COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on standard essential patents and amending Regulation (EU) 2017/1001

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EUROPEAN
COMMISSION
Brussels, 27.4.2023
SWD(2023) 124 final
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT REPORT
Accompanying the document
Proposal for a Regulation of the European Parliament and of the Council on standard
essential patents and amending Regulation (EU) 2017/1001
{COM(2023) 232 final} - {SEC(2023) 174 final} - {SWD(2023) 123 final} -
{SWD(2023) 125 final}
Offentligt
KOM (2023) 0232 - SWD-dokument
Europaudvalget 2023
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Table of contents
1. INTRODUCTION ................................................................................................................................ 4
2. PROBLEM DEFINITION .................................................................................................................... 8
3. WHY SHOULD THE EU ACT? .........................................................................................................27
4. OBJECTIVES: WHAT IS TO BE ACHIEVED? ................................................................................28
5. WHAT ARE THE AVAILABLE POLICY OPTIONS? .....................................................................29
6. WHAT ARE THE IMPACTS OF THE POLICY OPTIONS?............................................................35
7. HOW DO THE OPTIONS COMPARE?.............................................................................................51
8. PREFERRED OPTION .......................................................................................................................57
9. HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED?...................................59
ANNEX 1: PROCEDURAL INFORMATION.............................................................................................61
ANNEX 2: STAKEHOLDER CONSULTATION (SYNOPSIS REPORT).................................................63
ANNEX 3: WHO IS AFFECTED AND HOW? ...........................................................................................73
ANNEX 4: ANALYTICAL METHODS ......................................................................................................76
ANNEX 5: ADDITIONAL INFORMATION IN SUPPORT OF PROBLEM SECTION ...........................77
ANNEX 6: ADDITIONAL INFORMATION ON OPTIONS DISCARDED AT AN EARLY STAGE .....89
ANNEX 7: ADDITIONAL INFORMATION IN SUPPORT OF IMPACT ANALYSIS ............................97
ANNEX 8: SMES AND SEPS....................................................................................................................123
ANNEX 9: PUBLIC CONSULTATION – DETAILED SUMMARY .......................................................149
2
Glossary
Term or acronym Meaning or definition
3GPP 3GPP – The Mobile Broadband Standard Partnership
Project
Arbitration A structured process in which the parties submit their
dispute for adjudication to a trained arbitrator or panel of
arbitrators resulting in a binding decision.
ADR Alternative Dispute Resolution
EU Charter Charter of Fundamental Rights of the European Union
CJEU Court of Justice of the European Union
Commission European Commission
Conciliation A structured process in which the parties submit their
dispute for negotiation and resolution with the assistance
of a neutral person, who may issue a non-binding
opinion if the parties are unable to resolve their dispute.
Council Council of the European Union
EPO European Patent Office
EP European Parliament
ETSI European Telecommunications Standards Institute
EUIPO European Union Intellectual Property Office
FRAND Fair, Reasonable and Non-discriminatory
FRAND determination process
(conciliation +)
A structured process initiated at the request of one party,
in which a neutral person assists the parties to determine
FRAND royalties, may request evidence from the parties
and will issue a non-binding opinion, if the parties are
unable to resolve their dispute.
ICT Information and Communication Technologies
IEEE Institute of Electrical and Electronics Engineers
IoT Internet of Things
IPR Intellectual Property Rights
ITU-T International Telecommunications Union –
Telecommunications Sector
Mediation A structured process in which the parties submit their
dispute for negotiation with the assistance of a mutually
selected impartial and neutral person.
NDA Non-Disclosure Agreement
3
NPE(s) Non-Practicing Entity(ies)
NPO National Patent Office
Patent claims Under the European Patent Convention (EPC), a claim
must define the matter for which the protection is sought
in terms of technical features.
Patent Family A patent family is a collection of patents that cover the
same technology (invention) and are granted indifferent
countries.
Patent pool Means an agreement between two or more SEP holders
to license one or more of their patents to one another or
to third parties.
R&D Research and Development
SDO Standards Development Organisation
SEP(s) Standard Essential Patent(s)
SME(s) Small and Medium-sized Enterprise(s)
TRIPS Trade-Related Aspects of Intellectual Property Rights
WIPO World Intellectual Property Organisation
WTO World Trade Organisation
4
1. INTRODUCTION
1.1. Political and legal context
Standard Essential Patents (SEPs) are patents that protect technology that is incorporated in a
standard.1
SEPs are “essential” in the sense that implementation of the standard requires use of the
inventions covered by SEPs.
SEPs are a combination of two seeming contradictions. Standards ensure compatibility and
functionality of complex technology, as well as enable interoperability between devices. The success
of a standard depends on its wide implementation and as such every producer should be allowed to
use a standard. On the other hand, the goal of a patent is protection of the technology of the patent
owner who has the right granted by law to limit, or prevent, the usage of that technology and profit,
or not, from it, by choosing how and to whom to license/sell patents, whether or not this is for
remuneration. To deal with these contradictions, Standards Development Organisations (SDOs) ask
the patent owners who participate in standard development to promise to license their patented
technology (i.e., SEPs) on “fair reasonable and non-discriminatory” (FRAND) terms2
to any
implementer3
that chooses to use the standard. If a patent owner makes this promise (called FRAND
commitment)4
, it cannot refuse to license its SEPs to a party who is willing to agree to FRAND terms.
SEP licensing issues arise primarily in the context of standards where the SEP holders have made a
promise to the relevant SDO to license their SEPs on FRAND terms for remuneration. Such standards
are, for example, communication standards (e.g. 3G, 4G, 5G, WiFi, NFC), audio/video compression
and decompression standards (MPEG, HEVC), as well as standardized technologies for data storage
and exchange (CD and DVD), photo formats (JPEG), and Home Audio/Video Interoperability
(HAVi). The users of these standards are traditionally producers of telecommunication equipment,
mobile phones, computers, tablets, TV sets, etc. With the recent rise of the Internet of Things (IoT)
including connected cars, drones, payment terminals, tracking devices, smart meters and other smart
devices, the standards listed above are increasingly implemented by a growing number of companies,
often SMEs.
Standard setting and the related FRAND obligation are guided by the Horizontal Guidelines5
and the
CJEU landmark ruling from 2015 in Huawei v. ZTE.6
The summary of the judgment can be found
1
A patent that is essential to a standard established by a standardisation body renders its use indispensable to all
companies who envisage manufacturing products that comply with the standard to which it is linked. That feature
distinguishes a SEP from a patent that is not essential to a standard and which normally allows third parties to manufacture
competing products without recourse to the patent concerned and without compromising the essential functions of the
product in question (see Judgment of the Court of Justice of 16 July 2015, Huawei Technologies Co. Ltd v ZTE Corp.
and ZTE Deutschland GmbH, C-170/13, ECLI:EU:C:2015:477, https://e-justice.europa.eu/ecli/ECLI:EU:C:2015:477).
2
According to para. 285 of the Communication from the Commission – Guidelines on the applicability of Article 101 of
the Treaty on the Functioning of the European Union to horizontal co-operation agreements, OJ C 11, 14.1.2011, p. 60,
CELEX: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52011XC0114(04), FRAND can also cover
royalty-free licensing.
3
‘Implementer’ is any legal person that implements the standard in a product or service.
4
The FRAND commitment is a voluntary contractual commitment given by the SEP holder to the benefit of third parties.
Each commitment may be different, depending on each Standard Development Organisation’s policy.
5
Communication from the Commission – Guidelines on the applicability of Article 101 of the Treaty on the Functioning
of the European Union to horizontal co-operation agreements, OJ C 11, 14.01.2011, pp. 1-72, CELEX: https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52011XC0114(04).
6
Judgment of the Court of Justice of 16 July 2015, Huawei Technologies Co. Ltd v ZTE Corp. and ZTE Deutschland
GmbH, C-170/13, ECLI:EU:C:2015:477, https://e-justice.europa.eu/ecli/ECLI:EU:C:2015:477.
5
under the link below.7
The CJEU recognized the right of the SEP holder to seek to enforce its patents
in national courts subject to certain conditions that must be fulfilled to prevent an abuse of a dominant
position by the SEP holder. Since a patent confers on its holder the exclusive right to prevent any
third party from using the invention without the holder’s consent only in the jurisdiction for which it
is issued (e.g., Germany, France, the US, China etc.), the patent disputes are governed by national
patent laws and civil proceedings/enforcement laws.8
In case of unlicensed imports, SEP holders can rely on Regulation (EU) No 608/2013 concerning
customs enforcement of intellectual property rights9
by requesting detention of goods by customs,
although that Regulation does not provide specific provisions with regard to applications for customs’
action concerning goods infringing SEPs.10
Jurisprudence seems to suggest that the parties have to
comply with the conditions described under Huawei v ZTE before requesting such seizure or asking
for the release of impounded goods on the part of the implementer.11
In 2017, the Commission’s Communication12
“Setting out the EU approach to Standard Essential
Patents,” called for a comprehensive and balanced approach to SEP licensing to incentivise the
contribution of the best technology to global standardisation efforts and foster efficient access to
standardised technologies. The Commission acknowledged the need for increased transparency
(regarding, among others, existence of SEPs, SEP ownership, and FRAND royalties) and addressed
certain aspects of FRAND licensing and SEPs enforcement. The Commission’s views were
supported by Council Conclusions 6681/1813
, with the Council stressing the importance of increased
transparency.
7
The bringing of an action for a prohibitory injunction against an alleged infringer by the proprietor of a standard-
essential patent which holds a dominant position may constitute an abuse of that dominant position in certain
circumstances (europa.eu)
8
Harmonised by Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the
enforcement of intellectual property rights (‘IPRED’), OJ L 157, 30.4.2004, pp. 45-86,
http://data.europa.eu/eli/dir/2004/48/oj.
9
Regulation (EU) No. 608/2013 of the European Parliament and of the Council of 12 June 2013 concerning customs
enforcement of intellectual property rights and repealing Council Regulation (EC) No. 1383/2003 (‘Regulation
concerning customs enforcement of IPRs’), OJ L 181, 29.6.2013, pp. 15-34, http://data.europa.eu/eli/reg/2013/608/oj.
10
Customs enforcement of patents is regulated by Regulation concerning customs enforcement of IPRs. Taking into
account the broad definition of patents in this Regulation, in particular Article 2(1)(e): “a patent as provided for by
national or Union law”, it is understood that it already encompasses SEPs.
11
Hague District Court, decision of 24 October 2014, ZTE v. Vringo, C/09/470109 / KG ZA 14- 870,
https://slidelegend.com/judgment-hoyng-rokh-monegier_59ec9d4e1723dd6d9a764540.html; Regional Court
Düsseldorf, decision of 9 November 2017, Sisvel v. Samsung, 14d O 13/17,
http://www.justiz.nrw.de/nrwe/lgs/duesseldorf/lg_duesseldorf/j2017/14d_O_13_17_Urteil_20171109.html.
12
Communication from the Commission to the European Parliament, the Council and the European Economic and Social
Committee on Setting out the EU approach to Standard Essential Patents, COM(2017)712 final, 29.11.2017,
https://ec.europa.eu/docsroom/documents/26583.
13
Council conclusions on the enforcement of Intellectual Property Rights, 6681/18, 1.3.2018,
http://data.consilium.europa.eu/doc/document/ST-6681-2018-INIT/en/pdf.
6
Since then, the Commission has conducted several studies14
and a series of webinars15
, has
established a group of experts on the licensing and valuation of SEPs16
, and has actively monitored
the market situation. On 10 November 2020, by Council conclusions 12339/2017
, the Council invited
the Commission to present proposals for a future EU IP policy. The Council encouraged the
Commission to swiftly present the announced IP action plan, with initiatives to make IP protection
more effective and more affordable, especially for small and medium-sized EU enterprises
(“SMEs”),18
and to promote effective sharing of IP, in particular critical assets such as SEPs, whilst
ensuring adequate and fair compensation to technology developers.
On 25 November 2020, the Commission published its intellectual property action plan (‘the IP action
plan’)19
, where it announced its goals of promoting transparency and predictability in SEP licensing,
including by improving the SEP licensing system, for the benefit of EU industry and consumers, and
in particular SMEs. The IP Action plan noted increases in SEP licensing disputes in the automotive
sector and the potential for other IoT sectors to become subject of such disputes, as they begin using
connectivity and other standards. The IP Action plan was supported by Council Conclusions of 18
June 202120
and by the European Parliament (EP) in its Resolution21
. The EP acknowledged the need
for a strong, balanced and robust IPR system and agreed with the Commission’s position that the
transparency necessary for fair licensing negotiations depends in large part on the availability of
information about the existence, scope, essentiality, ownership, and stipulated royalties of SEPs. The
14
European Commission, Joint Research Centre, Bekkers, R., Henkel, J., Tur, E. M., et al., Pilot study for essentiality
assessment of standard essential patents, Publications Office of the European Union, 2020,
https://data.europa.eu/doi/10.2760/68906; European Commission, Joint Research Centre, Bekkers, R., Raiteri, E.,
Martinelli, A., et al., Landscape study of potentially essential patents disclosed to ETSI: a study carried out in the context
of the EC ‘Pilot study for essentiality assessment of standard essential patents’ project, Thumm, N. (editor), Publications
Office, 2020, https://data.europa.eu/doi/10.2760/313626; European Commission, Joint Research Centre, Baron, J.,
Pentheroudakis, C., Thumm, N., Licensing terms of standard essential patents: a comprehensive analysis of cases,
Thumm, N. (editor), Publications Office, 2018, https://data.europa.eu/doi/10.2791/32230; CRA, Régibeau, P., De
Coninck, R. and Zenger, H., Transparency, Predictability, and Efficiency of SSO-based Standardization and SEP
Licensing: A Report for the European Commission, 2016, https://ec.europa.eu/docsroom/documents/48794?locale=en;
European Commission, Directorate-General for Enterprise and Industry, Patents and standards: a modern framework for
IPR-based standardization: final report, 2014, https://data.europa.eu/doi/10.2769/90861.
15
See webpage https://ec.europa.eu/growth/content/webinar-series-standard-essential-patents_en.
16
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021,
https://ec.europa.eu/docsroom/documents/45217.
17
Council conclusions on Intellectual property policy and the revision of the industrial designs system in the Union,
12750/20, 10.11.2020, https://www.consilium.europa.eu/media/46671/st-12750-2020-init.pdf.
18
SME definition: https://single-market-economy.ec.europa.eu/smes/sme-definition_en.
19
Communication from the Commission to the European Parliament, the Council, the European Economic and Social
Committee and the Committee of the Regions on making the most of the EU’s innovative potential: An intellectual
property action plan to support the EU’s recovery and resilience (‘IP action plan’), COM(2020) 760 final, 25.11.2020,
https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:52020DC0760.
This proposal along with two others announced in the IP action plan on Supplementary Protection Certificates and
Compulsory Licensing are scheduled for adoption as a package in the first half of 2023. These three initiatives share
similar goals of increasing legal certainty and transparency as well as reducing fragmentation and transaction costs. All
three initiatives take into account the introduction of the Unitary Patent. Beyond the common objectives the two other
initiatives are not tackling issues specific to SEPs.
20
Council conclusions on intellectual property policy, 9932/21, 18.6.2021,
https://www.consilium.europa.eu/media/50529/st-9932-2021-init.pdf.
21
European Parliament resolution of 11 November 2021 on an intellectual property action plan to support the EU’s
recovery and resilience (2021/2007(INI)), OJ C 205, 20.5.2022, pp. 26-36, CELEX: https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52021IP0453.
7
EP also asked the Commission to provide more clarity on various aspects of FRAND, and to consider
possible incentives for more efficient SEP licensing negotiations and reducing litigation.
In parallel with this initiative, the Commission has updated its Standardisation strategy22
(EU
Strategy) and is revising the Horizontal guidelines23
. The new EU Strategy, published in February
2022, aims to strengthen the EU's global competitiveness, preserve the high quality of EU standards,
and enable a resilient, green and digital economy. The present SEPs initiative is complementary to
this EU Strategy and to the ongoing work to revise the Horizontal Guidelines.
Furthermore, this initiative is important in the context of global developments. For example, certain
emerging economies are taking a much more assertive approach, not only in promoting home-grown
standards, but also by actively supporting participation by domestic companies in global
standardisation efforts, providing their industries with a competitive edge in terms of market access
and technology roll-out. Moreover, courts in the UK, US and China have, with their own specificities,
decided that they have jurisdiction to determine global FRAND terms in specific cases, which may
impact the EU industry.24
Some countries have released25
or are considering guidelines governing
SEP licensing negotiations as well.26
22
Communication from the Commission to the European Parliament, the Council, the European Economic and Social
Committee and the Committee of the Regions on an EU Strategy on Standardisation: Setting global standards in support
of a resilient, green and digital EU single market, COM(2022) 31 final, 2.2.2022, https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A52022DC0031&qid=1675955640882.
23
https://ec.europa.eu/competition-policy/public-consultations/2019-hbers_en.
24
United Kingdom’s Supreme Court, Judgment of 26 August 2020, Unwired Planet v. Huawei, UKSC 2018/0214, [2020]
UKSC 37, https://www.supremecourt.uk/cases/uksc-2018-0214.html; Decision of the United States District Court for the
Central District of California, TCL v Ericsson, Case No. 8:14-cv-00341-JVS-DFM with consent of both parties; Chinese
Supreme Court, ruling of 19 August 2021, OPPO v Sharp, Zui Gao Fa Zhi Min Xia Zhong No. 517; Order of the Wuhan
Intermediate Court of 23 September 2020, Xiaomi v. Interdigital, (2020) E 01 Zhi Min Chu 169 No. 1,
https://patentlyo.com/media/2020/10/Xiaomi-v.-InterDigital-decision-trans-10-17-2020.pdf; Order of the Wuhan
Intermediate Court, Samsung v Ericsson, (2020) E 01 Zhi Min Chu No. 743. Due to concerns about the compatibility of
China's policy in this area with its WTO obligations, the EU has challenged certain measures before the WTO and initiated
dispute settlement proceedings (China – Enforcement of intellectual property rights DS611). The EU seeks to ensure that
its high-tech industry can effectively protect its patents before courts outside China. The EU internal initiative aims at
increasing transparency and improving the licensing environment for SEPs within the EU.
25
Japanese Patent Office Guide to Licensing Negotiations Involving Standard Essential Patents,
https://www.jpo.go.jp/e/system/laws/rule/guideline/patent/document/rev-seps-tebiki/guide-seps-en.pdf; South Korean
Guidelines on unfair exercise of Intellectual Property Rights,
https://ftc.go.kr/eng/cop/bbs/selectBoardList.do?key=2855&bbsId=
BBSMSTR_000000003632&bbsTyCode=BBST11; Singapore’s Competition & Consumers Commission Guidelines on
the treatment of Intellectual Property Rights, https://www.cccs.gov.sg/-/media/custom/ccs/files/legislation/ccs-
guidelines/revised-guidelines-jan-2022/9-cccs-guidelines-on-the-treatment-of-
ip.pdf?la=en&hash=4B788CFD35E23E6E6D680F898C3A339FD3B43E0A.
26
The United States of America withdrew its Policy Statement on Licensing Negotiations and Remedies for Standards-
Essential Patents Subject to F/RAND Commitments and concluded a Memorandum of Understanding with the WIPO
Arbitration and Mediation Centre. The UK has launched a process in 2021 on SEPs and innovation, which is ongoing.
India’s Department of Telecommunications is discussing a proposal to set up a Digicom Intellectual Property
Management Board to facilitate IPR licensing and IP management in the telecommunication sector. China has consulted
on the draft amendments to the implementing regulations of its Anti Monopoly Law. Japan’s Patent Office is revising its
guidelines and METI launched a Study Group on Licensing Environment of SEPs.
8
2. PROBLEM DEFINITION
2.1. Market description
SEPs represent approximately 2% of the population of the patents that are currently in force.
Standards to which FRAND commitments are made and SEPs are declared include communication
standards (e.g. 4G, 5G, WiFi) (90% of declared SEPs), computer technology (5% of declared SEPs),
audio/visual field (e.g. codecs) (2% of declared SEPs). The remaining 3% cover machinery,
measurement, semiconductors, optics or medical technology. The number of declared SEPs was
estimated at around 75 000 (patent families) worldwide in 2021 following a six fold increase over
the last decade. They are owned by approximately 260 companies (companies with at least 10
SEPs).27
One third of all SEPs is owned by Chinese companies, doubling their share in just seven
years. Also shares of Korean and Taiwanese SEPs increased over that period to respectively 19% and
1.2%. On the other hand, both the EU and the US shares in SEPs decreased from 22% to 15% and
from 26% to 19% respectively. The share of Japanese companies remains stable at around 11% (see
figure below). Around 80% of all SEPs held by EU companies are owned by just two companies,
Nokia and Ericsson, and a further 10% by Philips and Siemens. The remaining 10% are shared by
around 27 firms including telecoms (e.g. Orange, KPN, Deutsche Telekom, Teliasonera, Telecom
Italia, T-Mobile, Alcatel), engineering firms (e.g. Bosch), or research institutions (e.g. Fraunhofer
Gesellschaft) to name just a few.28
It has to be noted that the number of declared SEPs may not
provide information on the strength of the SEPs portfolio of the different companies. The latter would
depend inter alia on which of those declared SEPs are actually essential, which features of the
standard they cover and what is their quality.
Figure 1: SEP ownership share by year and country (top 50 owners)
Note: Based on top 50 owners representing from 88% (2014) to 95% (2021) of all SEP families
Source: IPLytics database
The FRAND commitment underlies the SEP owners’ approach to licensing SEPs to implementers,
which may be done either free of charge or for royalties. For instance, SEPs in the area of internet
(e.g. URL, HTML, XML, TCP, Java Script) are predominantly licensed royalty-free. Cellular
standards (e.g. 4G, 5G) are subject to royalty payments, similar to short range communication
standards WiFi and NFC, with the exception of Bluetooth, which is royalty-free but requires a small
annual membership fee. SEPs related to CD, DVD, digital image formats (JPEG) and most
27
The number of patent families presented. -Baron, J., Arque-Castells, P., Leonard, A., Pohlmann, T., Sergheraert, E.,
Empirical Assessment of Potential Challenges in SEP Licensing, European Commission, DG GROW, 2023; Figure 4
and 5, p. 17 (chapter 2.1.1. Potentially large numbers of declared SEPs per standard).
28
The statistics concern firms with 10 or more SEP patent families.
22%
EU, 15%
USA, 19%
Japan, 11%
Korea, 19%
China, 30%
Taiwan, 1%
0%
5%
10%
15%
20%
25%
30%
2014 2015 2016 2017 2018 2019 2020 2021
EU USA Japan Korea China Taiwan
9
audio/video compression technologies (MPEG, AAC, HEVC) are also subject to royalty payments.29
Royalty bearing SEPs can be licensed through bilateral arrangements or via joint licensing
programmes, including “patent pools” (consortia of patent owners created to license their patents
jointly, through a single transaction). SEP holders are expected to license their patents on FRAND
terms30
so as not to abuse their monopoly position.
An empirical study (Biddle et al., 2010) identified 251 technical interoperability standards
implemented in a modern laptop computer. The intellectual property rights policies associated with
197 of the standards were assessed. The results show that 78% were developed under “FRAND”
terms and 22% under “royalty free” terms.
The largest share of royalty payments for SEP licenses comes from the mobile telecommunications
industry, which generates an estimated patent royalty yield of EUR 14 – 18 billion per year31
with
additional EUR 4 billion of non-monetary benefits from cross-licensing.32
The EU’s share could be
estimated at around EUR 3 billion per year.33
One standard can consist of thousands of technical contributions protected by patents owned by
dozens or even hundreds of SEP holders (for example, in the case of 5G, major SEP holders include
Ericsson, Huawei, Intel, Nokia, Qualcomm, Samsung, and ZTE, just to name a few). Moreover, a
single product (e.g. a car) can implement multiple standards (see figure below).
Figure 2: Standards with FRAND commitments implemented in a modern connected car
Source: Tim Pohlmann, Intellectual Asset Management, May/June 2017, pp. 22-27
Historically, with regard to SEPs in communications technologies, SEP licensing occurred in large
part between phone and network equipment companies who licensed their SEPs to each other (i.e.,
29
See: Annex 5. ‘SEP – free or royalty bearing’.
30
The FRAND commitment is a voluntary contractual commitment given by the SEP holder to the benefit of third parties.
Each commitment may be different, depending on each Standard Development Organisation’s policy.
31
Galetovic et al. produce an estimate of the cumulative patent royalty yield in the mobile telecommunications industry,
which they estimate to reach USD 14.2 billion in 2016, see Galetovic, A., Haber, S., and Zaretzki, L., ‘An estimate of the
average cumulative royalty yield in the world mobile phone industry: Theory, measurement and results’,
Telecommunications Policy, April 2018, Vol. 42, Issue 3, pp. 263-276,
https://www.sciencedirect.com/science/article/pii/S0308596117302240?via%3Dihub, quoted in Baron, J., Arque-
Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing, European Commission,
DG GROW, 2023. Régibeau et al. cite an estimate of the yearly SEP royalty yield generated by 2G, 3G, and 4G
technology of EUR18 billion per year, see CRA, Régibeau, P., De Coninck, R. and Zenger, H., Transparency,
Predictability, and Efficiency of SSO-based Standardization and SEP Licensing: A Report for the European Commission,
2016, https://ec.europa.eu/docsroom/documents/48794?locale=en. Converted to EUR using EUR1:USD1 rate.
