment of essentiality of SEPs after the entry into force of this Regulation.

Added:Recital 29: (29) The competence centre would publish the results of the essentiality checks, whether positive or negative, in the register and the database. The results of the essentiality checks would not be legally binding. Thus, it should be possible to address any subsequent disputes with regard to essentiality to the competent court. The results from the essentiality checks, whether requested by a SEP holder or based on a sample, may, however, be used for the purpose of demonstrating essentiality of those SEPs or other relevant criteria in negotiations, in patent pools and in court.

Added:Recital 30: deleted

Added:Recital 31: (31) The purpose of the FRAND commitment is to facilitate adoption and use of the standard by making SEPs available to implementers on fair, reasonable and non-discriminatory terms and to provide the SEP holder a fair and reasonable return for its innovation. Thus, the ultimate goal of enforcement actions by SEP holders or actions brought by implementers based on a SEP holder’s refusal to license should be to conclude a FRAND licence agreement. The main objective of the Regulation in this regard is to facilitate the negotiations and out of court dispute resolution that can benefit both parties. Ensuring access to swift, fair and cost-efficient ways of resolving disputes on FRAND terms and conditions should benefit SEP holders and implementers alike. As such, a properly functioning out-of-court dispute resolution mechanism to determine FRAND terms (FRAND determination) may offer significant benefits for all parties. A party may request a FRAND determination in order to demonstrate that its offer is FRAND or to provide a security, when they engage in good faith.

Added:Recital 32: (32) The FRAND determination should simplify and speed up negotiations concerning FRAND terms and conditions and reduce transaction costs for all stakeholders. The EUIPO should administer the procedure. The competence centre should create a roster of conciliators that satisfy established competence and independence criteria, as well as a repository of non-confidential reports (the confidential version of the reports will be accessible only by the parties and the conciliators). The conciliators should be neutral and impartial persons with extensive experience in dispute resolution and substantial understanding of the economics of licensing on FRAND terms and conditions. There should be rules and procedures defining conflicts of interests and mechanisms for addressing any such conflicts that might arise.

Added:Recital 33: (33) In case one or more parties initiate a FRAND determination, it should be a mandatory step before a SEP holder would be able to initiate patent infringement proceedings or an implementer could request a determination or assessment of FRAND terms and conditions concerning a SEP before a competent court of a Member State. However, the obligation to initiate FRAND determination before the relevant court proceedings should not be required for SEPs covering those implementations of standards for which the Commission establishes that there are no significant difficulties or inefficiencies in licensing on FRAND terms.

Added:Recital 34: (34) Where a party does not reply to the FRAND determination request, the other party should be able to request either the termination or the unilateral continuation of the FRAND determination. Such a party should not be exposed to litigation during the time of the FRAND determination. At the same time, the FRAND determination should be an effective procedure for the parties to meet on neutral ground, such as before a panel of conciliators and reach agreement before litigation or to obtain a determination to be used in further proceedings. Therefore, the party or parties that duly engage in the procedure should be able to benefit from its completion.

Removed:Recital 46: (46) SMEs may be involved in SEP licensing both as SEP holders and SEP implementers. While there are currently a few SME SEP holders, the efficiencies produced with this Regulation are likely to facilitate the licensing of their SEP. Additional conditions are necessary to relieve the cost burden on such SMEs such as reduced administration fees and potentially reduced fees for essentiality checks and conciliation in addition to free support and trainings. The SEPs of micro and small enterprises should not be the subject of sampling for essentiality check, but they should be able to propose SEPs for essentiality checks if they wish to. SME implementers should likewise benefit from reduced access fees and free support and trainings. SEP holders should be encouraged to incentivise licensing by SMEs through low volume discounts or exemptions from FRAND royalties. Finally, MSMEs should benefit from a one-stop shop being set up by the competence centre which identifies relevant licensees and licensors for the MSME and advises them, free of charge, on SEPs. Patent assertion entities should not benefit from the exceptions and help from the competence centre provided for in this Regulation.