32
Sidak, G. ‘What aggregate royalty do manufacturers of mobile phones pay to license standard-essential patents?’, The
Criterion Journal on Innovation, 2016, Vol. 1, pp. 701-711,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3178336.
33
Under assumption that it is proportional to EU’s share in the world GDP (roughly 1/6).
10
“cross licensing”)34
, because they all had products using the standards. With the market entry of pure
SEP holders and pure SEP users, divestiture and licensing of SEPs for monetization purposes, lead
to the rise of patent assertion entities (PAE).35
More recently, the rise of the Internet of Things (IoT)
is resulting in more and more devices using connectivity and the landscape of SEP licensing is
shifting even more. Today, (i) some companies incorporate standards into their products while not
owning SEPs covering such standards, (ii) others own and license SEPs without using them in any
products, and (iii) major SEP holders have significantly reduced their product businesses and focus
more on licensing their SEPs. Whereas over the last two decades most high-stakes SEP disputes have
centred around mobile communication devices (i.e. smartphones), we are already witnessing more
disputes in the automotive sector and expect other IoT sectors to be similarly affected.
See Annex 5 for more explanations on SEP market and SEP licensing.
McKinsey36
estimates that by 2030 IoT could enable USD 5.5 trillion to USD 12.6 trillion in value
globally37
, including the value captured by consumers and customers of IoT products and services.
The total number of IoT connected devices38
is estimated to grow rapidly from 13 billion in 2022
to 30 billion by 203039
, with the share of devices connected to cellular networks gradually
increasing40
. The total number of cellular IoT connected devices is expected to grow from 1.7
billion in 2022 to 5.4 billion in 2030 (representing 18% of all IoT connected devices).41
98% of
these will be using either 5G or 4G standards.42
At the same time, the number of mobile phones is
expected to grow moderately from 8.4 billion in 2022 to around 9.5 billion in 2030.43
The largest SEP licensing market continues to be mobile phones, in which the top ten phone makers
are Samsung, Apple, and 8 Chinese companies, including OPPO, Xiaomi and Vivo. SEP licensing,
however, is now moving more towards the growing IoT market, including automotive, smart energy
(smart meters and smart grids), payment terminals, tracking devices, drones, medical devices,
wireless charging stations and other products.
34
Sidak estimated the implicit value of cross-licenses of large implementers, i.e., the licensing revenue that firms like
Samsung, Huawei or Apple would have obtained had they not engaged in cross licensing deals but charged royalties to
one another. Sidak's estimates imply an additional USD 4 billion in non-cash value of cross licenses in 2013 and USD
3.7 billion in 2014 (roughly one percent of mobile phone sales in each year). See Sidak, G. ‘What aggregate royalty do
manufacturers of mobile phones pay to license standard-essential patents?’, The Criterion Journal on Innovation, 2016,
Vol. 1, pp. 701-711, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3178336, cited in CRA, De Coninck, R., von
Muellern, C., Zimmermann, S., and Mueller, K., SEP Royalties, Investment Incentives and Total Welfare, 2022, p. 6.
35
Companies that acquire a patent or patent rights but do not practice the patented invention.
36
McKinsey & Company, Chui, M., Collins, M. and Patel, M., ‘The Internet of Things: Catching up to an accelerating
opportunity’, November 2021, https://sitic.org/the-internet-of-things-catching-up-to-an-accelerating-opportunity/.
37
See also IHS Markit, Campbell, K., Cruz, L., Flanagan, B., et. al., ‘The 5G Economy: How 5G will contribute to the
global economy’, November 2019, https://www.qualcomm.com/content/dam/qcomm-martech/dm-
assets/documents/the_ihs_5g_economy_-_2019.pdf?mod=article_inline.
38
Transforma Insights defines IoT connections as connections to remote sensing and actuating devices and includes
associated aggregation devices.
39
Number of Internet of Things (IoT) connected devices from 2019 to 2030 calculated by Transforma Insights. Retrieved
from Statista: https://www.statista.com/statistics/1194677/iot-connected-devices-regionally/.
40
https://www.statista.com/statistics/1194688/iot-connected-devices-communications-technology/.
41
Current IoT Forecast Highlights - Transforma Insights: https://transformainsights.com/research/forecast/highlights.
42
Connection numbers will be dominated by 5G mMTC (massive Machine Type Communications, which includes the
NB-IoT and LTE-M technologies) and 4G, driven to a great extent by 2G and 3G network switch-off.
43
CRA, De Coninck, R., von Muellern, C., Zimmermann, S., and Mueller, K., SEP Royalties, Investment Incentives and
Total Welfare, 2022, p. 19. Using: “Mobile phone units are approximated using SIM connections (excluding licensed
cellular IoT). SIM connections are reported in GSMA’s report ‘The Mobile Economy 2022’, available at
https://www.gsma.com/mo-bileeconomy/wp-content/uploads/2022/02/280222-The-Mobile-Economy-2022.pdf”.
11
Based on the Orbis44
database, in 2022 there were around 47 500 potential manufacturing firms
worldwide that may implement standards that are subject to FRAND commitments. Around 3 800
(8%) were located in the EU. Among those EU firms, 16% were large and 84% were SMEs (based
on employment figures). They employed 2.2 million persons. The combined turnover of these firms
for the last available year amounted to around EUR 600 billion. 88 of the companies reported a total
R&D spending of EUR 26 billion in the last available year, on average 7% of their turnover.45
Furthermore, we estimate that each year around 600 SEP license agreements are signed with
approximately 230 EU based implementers (including 80 SMEs) and around 190 non-EU based firms
with subsidiaries in the EU. For more information on the implementers’ landscape, please see
Annex 5.1.
2.2. What are the problems?
In this section we will present the current problems of SEP licensing, in a situation when a SEP holder
makes a FRAND commitment to an SDO, from the point of view of SEP holders and implementers.
As SEP licensing concerns commercial deals between two parties and is often subject to non-
disclosure agreements, there is only limited public information available (for instance when there is
a court dispute). Hence the information below is based on evidence obtained through public
consultations, numerous interviews with stakeholders and dedicated studies. The examples provided
below are anonymised and aggregated versions of evidence the Commission obtained from
testimonies, but which are subject to commercial secrecy. The figure below outlines the
argumentation logic of this chapter.
Figure 3: Problem tree
The overarching problematic issues are uncertainty and high transaction costs, which affect
differently the behaviour of SEP implementers and owners (this may not be the case when an
implementer also owns SEPs as e.g. in case of mobile phone companies, but increasingly with the
rise of IoT, the two groups are distinct).
2.2.1. SEP owners’ perspective
In order to participate in standard creation, prospective SEP holders had to invest considerable
resources and time in R&D activities to first develop new technology and then to patent it worldwide.
44
ORBIS is a private global database which has information on almost 60 million companies.
45
It should be noted however, that we cannot attribute neither the share of revenue, employment nor R&D expenses to
products embedding SEPs.
SEP ownership and essentiality not
clear
Limited information on SEP price
(FRAND royalty)
Dispute settlement
mechanisms not
adapted to resolve
FRAND disputes
Drivers
Problems
Consequences
Especially (but not limited) to SMEs:
- Reduced ability to innovate
- Impaired global sustainable competitiveness
- Frictions in technology diffusion
- Risks to supply chain security
Firms cannot assess SEP exposure
Firms unable to incorporate SEP cost into product price
Out of scope:
- Global forum
shopping for
favourable
court
- New business
models of
firms involved
in SEPs
- Specificities of
industrial
sectors,
including the
Internet of
Things.
Uncertainty and High transaction cost
Uncertain and delayed SEP revenue
Insufficient transparency
For implementers For SEP owners
- Reduced ability to innovate
- Impaired global sustainable competitiveness
- Frictions in technology diffusion
- Weaker participation in standardisation
12
CRA (2022) estimates R&D amounts of between USD 2 and 9 billion annually for standards used in
a smartphone.46
All that is done without guarantee that first, the inventor’s patents will be used by
the standard, and second, that the standard will be accepted by the market.47
Even if a standard is
accepted, it takes years before it is widely used while an invention is patented for maximum 20 years.
As a result, SEP holders have limited time to generate a return for their R&D investments through
royalties for the use of the patents.
A SEP owner, as any patent owner, may license implementers for the use of the protected technology
and request remuneration. In contrast to other patents, a SEP holder has to license subject to the
FRAND commitment. According to the public consultation48
, in order to be able to better assess the
value that their technology brings to the standard implementations, a SEP holder would wait a few
years (around 2 to 4 years)49
until the standard is implemented in the market and then approach
companies in specific markets to offer them licences. This is followed by negotiations, which take
on average 3 years50
, and potentially litigation in case parties cannot reach an agreement (adding
another 1 to 2.5 years).51
Work on the 4G standard began in 2002 with the first commercial use in 200952
, by 2021 around
60% of phones used this technology. Work on 5G started in 2008,53
and phones with this
technology only now emerge on the market. One of the leading SEP holders told the Commission
it spends around 20% of its annual sales on R&D.
The Avanci platform was created in September 2016 to license 2G, 3G and 4G technology to
vehicle producers. Even though it included only a few SEP holders at the outset, once its first
licence was concluded with a German automotive manufacturer at the end of 2017, more SEP
holders joined the platform, and it now represents about 52 SEP holders in these technologies
(about 60% of SEP).54
In September 2022 it announced that more than 80 automotive brands
selling 100 million connected vehicles are covered by its licence. Prices range from USD 3 (eCall)
to USD 20 (2G, 3G and 4G) per vehicle.55
The figure below illustrates progress in license coverage
of connected vehicles. Most OEMs took a licence before the announced increase in the price of the
46
CRA, De Coninck, R., von Muellern, C., Zimmermann, S., and Mueller, K., SEP Royalties, Investment Incentives and
Total Welfare, 2022, pp. 3-5, data for 2020, lower bound based on relation of R&D to SEP royalties, upper based on SEP
royalties. Based on the lower bound, the largest estimated smartphone R&D are Qualcomm (USD1.1bn in 2020), Nokia
(USD256m) and Ericsson (USD159m). Other upstream innovators are estimated to have invested USD 406 million in
smartphone related R&D.
47
Not all R&D expenses targeted at a certain standard (or a certain field of innovation more generally) lead, in the end,
to usable contributions to this standard. This reflects the generally risky nature of innovation.
48
Public consultation, see summary of comments to “Access to all” and “licensing in the value chain”.
49
OPC results, Q9 9. How much time after the first implementation of a standard in your products are you, on average,
contacted by a SEP holder with an invitation to take a licence?
50
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 145: “We observe significant heterogeneity in the duration of negotiations
prior to litigation, ranging from 0 to almost 9 years; with a median duration of 2.1 years (mean duration 2.9 years) from
the first contact to the filing of the (first) lawsuit”.
51
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 148: Once a complaint has been filed, the average duration of SEP litigation
cases (the period from first filing date to resolution) range from 14.4 months in Germany, 15.8 months in the Netherlands,
to 32.2 months in France (only first instance).
52
https://en.wikipedia.org/wiki/4G.
53
https://en.wikipedia.org/wiki/5G.
54
Companies missing from Avanci include among others Huawei, Samsung, Apple, Google, ETRI. Source of % IPlytics.
55
https://www.avanci.com/2022/09/21/avanci-expands-4g-coverage-to-over-80-auto-brands/; USD prices converted to
EUR using EUR1:USD1 rate.
13
licence from USD 15 to USD 20. According to major SEP owners, the process of licensing the
automotive industry is about 10 years.56
Figure 4: Estimated accumulated sales of licensed and unlicensed connected vehicles based on
Avanci announcements
* Including licenses signed up to August 4, 2022
Source: - Baron, J., Arque-Castells, P., Leonard, A., Pohlmann, T., Sergheraert, E., Empirical Assessment of Potential Challenges
in SEP Licensing, European Commission, DG GROW, 2023;, using estimates, p. 156
In the public consultation, SEP holders identified their most important problem to be the various
reasons used by the implementers to delay the taking of a licence.57
Examples are provided in
Annex 2.
The costs related to SEP licensing are also significant for both SEP holders and implementers. The
average bilateral negotiation cost per licence for both the SEP holder and the implementer is
estimated at EUR 2 million to EUR 11 million (see Table 1 and examples in Annex 2). Such high
cost (both, in terms of time and money) also explains why major SEP holders usually have licensing
deals signed with only around 100-200 implementers58
, that have a sufficiently high volume and/or
value of sales that would allow for absorbing these costs. There are also SEP holders whose main
source of income is licensing. They constitute a very heterogeneous population, including R&D
specialist firms (e.g. InterDigital), public or semi-public research institutes (e.g. Fraunhofer, CSIRO,
ETRI), universities, and different types of patent assertion entities (PAE).59
PAEs are entities whose
business model is the licensing and assertion of patents acquired from other parties. They usually
conclude below 100 licenses, yielding a modest revenue. Finally, patent pools are platforms through
which multiple SEP holders offer a single license to multiple licensees, promoting more efficient
licensing. For an overview of licensing practices see table below:
Table 1: Licensing cost and revenue for different SEP holders (worldwide)
Major net licensors
Patent Assertion
Entities/Non practicing
entities SEP Pools
# SEP Licenses per year (Total) 100-150 < 100 1 000-2 000
Licensees (types) Large multinationals
Large and medium-size
firms
Large, medium-size and
smaller firms
56
Major SEP holders reported approaching the automotive industry for licences already in 2013.
57
Public consultation – responses to question 19.
58
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, Section 6.2.3.1. SEP licensing by major net licensors.
59
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 114: “NPEs constitute a very heterogeneous population, including R&D
specialist firms (e.g. InterDigital), public or semi-public research institutes (Fraunhofer, CSIRO, ETRI..), universities,
and different types of patent assertion entities (PAE)”.
14
Average yearly royalty value
(royalty revenue per license) EUR 15M EUR 300k ?
Duration of license 6 years 6 years 6 years
Negotiation cost >1M EUR <500k EUR small
Dispute cost per license EUR 500k EUR 900k < EUR 25k
Average cost per license60
EUR 2M-11M EUR 1.75M EUR 300k-600k
Source: - Baron, J., Arque-Castells, P., Leonard, A., Pohlmann, T., Sergheraert, E., Empirical Assessment of Potential Challenges in
SEP Licensing, European Commission, DG GROW, 2023;, Table 16, pp. 138-139
Consequently, SEP owners, in particular those who pursue bilateral licensing, face two main
challenges: long negotiations and high cost of SEP licensing. This could potentially reduce their
income base and might reduce incentives for participation in development of new standards,
especially where strategic licensing markets stagnate and/or move to low-cost business models.
Stakeholders reported that the royalty rates earned by the firms that specialise in technology
development have been steady for years in the mobile phone market.61
It appears that the income
uncertainty is currently mitigated by relatively high SEP prices charged to those who are licensed
(first example below). And the rate of standard development does not appear to have been affected
(second example below).
There are indications that investment in the development of SEPs, certainly for cellular standards,
is commercially attractive. For instance, while Bekkers et al. (2002) count 14 different SEP holders
for 2G62
, more than 100 parties had declared 5G SEPs as of February 2021 according to IPlytics
(2021).63
In 2013 and 2014, royalties requested by SEP holders for patents essential to the 802.11 Wi-Fi
standard were slashed in multiple bench trials and jury verdicts in the United States, in some cases
considerably, by up to 90%. Yet incentives for innovation remained strong and the contributions
to the next generations, Wi-Fi 6 and Wi-Fi 7 – whose development began in 2014 and 2019,
respectively, are significantly larger than the contributions to Wi-Fi 4 and Wi-Fi 5.64
The ability of the SEP holder to seek royalties is likely to be put under pressure in the future. Some
phone manufacturers reported to the Commission that they adopted a low-cost business model to
serve lower income consumers, and the royalty demands are not commensurate with their business
model. An IoT supplier and an IoT mid-cap65
reported that the IoT market is very fragmented,
competitive and cost sensitive.
60
Average licensing cost = marginal cost of licence + (licensor fixed costs/ # licences/programme) + (implementer fixed
cost/ #licences/product).
61
Submission by the 4iP Council to the European Commission Call for evidence for an impact assessment.
62
Bekkers, R., Duysters, G., Verspagen, B., ‘Intellectual property rights, strategic technology agreements and market
structure: The case of GSM’, Research Policy, 2002, No. 31, pp. 1141-1161, DOI:10.1016/S0048-7333(01)00189-5,
https://www.researchgate.net/publication/239904150_Intellectual_Property_Rights_Strategic_Technology_Agreements
_and_Market_Structure_The_Case_of_GSM.
63
IPlytics, ‘Who is leading the 5G patent race?’, February 2021, p. 4, https://www.iplytics.com/de/report/5g-patent-race-
02-2021/.
64
CRA, De Coninck, R., von Muellern, C., Zimmermann, S., and Mueller, K., SEP Royalties, Investment Incentives and
Total Welfare, 2022, pp. 15-16., quoting: IPlytics: https://www.iam-media.com/article/whos-ahead-in-the-wifi-6-patent-
race.
65
Mid-cap (or mid-capitalisation) is the term that is used to designate companies with a market cap (capitalization) – or
market value – between USD 2 and USD 10 billion, https://www.investopedia.com/terms/m/midcapstock.asp.
15
These developments, together with the fact that many SEP holders are no longer implementers, or
implementers on a much smaller scale (in particular in the IoT), is likely to have an impact on the
FRAND royalty negotiations as the disagreements about the FRAND royalty determination are likely
to become more pronounced. This in turn will have a negative impact on both the length and the cost
of the negotiations.
2.2.2. Implementers’ perspective
While SEP holders need time to assess the value of the technology in standard implementations and
make decisions about who and how to license, and for how much, in particular in new markets,
implementers encounter great uncertainty and prospects of much higher than anticipated costs
associated with the use of standards, potentially discouraging the implementation of these new
technologies.
In principle, goods sold should be free from any right or claim of a third party based on intellectual
property, if known to the seller or the seller “could not have been unaware”.66
If a company discovers
that it may be infringing a patent67
, it has the choice, among other things, to (i) “work around”, using
a solution that does not result in patent infringement; or (ii) stop the product development unless the
company is able to secure a license from the patent owner for the use of the patented technology.68
The rationale is to respect the law by ensuring first, that a company does not infringe on another
person’s property rights, and second, anyone who buys such a product has legal certainty. The same
rules apply to exports.
50% of the companies who replied to the public consultation claimed that they have proactively
sought SEP licences.69
Not infringing a SEP, having legal certainty over costs and an enhanced ability
to plan business activities were mentioned as the top reasons for seeking a license by around three
quarters of respondents to the public consultation.70
Some of those who sought licences did not obtain
such licences, mainly because of disagreement on a FRAND royalty (especially in new markets
where the SEP holder has not yet decided on its licensing policy and where the SEP holder prefers
licensing at end-product level). 17% of the companies who replied to the public consultation reported
not to have requested a licence proactively. 33% expressed no opinion. There are various
considerations in the decision not to proactively seek a licence.
A manufacturer of medical devices for the treatment of various critical health disorders wishes to
implement cellular connectivity in its product to enable remote patient health monitoring and
enhancing patient adherence to prescribed treatments. Development, clinical trials and regulatory
66
Pursuant to Article 42 United Nations Convention on Contracts for the International Sale of Goods “The seller must
deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual
property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware…”, “The
obligation of the seller … does not extend to cases where: (a) at the time of the conclusion of the contract the buyer knew
or could not have been unaware of the right or claim” United Nations Convention on Contracts for the International Sale
of Goods, 2010, p. 12, https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-
09951_e_ebook.pdf.
67
Whether or not a product infringes a patent is established with legal certainty only through court proceedings, where
the validity and enforceability of a patent is also examined. A product developer may preliminarily assess whether it
could be infringing a patent to determine what course of action may be appropriate.
68
See Annex 9, Q12 “What is the main effect for SEP implementers, in particular start-ups and SMEs, of the costs
involved in licensing SEPs (search, negotiation and litigation costs)?”: “I look for alternatives (e.g. not using standardised
technology or royalty free standards)” – 38% all, 52% implementers; “I go out of business/change business” – 20% all,
38% implementers.
69
See Annex 9, Q7.
70
See Annex 9, Q10 “What would be the main reason for you to request a licence?”: “Not to infringe a SEP without a
licence” (72% all, 82% implementers); “To have legal certainty over my costs and plan my business activities” (60% all,
73% implementers).
16
approvals for a medical device take years (up to 10 years or more). Thus, the company needs
certainty at an early stage about the cost of cellular SEP licenses, as this must be taken into account
to consider total costs and alternative technologies. Moreover, once the company enters into
licensing negotiations, it faces the prospect of an injunction order potentially affecting patients’
access to telehealth services and derailing its product financially. With no indication of an
aggregate royalty for implementing the standard and given the large number of SEP owners,
evaluating the patents and negotiating the necessary licenses is beyond the firm’s capability.
In practice, it is impossible to sign a SEP licence with all SEP holders whose standardised technology
the firm uses. For example, Avanci represents 52 SEP holders of 2G, 3G and 4G but does not include
certain large SEP holders such as Huawei, Samsung and others in their membership. SEP holders
with whom a company did not sign a licence may ask the firm to enter into a licence at any time (and
some may never seek royalties).
Standards are in most cases embedded into components that are used in an end-product sold to the
consumer. Suppliers of such components may not have the necessary SEP licenses when they sell
such components to the end-product manufacturers. As a result, such end-product manufacturers
could be subject to a demand for SEP licenses. For example, in the automotive industry, while
component manufacturers were buying their chips licensed for 2G and 3G, they were not licensed
for 4G.71
With the adoption of the 4G standard, SEP holders chose not to license component
manufactures but to license the car manufacturers. Component suppliers are not able to pay the
royalty requested from the OEMs and pass the cost downstream. Some European suppliers chose to
exit the market72
, others are still litigating73
.
The likelihood of SEP holders asserting their SEPs in courts is greater in regions with more efficient
judicial systems and large markets. During the webinar on enforcement, to which 893 persons
registered for participation74
, 51% of the participants indicated that they prefer to litigate in Europe
against 30% who preferred the US. To the question in which jurisdiction they have litigated, 58% of
the participants indicated Germany, 7% indicated France and 4% indicated the Netherlands. 31%
specified jurisdictions outside of the EU. Using the number of court cases as a proxy, we can estimate
that implementers are targets of court actions in the EU primarily in Germany (around 44 court cases
per year), France (around 2) and the Netherlands (around 1).75
Note that not every SEP holder decides
to litigate, but only court cases are observable.
An EU small SME reports: “European companies are at a disadvantage compared to foreign
producers that might fly under the radar.”76
As the threat of a court injunction/cessation of production means income loss and loss of market
share to competitors and switching to another technology is costly or impossible (because of standard
implementation), implementers can engage in court procedures that are cost- and time intensive,
attempt to negotiate, or agree to licence agreements at any price (especially SMEs, if they are
targeted). This holds true especially for licensing in the IoT, where there is continuous entry of new
start-ups that implement standardised technologies in their IoT devices. 82% of SMEs in the targeted
71
If the supplier is licensed for all patents (SEPs), the downstream user does not need a licence. Otherwise, the SEP
holder will receive the price twice, the so called ‘double dipping’.
72
Bury, Thales and U-Blox.
73
Continental and partially Thales (for damages).
74
GROWTH, Webinar series on Standard Essential Patents, https://ec.europa.eu/newsroom/growth/items/701874/en.
75
Baron, J., Essentiality Checks for Potential SEPs – Framework for Assessing the Impact of Different Policy Options,
European Commission, DG GROW, 2023, p.133, Table 15.
76
See Annex A8.3 SME survey.
17
survey stated that they do not have resources to negotiate with SEP holders or engage in court
proceedings.77
Start-ups and SMEs lack not only the resources but also the SEP and licensing expertise.78
Two thirds
of SMEs replying to the Commission’s targeted survey stated that there is uncertainty regarding SEPs
and that royalty payments affect their competitive position.79
Currently, there is no public support
available to start-ups and SMEs for handling SEP licensing negotiations. So, the majority are de facto
not licensed. One third of the SMEs replying to the targeted survey believe that it is unlikely they
will be invited to take a licence by a SEP holder (small size and insufficient volume of sales). Another
third of the replying SMEs thought otherwise.80
In principle, nothing prevents a SEP holder from
demanding that an SME take a licence.
EU SME: It is said that large SEP holders ‘do not target SMEs’, our case shows that this is not
entirely accurate. Even if some do not, the financial uncertainty SMEs face is unreasonable and
unfair: an SME has to wait and fear that any SEP holder can approach it at any time (perhaps when
the SME becomes larger) and ask for payment of past royalties.
An SME reported: We received multiple SEP licensing requests. Some SEP holders have litigated
(one litigation cost amounted to tens of thousands of Euros, more than the few thousand Euro value
of the licence it concerned). We have taken several licences, but we know we have unfairly paid
much more than others.
Another SME noted: “As we are a small company, we often do not even have the option to
negotiate.” 81
Whether big or small company, this uncertainty makes business planning more difficult.82
We will
elaborate in the next section on the problem drivers. For more examples of problems that
implementers face, see Annex 2.
2.3. What are the problem drivers?
The problems above are caused in large part by the following drivers, which this initiative aims to
tackle: insufficient transparency on SEP ownership and essentiality; lack of information about
FRAND royalties; and a dispute settlement system not adapted for FRAND determination. There are
also other drivers affecting the problem, which this initiative cannot solve directly, such as the use of
foreign courts to resolve SEP cases.
77
See Annex A8.3 SME survey, Q12.
78
CRA, De Coninck, R., von Muellern, C., Zimmermann, S., and Mueller, K., SEP Royalties, Investment Incentives and
Total Welfare, 2022, p. 11: “SMEs – and in particular start-ups - are likely to lack licensing experience, expertise, and
resources to properly evaluate and challenge the demands of SEP holders. For this reason, they could be more intimidated
by the possible consequences of patent infringement (e.g., facing an injunction) and thus be prone to simply accept non-
FRAND royalty demands instead of engaging in further negotiations.”.
79
65% (17 out of 26) and 64% (18 out of 28) respectively. See Annex 8.3 SME Survey, Q16.
80
See Annex A8.3 SME Survey, Q16.
81
See Annex A8.3 SME survey.
82
In the Public consultation companies estimated their internal costs of assessing SEP exposure before they put a new
product onto market at on average EUR 155 000, with median in range of between EUR 10 000 and 50 000. See Annex
9, Q11.
18
2.3.1. Unclear SEP ownership and essentiality
To negotiate a SEP licence, a standard implementer should know which SEP holders license for a
fee, how many declared SEPs83
each has, and how many of those are actually essential (necessary to
implement a standard).
Information on patent ownership and essentiality is not readily available.84
The vast majority of SMEs
replying to the Commission’s survey said they did not know who owns SEPs relevant to a standard
they implement and stated they did not know if all the patents that a SEP holder presented to them
during negotiations were actually essential to the standard.85
This is consistent with the results from
the public consultation.86
Without such information, the cost and complexity of SEP licensing
negotiations increases. With regard to almost all standards, expert third party analysis is required to
obtain reasonably reliable estimates of the number of actual SEPs. The cost for implementers of
assessing the essentiality of individual patents could be significant from an average cost of EUR 355
to EUR 7 860 per SEP, depending on the evaluation rigorousness.87
There are three main reasons for the lack of transparency on the number of essential patents for
different standards:
First, many Standards Development Organisations (SDO) do not provide comprehensive data on self-
declared potential SEPs, as they allow for blanket disclosures. Patent owners may simply declare that
they own potential SEPs and are prepared to license on terms compliant with the SDO’s IPR policy,
without specifically identifying any of these patents or their relevance to the standard(s) in question.
Some estimates indicate that only about 10-20% of all Wi-Fi SEPs are specifically declared at its
SDO: IEEE,88
and approximately 20-30% of all High Efficiency Video Coding (“HEVC”) SEPs are
specifically declared at the relevant SDO: ITU-T89
. Hence, the large majority of potential SEPs are
not specifically declared at either SDO. As a result, these SDOs’ databases provide no useful
information about the numbers of potential SEPs held by the various owners.
Second, while some SDOs (for example ETSI) require patent owners to identify specific patents
and/or patent applications that they believe are or may become essential to a standard, the disclosure
(also called declaration) process is complex. This process is geared towards standardisation activities
and not adapted for SEP licensing negotiations.
Third, declarations of potential SEPs are often made during the standardisation process (firms
wishing to contribute to a new standard identify their patent assets that may cover the standard,
depending on what contributions are accepted) and hence do not provide reliable information on the
actual SEPs covering the final standard. This is one of the reasons why experts estimate that only
between 25% and 40% of the patents found in the ETSI IPR database are in fact essential to the final
83
Declared SEPs are patents that the holder declares as either being or likely to be essential to a standard. This is the SEP
holder’s position, largely without any independent evaluation. Some SDOs required such declarations of specific patents
(e.g. ETSI) but most do not. Thus, even the number of SEPs a holder believes to be essential is not available for most
standards.
84
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12510-Intellectual-Property-Action-Plan.
85
80% (16 out of 20) and 90% (19 out of 21) respectively. See Annex A8.3 SME Survey, Q12.
86
Public consultation – responses to Question 19.
87
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, pp. 38-39, Table 8: SEP evaluation rigorousness level description.
88
Estimations in Microsoft Corp. v. Motorola, Inc. 2013 U.S. Dist. LEXIS 60233.
89
Based on comparing ITU-T declaration data with patent lists of MPEGLA’s and Access Advance’s HEVC patent
pools.
19
published standard90
, as supported by empirical research.91
In the case of 5G, the essentiality rate can
be as low as 15%.92
Depending on the SDO, SEP holders are not required to regularly update the information originally
provided to SDOs, for example by removing non-essential patents or specifying a change in
ownership.
Patent pools provide more transparency93
and conduct essentiality checks. Typically, not all SEPs of
an individual SEP holder are checked for essentiality. In addition, the SEP holder chooses which of
its SEPs to submit for essentiality check. The likelihood of those SEPs being confirmed essential is,
therefore, very high. The essentiality check system of the pools is thus not designed to determine the
rate of essentiality in the portfolio of an individual SEP owner. Furthermore, there is no patent pool
that has gathered all SEP holders for a given standard. It follows that patent pools are not capable of
providing sufficient information on the overall SEP landscape.
More readily usable data is available from commercial providers. The cost varies from EUR 5 000
to EUR 25 000.94
These private databases are thus available only at high cost, and it is unclear how
reliable their assessments of essentiality are.95
80% of SMEs responding to the SME survey said they did not know who owns SEPs relevant to the
standard they use and 90% did not know if patents presented to them during negotiations were
essential to the standard.96
2.3.2. What is a FRAND royalty for SEPs?
FRAND refers to the grant of licences on fair, reasonable and non-discriminatory terms (‘FRAND
terms’) in relation to a patent right. Individual patent holders give an undertaking to the SDO that
they are prepared to grant licences on FRAND terms.97
90
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021, Part 2, Section 4.2,
https://ec.europa.eu/docsroom/documents/45217.
91
Brachtendorf, L., Gaessler, F., and Harhoff, D., ‘Truly Standard-Essential Patents? A Semantics-Based Analysis’,
CEPR Discussion Paper No. DP14726, May 2020, https://ssrn.com/abstract=3603956; estimate that in case of LTE
standards (4G) around 32.3% of SEP in the database are essential, in case of UMTS (3G) - 37.7%; GSM (2G): 38.5%.
92
IPLytics.
93
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021, Annex 10,
https://ec.europa.eu/docsroom/documents/45217.
94
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 30, Section 3.2.1.3. Commercial patent databases.
95
Professional software solutions provide a fast and easy access to SEP declaration data, allowing to break down patent
counts of self-declared patent families by current patent holder, standards generation, even release or working group
within a few minutes or hours. Some have created designated patent declaration analytics solutions that allow searching
across the full text of patent and standard documents. The solutions vary in terms of quality and scope. See: Baron, J.,
Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing, European
Commission, DG GROW, 2023, pp. 31-32.
96
See Annex A8.3, Q12 (16 out of 20), Q12 (19 out of 21) respectively.
97
According to Horizontal guidelines: Compliance with Article 101 by the standard development organisation does not
require the standard development organisation to verify whether the licensing terms of participants fulfil the FRAND
commitment. Participants must assess for themselves whether their licensing terms and in particular the fees they charge
fulfil the FRAND commitment. Therefore, when deciding whether to commit to FRAND for a particular IPR, participants
will need to anticipate the implications of the FRAND commitment, notably on their ability to freely set the level of their
fees.
20
Any SEP holder may demand royalties from an implementer, irrespective of the number of SEPs it
owns. Standards such as 5G can have around 200 SEP holders and each of them may own a different
number of SEPs covering different patented technologies included in the standard. It is, however,
unclear how many truly essential patents each owner has, as explained above. Furthermore, the value
of such patented technologies may be different. Therefore, the number of patents contributed by each
owner could be seen as an imperfect proxy. Finally, the products of the implementers almost always
include many other features and technologies that contribute to the value of their products. This
makes it even more difficult to determine the value of the standardised technology. In addition,
determining the share of royalties for each SEP holder is also a complex process.
When a SEP holder approaches a standard implementer for royalties, the implementer can choose to
engage in in-depth and lengthy negotiations to determine what would be a reasonable royalty (i.e.,
FRAND) or to accept the demanded rate. Engaging in negotiation requires technical competence,
knowledge of patent law and licensing skills, all of which may be less available capabilities in smaller
companies as compared to larger firms. Thus, SMEs for example may tend to accept the SEP holder’s
offered terms fearing an injunction/stop of production. Moreover, if a company (even a large one) is
implementing the standard by using a component supplied by a third party, it will most likely have
no knowledge of the relevant technology and must engage external expertise to assist in the
assessment of the royalty demand.98
This comes in addition to the legal resources necessary to
negotiate and finalise a licence agreement.
One way of determining the added value of a standard to a product is to compare its price with and
without the standardised technology. For instance, the price of a phone with and without 5G. The
problem is that any new technology (such as 5G) is first implemented in high end/flagship
products, which are the most expensive. Second, such products incorporate additional features on
top of the standard (e.g. better camera), and the additional value is partly attributable to the
interaction of the new standard with those features. A relatively high FRAND rate determined for
flagship product can then linger on also for cheaper models (unless an adjustment mechanism is in
place), slowing the rate of technology diffusion and adoption.
A SEP owner’s refusal to comply with their FRAND licensing obligation may give rise to liability
under competition law. However, FRAND may be a range and could mean that the royalty rates differ
in different market segments based on the specific use for the standard or parts thereof (e.g. car versus
connected vacuum cleaner) and even between producers of the same product, depending on whether
they are considered to be “similarly situated” (a FRAND rate should be the same for a company in a
comparable situation). SEP holders often disclose their FRAND rate demand at the outset of the
licencing negotiations (they may ask for a non-disclosure agreement to be signed, but many do not),
however they typically refuse to share information about “comparable licences” or are selective about
which comparable SEP deals they will show to the implementer (this kind of information is typically
not public). Some SEP holders announce a SEP price in advance, yet in many cases this is a maximum
price that can be reduced during negotiations. In most cases this is not a price for all relevant SEPs
(of all SEP holders) for a standard (“aggregate royalty”), but a rate the particular SEP owner(s) would
like to get for their share of the total SEPs.
Avanci (52 SEP holders in 2G/3G/4G) prices for connected vehicles range from USD 3 (eCall) to
USD20 (4G) per vehicle. Sisvel’s price for WiFi6 for certain products is from USD 0.5 to USD
3.6 per unit.99
Sisvel for DVB-T2 entrance fee of EUR 10 000 and EUR 0.60 to EUR 1 per
98
Half of SMEs reported that they “did not understand the technology (e.g. of component I use) to engage in meaningful
negotiations”. See Annex A8.3 SME survey, Q12.
99
Wireless connectivity standard, https://www.sisvel.com/licensing-programs/wireless-communications/wifi6/patent-
pool/license-terms.
21
consumer product.100
The MPGLA video coding standard AVC/H.264 is royalty free for the first
100 000 units per year, and then USD 0.2 per unit sold with an enterprise cap of USD 9.75 million
per year until 2025.101
Stakeholders consider that the FRAND licensing concept could benefit greatly from some
clarification, notably with regard to the determination of an aggregate royalty burden, the level in the
value chain at which SEPs should be licensed (e.g. at end product, or component level), or whether
an initial offer by a SEP holder must be FRAND (e.g. guidance in addition to that provided in the
2017 Communication). From our analysis and meetings with stakeholders it emerged that especially
the level of licencing issue is very controversial with no one-size-fits-all solution,102
and may not be
mandated. It could be recommended, however, that customary industry practices are considered in
this respect.
Issues related to SEP licensing are also regularly raised to competition authorities, including the
Commission’s department responsible for EU competition enforcement. SEP holders raise concerns
regarding implementers unduly delaying negotiations. Implementers complain mostly about SEP
holders not following the Huawei v. ZTE process, offers that are not on FRAND terms or about SEP
holders refusing to licence at a certain level of the value chain.103
Almost all SMEs reported that in negotiations they do not know what a fair price for the SEPs would
be.104
2.3.3. Dispute settlement not adapted to resolve FRAND rate disagreements
SEP holders and implementers often disagree about what constitutes FRAND terms and conditions
(primarily royalties) for a SEP licence. If parties cannot agree on a FRAND rate, SEP licensing
disputes can turn into patent infringement proceedings before national courts (around 35 per year in
the EU)105
in which SEP holders usually seek injunctions. On average, the annual costs of SEP related
court proceedings in the EU are estimated at around EUR 6 million. However, already the costs of a
complicated case alone can reach millions of euros.106
100
Digital Video Broadcasting – Terrestrial 2 (“DVB-T2”) is a standard for broadcasting digital television on terrestrial
networks available since 2009. https://www.sisvel.com/licensing-programs/digital-video-display-technology/dvb-
t2/license-terms.
101
https://www.mpegla.com/wp-content/uploads/avcweb.pdf.
102
It should be noted that implementers, especially SMEs (see Annex A8.3 SME Survey, as well as survey to SMEs
conducted by Apple) opt for component level licensing. On the other hand, SEP holders are adamant that they should
remain free as to the level they license. See Annex 9 “Questions on FRAND”, for instance see Q36: “Licensing could
take place at every level of the value chain” 93% of implementers and only 13% of SEP holders agree; or Q37 “Licensing
should take place at the most upstream level of the value chain” 69% of implementers and 0% of SEP holders agree. See
also Annex 5.4 for extended discussion on level of licensing.
103
Without taking any position on the merits of complaints, by way of example, one company has recently made public
its complaint: “HMD has now also filed competition law complaints against VAEVS before the European Commission
in order seek the authorities to intervene in issues such as over-standardization, requirements for open standards and
apparent non-FRAND demands and behaviour.”, see https://www.hmdglobal.com/evs-substandard-of-4g-press-
release#id-2hm0baKaAwcCJlKW0dRYY3-0.
104
See Annex A8.3 SME survey, Q12.
105
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, Table 15, p. 133.
106
During the public consultations we received a limited number of replies on cost of court disputes. Among eight
respondents who replied to Q51 on cost of FRAND disputes, the median amount was between EUR 3 and 6 million.
Among five who provided estimates on the costs of essentiality related disputes, the median amount was between EUR
1 and 2 million. According to Baron (2023) (see footnote 105) the average cost of a SEP related dispute in the EU
amounts to EUR 170 000 for around 70 cases per year (this figure however also includes for instance EPO opposition
proceedings). It is estimated that around half (35) are court cases, hence the EUR 6 million cost reported. For subsequent
22
An EU SEP holder reached out in 2016 to a car producer who was using cellular connectivity in
its cars. The SEP holder made several offers to the implementer which were rejected (for instance
the implementer was directing the SEP holder to license its suppliers instead). The SEP holder
spent tens of millions euros on legal counsels and litigation – resources that could have been spent
on R&D. The two firms signed a licence agreement in 2021.
It is very difficult to properly determine FRAND rates in patent infringement proceedings before a
national court, because the SEP holder selects a limited number of SEPs from its national portfolio
to adjudicate, but seeks to license all of its SEPs for the particular technology (e.g., 4G or HEVC),
including those in other jurisdictions (global FRAND licence).
The CJEU judgment in Huawei v ZTE established that the SEP holder’s offer, and the potential
licensee’s counteroffer must be FRAND and left it up to national courts to assess whether the parties
observed the process before granting an injunction. National courts in the EU typically focus on
establishing whether the good faith negotiation process has been complied with and have so far not
been involved in global FRAND determinations. Thus, potential remedies tend to focus primarily on
the availability of an injunction, as well as on damages for the past infringement of the asserted
patents and only in the relevant jurisdiction. Thus, the parties are still left with little certainty
regarding FRAND royalties for future sales.
To deal with this uncertainty, a number of courts outside the EU have declared to have jurisdiction
to determine a global FRAND rate, if the parties do not themselves reach agreement on global
FRAND royalties (e.g., UK107
and China108
). Courts in the EU have so far refrained from making any
FRAND royalties determinations at a national or global level.
While traditional alternative dispute resolution (“ADR”) mechanisms are available to SEP holders
and implementers and could potentially result in broader FRAND determinations, ADR is rarely used
to settle FRAND-related disputes.109
Among the key concerns are that (i) implementers may not be
able to obtain information regarding comparable licenses and other relevant data from SEP holders
(available through discovery proceedings in certain judicial proceedings), and (ii) the proceeding
itself as well as the resulting decision are kept confidential and are not publicly available, so they
have limited precedential value for future FRAND-related cases.110
In response to the public consultation, however, a number of respondents acknowledged the potential
for ADR processes to help resolve global SEP disputes, provided that the above concerns are
addressed.
calculations and in order to remain prudent we have used the lower figure from the study rather than figures reported
during the public consultations. See Annex 9, Q51.
107
Judgment of the United Kingdom’s Supreme Court of 26 August 2020, Unwired Planet v. Huawei, UKSC 2018/0214,
[2020] UKSC 37, https://www.supremecourt.uk/cases/uksc-2018-0214.html. Note that UK courts allow also different
prices per region.
108
Chinese Supreme Court’s ruling of 19 August 2021, OPPO v Sharp, Zui Gao Fa Zhi Min Xia Zhong No. 517. China's
Supreme People's Court has decided that Chinese Courts can set global FRAND rates at the request of one party, but so
far no court has made such a determination.
109
375 persons registered for a Webinar on Enforcement which took place on 4 May 2021 and responded to a survey
during the registration process. To the question in what type of dispute settlement the respondents were involved, 65%
indicated to have been involved in litigation before a court, 20% in settlements between the parties and 4% in mediation.
None indicated to have been involved in arbitration. The responses to the public consultation also revealed that those
mechanisms may be useful subject to conditions.
110
The responses to the public consultation identified this lack of information and transparency as an important obstacle
– see comments to responses to questions 53 to 55. Response of Continental to the Call for Evidence.
23
There is also no mechanism enabling the use of the customs enforcement regulation111
by SEP holders
because the regulation does not require that the negotiating steps set out in Huawei v ZTE be followed.
Customs authorities do not have the competence, resources and expertise to establish whether the
negotiating steps set out in Huawei v ZTE were conducted (for more explanation see Annex 5.4)
2.3.4. Drivers out of the scope of this initiative
There are also other factors that may contribute to the uncertainty and high transaction costs for both
SEP holders and implementers. These factors include, without limitation, the global nature of
standards and products; changes in the business models such as low-cost smart phones; specificities
of the IoT markets, which are fragmented, competitive and often a low margin market; and the fact
that SEP licensing is sector-specific depending on the nature of the use of the standards. Furthermore,
because both SEP holders and implementers typically operate globally, SEP disputes can be
adjudicated in different jurisdictions including outside the EU. As such, SEP holders and
implementers alike are free to exploit jurisdictional differences to their benefit.
2.4. What are the consequences?
As new standards are developed, additional contributors participate in the standardisation process
(particularly from Asia), putting more pressure on existing SEP holders due to further fragmentation
of the SEP landscape. Existing SEP holders also face increased challenges to their pricing policies
from their main licensing market, mobile devices (primarily for cellular standards). Chinese phone
makers are increasing their market share and are focusing on low-cost business models to serve lower
income populations. SEP holders need to adapt their licensing model to the realities of these new
emerging markets, especially the price pressures.
The IoT market presents additional challenges. It is a market that is growing at a high speed but is
fragmented. Volumes for certain applications may be small and profit margins seem tight.112
Licensing may prove difficult and expensive as those industries are not familiar with SEPs (see
Annex 2). The combination of all these factors is likely to deepen the disagreements about FRAND
royalties, which is likely to cause more delays in negotiations and to increase the parties’ licensing
costs, potentially impacting SEP holders’ revenues. This uncertainty about future revenues could
impact the decisions of SEP holders to invest into R&D and may in turn have an impact on
participation in standardisation.
On the other hand, the lack of transparency and unpredictability of royalty demands, plus the cost of
negotiation and disputes also puts pressure on the costs of products by implementers that are entering
the market. This is likely to put pressure on the innovation capacity of implementers as well.
CRA(2022) noted that there is a trade-off between high SEP royalties and more innovation upstream
(by SEP owners), on the one hand, and less innovation downstream (by implementers) as a result of
high SEP royalties, on the other hand.
Both SEP holders and implementers are likely to (i) lose incentives to innovate; (ii) reduce sustainable
competitiveness; and (iii) adversely affect supply chain security.
1) Incentives to innovate. Uncertainty regarding SEP licensing, price and conditions, with the risk
of litigation may impact investment and R&D decisions as explained above.
111
Regulation (EU) No. 608/2013 of the European Parliament and of the Council of 12 June 2013 concerning customs
enforcement of intellectual property rights and repealing Council Regulation (EC) No. 1383/2003 (‘Regulation
concerning customs enforcement of IPRs’), OJ L 181, 29.6.2013, pp. 15-34, http://data.europa.eu/eli/reg/2013/608/oj.
112
According to testimonies from an IoT supplier and an IoT end-product manufacturer.
24
2) Sustainable competitiveness
Global competitiveness
SEP holders often face challenges to the royalty rates offered. Although some implementers may
push to obtain lower rates without consideration of what constitutes FRAND, there is also a lack of
certainty and transparency with regard to factors that would support a determination of FRAND rates.
Uncertainty about which SEPs are essential and the inability of implementers (large and small) to
determine the overall essentiality and validity of the SEP owner’s portfolio through technical
discussions (which are often limited to one or two dozen SEPs) lead to questions whether the value
of the SEP owners’ portfolio is overestimated. The testimonies listed in Annex 2 all refer to a lack of
trust in the system and regarding the FRAND-ness of the SEP owners’ offers.
Implementers are typically challenged at courts in the EU first, particularly if they have important
sales in the EU. Those that take a licence first face competition from unlicensed competitors.
A European IoT device manufacturer who uses 3G/4G standards for connectivity was approached
by a SEP holder to pay royalty. The proposed licence would increase the product price by 3%. At
the same time, a Korean manufacturer sells similar products without a licence, as it has not yet
been approached by the SEP owner. The EU manufacturer fears losing its market share.
EU semiconductor firm: Not having a SEP license adds to uncertainty, both for us and for our
customers. If we make a provision for estimated royalties and our competitors do not, we are at a
disadvantage. Our module customers generally do not understand the technology and want a
solution with SEP indemnification as they feel unable to navigate the licensing process. If we do
not offer such indemnification and our competitors do, we are at a disadvantage.
Furthermore, EU companies implementing more expensive standards face difficulties to effectively
compete in markets which have adopted their own competing standards. For example, China
promoted the creation of a Chinese patent pool for its audio-visual standards (AVS) and standard
contributors accepted to contribute patented technologies for an aggregate fee of one yuan
(approximately EUR 0.14) per hardware device.113
EU implementers of the competing AVC standard
may not be able to compete in that market.
The public consultation confirms that if European companies in the IoT sector, such as smart meters,
wireless charging stations and payment terminals, are licensed first at rates that their competitors in
other jurisdictions would not pay, they are likely to lose competitiveness.114
More testimonials are
available in Annex 2.
Technology diffusion
There are risks that standards’ take-up will be slower or implementation will be delayed in the EU
until applicable SEP royalty rates become more affordable.
Royalty free Bluetooth gained 100% phone market coverage in 8 years, while royalty bearing NFC
gained only 36% coverage in the same period.115
Companies may also try to work around the SEP technology by creating their own (not standard)
solutions or develop a competing standard on a royalty-free basis, where investment cost permits it.
113
AVS-Audio and Video Coding Standard Workgroup of China and Webinar on Patent Pools – 20 April 2021, Summary
report, p. 9, https://ec.europa.eu/docsroom/documents/45814/attachments/1/translations/en/renditions/pdf.
114
Public consultation, answers to Questions 8, 13 and comments on non-discrimination.
115
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 180.
25
It is also possible that older/less efficient, but lower-royalty or royalty-free technology will be used
to avoid high SEP royalty exposure. Half of the SMEs stated they try to use free or older technology
in order not to pay for SEPs, while one in five stated that they would try to develop in-house
alternatives.116
Royalty bearing FireWire (at least initially) was superior to the royalty-free USB standard, but
USB became the dominant one.117
Although the study commissioned to support this IA concluded that at least currently there is no
systematic evidence of mass scale occurrence of slower than expected or delayed implementation of
standards,118
the public consultation and several testimonies show that the IoT sector is adopting the
newest standards slower than the mobile phone market.119
Many IoT devices can operate on older
standards such as 2G (patents expired) and 3G (which is cheaper) but the 2G and 3G infrastructure
will be removed in the near future.120
Both EU SEP holders and implementers are set to lose from this situation.
3) Supply chain security
Delays in the negotiations and increasing costs of licensing, may disincentivise EU SEP holders to
continue their participation in standardisation. This would benefit non-EU contributors to the
standards. The EU would thus lose its ability to contribute European technology to the global market,
also related to critical infrastructure.
There is already proof in the automotive industry that because of SEP royalties, European suppliers
are no longer able to compete and exit the automotive supplier market. In a submission to the
Commission, the automotive manufacturers’ organisation ACEA reported a shortage of supplier
offers and a growing dependence on Chinese suppliers.