Added:Recital 38: (38) The panel of conciliators should examine the parties’ submissions and suggestions for the determination of FRAND terms and conditions, and consider the relevant negotiation steps, among other relevant circumstances. The panel of conciliators, upon its own initiative or the request of a party, should be able to require the parties to submit evidence it deems necessary for the fulfilment of its task. It should also be able to examine publicly available information and the competence centre’s register and reports of other FRAND determinations, as well as non-confidential documents and information produced by or submitted to the competence centre.

Removed:Recital 46 a (new): (46a) The support mechanisms, such as IP vouchers for SMEs, have been effective in assisting SMEs to protect their IP rights. The period of application of those mechanisms should be prolonged beyond 2024.

Added:Recital 39: (39) If a party fails to engage in the FRAND determination after the panel of conciliators has been appointed, the other party may request the termination or may request that the conciliator issues a recommendation for a FRAND determination on the basis of the information it was able to assess.

Removed:Article 1 – paragraph 2 – introductory part: 2. This Regulation shall apply to patents that have been declared essential to a standard that has been published by a standard development organisation, regardless of whether the SEP holder has or has not made a commitment to license its SEPs on fair, reasonable and non-discriminatory (FRAND) terms and conditions and that is not subject to a royalty-free intellectual property policy,

Added:Recital 40: (40) If a party initiates a procedure in a jurisdiction outside the Union resulting in legally binding and enforceable decisions regarding the same standard that is subject to FRAND determination and its implementation, or including SEPs from the same patent family as SEPs subject to FRAND determination and involving one or more of the parties to the FRAND determination as a party; before or during of the FRAND determination by a party, the panel of conciliators, or where it has not been appointed has not been established, the competence centre, should be able to terminate the procedure upon the request of the other party.

Removed:Article 1 – paragraph 3: 3. Where there is sufficient evidence that, as regards identified use cases of certain standards or parts thereof, SEP licensing negotiations on FRAND terms do not give rise to significant difficulties or inefficiencies affecting the functioning of the internal market, Articles 17 and 18 and Article 34(1) shall not apply. The Commission shall, after an appropriate consultation process including all relevant stakeholders, by means of a delegated act adopted in accordance with Article 67, establish a list of such use cases, standards or parts thereof. The Commission shall review that list once a year in order to determine if it needs to be updated.

Added:Recital 41: (41) At the conclusion of the procedure, the panel of conciliators should make a proposal recommending FRAND terms and conditions. Either party should have the option to accept or reject the proposal. If the parties do not settle and/or do not accept its proposal, the panel of conciliators should draft a report of the FRAND determination. The report would have a confidential and a non-confidential version. The non-confidential version of the report should contain the proposal for FRAND terms and conditions and the methodology used and should be provided to the competence centre for publication in order to inform any subsequent FRAND determination between the parties and other stakeholders involved in similar negotiations. The report would thus have a dual purpose to encourage the parties to settle and to provide transparency as to the process and the recommended FRAND terms in cases of disagreement.

Removed:Article 1 – paragraph 4: 4. Where the functioning of the internal market is severely distorted due to significant difficulties or inefficiencies in the licensing of SEPs, this Regulation shall also apply to existing standards. The Commission shall, after an appropriate consultation process including all relevant stakeholders, by means of a delegated act pursuant to Article 67, determine which of the existing standards, parts thereof or relevant use cases can be notified in accordance with Article 66(1) or (2), or for which an expert opinion can be requested in accordance with Article 66(3). The Commission shall also determine by means of that delegated act which procedures, notification and publication requirements set out in this Regulation apply to those existing standards. The delegated act shall be adopted by ... [OJ: please insert the date 18 months from entry into force of this regulation]. The Commission shall check once a year if the list needs to be updated.