2.5. How likely is the problem to persist?
With an increasing demand for connectivity (particularly for IoT) and other standards that promote
interoperability, the problem of SEP licensing is set to gain prominence and affect a much larger
number of companies. About 70% of surveyed SEP experts121
as well as conclusions from the Expert
Group Contribution confirm that the licensing of SEPs for IoT applications is expected to be more
challenging. This is because of current trends in standard development, including the increasing
complexity of new standards, the high number of SEP holders with varying interests and business
models, a lower volume of products for a larger number of implementers, and increased use of
standards across different sectors of the economy. These factors in combination are likely to amplify
frictions in the SEP licensing environment, further spotlighting the need for more certainty and
transparency.
116
48% (12 out of 25) and 19% (5 out of 26) respectively. See Annex A8.2 SME survey, Q16.
117
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 176.
118
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 179.
119
See Annex 9, Q12.
120
Michael Bosson, 2G and 3G sunsets and how to prepare, Onomondo, 2022, https://onomondo.com/resource-hub/2g-
3g-sunset/#Europe.
121
Results of a Survey conducted with SEP industry experts by the Technical University of Berlin in October 2020. See
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 24.
26
On the other hand, the level of information on SEP ownership and essentiality is not expected to
improve absent a push from outside sources. The Commission has been trying to stimulate voluntary
industry solutions since its Communication in 1992 on Intellectual Property Rights and
Standardisation122
, and most recently in 2017 when the Commission issued a Communication on
SEPs123
. Attempts to improve the quality of SEP declarations at SDOs since then show little
progress.124
The polarised responses to the many surveys, webinars, conferences and the Public
Consultation have made it clear that the industry will not act on its own.
SEP holders will continue to selectively approach successful SEP implementers for royalty payments
(70% of SEP holders in the public consultation answered that they do not contact all known
implementers).125
Although patent pools are likely to emerge for certain IoT applications, such as
Sisvel pools for Wi-Fi 6 products,126
smart meters and tracking devices,127
such pools will not
represent all SEP owners. Consequently, most implementers will not be fully licensed and will
operate under the threat of an injunction (particularly if they become successful with higher volumes).
Furthermore, due to the increasing number of SEP implementers in an increasingly connected world,
SEP holders could choose to outsource SEP licensing (and resulting litigations) to specialized patent
assertion entities128
in the future.
About 70% of the implementers take a licence without litigation according to the results from the
public consultation.129
There is no indication that traditional alternative dispute resolution
mechanisms currently available to SEP holders and implementers will be used more often going
forward to settle FRAND-related issues.130
Respondents to the public consultation considered
mediation insufficient as the mediator has no authority to request information and no authority to
make a price recommendation.131
The newly established Unified Patent Court132
is not yet
operational, and it remains unclear how the court will assess and grant injunctions in the context of
SEPs and whether it will engage in the assessment of (global) FRAND rates.
No other initiative by the Commission or Member States is going to help provide solutions for these
SEP issues.133
At the same time other jurisdictions already have (Japan, South Korea, Singapore) or
122
Communication from the Commission on Intellectual Property Rights and Standardisation, COM(92) 445 final,
27.10.1992, https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:1992:0445:FIN:EN:PDF.
123
Communication from the Commission to the European Parliament, the Council and the European Economic and Social
Committee on Setting out the EU approach to Standard Essential Patents, COM(2017)712 final, 29.11.2017,
https://ec.europa.eu/docsroom/documents/26583.
124
For example, ETSI has taken some incremental steps to improve its database and to make it more user-friendly. CEN-
CENELEC improved its declaration system. Other industrial associations, like the Next Generation Mobile Networks
(which brings together mobile network operators and their suppliers) are working on proposals to improve transparency.
125
See Annex 9, Q15. Do you contact all known SEP implementers from the selected category?
126
https://www.sisvel.com/news-events/news-events/news/sisvel-launches-a-patent-pool-on-wi-fi-6.
127
https://www.sisvel.com/news-events/news-events/news/sisvel-launches-its-cellular-iot-patent-pool.
128
This includes state-owned entities (such as Japanese IPBridge or FranceBrevets), ‘privateering’ spinoffs from large
operating companies (e.g. Unwired Planet from Ericsson, Panoptis from Panasonic etc), former operating companies who
have ceased other activities to concentrate on patent licensing (e.g. Sisvel), and private companies acquiring patents from
a variety of predecessors (e.g. IPcom, Uniloc, etc.). PAEs contribute to further fragmentation of the SEP holders market.
129
See Annex 9, Q17. What percentage of the SEP implementers that reply take a license without litigation?
130
WIPO arbitration and mediation centre has reported an increased interest in mediation and referrals by national courts
to WIPO for mediations on FRAND terms and conditions by non-EU courts. There is no public data as to whether EU
courts use this possibility. https://www.wipo.int/amc/en/center/caseload.html.
131
Public consultation – responses and comments to question 53.
132
https://www.unified-patent-court.org/en.
133
The Commission is currently reviewing of Horizontal Guidelines
(https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1371). However, the revised draft Horizontal Guidelines
address issues in the context of standardization agreements, but do not tackle issues related to license negotiations,
litigation and lack of information on SEPs once the standard is adopted. The Horizontal Guidelines also remain voluntary.
27
are considering SEP related initiatives (including China, India and the UK). If the EU does not take
the initiative, it will have to follow developments in other jurisdictions, which will affect EU
companies as well as the EU-related businesses of global companies.
3. WHY SHOULD THE EU ACT?
3.1. Legal basis
The initiative concerns standards to which a patent holder has contributed a patented technology and
which it has committed to an SDO to license on FRAND terms and conditions. Standards for which
patent holders make FRAND commitments are applied cross-border among Member States and
globally. SEP licensing is also seldom national. Usually, licensing contracts are global and may take
into account certain regional aspects. The international standards in question cover technologies such
as 4G, 5G, Wi-Fi, HEVC, AVC, DVB and others that ensure interoperability of products worldwide.
Article 114 TFEU constitutes the appropriate legal basis as the objective is to improve the conditions
for the establishment and functioning of the internal market. The initiative seeks to ensure the
efficiency of SEPs licensing, facilitating lawful access to the standards and promoting wider adoption
of standards. There are no specific EU or national rules on SEPs and it has been left to competition
law to regulate.134
In addition, as acknowledged by the CJEU in Huawei v ZTE, apart from common
rules relating to the grant of a European patent, a European patent remains governed by the national
law of each of the Contracting States for which it has been granted as is also the case of national
patents.
The CJEU has confirmed135
that recourse to Article 114 TFEU is possible, if the aim is to prevent the
emergence of obstacles to trade between Member States resulting from the divergent development of
national laws. However, the emergence of such obstacles must be likely and the measure in question
must be designed to prevent them. Dutch136
, French137
and German138,139
courts have been
considering FRAND-related issues in national litigation, based on the laws of the Member states and
the specificities of the disputes brought before them. Those cases show different approaches (not
necessarily different results) with regard to FRAND determinations concerning SEPs covering
regional or global standards. It is difficult for EU national courts to handle SEP-related cases and
make detailed and consistent FRAND determinations. This is in large part due to the lack of
transparency and complexity of the issues that are central to such determinations, such as essentiality
of patents, comparable licences and compliance with FRAND requirements. While the initiative will
neither interpret the CJEU case-law nor dictate methodologies for FRAND determinations per se, it
will establish mechanisms that promote the necessary transparency, increase certainty and reduce the
134
Communication from the Commission – Guidelines on the applicability of Article 101 of the Treaty on the Functioning
of the European Union to horizontal co-operation agreements, OJ C 11, 14.01.2011, pp. 1-72, CELEX: https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52011XC0114(04) and competition case-law.
135
Judgment of the Court of Justice of 12 December 2006, Germany v Parliament and Council, Case C‑380/03, [2006]
ECR I‑11573, para. 38 and the case-law cited, and Judgment of the Court of Justice of 10 February 2009 , Ireland v
Parliament and Council, Case C‑301/06 [2009] ECR I-593, para. 64; see also, to that effect, Judgment of the Court of
Justice of 2 May 2006, United Kingdom v Parliament and Council, Case C-217/04, [2006] ECR I‑3771, paras. 60 to 64.
136
Court of Appeal of The Hague, judgment of 2 July 2019, Philips v Wiko, Case number : C/09/511922/HA ZA 16-
623; Hoge Raad, Judgment of 25 February 2022, Wiko v Philips, Nummer 19/04503, ECLI:NL:HR:2022:294; District
Court The Hague, Judgment of 15 December 2021, Vestel v Access Advance, ECLI:NL:RBDHA:2021:14372.
137
Paris Court, order of the pre-trial judge of 6 February 2020, TCT v Philips, RG 19/02085 – Portalis 352J-W-B7D-
CPCIX; TJ Paris, 3.3, judgment of 7 December 2021, Xiaomi v Philips and ETSI, RG 20/12558.
138
German Federal Court of Justice (‘Bundesgerichtshof – BGH’), judgement of 5 May 2020, Sisvel v. Haier, KZR
36/17, and German Federal Court of Justice, judgment of 24 November 2020, FRAND-Einwand II, KZR 35/17.
139
Order of the President of the Court of 24 June 2021, Nokia Technologies Oy v Daimler AG, Request for a preliminary
ruling from the Landgericht Düsseldorf, Removal from the Register, Case C-182/21, ECLI:EU:C:2021:575.
28
potential for inconsistent rulings. This will be a significant improvement in these courts’ abilities to
handle SEP disputes.
EU-wide rules on transparency regarding SEPs and FRAND terms would have a harmonising effect
within the EU, which would facilitate the work of national courts and the future Unified Patent Court.
The instrument to implement this initiative should be a regulation. A regulation would be directly
applicable, including by empowering an EU agency with the tasks of managing a register of SEPs,
and establishing a common FRAND determination procedure that would ensure uniformity across
the EU and provide greater legal certainty. These outcomes cannot be achieved by means of a
Directive.
3.2. Subsidiarity: Necessity of EU action
Measures taken at national, regional or local level aiming at increasing transparency and facilitating
licensing of SEPs may not be efficient for the following reasons. First, instead of one EU-wide
solution for SEPs, there might be different national solutions for the SEPs on one specific standard.
Second, under an EU-wide approach, it will not be necessary to conduct more than one essentiality
check per patent family to find that patents are indeed truly essential to a standard. The check would
be done based on a single EU-wide methodology. Third, non-centralized alternative dispute
resolution processes may come to different results for the same SEP portfolio, opening the door to
“forum shopping” within the EU. An EU-wide approach can help avoid these problems.
3.3. Subsidiarity: Added value of EU action
Action at EU level is expected to save costs for stakeholders, both SEP holders and implementers,
and for Member States. For instance, there would be one register, one essentiality check per patent
family, one common methodology for the conduct of such checks, and a streamlined and transparent
conciliation (FRAND determination) process. SEP holders and implementers would not have to incur
the same costs in each EU Member State which would be the case with national solutions, especially
in a situation where most standards are regional or global.
4. OBJECTIVES: WHAT IS TO BE ACHIEVED?
4.1. General objectives
This initiative aims at:
 Ensuring that end users, including small business and EU consumers benefit from products
based on the latest standardized technologies at reasonable prices.
 Making the EU an attractive place for innovation and standards development (including for
global participants).
 Ensuring that both EU SEP holders and implementers innovate in the EU, make and sell
products in the EU and are competitive on global markets.
In particular, the goal is to facilitate SEP licensing negotiations for both SEP holders and
implementers, by reducing current uncertainties as to the level of SEP exposure (implementers) and
return on research and development activities (SEP owners) thereby also lowering the transaction
costs.
4.2. Specific objectives
This initiative has three specific objectives:
 Provide more clarity on who owns SEP and which SEPs are truly essential.
 Provide clarity on FRAND royalty and other terms and conditions
29
 Facilitate SEP dispute resolution.
Figure 5: Objectives tree
5. WHAT ARE THE AVAILABLE POLICY OPTIONS?
5.1. What is the baseline from which options are assessed?
The baseline was described in section 2.5 above. In essence, SEP holders will continue to selectively
approach implementers, and both will bear the costs of protracted negotiations and court disputes.
The information asymmetry between SEP holders and implementers will remain, with the latter
having to bear additional costs either by committing resources to long negotiations (including own
essentiality checks) or by accepting the SEP owner’s offer and paying potentially higher fees to
continue production. With time, patent pools offering more efficient licensing solutions for selected
applications may emerge and facilitate licensing, if they gain acceptance in the market. This is not
likely to happen because the new emerging pools gather SEP holders who do not implement the
technology, for example in the IoT. The FRAND royalty expectations are likely to be higher than the
market would suggest.140
None of the other patent related initiatives announced in the IP action plan of 2020 (i.e.
Supplementary Protection Certificates141
and Compulsory Licensing142
) is tackling nor affecting
development of SEP specific problems identified in this impact assessment.
5.2. Description of the policy options
The options concern international standards for which a patent owner has made a FRAND
commitment and SEPs are in force in one or more EU Member State(s). The initiative will exclude
national standards and standards with royalty free licensing policies. The options are constructed
following an incremental approach from the least to the most ambitious. More details on options are
provided in Annex 6.
140
For example, Sisvel launched a new IoT pool with 20 licensors who claim to represent about 30% of all SEPs. The
price for a smart meter is announced at USD 2, so the total aggregate royalty would be around USD 7 (EUR 6.7 on 15
February 2023). The value of a consumer smart meter is reported to be around EUR 65.
141
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13353-Medicinal-&-plant-protection-
products-single-procedure-for-the-granting-of-SPCs_en
142
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13357-Intellectual-property-revised-
framework-for-compulsory-licensing-of-patents_en
General
Specific
Ensure that EU customers have access to the latest technology at reasonable price
Ensure that EU firms innovate and produce in the EU and are competitive on global markets
Facilitate SEP negotiations (reduce uncertainty and transaction costs)
Provide clarity on FRAND
royalty
Provide information on SEPs
ownership and essentiality
Facilitate dispute resolution
For implementers:
Facilitate assessment of SEP exposure
For SEP owners:
Facilitate reasonable return on SEP innovation
30
5.2.1. Option 1 (PO1): Voluntary guidance
This option consists of non-binding guidance that provides further clarification of FRAND concepts
and conditions such as, for example, i) the economic value of patented technology should not be
conditional on market success of a product that implements it, ii) the value may depend on actual
functionalities of the standard used, iii) similarly situated entities using the same functionalities of a
standard in similar applications should receive similar terms and conditions; iv) an aggregate royalty
must be “reasonable”; v) promote the use of FRAND rate discounts for early standard adopters; vi)
differentiation of FRAND terms and conditions between sectors and over time; vii) a
recommendation that SEP licensing takes place at the level (component or final product) where
intellectual property is customary licensed in an existing industry; viii) an explanation of the legal
rules on liability for infringement of third-party intellectual property in commercial contracts and
their application in the context of SEPs (e.g. indemnification obligations, passing the cost of the SEP
licence downstream; ix) clauses in arbitral agreements that should be avoided (e.g. a prohibition to
challenge the validity of a patent). The guidance will also recommend measures to facilitate SEP
license uptake by SMEs. Additionally, the Commission may recommend to (or require) SEP holders
to adopt existing SEP pool practices addressed to SMEs, such as royalty-free licences for small
volume production or discounts. The guidance will be reviewed and updated regularly to take account
of legal (e.g. CJEU jurisprudence, other case law) and market developments.
An EU Competence Centre on SEPs will be created within the European Union Intellectual Property
Office (EUIPO). Its tasks will include monitoring of the SEP licensing landscape, gathering and
providing easy access to SEP-related policies from key jurisdictions globally as well as case-law
summaries (including arbitrations) related to FRAND issues, also for foreign jurisdictions,
supporting EU SEP policy making (e.g. via studies). The Competence Centre would also seek to sign
an agreement with the World Intellectual Property Organization (WIPO) to promote the use of the
WIPO Arbitration and Mediation Centre for SEP disputes in the EU and to exchange information.143
Additionally, the centre will become an SME144
SEP licensing assistance hub. It will offer European
SMEs free SEP advice, both for SME SEP holders and SME implementers, provide trainings on SEP
licensing/FRAND negotiations and conduct studies concerning SEP-related issues. These activities
will be available at least in English, free of charge and may be funded from the existing SME support
mechanisms such as the SME Fund or the IP Helpdesk.145
5.2.2. Option 2 (PO2): SEP register with essentiality checks
PO2 builds on PO1 and establishes a SEPs register146
where SEP holders that seek to license their
SEPs in the EU will specify which patents they consider to be essential to a particular standard.
Registration will be mandatory for enforcement purposes, such that if a SEP is not registered, the
SEP holder will not be able to assert it in court and/or it will not be able to collect royalties or past
damages for any use of a SEP prior to the date of registration. This condition will apply to patents
for standards (or new versions of existing standards) adopted after the entry into force of the rules
implementing this option.147
A number of standards, however, rely on older technical documents in
143
Similar to the agreement signed between USPTO and WIPO in mid-2022: https://www.uspto.gov/about-us/news-
updates/uspto-and-wipo-agree-partner-dispute-resolution-efforts-related-standard.
144
SMEs as defined by the EU recommendation 2003/361, https://single-market-economy.ec.europa.eu/smes/sme-
definition_en
145
https://euipo.europa.eu/ohimportal/en/online-services/sme-fund.
146
This register would provide an interface for SEP holders to submit their patents.
147
It will also not affect ongoing license agreements, only the new ones, or renewal of existing agreements (if it concerns
patents in the SEP register).
31
order to function (for example, a 4G phone should be able to also support 3G) and many IoT
applications rely on 4G. Therefore, it will be possible to determine the scope of the standard by listing
the relevant technical documents. All SEPs relevant to those documents will have to be registered.
SEP holders can register their SEPs anytime following the publication of the relevant standard or the
granting of their patents which are declared SEPs. Once a registration is done, any changes, such as
ownership, invalidation or other court judgments should be updated within 6 months.148
For the registration, SEP holders will be requested to submit: i) full details regarding their patents
protected in the EU claimed to be essential, including the patent office that granted the patent; ii)
proof of their ownership; iii) identification of the commercial name of the standard for which the
patent is essential; iv) information that helps to link the patent to the standard such as the specific
section(s) of the standardisation document(s) for which the patent is potentially essential149
and an
identification of which features of the standard are normative or optional; v) evidence of the SEP
owner’s FRAND commitment and any other relevant information, such as links to standard licensing
terms and conditions as well as contact details. SEP holders will have to update the information in
the register to reflect relevant changes (including e.g. validity of a patent).
The essentiality checks on SEPs included in the register150
will be performed in accordance with a
pre-determined EU methodology to be developed by industry experts under the auspices of the
Commission. Essentiality checks could concern either: sub-option i) all SEPs in the register or sub-
option ii) up to a fixed number (e.g. 50 or 100)151
of patents selected by a SEP holder (or implementer)
and a representative random sample of all SEPs in the register conducted annually to ensure the
quality of the register. No SEP holder or other interested party will be able to choose the evaluator
for any given essentiality check. The SEP holder will have an opportunity to submit a claim chart (a
detailed document that links a standard to the claims of a patent) for each SEP that is checked. The
SEP holder will receive the preliminary results of the essentiality checks and have the opportunity to
comment before the opinion is issued.
The results of the non-binding essentiality checks will be published in the register (for each essential
patent of the “up-to-100” group, and information on the percentage of essential patents for a given
SEP holder based on random sampling). After the annual essentiality check process is completed, a
SEP holder may request the cancellation of a SEP registration, if the result is negative. A certain
number of the essentiality checks will be the subject of a peer evaluation, to be performed annually
by a group of evaluators with significant experience. This will ensure the quality and consistency of
the essentiality checks. Essentiality checks conducted by an independent person prior to the
publication of the standard in the context of pools and essentiality determinations in courts will be
reflected in the register. Those SEPs will not be re-checked for essentiality. Any court decision
determining the essentiality or lack thereof will be reflected in the register.
Both register and essentiality checks will be managed by the Competence Centre152
created under
PO1. The persons that will conduct the essentiality checks (evaluators) will have to satisfy pre-
determined criteria regarding competence and independence and will be designated and remunerated
148
There could be a mandatory rule that the FRAND commitment must be transferred with the SEP ownership. This is
currently in the Horizontal Guidelines as a guiding principle but could be reinforced in a Regulation as Canada did.
Technically some changes could be automatically updated by connecting the SEP register to patents registers/databases.
149
Such as ‘ETSI TS 125 215’, Section ‘claim charts’.
150
This register will provide an interface for subject evaluators to chart patents and submit the results to this register.
151
The public consultation revealed that in most cases no more than 50 SEPs will be discussed individually in SEP
licensing negotiations, even if the number of SEPs licensed may be significantly higher. The number could be doubled
to facilitate/encourage SEP holders to join patent pools, some of which conduct essentiality checks.
152
Its main tasks would be: (i) creating and maintaining the register; (ii) setting up a scheme that would ensure that the
assessing bodies are able to perform the assessments in a harmonised manner and meet the requirements for reliability,
impartiality, quality, and performance; (iii) administrating the essentiality checks, etc.
32
by the EUIPO. The essentiality check methodology and criteria for the selection of evaluators will
be adopted as an implementing act under the Regulation.
There will be an administrative fee for SEP holders to enter SEPs into the register and to cover the
costs of essentiality checks. Interested stakeholders will be able to access certain basic information
in the register for free (for example the list of SEP owners). Fees will be required, however, from
implementers and any other interested stakeholder to access detailed information from the register.
SMEs (both SEP holders and implementers) will benefit from reduced fees.
5.2.3. Option 3 (PO3): SEP register with essentiality checks and conciliation
procedure
This option adds a conciliation (bilateral FRAND determination) process to PO2. Conciliation aims
at assisting parties in negotiations of a SEP licence with the FRAND royalty determination designed
for their needs.
The Competence Centre will administer the conciliation procedure. It will create a “roster” of
conciliators that satisfy the requirements of competence and independence, as well as a repository of
conciliation reports, the confidential version of which would be accessible only to the conciliators.
The conciliator would be a neutral party with extensive experience in dispute resolution and
substantial understanding of the economics of FRAND licensing to be credible. The parties will be
given an opportunity to agree on (a) conciliator(s) from that roster and failing to do so will empower
a representative of the EU Competence Centre to choose the conciliator(s).
The conciliation procedure would have to be initiated by either the SEP holder or the implementer
and concluded within nine months. Neither party would be able to initiate an action in a court of any
EU Member State (either patent infringement or FRAND determination) until the conciliator has
issued a report153
(or optional: the procedure has been initiated).
The conciliator would examine the parties’ offers/counteroffers and consider the Huawei v ZTE
negotiation steps among other relevant factors. The conciliator would have the power to request and
receive information necessary to conduct the task (including access to the SEP register, essentiality
checks and past conciliation reports), observing the level of confidentiality attributed to the relevant
information in the proceedings. However, the parties would be free to engage in the proceedings and
would not be prevented from leaving the process at any time or even not engaging at all. At the
conclusion of the procedure, the conciliator would issue a report recommending a FRAND rate.
Either party would have the option to accept or reject the conciliator’s report and/or recommendation.
The conciliation procedure would be confidential, as well the report the parties would receive at the
end, unless they settle beforehand. A non-confidential version of the report containing the FRAND
rates and the methodology used (excluding any confidential information) will be provided to the
Competence Centre for further publication. The SEP holder would also have to use the report or a
notice of termination of the procedure before customs to support a request for customs action with
regard to goods infringing SEPs.
The conciliation procedure would be conducted in English, unless parties decide otherwise. All costs
of the conciliation process would be in principle shared equally between parties. Each party would
bear its own costs in the process. As a support measure for SMEs, the EU Competence Centre would
provide free advice to SMEs on SEPs licensing, the conduct of the conciliation and how the SME
can best represent itself. SMEs would also be able to benefit from a reduced administration fee for
the conciliation and potentially a discount or financial support from e.g. the SME Fund to cover the
conciliator’s fees.
153
Except if one party is not participating or has started parallel court proceedings in a third country, the other party can
terminate the conciliation without a report.
33
5.2.4. Option 4 (PO4): Aggregate royalty for SEP
This option adds to PO3 a process for determining (ex-ante) an estimated maximum aggregate
royalty.
Ex-ante i.e., before (or shortly after) the publication of a standard, contributors to a standard should
inform the Competence Centre about the maximum aggregate royalty for all SEPs essential to that
standard. For complex standards with multiple implementations there may be a need for different
aggregate royalties depending on the implementations known at the time of the publication of the
standard.154
It would be possible, however, to reassess the aggregate royalty after a reasonable period
of time following the adoption of the standard. Standard contributors would have the right to ask the
Competence Centre to appoint a neutral party (a conciliator from the roster set in PO3) to assist them
in setting an aggregate royalty.155
Additionally, a group composed of contributors to a standard and/or
(potential) implementers would be able to ask the Competence Centre within a predefined time after
the publication of a standard or after a new implementation becomes known, for an expert opinion
on the aggregate royalty. An expert opinion would be delivered by a panel of three conciliators,
following an open process where any party demonstrating a legitimate interest in the standard (and
upon paying a participation fee) will be able to provide information to the panel. There will be a fixed
time for the panel to deliver its opinion.
In case an aggregate royalty is not set by any of the methods described above, during the first bilateral
FRAND determination (conciliation) procedure related to the relevant standard, the conciliator may
make a recommendation for an estimated aggregate royalty (in addition to the determination of a
FRAND rate for the parties’ specific dispute). Whether the conciliator makes such a recommendation
would depend on the methodology it uses for the determination of the FRAND rate for the specific
dispute at hand. Such an aggregate royalty will be specific to the dispute at hand. An aggregate royalty
can also be determined or updated during any subsequent conciliation(s).
An aggregate royalty set by any of the above methods will be published in the register and will be
non-binding on the negotiating parties. Under this Option there will be no determination of the
allocation of the aggregate royalties among different SEP owners.
5.2.5. Option 5 (PO5): SEP clearing house
This option adds to PO4 a one-stop-shop facility for implementers. The aggregate royalty determined
under the procedure under PO4 will become a binding aggregate royalty for those using the one-stop-
shop. Once the aggregate royalty is determined, any implementer will be able to request a licence
from all SEP holders by informing the Competence Centre and depositing in an escrow account either
the full amount of the published aggregate royalty (in case of lump sum payment) or the amount
corresponding to at least an estimated monthly sales volume of a product concerned (in case of per
unit royalty payment). At fixed intervals (at least once a year) the implementer should deposit further
royalty payments to the escrow account, provide evidence on real sales volumes (e.g. VAT, financial
statements) and correct past royalties to actual sales. Any royalties not collected by SEP holders
within a year from the deposit shall be returned to the implementer. The Competence Centre will
charge fees to cover the costs of the “clearing” service.
The Competence Centre will notify all SEP holders who have registered, checked and confirmed
SEPs in the EU register, so that they may conclude a licensing agreement with an implementer. SEP
holders should also inform the Competence Centre how to allocate the aggregate royalty among them.
154
Once new implementations become known at a later stage, contributors will again have an opportunity (within a fixed
time period) to inform the Competence Centre on the aggregate royalties for those implementations.
155
Those requesting will have to bear the cost of such service.
34
Until they do so, they will not be able to collect royalty payments from the escrow account. Should
SEP holders fail to agree on such method, the Competence Centre upon request from any SEP holder
involved will appoint a conciliator from the roster set in PO3 to recommend an allocation method
(the cost of the facilitator will be borne by all SEP holders involved). Once an allocation is
established, any implementer will be expected to deposit in the escrow account the aggregate royalty.
Each SEP holder will have a period of time to conclude a licensing agreement. The implementer will
be reimbursed the part of those SEP holders that do not conclude licensing agreements. Following
notification, SEP holders may not start infringement proceedings in any EU court against an
implementer who deposited security for an aggregate royalty in the escrow account.
An implementer may choose not to use the one-stop-shop and to have bilateral licensing with SEP
owners.
5.3. Logic of options construction. Could options be standalone?
The options are constructed following an incremental logic proposed already in the Call for
evidence.156
PO1 is voluntary and thus the least ambitious option. PO2 adds to PO1 a SEP register
with essentiality checks. PO3 adds conciliation to the register. Conciliation could be a standalone
option. However, in that case a conciliator will not be able to use the register and the databases of
case-law and other information to complete its analysis. This means that if only one party engages in
the conciliation in good faith, the conciliator will be compelled to use only the information provided
by that party and any other public information it may find but not on the information available to it
under PO1 and PO2. This will significantly reduce the value and credibility of its report. This is why
it is important that a conciliator can benefit from the SEP register in making recommendations. This
way (s)he can at least check which patents a SEP holder has and what share is essential. PO4 adds
aggregate royalty to PO3. SEP holders can benefit from the help of the Competence Centre’s
conciliators to propose an aggregate royalty. Stakeholders will also have the right to request a non-
binding expert opinion on the aggregate royalty by a panel of three conciliators. If no aggregate
royalty is announced or proposed by the panel of conciliators, an aggregate royalty may be
determined by any conciliator who decides to use this methodology for FRAND determination in a
bilateral process (as explained in PO3). Finally, PO5 can only work when both aggregate royalty (set
in PO4) and SEP holders eligible to get a share of that royalty (PO2) are known.
5.4. Options discarded at an early stage
The following sub-options to those presented above were discarded following an initial assessment.
For details see Annex 6.
In case of PO1, determination of the level of licensing by the Commission was discarded as currently
there are different practices with different standards and there does not seem to be a one size fits all
solution. Therefore, such an intervention in the contractual freedom would be disproportionate.157
In
156
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13109-Intellectual-property-new-
framework-for-standard-essential-patents_en.
157
Competition law (Article 102 TFEU) does not imply a preferred licensing level. SEP holders argue that any
intervention undermining a SEP holder’s discretion over licensing level would likely contravene Articles 30 and 31 of
the TRIPS Agreement. Furthermore, some respondents explain that courts in Europe and other jurisdictions have rejected
the contention that SEP holders are required to grant licenses to component and chip makers (see, District Court
Mannheim, decision of 18 August 2020, Nokia v Daimler, 2 O 34/19, http://eplaw.org/wp-content/uploads/2020/10/DE-
2-O-34_19-URT-Allgemeines-Urteil-FINAL_ANONYMISIERT.pdf; District Court of Munich, judgment of 10
September 2020, Sharp v Daimler, 7 O 8818/19, https://www.gesetze-bayern.de/Content/Document/Y-300-Z-GRURRS-
B-2020-N-22577?hl=true; US Court of Appeal for the Ninth Circuit, decision of 11 August 2020, Federal Trade
Commission v Qualcomm Inc.). See also US Court of Appeal, HTC v Ericsson. The US Court of Appeals for the Fifth
35
case of PO2, a creation of up to 27 national SEP registers was discarded as a more expensive and
cumbersome option. A SEP register without essentiality checks on a sampling basis to control the
quality of the register was also discarded because it would have only helped to create some
transparency with regard to standards to which blanket declarations are made but would not resolve
the issue of over-declaration in existing databases. In case of PO3, a voluntary conciliation was not
considered as already existing voluntary alternative dispute resolutions are not frequently used by
stakeholders158
and there are usually no negative consequences for non-participation. In case of PO4,
a mandatory aggregate royalty determination after adoption of a standard was rejected as by that time
products incorporating the technology are already placed on the market and the price uncertainty
problem would not be solved. Moreover, SEP holders would then be in a stronger negotiating position
vis-à-vis implementers, shifting the negotiation power to the benefit of the SEP owner. A royalty-
free SEP licensing obligation was rejected because from an economic perspective whether or not a
standard should be royalty-free depends on the economic interest of standard contributors to be
subject to such IPR policy and there cannot be general rules that would determine that. Similar
concerns could be raised in case of a uniform SEP royalty per standard irrespective of how the
standard is implemented. This applies because a too high price could limit the usage of the standard
by certain lower value implementations, while a too low one would reduce incentives to participate
in standard setting for SEP holders. For options 1 to 5 a sub-option to cover all past standards (e.g.
3G) was discarded as too costly, because of the large number of patents that would need to be
registered, and having the effect of reducing legal certainty for existing contracts. Finally, regarding
the choice of an organisation to run the Competence Centre, the EPO was not chosen as changing its
mandate would require consent of all 39 member countries, including 12 non-EU countries which
are not bound by the EU SEP policy goals. SDOs were not selected as this would mean a dispersed,
rather than centralised register, as well as because the EU does not have jurisdiction over non-EU
based SDOs.
6. WHAT ARE THE IMPACTS OF THE POLICY OPTIONS?
This chapter presents impact of the options considered as viable. The analysis is qualitative and to
the extent possible quantitative. As options build on each other and to avoid double counting we
present only quantification of additional features of each option. Quantifications are based on several
assumptions and estimations since data on SEP licensing is largely not observable (as explained in
the problem definition). The purpose of quantifications is to allow comparison of options and to
present relative impacts on affected groups rather than to provide an accurate figure. The fees
presented below are just an indication of the fees that would cover the costs of the Competence Centre
(based on an initial cost prognosis by the EUIPO). Details on quantitative analysis as well as all the
assumptions used for calculations are presented in Annex A7.1.
6.1. PO1: Voluntary guidance
SEP guidelines are necessary to provide clarity on the most problematic and contentious issues in
SEP negotiations. Those proposed under PO1 will be voluntary, thus not limiting the negotiating
flexibility and customisation of terms and conditions to the specific needs of both parties. At the same
time, they will shed light on current best practices and solutions, and can thus serve as a reference
Circuit ruled on 28 February 2022 that the supplier does not have a legal right to a licence and that Avanci and its licensors
have not breached their FRAND obligations, No. 20-11032. See Questions on FRAND in Annex 9.
158
During the webinar on enforcement from the 463 registered participants only 4 responded that they were involved in
arbitration and only 3 responded to have been involved in mediation. 20% were involved in settlements and 65% in court
cases. GROWTH, Webinar series on Standard Essential Patents,
https://ec.europa.eu/newsroom/growth/items/701874/en.
36
point especially for less experienced parties in negotiations (e.g. SMEs). The Guidelines could also
be relatively easily and frequently updated to reflect e.g. new court rulings, or market developments.
The Competence Centre will centralise information from diverse public sources (e.g. different
licensing policies, published or otherwise revealed (e.g. in court judgements), FRAND terms,
conditions and SEP rates/royalties, SEP judgements etc.), produce ad hoc studies to identify SEP
holders and their share in different standards, promote WIPO Alternative Dispute Resolution
mechanisms,159
give trainings and advise SMEs on SEP negotiations (e.g. around 80% of SMEs in
our survey noted that they do not know strategies to defend themselves in SEP negotiations).160
Therefore, it may become the first place to be visited by potential SEP implementers, especially
SMEs, who are not experienced with SEPs.
In order to limit operational costs, it is proposed that all activities are carried out in English only. The
technology firms applying modern standards are most likely already dealing with most of the
technical specifications in that language, consequently using only one language is not expected to
become an access barrier.
It is estimated that around 400 firms (including up to 80 EU based SMEs), 261 SEP holders and up
to 500 other users (e.g. judges, legal counsels) would use services of the Centre each year. The annual
costs of operating the centre are estimated at EUR 0.6 million per year. The benefits users could
derive from the centre’s activities such as trainings or studies are estimated at EUR 5.9 million (based
on cost of buying such services commercially).161
While guidance will be important and will help to improve transparency and knowledge about SEP
licensing, including by providing specific advice to SMEs, it will not be sufficient to help resolve
disputes around FRAND royalties.
The public consultation clearly revealed several major issues: e.g. lack of transparency about the
FRAND royalties (68% of all respondents, 100% of implementers and 19% of SEP owners), lack of
transparency about the SEP landscape (67% of all respondents, 97% of implementers and 13% of
SEP owners) or no guidance on FRAND concepts (57% of all, 93% of implementers and 19% of SEP
owners).162
The Competence Centre can gather all public information about pricing but much of it is under non-
disclosure agreements. A guidance is not capable of promoting more transparency in this respect.
The Competence Centre may also commission SEP landscape studies on a regular basis, but it will
need to use existing third parties’ commercial solutions with their limitations. The limitations concern
both the information available to these third parties (e.g. missing data and over-declaration mentioned
above) and the different methodologies they use. Such methodologies are deemed commercial
secrets, have a different level of robustness, and thus may lead to different results.
Finally, while the WIPO Arbitration and Mediation Centre is reporting some positive results, the
public consultation revealed that only 35% of all respondents consider mediation useful. Two key
concerns are (i) implementers may not be able to obtain information regarding comparable licenses
and other relevant data from SEP holders (available through discovery proceedings in certain judicial
proceedings), and (ii) the proceeding itself as well as the resulting decision is maintained as
159
WIPO informed us that since 2021 there have been 65 SEP related mediation cases and over 60% of parties to WIPO
SEP ADR proceedings are companies based in the EU. As of January 2023, most of these cases were still pending. In
many other cases, requests for WIPO Mediation prompted renewed licensing negotiations between parties with potential
settlement outside the mediation procedure. Source: WIPO Arbitration and Mediation Centre.
160
See Annex A8.2: Q12 (16 out of 19 replies).
161
See Annex A7.1.
162
See Annex 9, Q19.
37
confidential and is not publicly available, so it has limited precedential value for future FRAND-
related cases.
In order to offer valuable information to interested parties on the SEP landscape, FRAND licensing
and royalties, the Competence Centre would need to develop its own data on the basis of
independently conducted essentiality assessments and FRAND determination procedures, which this
option is unable to achieve.
This option bears similarities with SEP Expert Group Proposal 28 on three licensing principles.163
6.2. PO2: SEP register with essentiality checks
This option is expected to bring more clarity to the SEP landscape. The register under this option will
not replace SDO databases, the purpose of which is to create transparency ex-ante during the
standardisation process. It will be created ex-post, after the publication of the standard for the purpose
to facilitate licensing negotiations and will be updated regularly. As such it is complementary to the
activities of the SDOs.
SEP holders will have to register their SEP(s) in order to be able to enforce their patents and/or collect
FRAND royalties for the past. This is reasonable given that on average the SEP holder invites the
implementer to conclude a licensing agreement within 2 to 4 years after the publication of a given
standard. The registration will be simple (comparable to the declarations at ETSI) and provide
information to implementers about the identity and contact details of SEP owners. Moreover, details
provided (e.g. link between standard and patent) should help an implementer to judge if the patents
cover the functionality/technology it uses (as not all implementers are using the full potential/all
functionalities of a standard).164
The initial stock of patents that could be registered is estimated at maximum up to 72 000 patent
families.165
Some of the new standards may need to include older technical documents (for example
a 5G mobile phone will need to also support 4G). So, all SEPs relating to those older technical
documents will also have to be registered. The register will serve a dual purpose. First, the register
will be used to prove that a SEP holder has true SEPs. Second, the register will provide additional
information regarding the size and value of the SEP owner’s portfolio, if the SEP holder registers all
its SEPs.
Since the register may include patents that are not truly essential to the standard, it is necessary to
have a mechanism for essentiality checks to ensure the quality of the register. With regard to 4G,
experts claim that only between 25% and 40% of SEPs declared to ETSI are truly essential.166
It is
unlikely that the essentiality rate of the new register will be so low. This is because the ETSI database
includes patents and patent applications made during the standardisation process. Some of those
technologies were not accepted in the standard and some of those patents were not granted or their
scope was reduced so that they do no longer fall under the scope of the standard.
163
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021,
https://ec.europa.eu/docsroom/documents/45217.
164
Between 70 and 80% of all respondents to the public consultation considered that the following information should
be provided publicly: Patent and application number; contact details of the SEP holder; the relevant standard, version,
section of the standard; transfer of ownership, if any; licensing programs; Standard FRAND terms and conditions.
165
This is a generous estimate which includes an estimate of 60 000 patent families and a 20% increase in SEP patenting
rate.
166
Expert Group on Licensing and Valuation of SEPs, Contribution to the Debate on SEPs, Section 4.2.
38
The new register will be created after the publication of the standard and will require that the SEP
holder indicates the section of the standard to which its patented technology refers. The rate of
essentiality would thus be higher. However, it cannot be excluded that patents that are not essential
are also included. One should note that no assessment can give 100% assurance that a patent is truly
essential until a court has ruled on the essentiality (even then, the court would rely on experts). A
recent JRC study found that assessors correctly identify as essential or not around ¾ of patents they
check. However, the authors also explain that this share will be higher in practice due to improving
routines, and because identifying non-essentiality of the patents in the experiment was particularly
difficult (the examiners had a lot of limitations, including no access to support tools and support
group).167
The cost of an essentiality check is estimated at EUR 5 000 per one patent from a patent family.168
There is no need to check the other members of the family as most European patents have the same
claims being examined by the European Patent Office. The cost should also cover the peer evaluation
process for some of the patents already checked for essentiality.
A SEP holder will be given the opportunity to submit a claim chart (a document linking the standard
to the patent), if a registered SEP is selected to be checked for essentiality.169
According to experts,
all SEP holders who proactively license or cross-license their SEPs have claim charts or internal
expertise to create them. The most impacted will be the patent assertion entities that buy the patents
from others solely to license for revenue. We estimate that for about half of the patents selected for
random essentiality checks, SEP holders will decide to update or produce new claim charts at a cost
similar to the one indicated above.
In sub-option (i) all registered SEPs will be checked for essentiality. This will result in the most
accurate SEP landscape analysis (subject to the uncertainties mentioned above, including the portion
of SEP patents registered by owners). 72 000 patent families are likely to be checked in the first
year(s) (registering only those of the family members that are in force in the EU). Following a
negative assessment, SEP holders are likely to request re-check for up to 40% of patents.170
In the
following years, the number of patents registered and checked is expected to drop to 10% of the initial
numbers.
To implement this option the back-office costs of the Competence Centre are estimated at around
EUR 5 million initially and EUR 1.5 million in subsequent years. In order to cover this cost SEP
holders will be charged a registration fee of around EUR 140 per patent family registered.
The average total cost to SEP holders of registration and essentiality checks is estimated at EUR 1.9
million and EUR 94.5 million per year respectively. Additional indirect cost of filling the forms and
production/update of claim charts is estimated at EUR 2.7 million and EUR 34 million respectively
167
According to experiments by Bekkers et al., 74% of patents with claim charts checked by examiners working for
patent offices were consistent with checks done by a patent pool. Regarding different types of possible errors: an essential
patent has 17% probability of not being found essential in a check, and a non-essential patent has 38% probability of
being found essential. See Bekkers, R., Henkel, J., Tur, E. M., et al., Pilot study for essentiality assessment of standard
essential patents, Publications Office of the European Union, 2020, pp. 76-78, https://data.europa.eu/doi/10.2760/68906.
168
The evaluators will be remunerated by fees established by the Commission through an implementing act. Assessment
of one SEP per patent family was supported by two thirds respondents to public consultations (54% of implementers and
71% of SEP owners). See Annex 9, Q32.
169
Many or most existing claim charts may relate to foreign, in particular US members of global potential SEP families.
In such cases claim charts would have to be produced/updated for European patents.
170
Baron, J., Essentiality Checks for Potential SEPs – Framework for Assessing the Impact of Different Policy Options,
European Commission, DG GROW, 2023.
39
per year.171
Around 15% of that cost will be borne by SEP holders based in the EU. As indicated in
the market description almost all EU based SEP holders are large companies.
The register is expected to give a fairly accurate overview of the number of true SEPs and their
ownership.
In sub-option (ii), the same number of patent families will be registered but not all will be checked
for essentiality. The checks will be done based on two complementary steps. First, the SEP holders
may select up to 100 patent families of which one patent from a family will be the subject of an
essentiality check. These are expected to be patents they use often in licencing negotiations (typically
up to 15 patents are discussed according to experts, an average of 49 SEPs was indicated by SEP
holders in the public consultations).172
Having checked patents might also facilitate/encourage
participation in patent pools as some require essentiality checks. Under this step, it is expected that
up to 3 550 patents will be initially submitted with 355 added each year. Following negative
assessment around 25% re-check requests are expected (lower percentage than in sub-option i)
reflects better quality of SEPs used in negotiations). Second, the Competence Centre will select a
random sample from all SEPs registered by each SEP owner, including those designated by the SEP
holders under the first step. This is necessary to ensure a statistically valid sample. The Commission
will commission a study to develop the sampling methodology that would render the most optimal
results. If the sampling includes a patent also selected by the SEP owner, there will be only one
essentiality check. Our study173
finds that the effects of checks conducted based on sampling from
the register will be similar to those discussed under sub-option (i) with an acceptably low margin of
error. However, sub-option (ii) will limit the number of checks to around 10 000.
To implement this option the back-office costs of the Competence Centre are estimate at around EUR
3.7 million initially and EUR 1.1 million in subsequent years (figures lower than in i) due to lower
workload). In order to cover this cost SEP holders will be charged a registration fee of around EUR
100 per patent family registered.
The average total cost to SEP holders of registration and essentiality checks is estimated at EUR 1.35
million and 13.7 million per year respectively. Additional indirect cost of filling the forms and
production/update of claim charts is estimated at EUR 2.7 million and EUR 6.4 million respectively
per year.174
Around 15% of that cost will be borne by SEP holders based in the EU.
The register is expected to give as accurate overview the number of true SEPs as in sub-option i).
However, except for patents in the “up to 100” list only a percentage of essential patents in a SEP
holder’s portfolio will be indicated.175
Additionally, the register will reflect any decisions of
essentiality by courts and for patents that are examined by an independent examiner of a patent pool
prior to the creation of the register. This is however sufficient to allow comparison between portfolios
of different SEP owners.
Since sub-option i) is ten times more expensive than sub-option ii) and provides only a marginally
more accurate picture, the preferred choice should be sub-option ii).
171
Average cost over ten years: including initial year with a higher number of patent registrations/essentiality checks and
subsequent nine years with the number of registrations/essentiality checks at 10% of the initial figures. For more details
see Annex A7.1
172
See Annex 9, Q6.
173
-Baron, J., Essentiality Checks for Potential SEPs – Framework for Assessing the Impact of Different Policy Options,
European Commission, DG GROW, 2023.
174
See footnote 171.
175
The percentage will indicate the date on which it was produced and the number of patents checked and in the register
at that time. This is to avoid a situation when a SEP holder registers initially only its best patents to obtain a high
essentiality percentage and subsequently adds more patents of potentially lower quality.
40
Implementers and interested stakeholders will have free access to some basic information (for
example the list of SEP owners, number of registered SEPs, etc.) but they will be required to pay a
fee to access detailed SEP information in the register and the various databases of the Competence
Centre. This requirement has two objectives. First, it will enable the development of high-quality
data that can be used for aggregate royalty and bilateral FRAND determinations. Second, it will give
SEP holders the reassurance that the data they provide is accessed by persons interested in SEP
licensing and their representatives, and to specialised professionals. We estimate that at least 380
firms that conduct license negotiation per year will buy access. The fees will cover cost of activities
of the Competence Centre described in PO1 and at minimum should amount to around EUR 1 700
for large firm and EUR 850 for an SME for an annual subscription.
SEP holders are likely to withdraw non-essential patents from the register following negative checks
and save on patent maintenance fees. This should be considered beneficial to all parties – SEP
implementers will have more certainty in negotiations in which only essential patents are presented
to them. On the other hand, if the register will be perceived by SEP holders as a means of indicating
portfolio strength (and e.g. used in negotiations to determine the share of aggregate royalty applicable
to them), they may increase the number of registered patents.176
Under sub-option i) as all patents are
checked, the withdrawals are likely to be higher than new registrations. This is expected to produce
net savings for SEP holders of EUR 11.6 million per year (15% applicable to the EU based SEP
holders). The savings to SEP holders are losses to the EPO and EU patent offices. In case of sub-
option ii) in which a lower number of patents is checked, the opposite is expected. SEP holders are
likely to patent more than to withdraw, with a net impact of EUR 29 million in new patent
registration/maintenance fees to the benefit of the EPO and EU patent offices. Nevertheless, the
impact on the number of patents is uncertain and may not materialise (see also common impacts on
patent offices below).
The costs mentioned above should be seen in comparison to an average license revenue a SEP holder
gets on its patents. An average worth (net present value) of a positively assessed patent family would
be approximately EUR 6 to 10 million (EUR 1 to 1.7 million net present value if the effect of the
checks is limited to the EU only).177
The objective of the register is to have all SEPs in force in the EU registered, irrespective of who the
SEP holder is. With the help of essentiality checks, implementers will know approximately what
share of the registered SEPs are truly essential. This will determine the scope of the negotiations.
SEP holders will receive a powerful argument when approaching implementers with a licence offer
that they have truly essential SEPs and are thus more certain to have the right to ask for royalties.
The evidence from the register will allow a SEP holder to justify the FRAND rate demand, and the
implementer can better determine whether the offered rate is FRAND. SEP holders with smaller
portfolios, who could not afford the costs of licensing until now, would be able to license.
176
This does not necessarily mean new innovation though.
177
Study estimates that there currently are approx. 60 000 potential SEP families, generating approx. EUR 18bn annual
royalty revenue (EUR 300 000 per patent family). If, on average, a potential SEP family will generate significant royalties
for approx. 10 years, the net present value of a potential SEP family early in life would be approx. EUR 2.5 million. If
FRAND royalties are determined by apportionment among confirmed SEPs only, and 25 to 40% of the potential SEPs
are confirmed essential, the average NPV of these confirmed SEP families would be EUR 6 to 10 million (whereas non-
confirmed potential SEPs have no value). Proportional to the EU’s share in world GDP, we estimate that approx. one
sixth of that value is attributable to the licensed use of SEPs within the EU. See -Baron, J., Essentiality Checks for
Potential SEPs – Framework for Assessing the Impact of Different Policy Options, European Commission, DG GROW,
2023.
41
The option also provides efficiency gains as implementers will no longer need to assess essentiality
on their own or negotiate without that knowledge. With an estimated around 575 new SEP licensing
agreements signed per year (and associated negotiations), the value of information in the register to
implementers and SEP holders is estimated at EUR 6.2 million each.178
These benefits could increase
if the number of SEP licensing contracts is going to accelerate due to, among others, a growth in
importance of IoT. Almost two thirds of respondents to public consultations (93% implementers and
24% SEP owners) considered that a system of essentiality checks would be useful if assessors are
independent.179
Moreover, it is expected that the registered SEPs will reflect better the size of the SEP holder portfolio
than currently. This is because the SEP holders will have to review their declarations to ETSI or
review their portfolio if they made a blanket declaration and register only those SEPs whose claims
can be linked to the standard. Since the registration will require them to also indicate the section and
features of the standard to which the SEP relates, it will make it easier to determine which SEPs
pertain to core features of the standard and which to optional parts of the standard. This will help
level the playing field among SEP holders.