Added:Recital 42: (42) The Regulation respects the intellectual property rights of patent owners, in line with Article 17(2) of EU Charter of Fundamental Rights, although it includes a restriction on the ability to enforce a SEP that has not been registered within a certain time-limit and introduces a requirement to conduct a FRAND determination before enforcing individual SEPs. The limitation on the exercise of intellectual property rights is allowed under the EU Charter, provided that the proportionality principle is respected. According to settled case-law, fundamental rights can be restricted provided that those restrictions correspond to objectives of general interest pursued by the Union and do not constitute, with regard to the aim pursued, a disproportionate and intolerable interference which infringes the very essence of the rights guaranteed39 . In that respect, this Regulation is in the public interest in that it provides a uniform, open and predictable information and outcome on SEPs for the benefit of SEP holder, implementers and end users, at Union level. It aims at dissemination of technology for the mutual advantage of the SEP holders and implementers. Furthermore, the rules concerning the FRAND determination are temporary thus limited and aimed at improving and streamlining the process but are not ultimately binding.40

Removed:Text from Article 66 (4) has been moved to Article 1, since it deals with the scope of application of this Regulation.

Added:Recital 43: (43) The FRAND determination is also consistent with the right to an effective remedy and to access to justice as laid down in Article 47 of the Charter of Fundamental Rights of the European Union as the implementer and the SEP holder fully retain that right. In case of failure to register within the prescribed time limit, the exclusion of the right to effective enforcement is limited and necessary and meets objectives of general interest. As confirmed by the CJEU41 , the provision of a mandatory dispute resolution as a precondition to access to competent courts of Member States is deemed to be compatible with the principle of effective judicial protection. The FRAND determination follows the conditions for mandatory dispute resolution outlined in the CJEU judgments, taking into account the particular characteristics of SEP licensing. The FRAND determination procedure also allows a deposit of a bond by the alleged infringer as a provisional injunction of a financial nature, which can be requested in order to avoid seriously restricting the alleged infringer’s activity and ensuring that the other party receives the corresponding sum in the event of a claim for damages. Moreover, the FRAND determination in no way impairs the SEP holder’s ability to receive compensation for an infringement that occurred during the FRAND determination in subsequent court proceedings.

Removed:Article 2 – paragraph 1 – point 1: (1) ‘standard essential patent’ or ‘SEP’ means any patent that has been declared essential to a standard and is in force in a Member State;

Added:Recital 44: (44) When determining the aggregate royalties and making FRAND determinations the conciliators should take into account in particular any Union acquis and judgments of the Court of Justice pertaining to SEPs as well as guidance issued under this Regulation, the Horizontal Guidelines42 and the Commission’s 2017 Communication ‘Setting out the EU approach to Standard Essential Patents’.43 Furthermore, the panel of conciliators should consider any expert opinion on the aggregate royalty or in the absence thereof, should request information from the parties before it makes its final proposals well as guidance issued under this Regulation, as well as guidance issued under this Regulation.

Added:Recital 45: deleted

Added:Recital 45 a (new): (45a) In order to avoid a possible negative impact on companies which are established in the Union as well as engage and compete successfully as regards the development of global technologies through standardisation, the Commission should evaluate the impact that the essentiality check system, the aggregate royalties determination system and the FRAND determination system have on the competitiveness of Union SEP holders on a global level. Based on the outcome of that evaluation, the Commission should, where necessary, present a legislative proposal in order to adapt the systems. The role of patent pools, including those created by SEP implementers, should be evaluated by the Commission in order to assess their impact once this Regulation has entered into force, notably in terms of their impact on the competitiveness on the market.

Added:Recital 46: (46) SMEs may be involved in SEP licensing both as SEP holders and SEP implementers. While there are currently a few SME SEP holders, the efficiencies produced with this Regulation should also facilitate the licensing of their SEP. Additional conditions are necessary to relieve the cost burden on such SMEs such as reduced administration burdens and administrative fees and potentially reduced fees for essentiality checks and conciliation in addition to free support and trainings, so that they are better placed to engage in SEP related matters and also standard development. The SEPs of micro and small enterprises and start-ups should not be the subject of sampling for essentiality check, but they should be able to propose SEPs for essentiality checks if they wish to. SME and start-up implementers should likewise benefit from reduced access fees and free support and trainings. Finally, SEP holders should be encouraged to incentivise licensing by SMEs through low volume discounts or exemptions from FRAND royalties. In this context, it is important to ensure that SMEs and start-ups benefit from a one-stop shop set up by the competence centre which identifies relevant licensees and licensors for the SMEs and advises them, free of charge, on SEPs. To that end, the competence centre should set up a SEP Licensing Assistance Hub for SMEs and start-ups which could also provide, under certain conditions, assistance with regard to judicial support, such as a pro bono legal representative …