Finally, conditioning patent enforcement or licensing on registration (with no possibility to collect
royalty for the period before registration) might be considered an encroachment on property rights.
This is, however, a justifiable and a very limited restriction. First, the main problem is that either SEP
holders do not declare each of their SEPs to the SDO or they over-declare. The choice is made based
on the individual business strategy of the SEP owners, but it is detrimental to the SEP licensing
system as a whole. Because of the lack of transparency, some SEP owners’ portfolios are devalued,
and others are over-valued; furthermore, implementers face business uncertainty. The lack of
predictability has a direct impact on both contribution to a standard and standard implementation.
Second, the registration is simple and corresponds to what the SEP holders already committed to
declare in the ETSI database but do so with a various degree of rigorousness. The registration will
normally not impact on any negotiations as it can be done much earlier than the start of the
negotiations. Pursuant to the public consultation, negotiations start on average 2 to 4 years after the
publication of the standard and last for an average of 3 years.
This option will benefit SEP holders by reducing delays resulting from implementer requests for, or
need to obtain their own, essentiality checks and technical documents. This in turn reduces the
amount of negotiation time resulting in SEP holders starting to collect royalties earlier.
Around two thirds of all respondents (around 85-89% of implementers, and between 24 and 41% of
SEP owners) named the following benefits of a system for essentiality checks: better information
regarding the actual SEP exposure of a given product; reduction of the resources spent on licensing
of SEPs; it may help to smoothen licensing negotiations; easier negotiations of a fair royalty
(preventing over-pricing); trustworthy and reliable overview of the share of each SEP holders’
essential patents.180
This Option bears similarities with SEP Expert Group Proposals 7, 8, 11, 13 and 14 on introducing
essentiality checks by an independent body for those SEPs that SEP holders intend to commercialise.
All those proposals received support with 4 out of 5 stars by the experts. It also bears similarities
with Proposals 50 and 51 that when a SEP holder asserts its SEP, it should disclose certain
178
Value per licensing negotiation estimated as cost of essentiality checks of 15 patents (number typically negotiated
according to experts) – and amounts to EUR 60 000. Those typically negotiated patents are likely to be among the “up to
50” group of patents registered by the SEP holder under sub-option ii).
179
See Annex 9, Q30.
180
See Annex 9, Q31.
42
information on those SEPs and high-level claim charts.181
Those proposals were supported with 4.5
out of 5 stars by the experts.
6.3. PO3: SEP register with essentiality checks and conciliations
Conciliation is a process for a FRAND rate determination between a SEP holder and an implementer
(prospective licensee). The objective of the conciliation is to facilitate a settlement between the
parties before resorting to court. For example, WIPO reports that 70% of its mediations and 33% of
arbitrations end up in settlement.182
53% of the respondents to the public consultation considered arbitration useful and 35% of the
respondents considered mediation useful. Some of them explained that the problem with arbitration
and mediation is that the results are not published. For mediation, an additional disadvantage was
that the mediator has no authority to request information and no authority to make a price
recommendation.183
The conciliation thus has all the additional features that have the potential to address those concerns.
It provides powers to the conciliator to (i) request relevant information and documents from the
parties, (ii) propose a recommendation for a FRAND rate and (iii) to issue a non-confidential report
(containing the methodology for the calculation of the FRAND rate).
EU phone producing SME: “For an SME it is difficult to estimate whether the offered terms are
FRAND, particularly if the terms are not published.”184
Since conciliation will likely take place before concluding a licence agreement, and it will be a
mandatory step before initiating a patent infringement proceeding or a FRAND assessment before a
court, it can be even a more effective tool in limiting the number of court cases. The ability to
negotiate a FRAND rate with the assistance of an independent conciliator without the threat of an
injunction is important for any implementer. Conciliation can also help SEP holders (e.g. when
negotiating with large multinationals). The SEP holder who has made a FRAND offer confirmed by
the conciliator will increase its credibility also for future negotiations. Credibility is important as
evidenced by this example: The WIPO Centre has seen one party make systemic use of WIPO
Mediation – filing numerous requests for WIPO Mediation as one way of demonstrating its
willingness to take a licence.185
Moreover, the conciliation would be more acceptable than arbitration to the parties (where a decision
is final) as a conciliator only issues a non-binding suggestion and report on FRAND terms and
conditions. The conciliation report will contain a factual summary of the process before the
conciliator and include information whether the SEP holder has made a FRAND offer and whether
the implementer has responded to that offer. This summary will de facto also cover the information
needed to assess whether the SEP holder engaged in the Huawei v. ZTE process with an implementer.
The conciliator’s suggested FRAND royalty could also be used by both SEP holders and
implementers to determine the appropriate amount of the security that the implementer needs to
provide under the Huawei v ZTE process. The non-confidential report (or notice of termination of the
181
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021,
https://ec.europa.eu/docsroom/documents/45217.
182
Out of 900 mediation, arbitration and expert determination cases during 2012-2021 concerning patents, copyrights,
trademarks.
183
Public consultation – responses and comments to questions 53 and 54.
184
See SME survey in Annex 9.
185
https://www.wipo.int/wipo_magazine/en/2022/04/article_0007.html?utm_source=WIPO+Newsletters&utm_campaig
n=a4eeca0fb5-DIS_MAG_EN_201222&utm_medium=email&utm_term=0_-a4eeca0fb5-%5BLIST_EMAIL_ID%5D.
43
procedure) could also be used before customs to support a request for customs action with regard to
goods infringing SEPs.186
Although the conduct or commencement of the conciliation will be obligatory before initiating a
court action, it will be up to the parties to decide on their level of engagement (e.g. participation in
meetings, providing supporting documents on request by the conciliator). In an extreme case, the
conciliator could draw up an opinion based on input from just one party if the other decides to
‘boycott’ the process. This is why it is important that a conciliator has access to the SEP register, the
databases of the Competence Centre and confidential reports from other conciliations, so (s)he can
receive information on the concerned patents in any event.187
During the webinar series on SEP enforcement, it was underlined that parties prefer to agree on
FRAND terms rather than having a third independent party determining the FRAND rate for them,
even if it would be not binding. Furthermore, the participants in the webinar noted the need of
specialised knowledge for FRAND determinations.
Mandatory conciliation should benefit both SEP holders and implementers in reaching a licence
agreement faster without costly court proceedings. Since the procedure would be limited to maximum
nine months, it would expedite the negotiation process thus making delaying tactics on either side
less attractive. This should be especially useful for SMEs (according to WIPO in 94% of SEP ADR
at least one party was an SME).188
On the other hand, the procedure may potentially lead to delays in licence payments. However, past
payments are either resolved in the license agreement or the SEP holder can request damages for past
use before the court, albeit depending on national laws requiring commencements of national
proceedings before Member States’ courts of choice.
An indicative hourly wage of a conciliator is about EUR 500.189
We estimate that a conciliator would
spend on average around 40 hours per case (e.g. as a conciliator may need to come to a conclusion
and draw up a report in case the parties do not settle). With estimated around 70 conciliation cases
per year (35 based on the current number of FRAND related court cases in the EU and another 35
not related to court proceedings), the cost of back-office support to conciliation is estimated at EUR
800 per case. Thus, the total cost of a conciliation should amount to around EUR 20 800. This is eight
186
If a note of termination of conciliation were required to be submitted to customs to effectively request customs' action
with regard to SEPs, this would require:
1. An amendment of the Implementing Regulation 1352/2013 establishing the forms provided for in Regulation (EU)
No. 608/2013 of the European Parliament and of the Council concerning customs enforcement of intellectual property
rights (OJ L 341, 18.12.2013, p. 10);
2. IT developments in the following IT systems: - anti-Counterfeit and anti-Piracy Information System (COPIS) used to
process, store and manage information from applications for action (AFAs) and decisions between right holders, the
Commission, the European Union Intellectual Property Office (EUIPO) and customs authorities of the Member States; -
IP Enforcement Portal (IPEP); national IT systems of DE, ES, IT, PL, CZ, NL.
3. Additionally, the EU anti-Counterfeit and anti-Piracy Information System COPIS (established by Regulation
608/2013) used for the processing and management of all AFAs would need to be adapted accordingly, as well as the
national systems linked to COPIS used by certain Member States. The EUIPO database IPEP (Intellectual Property
Enforcement Portal), which is one of the trader portals offered to right holders to lodge electronic AFAs would also be
impacted and would need to be adapted accordingly.
187
Conciliation could also be introduced without SEP register, in that case however the conciliator could end up with no
information to draw an opinion in case one party is unwilling to provide documents.
188
Source: WIPO Arbitration and Mediation Center.
189
“The WIPO Center often sees mediations where a mediator spends approximately 15 hours on a case. With indicative
mediator fee rates between USD 300 and USD 600 per hour split between the parties”,
https://www.wipo.int/wipo_magazine/en/2022/04/article_0007.html?utm_source=WIPO+Newsletters&utm_campaign=
a4eeca0fb5-DIS_MAG_EN_201222&utm_medium=email&utm_term=0_-a4eeca0fb5-%5BLIST_EMAIL_ID%5D.
44
times lower that the average SEP court cost in the EU of EUR 170 000.190
Based on WIPO experience
(70% settlement rate) we estimate that up to 24 court cases could be avoided. Additionally parties
could receive help on FRAND terms determination in at least 35 cases per year. Altogether the
additional benefits of this option are conservatively estimated at EUR 6 million and could increase
further as the mechanism becomes more known and used.
This Option bears similarities with the Expert Group Proposals 68 and 70 on establishing an
independent board of experts for determining FRAND royalty upon request and a specialised
mediation institute for FRAND licensing disputes.191
Proposal 68 was supported with 4.5 out of 5
stars and Proposal 70 was supported with 4 out of 5 stars by the experts.
6.4. PO4: Aggregate royalty for SEPs
Aggregate royalty can be considered a total potential cost of licensing a standard.192
Economically,
an aggregate royalty makes sense because implementers value the standard as a whole, not a
collection of inventions represented by an incomplete portfolio of SEPs. It may also help to overcome
problems of royalty stacking, a modern version of Cournot’s (1838)193
well-known problem that the
independent pricing of complementary goods – here: licenses to different SEP portfolios on the same
standard – leads to excessive prices, above those that a single party offering all those goods jointly
would charge. As Contreras (2017)194
notes, “[t]op-down approaches [i.e. aggregate royalty] avoid
many drawbacks associated with bottom-up approaches in which royalties for individual SEPs are
assessed, often in an inconsistent and piecemeal manner, without regard for the other SEPs that cover
the standard.”
70% of all respondents to the public consultation and 100% of implementers considered that it is
important to know the aggregate royalty. Views of SEP holders were mixed, with more (40%)
considering it not important, than those who thought it was (20%). Moreover, 70% of all, 93% of
implementers, and 25% of SEP holders considered it important to have a transparent process for
aggregate royalty determination (38% of SEP holders disagreed). 195
Knowing it for different applications would simplify cost planning for SEP implementers and
assessment, if their business model is profitable. As Henkel (2022, Section 4.1) shows, these are very
real concerns for SMEs implementing SEPs: “During the development of an IoT device, it is
unknown which demands for SEP royalties will surface later, so innovators cannot make reliable cost
calculations.” For SEP holders it will allow to decide if they wish to contribute their technology to a
standardisation process and help estimate potential future revenues.
Under this option standard contributors may announce jointly an aggregate royalty to the Competence
Centre. Finding an agreement among contributors might however be a challenging task due to often
opposing interests of contributors. Some may also be implementers and thus are likely to favour
lower royalties, while others are “pure” SEP holders whose primary source of income is licensing
190
Please note this is an average court cost, but there are court cases where one party costs can approach millions of euros
(See example in Annex 2).
191
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021,
https://ec.europa.eu/docsroom/documents/45217.
192
An implementer is unlikely to pay the full aggregate rate since not all SEP holders will be seeking royalties, or it may
enter into cross-licenses.
193
Cournot, A. A., Recherches sur les principes mathématiques de la théorie des richesses, L. Hachette, 1838,
https://gallica.bnf.fr/ark:/12148/bpt6k6117257c.texteImage.
194
Contreras, J. L., ‘Aggregated royalties for top-down FRAND determinations: revisiting “joint negotiation”’, The
Antitrust Bulletin, 2017, Vol. 62, Issue 4, pp. 690-709, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3051502.
195
See Annex 9, Q44 and Q45 respectively.
45
and who are interested in higher aggregate royalty levels. To help contributors in reaching an
agreement, the Competence Centre upon request may appoint a conciliator to facilitate their
discussions. Finally once royalty is set, it will not be for ever, there will be a mechanism to adjust the
aggregate royalty to reflect changing market conditions (e.g. the fact that a standard ages with time).
The aggregate royalty could be irrespective of the level of licensing196
, and it should be possible to
pass the cost of the licence downstream without a mark-up (the commission usually charged by the
various levels in the value chain on top of the price). As per PO1 guidelines, the industry is expected
to figure out the appropriate level of licensing to avoid the so called “double dipping” (collecting
royalties twice for the same SEPs).
From the point of view of an implementer, one risk could be that the aggregate royalty announced by
the standard contributors is too high. SEP holders might set it high strategically in order to have room
for negotiation.
SEP holders publish maximum expected royalties in order to be able to negotiate. Stasik (2010)
found that the sum of individually published handset royalty rates for 4G amounted to 14.8% of
the sales price – representing only 60% of declared SEPs.
This may, however, dissuade implementers from taking a licence, which should have a self-limiting
effect on SEP holders, as wide implementation of the standard is of interest to the SEP owners.
Nevertheless, in order to cater for such situations, a group composed of standard contributors and/or
implementers may ask the Competence Centre for a non-binding expert opinion on the aggregate
royalty. The process will be inclusive where any interested party would be able to submit its views.
We estimate that around three such requests will be coming each year and that the cost of delivering
one expert opinion (consisting of approximately 240 working hours of experts’ time and Centre’s
back-office support) is estimated at around EUR 135 800. The costs would be shared by requesting
parties.
Besides predictability, this option is also expected to facilitate SEP license negotiations. Asked about
problems in negotiating with SEP owners, 90% of respondents to the SME survey rated a fair price
for SEPs as either a “very important” or an “important” issue.197
In fact, SEP licensing negotiations
are mainly about royalty rates. By combining an aggregate royalty with a SEP owner’s share in all
essential patents for a standard (from PO2), one obtains a proxy (albeit imperfect) of a royalty level
to be expected. This could establish a reference point to help negotiating parties in reaching an
agreement. It might be especially useful for smaller and SME implementers (who have limited
resources to conduct own research or gather evidence), but also for (smaller) SEP holders who could
underpin their FRAND offer with additional, publicly available evidence.
With an estimated 575 SEP licensing negotiations taking place in the EU each year, we
conservatively estimate the value of publicly known aggregate royalty rates at approximately
EUR25.3 million per year.
In case licensing negotiations fail, an aggregate royalty would also facilitate the work of conciliators
and judges by providing a clear reference maximum price for using a standard. This will not prejudice
the use of other valuation methods in bilateral FRAND determination processes. For instance, during
any conciliation process, the conciliator may choose the methodology (s)he uses to propose a FRAND
rate and may also choose to look at the aggregate royalty. The non-confidential version of the report
will be published and will inform any future discussion on an aggregate royalty.
196
68% of the respondents to the public consultation consider that the fair and reasonable terms should not depend on the
level of licensing – see question 40.
197
See Annex A8.2, Q12.
46
The publication of aggregate royalties is not expected to impact on innovation by SEP owners, as
exemplified by the following research:
In 2007, the patent policy of VITA198
(SEP on critical embedded computing architectures) was
revised to require ex-ante disclosure of maximum patent royalty rates. Contreras (2011) finds that
this policy change had no detrimental effect on the output and participation at VITA. As measures
of output and participation, Contreras looked at the number of disclosures, the number of new
standards-development activities that were initiated, the number of standards that were approved,
the average time between the introduction of a draft standard and its final approval, the number of
members participating in VITA, and the number of citations for newly approved standards.199
For a more developed analysis of economic rationale for an aggregate royalty please consult Annex
A7.2.
This Option bears similarities with SEP Expert Group Proposals 38 and 42 on encouraging SEP
holders to announce ex-ante most restrictive licensing terms and determine a reasonable aggregate
royalty.200
Both proposals received support with 4 out of 5 stars by the experts.
6.5. PO5: SEP clearing house
This option depends on an aggregate royalty established above, and adds a clearing house facility, or
one-stop-shop for implementers to acquire SEP licenses with a single (annual) payment and without
any negotiations.
PO5 would be most helpful for mid-caps and SMEs developing solutions in the IoT as it will enable
them to simply deposit the aggregate royalty in an escrow account and then just sign standard deals
with SEP holders.201
One third of respondents to the SME survey quoted too much efforts to enter
license agreements with all SEP holders as a reason for not obtaining a license; and around 80%
complained they did not have sufficient resources to negotiate with SEP holders.202
However, any
implementer may always choose not to use the clearing house and negotiate with SEP holders
bilaterally instead, to receive better conditions.
The initial escrow account would be based on the estimated volume and value of sales by the
implementers. Once SEP holders are informed by the Centre, those that are interested in a licence
will reach out to the implementers concerned to conclude a licensing agreement on standard terms.
This agreement will detail the sales and the monitoring mechanism and will regulate the relationship
between the SEP holder and the implementers. The amount allocated to SEP holders that chose not
to conclude a licensing agreement will be returned to the implementer within one year of the deposit.
Given the fragmentation of the IoT and the large number of potential licensees this option should
also benefit SEP holders. In particular, those SEP holders with small portfolios (e.g. SMEs) who have
limited resources to engage in bilateral negotiations with many (or larger) implementers. The clearing
198
VITA is accredited as an American National Standards Institute (ANSI) developer. Website: VITA - Home.
199
CRA, De Coninck, R., von Muellern, C., Zimmermann, S., and Mueller, K., SEP Royalties, Investment Incentives and
Total Welfare, 2022, p. 16, quoting: Contreras, J., An Empirical Study of the Effects of Ex-ante Licensing Disclosure
Policies on the Development of Voluntary Technical Standards, National Institute of Standards and Technology, GCR
11-934, 2011, https://www.nist.gov/system/files/nistgcr_11_934_empircalstudyofeffectsexantelicensing2011_0.pdf.
200
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021,
https://ec.europa.eu/docsroom/documents/45217.
201
It should be noted that 75% of all, 73% of implementers and 88% of SEP holders indicated that “Providing a security
at a fair and reasonable amount” is a relevant behaviour of an implementer, which indicates willingness to take a license.
See Annex 9, Q49.
202
See Annex A8.3: Q8 (9 out of 26 answers) and Q12 (18 out of 22 answers) respectively.
47
house would allow them to reach a wider audience of implementers at limited cost. All money
transfers will be dealt with by the Competence Centre.
There are two main challenges regarding this option. First, the aggregate royalty from PO4 would
have to become binding on the parties. Consequently, a mechanism should be established to allow
both updates and challenges of this royalty (e.g. in case it is set at too high level, or when the standard
ages). However, changes to the aggregate royalty levels should not occur too often, as this would be
rather disruptive to the licensing process, especially as regards predictability.
Second, the problem is how to incentivise SEP holders to agree on the allocation of the aggregate
royalty between them as they will be able to access escrow deposits only after doing so. In practice,
it may not be possible for the SEP holders to agree on allocation methods because not all SEP holders
license their SEPs for remuneration, and they may have diverging commercial interests. For some
licensing is a business model, for others this is just a gateway for building business relationships. To
get to an agreement SEP holders may use services of Centre’s facilitator. We estimate that on average
there would be three such request per two years. Remuneration of facilitator(s) is estimated at EUR
120 000 per case and will be borne by the requesting parties. In any case however, it is likely that at
least some SEP holders will be dissatisfied either with the level of binding royalty or allocation
method. This can result in numerous legal challenges against both the Commission and the
Competence Centre.
Nevertheless, if the allocation is agreed upon, the transfer of royalties should be automatic without
the need for individual negotiations. We estimate that the majority of implementers will want to use
the clearing house for at least some of the standards they use. We estimate that this option has the
potential to eliminate the need for up to 500 negotiations per year, producing net benefits of up to
EUR 76 million annually. Fees for using the service and covering cost of the Centre are estimated at
just below EUR 100 per payment.203
A potential drawback of this option from the point of view of implementers is that more SEP holders
(also those who did not actively seek royalties in the past) might register to get their share of royalties.
So, it is likely that more SEP holders will decide to license their SEPs, e.g. once Avanci became
known and used by vehicle manufacturers, the number of SEP holders grew from an initial five in
2016 to around 20 in 2018).204
In practice this could mean that the implementers will pay (almost)
the full aggregate royalty. Currently not all SEP holders seek royalties, so the implementers are likely
to pay only to those who proactively request royalties. Second, it may happen that due to ease of
licensing under the new system, standards that thus far were in practice royalty free could become
royalty bearing.
This option bears similarity (but is different from) Proposal 74 from SEP Expert Group “On demand
collective licensing agencies”.205
This proposal received 2 of 5 stars support from the experts. To the
extent that it bears similarities, the objections to that proposal would apply. Those include that
mandatory patent agencies would create strong disincentives for companies to participate in standard
setting and mandatory patent agencies would result in that SEP holders only licensing their SEPs
defensively, would collect licence fees through the agency, contrary to their policy not to seek licence
fees from other users of a standard.
203
Fee based on an average number of payments per year during a ten year period, assuming that each year there’s also
payment for licenses taken in previous year(s). See Annex A7.1 for details.
204
https://en.wikipedia.org/wiki/Avanci.
205
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021,
https://ec.europa.eu/docsroom/documents/45217.
48
6.6. Common impacts
The general objectives are to ensure that end users, including small businesses and EU consumers
benefit from products based on the latest standardized technologies at reasonable prices; and to make
the EU an attractive place for innovation and standards development. Ultimately, the initiative wants
to ensure that both EU SEP holders and implementers innovate in the EU, make and sell products in
the EU and are competitive in non-EU global markets.
Specifically, the initiative aims at providing the tools for the parties to negotiate and conclude a
FRAND license agreement successfully. All options aim at facilitating SEP licence take-up in the
EU by reducing information asymmetries and redundant transaction costs. The initiative is thus likely
to balance the negotiating power between SEP holders and implementers. It should provide SEP
implementers with predictability as to their SEP exposure, allowing for proper business planning and
usage of the latest technology in the EU. It should also ensure sustainable licensing income for SEP
holders thus enabling them to continue participating in standard development. It would promote a
level playing field for SEP holders with good quality SEP portfolios.
A SEP holders has been negotiating the renewal and extension of its existing patent license
agreement with a Chinese implementer that is also a SEP holders. The Chinese company did not
accept FRAND offers and did not make a FRAND offer to the SEP holders. The Chinese company
provided very limited material on its own SEP portfolio and it sought a significantly higher
valuation, which was also inconsistent with a third-party analysis. The SEP holders offered to
engage in neutral mediation or arbitration to agree on FRAND rates, but the Chinese company
rejected those offers.
The precise impact of the options on SEP holders and on costs of implementers is difficult to predict.
As transaction costs go down (progressively with each option) it will be easier for implementers to
take a licence (options mainly reduce information asymmetry that implementers currently face) and
thus, not to infringe on patents. SEP holders would also benefit from such wider market increasing
their licensing income base.
Impact on fundamental rights
This initiative may impact the right to intellectual property of patent holders (article 17(2) of EU
Charter), if it is viewed as a restriction on the ability to enforce individual patents within a standard
for which a FRAND commitment was made, but that has not been registered. The same may apply
to the requirement to conduct a conciliation procedure before enforcing individual patents. IP rights
are not absolute rights and limitations to the exercise of these rights are 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 European Union and do not constitute, with regard to the aim pursued, a
disproportionate and intolerable interference, which infringes the very essence of the rights
guaranteed.206
In that respect, this initiative is in the public interest in that it provides uniform, open
and predictable information and outcome on SEPs for the benefit of SEP holders, implementers and
end users, at EU-wide level, and in that it aims at promoting technological innovation and the
dissemination of technology to the mutual advantage of the SEP holder and implementers.
206
Case C-44/79 Hauer of 13 December 1979, para. 32; ECJ Case C-265/87 Schräder of 11 July 1989, para. 15, and
Case C-5/88 Wachauf of 13 July 1989, paras. 17 and 18.
49
Furthermore, the rules concerning the conciliation procedure and the determination of the aggregate
royalty are aimed at improving and streamlining the process, but are not ultimately binding. 207
The initiative should also improve the conduct of business for both SEP holders and implementers,
and ultimately other businesses downstream (Article 16 of the Charter).
The initiative is also entirely consistent with the right to an effective remedy and to access to justice
(Article 47 of the Charter), as the implementer and the SEP holder fully retain that right. In case of
failure to register, the exclusion of the right to effective enforcement is limited and necessary, and
genuinely meets objectives of general interest, described above (see the first paragraph of this
Section).208
Impact on innovation
Reducing uncertainty about costs and legal exposure will have a positive effect on implementer-level
innovation. Reasonable SEP licensing costs and a reduction of negotiation delays will have a positive
impact on SEP holder innovation. Both SEP holders and implementers may experience negative
impact if a balance is not achieved in the determination of the FRAND terms.