Added:Recital 46 a (new): (46a) While advantages should be granted to SMEs, they should not be susceptible to misuses. In this regard, patent assertion entities, which may be characterised by an “obtain and assert” business model and which have the purpose of generating revenues through licensing fees, royalties and damage compensation, should not benefit from exemptions and the help from the competence centre provided for in this Regulation.

Added:Recital 46 b (new): (46b) The support mechanisms, such as IP vouchers for SMEs, have been effective in assisting SMEs to protect their IP rights. The period of application of those mechanisms should be prolonged beyond 2024.

Added:Recital 47: (47) In order to supplement certain non-essential elements of this Regulation, the power to adopt acts, in accordance with Article 290 of the Treaty on the Functioning of the European Union, should be delegated to the Commission in respect of the items to be entered in the register or in respect of determining the relevant existing standards or to identify implementations of standards or parts thereof for which the Commission establishes that there are no significant difficulties or inefficiencies in licensing on FRAND terms. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making44. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

Added:Recital 48: (48) In order to ensure uniform conditions for the implementation of the relevant provisions of this Regulation, implementing powers should be conferred on the Commission to adopt the detailed requirements for the selection of evaluators and conciliators, as well as adopt the rules of procedure and Code of Conduct for evaluators and conciliators. Evaluators and conciliators should be of good repute and possess sufficient knowledge, skills and experience to perform their duties. The Commission should also adopt the technical rules for the selection of a sample of SEPs for essentiality checks and the methodology for the conduct of such essentiality checks by evaluators and peer evaluators. The Commission should also determine any administrative fees for its services in relation to the tasks under this Regulation and fees for the services of evaluators, experts and conciliators, derogations thereof and payment methods and adapt them as necessary. The Commission should also determine the standards or parts thereof that have been published before the entry into force of this Regulation, for which SEPs can be registered. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council.45

Added:Article 1 – paragraph 2 – introductory part: 2. This Regulation shall apply to patents that are in force in one or more Member States and that a SEP holder claims to be essential to a standard that has been published by a standard development organisation, after entry into force of this Regulation regardless of whether the SEP holder has or has not made a commitment to license its SEPs on fair, reasonable and non-discriminatory (FRAND) terms and conditions. / (deleted) / (deleted)

Added:Article 1 – paragraph 3: 3. Articles 17 and 18 and Article 34(1) shall not apply where there is sufficient evidence that SEP licensing negotiations on FRAND terms and conditions do not give rise to significant difficulties or inefficiencies affecting the functioning of the internal market as regards identified implementations of certain standards or parts thereof. Such implementations, standards and parts thereof shall be identified pursuant to the procedure set out in Article 65b.

Added:Article 1 – paragraph 4: 4. Without prejudice to paragraph 2, this Regulation shall also apply to patents in force in one or more Member States and that a SEP holder claims to be essential to a standard published by a standard development organisation before the entry into force of this Regulation, where the functioning of the internal market is severely distorted due to significant difficulties or inefficiencies in the licensing of SEPs for certain implementations, standards and parts thereof. Such implementations, standards and parts thereof shall be identified pursuant to the procedure set out in Article 65c.

Added:Article 1 – paragraph 5: 5. This Regulation shall not apply to SEPs that are subject to a royalty-free intellectual property policy, except when such SEPs are part of a portfolio of patents licensed for royalties.

Added:Article 2 – paragraph 1 – point 1: (1) ‘standard essential patent’ or ‘SEP’ means any patent that a SEP holder claims to be is essential to a standard;