A more sustainable standardisation system and the availability of open standards to a wider range of
implementers will have a positive effect on innovation that builds up on those standards.
SEP licensing is expected to remain a profitable business after the options considered are
implemented. For instance, the total costs (including indirect costs and excluding benefits) for SEP
holders of PO2 of EUR54 million annually account only for 0.3% of the estimated global royalty
payments on cellular standards alone (EUR 18 billion).209
Thus, incentives to innovate are likely to
continue.210
Two thirds of respondents to the public consultations considered that efficient SEP
licensing would foster innovations by implementers, including start-ups and SMEs.211
Social and environmental impacts
The options have no direct social impacts. Indirectly by facilitating take-up of new technologies they
can help in the digital transition such as e.g. smart cities, connected cars, telework, etc. More jobs
could emerge in the new technology sectors.
The options have no direct environmental impacts. They comply with the “do no significant harm”
to the environment principle. Indirectly, by facilitating application of new technologies they can help
in the green transition e.g. by contributing to a reduction of energy usage (via smart grid, smart
meters) or air pollution (e.g. connected cars avoiding traffic jams).
207
The conciliation procedure follows the conditions for mandatory dispute settlement outlined in the CJEU judgments;
Joint Cases C-317/08 to C-320/08 Alassini and Others of 18 March 2010, and Case C-75/16 Menini and Rampanelli v.
Banco Popolare Società Cooperativa of 14 June 2017, taking into account the specificities of SEP licensing.
208
Since the alternative of excluding the right to collect past royalties absent a registration or the alternative to only
require the initiation of the conciliation procedure before being able to enforce patent rights weighs less than the exclusion
of enforcement, argumentum a maiore ad minus, would also be compliant with fundamental rights.
209
CRA converted to EUR using EUR1:USD1 rate, see CRA, Régibeau, P., De Coninck, R. and Zenger, H.,
Transparency, Predictability, and Efficiency of SSO-based Standardization and SEP Licensing: A Report for the
European Commission, 2016, Section 3.2, p. 57, https://ec.europa.eu/docsroom/documents/48794?locale=en.
210
- Baron, J., Essentiality Checks for Potential SEPs – Framework for Assessing the Impact of Different Policy
Options, European Commission, DG GROW, 2023: “Essentiality checks may accentuate the difference between the
returns to essential and non-essential patents; thus increasing SEP holders’ efforts to produce truly essential patents. In
the theoretical analysis of Wipusanawan and Schuett (2022), increasing the differential between the value of essential
and non-essential patents increases potential SEP owners’ incentives to contribute to standards development”.
211
See Annex 9, Q64.
50
Two thirds of respondents to the public consultation considered that efficient SEP licensing would i)
increase employment and keep a high level of competence in the EU and ii) foster the EU’s transition
to the green economy.212
Impact on SEP holders’ royalty income and availability and cost of products to customers
Many implementers currently use standards without having a license. Thus, the effect on availability
of SEP embedding products is unknown. We expect that lower transaction costs will promote license-
based applications and more implementers will take a license. It may be just a shift from unlicensed
products to licensed products, or real increase in technology take-up resulting in more SEP
embedding products on the market (also due to expected increase in IoT applications).
The impact on SEP prices (royalties paid by implementers) is also unknown (see Annex A7.1).
Announcements of aggregate royalties and FRAND determination processes may (but do not have
to) contribute to lowering the royalties paid by implementers.
Consequently, we have two effects working in different directions: i) potentially more firms taking a
license (increasing implementers costs, and income of SEP holders) and ii) potentially lower royalties
paid (decreasing implementers cost and income of SEP holders). Finally, the impact on prices for
customers will depend on the competition on a given product market. Any change in royalties paid
by producers may be internalized by a firm or passed on to final customers.
Impact on national patent proceedings
The additional information on essentiality shares, on aggregate royalty as well as information from
conciliator reports are likely to facilitate judgements in SEP related cases. Moreover, mandatory pre-
trial conciliations are expected to reduce the number of SEP litigation by up to 70%. The benefits for
the national judiciary are estimated at EUR 2.8 million in terms of access to information, and at EUR
4 million in terms of reduction of the number of court cases. In the analysis these benefits were
attributed to SEP holders and implementers.
Impact on patent offices
Options starting from PO2 may create additional demand for European patents, in case the share of
SEPs in the register will become a reference point for aggregate royalty allocation. Especially larger
stakeholders may take advantage of the fact that there is certain probability that a non-essential patent
will be considered essential by evaluators.213
This effect however is likely to diminish as evaluators
gain experience. Thus, an increasing number of SEPs in the register may improve SEP holders
position vis-à-vis other holders. We estimate that in case this effect occurs, it may result in additional
income to EPO/national patent offices of around EUR 29 million annually (in case PO2 sub-option
ii) is chosen).
Impact on SEP patent pools
All options will have positive impacts on patent pool formation and patent pool licensing.
First, all patent pools conduct essentiality checks for some or all patents included in the pool. In the
future, SEP holders may include in the pool SEPs that were found essential under PO2.214
Merges
and Mattioli (2016) e.g. estimate that the cost of these essentiality checks related to the MPEG Audio
212
See Annex 9, Q65 and Q66 respectively.
213
JRC found through experiment that the probability of marking a non-essential patent as essential stands at 38%. The
study noted however, that errors in assessment are likely to diminish as assessors gain experience, see European
Commission, Joint Research Centre, Bekkers, R., Henkel, J., Tur, E. M., et al., Pilot study for essentiality assessment of
standard essential patents, Publications Office of the European Union, 2020, https://data.europa.eu/doi/10.2760/68906.
214
It should be noted however that pools do not license just the evaluated patents – they license the licensors’ entire
portfolios of relevant SEPs (without having identified what or how many there are), but uses the evaluated patents as an
proxy for showing licensees the composition of the licensor portfolios and the pool portfolio as a whole.
51
pool represented USD 5 250 000, approximately two thirds of the total set-up cost of this patent pool.
Patent pools may continue to do their own essentiality checks.
Second, the requirement to announce an aggregate royalty is likely to promote patent pool formation
as independent patent pool administrators have significant experience in pool formation. They also
have internal revenue allocation mechanisms, which may increase transparency with regard to the
share of the various SEP holders and facilitate their business planning.
Finally, if a patent pool comprising all SEP holders relating to a given standard would be formed, it
would replace the use of PO5.
Impact on commercial database providers
Providers of commercial solutions include companies such as LexisNexis Patentsight, Clarivate
Derwent Innovation, Questel Orbit, Patsnap, Minesoft Patbase and many others. Recently such
companies have integrated SEP declaration information in their databases; i.e. patent datasets include
a flag whether or not a patent has been declared. Some solution providers such as IPlytics,
PatentCloud Inquartik, Patently or Unified Patents have created designated patent declaration
analytics solutions that allow searching across the full text of patent and standard documents.215
These providers may have access to the register, use it in their commercial offers and build services
on top of that data. There may be new users and thus enhanced competition. Providers that are
currently focused on collecting and curating the currently missing or imperfect data available are
likely to lose that part of their business. The companies above, however, all offer additional services.
While users may no longer need to purchase commercially produced reports on the SEP landscape,
they may benefit from the price decrease and quality increase in new analytical commercial reports
induced by the free availability of the Competence Centre’s information on essentiality rates or
aggregate royalty.
Digital impacts
The SEP database may be used for research purposes, and/or to train machine learning (ML)
algorithms to recognize “true” SEPs among larger populations of potential SEPs. These methods are
expected to significantly improve over the next years, and the policy options may further contribute
to this evolution. The causal effects of improved ML approaches to essentiality determinations are
complex, but potentially significant. Among others, it may limit significantly the costs of essentiality
checks.
7. HOW DO THE OPTIONS COMPARE?
Guidelines and support measures created under PO1 will support SEP license negotiations and
improve the SEP licensing environment mainly by increasing transparency and reducing some costs.
Their impact, however, may be limited. The assistance package for SMEs can be seen as the biggest
advantage of this option. As explained under PO1, much of the public information about pricing is
under non-disclosure agreements. A guidance is not capable of promoting more transparency in this
respect. Any SEP landscape study will suffer from natural limitations such as missing data and over-
declaration, and the use of different methodologies to produce them, which may lead to different
results. WIPO mediation will not address the key concern about transparency of the results of the
mediation that are to benefit future comparable situations. In order to offer valuable information to
interested parties, the Competence Centre would need to gather its own quality data through unbiased
and transparent processes. This option is unable to achieve this.
215
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 30, Section 3.2.1.3. Commercial patent databases.
52
By making registration in the EU register mandatory, and enforcement and/or collection of past
royalties conditional on registration, PO2 will create transparency about the SEP landscape
(improving on objective 1). In addition, regular essentiality checks will guarantee the quality of the
register. Essentiality checks will also give an indication on the number of truly essential patents per
SEP holder. With time this might lead to creating a register of ‘truly’ essential patents. Implementers
will have a (comparative) proxy of the shares that each SEP holder has in the respective technology.
There will be benefits for both the SEP holders and the implementers. The SEP holders that register
will demonstrate the legitimacy of their claims and see reduction of some costs related to the technical
discussions plus shorter negotiation periods. The implementers will be able to see who the SEP
holders are who may have legitimate claims on SEPs, what the potential strength of those claims is
and how those may impact on its business.216
They will economise on their own essentiality
assessments which should aid in negotiations – improvement on objective 2. Nevertheless,
implementers will still have to negotiate licence and royalties individually with each SEP holder with,
in most cases, no aggregate royalty available as a reference. PO2 also includes all impacts of PO1.
By adding an obligatory pre-litigation conciliation, PO3 is expected to speed up dispute resolution
and lower its cost as compared to court proceedings, thus significantly improving on objective 3. A
conciliator would also propose FRAND conditions including royalty, thus further helping especially
implementers and improving on objective 2.
PO4 is going to solve one of the key issues in SEP licensing negotiations by adding an aggregate
royalty to the SEP register and providing a reference price for using a standard – thus significantly
improving on objective 2. It should speed up license negotiations and dispute resolution, thus further
improving on objective 3. It will especially help smaller SEP implementers, facilitate production cost
planning and profit calculations. It will also restrict room for exploitation by SEP holders by setting
reasonable maximum royalty rates.
By creating a one-stop-shop for obtaining SEP licences, PO5 eliminates the business uncertainty
about the aggregate royalty. It gives the opportunity to implementers to sign licence deals with many
SEP holders. For SEP holders it gives clarity about their share of the aggregate royalty and facilitates
licensing with implementers who choose to use the one-stop-shop. This option will reduce the
licensing costs in a similar way as for pools. Given that all SEP holders will be covered by this option,
it would represent an improvement in comparison to a pool. This option radically improves on
objective 2 and could eliminate the majority of disputes, thus improving on objective 3. However,
the SEP burden on implementers might increase as transaction costs get very low, more SEP holders
than currently might want to participate in SEP licensing (including those that were not licensing thus
far, or even those that had a royalty free policy might change to royalty bearing licensing). PO5 would
eliminate the issue of licensing in the value chain as any implementer may use the one-stop-shop and
its customers will be licensed. Finally, for PO5 to work, SEP holders have to be incentivised to agree
on a mechanism for royalty allocation. This is a very complex exercise because of the many diverging
interests of SEP holders (those whose main business is using the standard, those whose main business
is SEP licensing and those who do both). It is very likely that they will fail to agree, and the issue
will be referred to the FRAND determination process. This option has an impact on the freedom to
conduct business.
216
As with time new SEP holders might register, it may be necessary to check the register regularly to have up-to-date
picture on the SEP holder landscape.
53
Table 2: Comparison of policy options against the effectiveness and efficiency criteria
Options Effectiveness Cost efficiency (EUR)
only quantifiable costs and benefits
for all stakeholders
(see next table for details)
Provide information on SEPs
ownership and essentiality
Provide clarity on FRAND royalty Facilitate dispute resolution
Baseline 0 0 0 0
PO1 Voluntary guidance
(0/+) clarification of key issues in SEP negotiations in guidelines, effectiveness
depending on market uptake.
(+) Competence Centre landscape studies, collection of case-law and rules
worldwide, and help/training to SME implementers.
(0/+) promotion of WIPO ADR tools. Net effect (+)5.3 million
Benefits 5.9 million
Cost 0.6 million
PO2: SEP register + essentiality check
(on up to 100 patents + random
sample)
(++) Clarity on which SEPs can be
enforced and (optionally: which
damages for past use can be collected)
(those in the register only), who owns
them and how many essential patents
there are per SEP holder.
(+) as in PO1 + proxy of SEP shares
of each SEP holder based on patent
count
(0/+) as above + register is another
source of evidence in WIPO ADR.
Net effect (-)12.3 million
Benefits 41.5 million
Cost: 53.8 million
PO3: Register and conciliation
(++) as in PO2 + conciliator’s opinion
on royalty facilitates negotiation and
conclusion of SEP licence (potentially
global).
(+) Mandatory conciliation
(optionally: commencement of
procedure) should limit costly court
cases by up to 70%
Additional evidence for SEP holders
in case of an application for customs’
action.
Net effect (+) 6 million
Benefits 7.5 million
Cost 1.5 million
PO4: Aggregate royalty for SEP
(+++) as in PO3 + clarity on total SEP
cost (aggregate royalty).
(++) as in PO3 but conciliation/licence
negotiations should be faster when
aggregate royalty is available.
Net effect (+) 24.9 million
Benefits 25.3 million
Cost 0.4 million
PO5: SEP clearing house
(++++) as in PO4 + clarity on split of
aggregate royalty between SEP
holders.
(--) implementers may face higher
SEP cost if more SEP holders than
currently decide to license for royalty.
(--) SEP holders could likely disagree
with the mandatory aggregate royalty
and apportionment method
(+++) can substantially reduce
disputes, otherwise as in PO4.
Net effect (+)75.2 million
Benefits 75.6 million
Cost 0.4 million
Note: Only additional quantifiable costs and benefits of each option presented. Options build on each other thus for instance impact of PO3 consist of impact of PO1, PO2 and PO3.
Quantifications are only indicative based on several assumptions. Not all impacts are quantifiable, notably impact on SEP licensing revenue. See annex A7.1 for details.
54
Table 3: Comparison of the impacts of policy options on stakeholders (including quantifiable costs and benefits)
SEP implementers SEP holders Courts / lawyers Patent Offices (PO) and commercial
data providers
No. affected Around 230 EU based implementers and around
190 non-EU based implementers with
subsidiaries in the EU
Altogether around 260 with more than 10 SEP families.
Around 31 from the EU (owning 15% of potential SEPs)
Around 35 FRAND related court
cases per year
EPO, 27 NPOs and about 20 data
providers (including 4 main patent
and 4 main SEP specific)
Baseline 0 0 0 0
PO 1: (+) Guidelines will provide definition and
interpretation on issues posing most problems in
SEP negotiations – though they remain
voluntary
Competence Centre will do landscape studies on
SEPs, have a repository of cases, and rules
worldwide that should facilitate negotiations
SMEs will benefit from free advice
(+) Guidelines could smoothen negotiations
(+) Access to landscaping studies
(-) Implementers due to information/resources from the
Competence Centre can become more assertive
negotiators
(0/+) guidelines, database of case
law and landscape studies can be
used in court judgements;
(0) No impact on patent offices
(0/+) Case law database of the centre
and produced studies are not
expected to impact on database
providers but can be another free
source of analysed information.
Costs (€) 0 (0.6 million, cost covered by fees of PO2) 0 0 0
Benefits (€) 3.4 million 2.5 million 0 (benefit of 2.4 million)* 0
Net (€) 3.4 million 2.5 million 0 (2.4 million)* 0
PO 2:
Sub-option
ii) up to 50
checks +
sampling
(++) clarity on which SEP holders may enforce
and (optionally only) collect royalties for past
damages in the EU and share of essential patents
they have.
Likely to reduce cost of internal investigations
of each implementer engaged in licence
negotiations; provides indication on the share of
SEP royalty based on patent count, but also gives
an indication of value as the register will create
transparency as to how the patent relates to the
standard.
(0,-) SEP holder risks that (some of) its patents will be
assessed as non-essential to a standard. Patents in the
register may be subject to invalidation procedures which
might lead to weakening of SEP holder’s patent portfolio.
(+) SEP holder will gain credibility that it has essential
patents which should facilitate approaching implementers
for a licence.
(+) SEP holders with a higher essentiality rate from their
registered SEPs will improve their negotiating position in
all SEP negotiations (also cross-licensing)
(+) information on registration and
essentiality should facilitate SEP
judgements
(0,-) increased number of patent
invalidation claims
(0,-) Patent Offices may face
increased number opposition
procedures
(+) providers may have access to the
register, use it in their commercial
offers and build services on top of
that data. There may be new users
and thus enhanced competition.
(-) providers that are currently
focused on collecting and curating
the currently missing or imperfect
data available are likely to lose that
part of their business.
Costs (€) 0.6 million (access fee: €1 700 for large and
€850 for SME)
53.2 million (including 38 million of indirect costs) (filing
fee 100 per patent, essentiality check 5 000 per patent)
0 0
Benefits (€) 6.1 million 6.4 million 0 (benefit of 0.4 million)* 29 million in additional patent fees
Net (€) 5.5million -46.8 million 0 (0.4 million) 29 million
PO 3: (+++) as in PO2 + up to 70% of SEP conflicts
could be solved without court involvement (due
to mandatory pre-trial conciliation).
Especially smaller implementers could benefit
from help conciliator provides in negotiations
with SEP holder.
(++) as in PO2 + up to 70% of SEP conflicts could be
solved without court involvement (due to mandatory pre-
trial conciliation [optionally commencement of
procedure])
(++) Reduction of SEP court cases
by up to 70%.
(+) In case of a trial, courts can use
the non-confidential report of the
conciliator (on e.g. FRAND rate
assessment) in SEP judgements.
(0) No impact on patent offices
(+) Providers may re-use public
outcomes of conciliation procedures
55
SEP implementers SEP holders Courts / lawyers Patent Offices (PO) and commercial
data providers
(+) Conciliation report would be used to support an
application for customs’ action with regard to goods
suspected of infringing SEPs.
(-) Obligatory conciliation [optionally commencement of
procedure] might delay SEP holder’s going to court.
The court can also use the
confidential report, if the parties
agree.
Costs (€) 0.7 million 0.7 million 0 0
Benefits (€) 3.7 million 3.7 million 0 (4 million)* 0
Net (€) 3 million 3 million 0 0
PO 4: (++++) as in PO3 + Implementers will know
maximum price of a standard (aggregate royalty)
(0/-) Risk that aggregate royalty announced will
be too high,
(+) mitigated by possibility to request an expert
opinion, with resulting aggregate royalty
published in the register
(0/-) Risk that each SEP holder approaching an
implementer will demand a bulk share of the
aggregate royalty, which might increase need for
conciliations/trials
as in PO3 but
(-) Freedom to negotiate SEP royalty will be reduced by
the announced maximum SEP royalty. Implementers are
likely to try to negotiate price down
(+) SEP holder will still be able to claim it has the most
important patents and should get the largest chunk of the
aggregate royalty
(+) Depending on the mechanism by which the aggregate
royalty is set, the aggregate royalty may in the end be
higher than under the current system.
(-) potential dissatisfaction with the aggregate royalty set
might trigger more conciliation requests
(+) Courts can benefit from the
publicly announced aggregate
royalty
(0) No impact on patent offices
(+) Providers may use the data to
offer additional solutions to
customers.
Costs (€) 0.2 million 0.2 million 0 0
Benefits (€) 12.7 million 12.7 million 0 0
Net (€) 12.5 million 12.5 million 0 0
PO 5: (++++) as in PO3 +
+ One stop shop will allow taking a licence
without negotiating with individual SEP holders
+ any implementer can take a licence regardless
of its level in the value chain
(0/-) Risk that aggregate royalty announced will
be too high.
(--) Risk that more SEP holder holders will join
“public pool” and seek royalties, risk that royalty
free standards will become royalty bearing
(+) Potential for smooth licensing without negotiations or
disputes, i.e. increase of licensing base
(-) potential disagreements on aggregate royalty allocation
method
(-) In case negotiations take place, impacts as in PO3 but
freedom to conduct business limited by published
aggregate royalty and allocation shares
(+) Potential to reduce most of
SEP court cases.
(+) Courts can benefit royalty
allocation between SEP holders in
addition to the benefits listed
under the previous POs.
(-) SEP holders may challenge the
allocation method before
conciliators
(0) No impact
Costs (€) 0.3 million 0.2 million 0 0
Benefits (€) 37.8 million 37.8 million 0 0
Net (€) 37.5 million 37.6 million 0 0
* added in equal shares to benefits of SEP implementers and holders
Note: Only additional costs and benefits of each option presented. Options build on each other thus for instance impact of PO3 consist of impact of PO1, PO2 and PO3.
Quantifications are only indicative based on several assumptions. Not all impacts are quantifiable, notably impact on SEP licensing revenue. See annex A7.1 for details.
56
7.1. Compliance with the proportionality principle
None of the options goes beyond what is necessary to achieve the identified objectives. The options
are characterized by progressively increasing market intervention, which is justified to balance the
distorted balance of power and information asymmetry, and to reduce unnecessarily high transaction
costs in licensing negotiations between SEP holders and implementers, especially with smaller
(including SMEs) implementers and ensure that the principle of FRAND licensing is implemented.
7.2. Coherence with other EU legislation
The options are coherent with the application of EU competition policy as regards the enforcement
of the FRAND obligation arising from Article 102 TFEU. Other instruments in the area of
enforcement of intellectual property rights are not impacted by this initiative.
Possible legal instruments for implementing the policy options are in case of PO1 an EU
recommendation for setting the guidelines and a regulation to create the Competence Centre (e.g.
adding new tasks to the EUIPO). In case of PO2 to PO5, an EU regulation would be required,
supplemented by delegated or implementing acts (e.g. establishing the methodology for essentiality
checks, criteria for essentiality assessors, criteria for aggregate royalty determination, rules for
conciliation).
7.3. Coherence with international obligations (WTO rights)
Certain proposed limitations on the rights of a SEP holder, including requirements to (i) register its
patents in a designated register, and to (ii) conduct a specified FRAND determination process
(conciliation) in order to be able to enforce their patents and/or collect FRAND royalties for the past,
could be considered a legitimate limited exception as stipulated in Article 30 TRIPS to the exclusive
rights conferred on SEP holders under Article 28 TRIPS (a more detailed assessment is provided in
Annex 8). 217
There is only limited guidance on Article 30 TRIPS, which on the one hand seems to
allow only a narrow curtailment of the legal rights of a patent holder, but on the other hand suggests
that public interest objectives stated in Articles 7 and 8(1) TRIPS, are legitimate objectives permitting
encumbrance on the use of intellectual property.218
The temporary exclusion of the right to effective enforcement of exclusive rights may be considered
to be limited. The inclusion of a patented technology in a standard gives the SEP holder dominant
market power over an implementer of the standard, as they cannot design their products around SEPs
because the technology is essential for implementing the standard. SEPs holders benefit from the
adoption of the standard and therefore usually tolerate the infringement of their patents to ensure the
standard is widely used in products. When SEP holders commit to FRAND licences in order to
promote adoption of the standard, their objective is not to stop the sale of infringing products but to
collect royalties from such sales. The exceptions to the exclusive rights of SEP holders are thus
consistent with the objectives of the TRIPs agreement to promote technological innovation and the
dissemination of technology to the mutual advantage of the SEP holder and the user of the technology
(Article 7). It would also be consistent with its principles of preventing the abuse of intellectual
property rights and adopting measures for public interest reasons (Article 8). 219
217
The registration of patents in a designated register could also qualify as a procedure concerning the maintenance of
intellectual property rights under Article 62 of the TRIPS Agreement.
218
The detailed assessment of the permissibility of the exceptions under Article 30 of the TRIPS Agreement and the
interpretations by WTO adjudicating bodies is set out in Annex 8 WTO/TRIPS compatibility.
219
The temporary exclusion of the right to effective enforcement also reflects the FRAND commitments of the SEP
holders that involves a period of negotiation with potential licensees during which it is premature for the SEP holders to
launch enforcement procedures.
57
The exception to the exclusive right would not conflict with the normal exploitation of the patent.
The normal exploitation of the patent in the context of standard-compliant products is to be able to
collect FRAND royalties. Thus, exploitation rights should be more strictly defined or limited because
of concerns regarding potential restrictions to fair competition and discrimination.
Furthermore, the legitimate interests of the patent holder would not be unreasonably prejudiced either
since enforcement would be possible following registration and would also include royalties due for
the conciliation period. Conciliation would only temporarily suspend the enforcement and neither the
conciliation result nor the published aggregate royalty would be binding upon the parties. Moreover,
the proposed initiative takes full account of the legitimate interests of third parties, notably
implementers and end users.
Article 40 of the TRIPS Agreement on the Control of Anti-competitive Practices in Contractual
Licences provides that the TRIPS Agreement does not prevent Members from specifying in their
legislation licensing practices or conditions that may in particular cases constitute an abuse of
intellectual property rights having an adverse effect on competition in the relevant market. The
proposed FRAND determination process (conciliation and aggregate royalty setting) is intended to
address, among other issues, concerns about whether the demanded royalty is truly FRAND, which
may have potential anti-competitive effects. Such anti-competitive effects may impede the adoption
of the standardised technology mainly by new entrants and SMEs that lack the resources to deal with
such demands or pay potentially non-FRAND royalties. Any potentially abusive practices in the
licensing of IP rights may result in harm to the consumer and public interest. Therefore, the proposed
registration of SEPs in a designated register prior to enforcement and the FRAND determination
process are likely to fall under Article 40 of the TRIPS Agreement.
Furthermore, the introduction of a conciliation is not unreasonably expensive or burdensome, given
the specific SEP practices, and is thus in line with the obligation in Article 41(1), (2) TRIPS, which
requires WTO members to ensure that the different types of proceedings relating to IP enforcement
shall be available under the respective national laws. SEP holders benefit from the adoption of the
standard and therefore usually tolerate the infringement of their patents to ensure that the standard is
widely used in products. When SEP holders commit to FRAND licences in order to promote adoption
of the standard, their objective is not to stop the sale of infringing products, but to collect royalties
from such sales. As such, the FRAND determination (conciliation) process cannot be considered
a restriction of the SEP holder’s right to enforce its patent against an implementer220
.
8. PREFERRED OPTION
Option 4 is the preferred option – a mandatory register for SEPs with essentiality checks, a process
for determining an aggregate royalty, and a mandatory pre-trial conciliation, combined with
voluntary guidance on SEP licensing and a central Competence Centre offering, among other
services, also assistance to SMEs.
This option is expected to strike the right balance between negotiating powers of SEP holders and
implementers and at the same time allow sufficient room for private negotiations between them, with
more relevant information at hand. The option reduces information asymmetry between a SEP holder
and an implementer by providing the latter with information who the relevant SEP holders are, how
many patents they have registered in the register and what their essentiality rate is (derived from a
representative random sample of all registered SEPs) and what the potential [or maximum] total cost
of using a standardised technology (aggregate royalty) is. A pre-trial obligatory conciliation is likely
to reduce SEP dispute settlement costs to about 1/8 as the conciliator will assist both parties in
220
Since the alternative of excluding the right to collect past royalties absent a registration or the alternative to only
require the initiation of the conciliation procedure before being able to enforce patent rights weighs less than the exclusion
of enforcement, thus, argumentum a maiore ad minus, this would also be coherent with WTO/TRIPS obligations.
58
reaching an agreement. A Competence Centre will provide objective information, guidance, trainings
and support to SMEs in relation to SEPs and SEP licensing. Moreover, SMEs will benefit from
reduced administrative fees and/or financial support from existing facilities such as the SME Fund to
cover e.g. conciliation costs.
The option is likely to reduce the time for negotiation and the cost of the negotiation for both parties.
Transparency will inject trust into the system. SEP holders are likely to reach a wider set of
implementers therefore securing adequate remuneration on their innovation, and incentivising
participation in future standard setting. Implementers (especially smaller ones) will be able to plan
their business costs and make their risk assessments.
Finally, the initiative will cover future standards (or generations of standards) and there may be a
possibility to request the inclusion of older versions of the standards, such as LTE, of particular
importance to the roll-out of the IoT. The option will complement and not replace the Huawei v ZTE
process. It is expected not to impact licences that are already in force.
As far as quantification is possible, and under several assumptions, the net benefits of the preferred
option are estimated at around EUR 24.5 million per annum. In terms of distribution of costs and
benefits, the majority of net benefits (estimated at around EUR 24 million) will be directed to SEP
implementers localised in the EU (split almost equally between firms with headquarters in the EU or
non-EU firms with subsidiaries on the territory of the EU). With an approximate number of less than
600 new SEP licensing contracts signed per year in the EU, net benefits are estimated on average at
around EUR 40 000 per negotiation. SEP holders are expected to bear the brunt of costs of this
initiative mainly due to the cost of SEP registration and essentiality checks. The costs for this group
amounts to EUR54 million, with 85% of these costs applicable to non-EU based SEP holders. The
estimated benefits to this group account for around half of costs, so the net effect is negative (EUR
29 million). It should also be noted that a large part of SEP holders’ costs (EUR 29 million) is due to
an expected increase in patent fees due to an expected increase in number of patents. This impact is
uncertain and thus may not materialise, in which case the overall impact on SEP holders would be
neutral. However, if it were to happen, it would constitute a new income to the European and National
Patent Offices. In terms of geographical distribution of impacts in the EU, it is expected that firms
from all but three (FI, SE and LU) Member states are likely to experience net benefits, with DE, IT
and FR accounting for 75% of benefits. Finally, it should be noted that certain impacts, such as e.g.
a change in SEP licensing revenue are difficult to predict, thus are not included in the cost/benefits
calculation. For discussion of those impacts as well as for details on all calculations see Annex A7.1.
The table below summarises costs and benefits of the preferred options:
Table 4: Ten-year-average total approximated annual costs and benefits of the preferred option per
affected party and localisation (EUR million)
EU non-EU Total
SEP implementers
Costs -0.77 -0.77 -1.5
Benefits 12.89 13.03 25.9
Net 12.11 12.26* 24.4
SEP holders
Costs -8.13 -46.04 -54.2
Benefits 3.79 21.50 25.3
Net -4.33 -24.54 -28.9
Subtotal (net effect for implementers and holders) 7.8 -12.3 -4.5
EPO/NPO benefit 29.0 29.0
Total net benefit 36.8 -12.3 24.5
* concerns non-EU implementers with subsidiaries in the EU
Note: numbers rounded which may affect totals
Source: Own assessment based on studies and assumptions. See annex A7.1 for more explanations
59
8.1. REFIT and One-in-one-out
This initiative is not part of the REFIT simplification effort as there are currently no EU rules on
SEPs that could be simplified or made more efficient. The administrative costs of filing the forms
necessary for SEP registration, estimated at EUR 200 per patent or around EUR 2.7 million annually
over a decade are considered eligible for one in one out calculations.
9. HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED?
The legislation to be proposed would include a provision requiring evaluation every five years.
Table 5: Monitoring indicators
Research question Indicators
Specific Objective 1. Provide information on SEPs ownership and essentiality
Has access to
information on
SEPs improved?
- Number of standards with SEPs registered in the database
- Number of SEP holders registered
- Number of essentiality checks conducted (overall, per SEP holder, per standard)
- Is database up to date (when SEP is registered, is information updated)
- Number of times database is used (access rate) and how it is used (e.g. new private services
built on these data)
- Perception of quality of register and essentiality checks
- Results of peer evaluations (number of confirmed essentiality checks)
- Cost/quality of the central system in comparison to available private solutions
Specific Objective 2. Provide clarity on FRAND royalty
Has information on
FRAND price,
terms and
conditions
improved?
- Number of studies done by Competence Centre
- Number of SMEs receiving assistance
- Perception of quality of studies, assistance
- Number of standards, and their applications
- Number of aggregate royalties announced, or expert opinions provided
- Perception of the aggregate royalty rate setting process/and rate itself by implementers and
holders; use in court cases/judgements
- Frequency of changes of the aggregate royalty
- Cost/quality of the Competence Centre services in comparison to available private solutions
Specific Objective 3. Facilitate dispute resolution
How the new
systems changed
dispute resolution
- Usage of conciliation (number of cases per year, duration, quality assessment by courts, usage
in court proceedings and in judgments; usage in support of applications for customs’ action)
- Change in SEP litigation cost/duration due to conciliation
- Usefulness of guidelines (perception by stakeholders, usage in court cases,)
Sources of information: Competence Centre database; Feedback/Surveys of new system (Competence
Centre/register/conciliation/guidelines) users such as e.g. SEP holders and implementers, judges, essentiality checkers;
Court cases/judgements/injunctions analysis; dedicated evaluation studies; public consultations; desk research
General objectives
Impact on SEP
owners
- Number of SEP holders based in the EU
- Number of SEPs registered by SEP holders based in the EU
- Length of licence negotiations, number of licensors
- Contribution of EU firms in standard development activities
- Localisation of production/R&D of such products/services (EU/third countries)
Impact on SEP
Implementers
- Cost of SEP licence for EU firms, effort of obtaining a license
- Percentage of SEPs covered through licensing.
- Competitiveness of EU firms making SEP implementing products/services in the EU and third
countries.
- Localisation of production/R&D of such products/services (EU/third countries)
- Contribution of EU firms in standard development activities
Impact on EU
customers
- Time of introduction of new products/services using latest standards in the EU in comparison
to other countries, price of such products
Sources of information: Surveys, official statistics (e.g. Eurostat’s “Enterprises using IoT”, isoc_eb_iot), dedicated
evaluation studies; public consultations; desk research.
60
61
ANNEX 1: PROCEDURAL INFORMATION
1) Lead DG, Decide Planning/CWP references
DG for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW).
2) Organisation and timing
This proposal is scheduled for adoption by the Commission in the second quarter of 2023.
Inter-service group meetings took place on 23.09.2021, 12.10.2021, 23.11.2021, 09.12.2021,
20.06.2022, 19.09.2022, 11.10.2022 and 27.01.2023.
The following Commission services were invited to participate: DG AGRI, CNECT, COMP, ENER,
JRC, MOVE, RTD, SJ, SG, TAXUD, TRADE, and GROW. DG JUST was consulted on specific
issue with regard to mediation. The EUIPO was also involved with regard to the institutional aspects.
Those services were actively consulted throughout the project, including in discussions with
consultants.
3) Consultation of the RSB
A meeting with the RSB took place on 15.03.2023. On 17.03.2023 the RSB delivered a positive
opinion. The table below shows RSB comments and how they were addressed in the revised text.
RSB comments DG GROW replies
(1) The report does not provide a clear overview of
all the measures to minimise the negative impacts on
Small and Medium Enterprises (SMEs) nor their
combined impact.
Overview of SME measures was added to the SME
test (annex A8.2). It is now more prominent in the
main text including in options description and in the
chapter on the preferred option.
(2) The report does not sufficiently disaggregate the
costs to allow the administrative costs to be
identified for the purpose of the One In, One Out
approach.
Disaggregation of costs with a view to identify one-
in-one-out costs was added (to the main text, and
annex 3). Additional tables with more details on
costs and benefits were added to annex A7.1.
4) Evidence, sources and quality
The analysis presented in this impact assessment is based on the following key sources:
- Baron, J., Arque-Castells, P., Leonard, A., Pohlmann, T., Sergheraert, E., Empirical Assessment of
Potential Challenges in SEP Licensing, European Commission, DG GROW, 2023;
- Baron, J., Essentiality Checks for Potential SEPs – Framework for Assessing the Impact of Different
Policy Options, European Commission, DG GROW, 2023;
- Charles River Associates, Transparency, Predictability, and Efficiency of SSO-based Standardization
and SEP Licensing, European Commission, DG GROW, 2016,
https://ec.europa.eu/docsroom/documents/48794;
- Commission webinar series on Standard Essential Patents (2020 – 2021);
- Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard
Essential Patents ‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021,
https://ec.europa.eu/docsroom/documents/45217;
- European Commission, Joint Research Centre, Bekkers, R., Henkel, J., Tur, E. M., et al., Pilot study
for essentiality assessment of standard essential patents, Publications Office of the European Union,
2020, https://data.europa.eu/doi/10.2760/68906;
- Number of other studies and research papers are used and references are provided in the footnotes;
- Submissions to the call for evidence, the public consultation, the survey of SMEs and numerous
interviews with stakeholders and papers submitted in confidential and non-confidential format to the
Commission;
- The Options considered all contributions of the Expert Group, the suggestions made during the
webinar series and contributions by practitioners, academia and judiciary.
Additionally, the following data sources were used in order to perform in-house analysis:
62
 IPLytics Platform – data extracted in 2022;
 Experts analyses based on contracts with the Commission.
The remaining sources are provided in the footnotes, whenever they are referred to in the text.
63
ANNEX 2: STAKEHOLDER CONSULTATION (SYNOPSIS REPORT)
The public consultation took place between 14 February 2022 and 09 May 2022. During that period
74 replies were submitted using the EUSurvey tool.
This annex presents summary of results, a detailed question by question analysis is presented in
Annex 9. All received responses are published.221
1) Respondents’ characteristics
Respondents were asked to provide basic information about themselves, such as country of origin,
area of activity, and registration in the transparency register.
Two thirds of the replies came from the European Union. The highest number of EU replies came
from Germany. The remaining one third of the replies came from third countries, with the highest
number coming from the USA. The graph below (Figure 6) presents responses per country of origin.
Six out of ten replies came from companies (39 replies) or business associations (7). Followed by
seven replies from academia, two from public authorities, one from a non-governmental organisation
(NGO) and one from trade union. Six replies came from EU and non-EU citizens (see Figure 7).
Among the 39 companies, 77% were large entities and 23% were small and medium-sized entities
(SMEs).
30% of the respondents identified themselves as both SEP holders and implementers, 13% as only
SEP implementers and 4% as only SEP owners. Around 50% identified themselves as “other” (which
consists of for instance attorneys, advisers, academia…).
Around half of the respondents (35) are registered in the transparency register.222
The transparency
register is a tool to allow European citizens to see what interests and on whose behalf the respondent
represents.
Figure 6: Distribution of responses per country of origin of respondent
Source: Commission own analysis
221
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13109-Intellectual-property-new-
framework-for-standard-essential-patents_en.
222
https://ec.europa.eu/transparencyregister/public/homePage.do.
23
6
5
3
2 2 2 2
1 1 1 1
11
5 5
1 1 1 1
0
5
10
15
20
25
64
Figure 7: Distribution of responses by type of respondent
Source: Commission own analysis
2) Summary of replies
Participants to this consultation were invited to provide answers on the following blocks of questions:
general questions, questions on the licensing process and related problems, questions on transparency
of SEP licensing, on essentiality of SEPs, on fair, reasonable and non-discriminatory (FRAND)
licensing terms and finally questions on SEP enforcement. Below is a short quantitative summary of
the responses based on selected questions per block.
Replies to general questions.
Around 60% of the respondents considered that the current legal framework sufficiently protects
against implementers “hold-out” (e.g. unreasonably delaying the conclusion of a licence by an
implementer). Around 30% had opposing views. The responses showed a similar pattern across
different stakeholders’ groups (companies, associations, academia, respondents from the EU and
non-EU countries).
Respondents were divided on the issue whether the current legal framework provides sufficient
protection against SEP holders “hold-up” (broadly opportunistic behaviour by SEP holders, such as
using their market power to extract excessive rents or terms from implementers) with 43% agreeing
and 48% disagreeing. Companies, citizens, and non-EU respondents mainly disagreed. While
academia/authorities/NGOs/others, and EU based respondents tended to agree with that the current
legal framework provides sufficient protection against SEP holders “hold-up”.
The final question in this section asked about the impact of the current SEP licensing framework on
SMEs and start-ups. Around half of all respondents assessed the impact as negative, a third thought
there is no impact, and around 5% deemed it positive. Responses showed similar patterns for all
analysed groups, except for associations, implementers and SEP holders. Around half of the
associations and SEP holders considered that there was no impact, while around 80% of implementers
thought that the impact is negative.
Company/business
organisation, 53%
Business
association, 9%
Academic/research
institution, 9%
EU citizen, 8%
Non-EU citizen, 8%
other, 7%
Public authority, 3%
NGO, 1% Trade union, 1%
65
Questions on the licensing process
SEP implementer perspective: Around half of the respondents reported seeking a licence before a
SEP holder approaches them. SEP holders usually contacted the respondents around 3 years after the
first implementation of a standard in a product. Licence negotiations with a large SEP holder on
average concerned around 60 patents.
Almost three quarters of the respondents request a licence in order not to infringe a SEP and 60% to
be able to plan production and costs.
Reported costs of estimating SEP exposure per product amounted to on average around EUR
230 000.
In terms of consequences of the current SEP licensing practices: Two thirds of all respondents and a
majority of implementers try to share SEP cost/risks with their suppliers. Around 40% of all
respondents, and two thirds of the implementers will try to settle with the SEP holder as quickly as
possible to avoid litigation or will search for an alternative to SEP (another technology or royalty free
standard). Around a third of the respondents (and half of the implementers) will increase prices and
may become less competitive.
SEP holder perspective: The main reasons for licensing/having SEP are securing the return on
investment (70% of answers), followed by use of SEP for defensive/bargaining purposes (60%) and
participation in the standardisation process in the future (40%).
On average SEP holders said they start contacting implementers two years after the publication of a
standard. Around 70% do not reach out to all SEP implementers though. On average around 60% of
the contacted implementers reply within one year. Around 70% take a licence without any litigation.
It takes on average 3 years and 3 months to conclude a licence.
Questions on the problems related to SEP licensing
Lack of transparency on the FRAND royalty rate, on the SEP landscape (who owns SEP) and
divergent court rulings were named as the key problems by three quarters of all respondents (and
almost all implementers). From the SEP owners’ point of view the main problems were hold out and
anti-suit injunctions.
Questions on SEP transparency
Respondents asked for more public information on SEP as regards “patent and application number”
(88% of all responses), “relevant standard, version, section of the standard” (80%), “contact details
of SEP owner” (80%), “transfer of ownership” (77%), “licensing programs” (76%) and “standard
FRAND terms and conditions” (72%).
Patent pools should disclose “standards subject to pool licensing” (100%), “product royalties per
programme” (94%) and “list of SEP owners” (87%).
Around 70% of the respondents considered that a confidential repository of licensing agreements
could help judges and arbitrators to determine a FRAND rate. Such repository should contain
information on “licensed SEPs” (96%), “royalties” (96%) and “methodology used to calculate the
royalty” (94%).
Questions on essentiality
Around 60% of all respondents and 90% of the implementers supported third-party essentiality
checks as long as independent experts do them. Only 24% of the SEP holders supported such a
solution. A third of all respondents considered that essentiality checks should serve only an advisory
role with no legal consequences.
Around two thirds of all respondents and around 80% of the implementers thought that essentiality
assessment might help in assessing SEP exposure of a product and deciding whom to negotiate with,
66
smoothen licensing negotiation and prevent over pricing. More than half of the SEP holders disagreed
with these impacts but agreed that checks might provide a reliable overview of the share of each SEP
owners’ essential patents.
As regards practical implementation, the respondents preferred that the European Patent Office
(EPO) conducts the checks (63% of all replies) on just “one SEP per SEP family” (63%).
Questions on FRAND
Between 55% and 75% of all respondents and between 85% to 100% of the implementers, consider
that SEP holders cannot refuse a licence following a request from an implementer. The majority of
SEP holders were of the opposite view.
60% of all respondents and 93% of the implementers consider that licensing could take place at any
level of the value chain. Around 70% of the SEP holders consider that it should be at one level only
(level allowing for the best monitoring of applications).
Around three quarters of respondents (93% of SEP owners) agreed that fair and reasonable terms and
conditions might depend on functionalities of the standard implemented in a product. Around 70%
thought these terms could depend on the level of licensing.
For non-discrimination assessment, it matters if companies that use the same functionalities of the
standard in similar applications are put at a competitive disadvantage (around 75% of all answers,
and 94% of holders’ answers).
SEP holders considered that discounts between 28% and 40% do not cause discrimination. For
implementers reasonable discounts amount to between 5% and 10%.
70% of all respondents and 100% of the implementers argued that it is important to know the
reasonable aggregate royalty rate for a product. Only 20% of SEP holders shared that view.
Questions on enforcement
Respondents estimated that court costs could range from approximately EUR 2.1 million for
essentiality, EUR 6.6 million for injunction and EUR 7.1 million for FRAND disputes.
Arbitration (53% of all answers) was deemed more useful than mediation (35%) for FRAND
assessment, especially by SEP holders and academia/authorities/NGOs.
Two thirds of the respondents were of the opinion that efficient SEP licensing would foster innovation
by implementers, increase employment and allow for keeping high level of competence in the EU as
well as foster transition to the green economy.
3) SMEs survey
Internet survey targeting SMEs was active from 25/10/2022 until 27/12/2022. It used EUSurvey tool.
It is not representative but gives an impression of the issues start-ups and SMEs face in the context
of SEP licensing. A summary of replies is presented below, a detailed question by question analysis
can be found in Annex A8.3 – SME survey.
The sample is quite diverse with respect to geography, sectors, and standards used.
In total, 39 firms responded to the survey. They are mostly start-ups and SMEs (37), from 17 different
countries, mostly from the EU (30). They are active in ICT (24) and various other ICT- and IoT-
using industries. In the sample, cellular standards are the most widely used or developed (by 24
firms), followed by Wi-Fi (21), LPWAN (15), NFC (12), and video/audio codecs (10).
Implementers dominate the sample; standards are very important for them.
Most firms (35) are implementers of existing standards, e.g. by producing or buying components that
incorporate a standard. 12 stated that they participate in standard setting. Asked about the importance
of the respective standard, 24 out of 30 responding considered the standard very important for their
67
business. Seven firms are SEP licensees, for cellular standards (4), video and audio codecs (4), Wi-
Fi (3), and other technologies.
SEP licensing is difficult for SMEs, due mostly to resource constraints, lack of expertise, uncertainty
about infringement, and the fragmentation of SEP ownership.
Most respondents have, when buying or importing components that incorporate standardized
technologies, a clear preference for components with all IP rights fully licensed (25 out of 34 prefer
this solution “in most cases”). One respondent described it as “ridiculous that patent pools should
come after each company doing some modern radio technology, rather than settle cost per module
with manufacturer.” The main stated reasons not to take a SEP license are: (i) the assumption that
purchased components are fully licensed (15); (ii) difficulties to find out the SEP holders (10); and
(iii) an excessive effort to enter license agreements with all SEP holders (9). Related, the main stated
problems in negotiating with SEP holders are: (i) lack of knowledge what would be a fair (FRAND)
royalty (15); (ii) lack of resources to negotiate or engage in court proceedings (14); (iii) uncertainty
if own product infringed the patents at hand (13); and (iv) the firm’s ignorance how to defend against
SEP holders (13). Few (8) have in-house patent specialists.
For SMEs, device-level licensing was acceptable only if it was efficient (ideally one-stop), at publicly
known royalties, and consistent across all implementers (which given their fragmentation seems
difficult to achieve). Respondents consider the best solution for SMEs to be upstream SEP licensing,
to module or component makers.
Respondents stated that the uncertainty about SEP licensing would affect their business in various
ways. Most frequently, they stated: Royalty payments will affect the firm’s competitive position on
the market (18); potential future SEP payments may make the firm unable to compete (13) – however,
if competitors pay the same royalties, licensing will not affect the business significantly (13); the firm
tries to use alternatives available on the market in order not to pay for SEPs (e.g. older or free
technology) (12). In open comments, respondents expressed wishes among others for licensing to
component makers. Failing this, efficient licensing through pools, ideally one-stop, rather than having
multiple licensors per standard and even portfolio split-ups to several NPEs. Publicly known royalty
rates that are paid consistently by all and protection from abusive licensors.
About 40 percent of firms in the sample contribute in some way to standard development, though
very few own SEPs. The majority does not contribute, mostly for lack of resources.
Of the respondents, 15 participated in standard setting, though mostly not to complex ICT standards,
such as cellular and Wi-Fi. Only 2 firms own SEPs. Motives to contribute to standard development
comprise improving the standard, influencing the direction of standard development, facilitating
adoption of the firm’s own technology, learning, and networking. Reasons not to contribute to
standard development comprise a lack of resources and expertise, and the domination of SDOs by
large firms.
4) Interviews with stakeholders
During the course of 2021-2022, the Commission services met with various SEP holders and SEP
implementers in order to assess the problems they face with SEP licensing. As these meetings
concerned confidential information based on licensing negotiations, below we present selected
stylised summaries of issues raised that combine the experience of several parties we interviewed.
Problems faced by SEP implementers
A manufacturer of medical devices for the treatment of critical health disorders may wish to
implement cellular communication functionality in its products to enable remote patient health
monitoring and efficiently improve patient adherence to treatment. Considering the multi-year (e.g.
5-10 years) medical device development process for homologation and certification from network
68
operators, the company needs certainty at an early stage regarding the aggregate FRAND royalty
for SEP licenses as it must take such factors into account during the development and
commercialization phase and as it considers total cost and alternative technologies. In addition, the
inability to negotiate with dozens of SEP holders individually and the prospect of being excluded
from the market for an infringement of a single SEP is a further disincentive for using the
connectivity standards risking the continued access of patients to telehealth services which are
crucial for public health.
A smart meter manufacturer is invited to take a licence from a SEP holder not only for the future
but also for 5 years back. The smart meters are purchased by utility companies by public
procurement contracts in order to promote the reduction of energy consumption under the EU Gas
and Electricity Directives. The smart meter manufacturer buys communication components, which
it integrates in its products. It directs the SEP holder to its supplier and the SEP holder prefers to
negotiate with the smart meter manufacturer as it is its understanding that it can choose who to
license. The smart meter manufacturer requests its supplier to indemnify it for the SEP royalties as
per supply contract. The royalties are higher than what the supplier is willing and able to pay. The
supplier expresses its wish to take the licence itself as it used to have such licences in the past.
However, it is unable to get such a licence at the conditions that are acceptable to it. Its (non-EU)
competitors continue promising indemnifications to their customers. The supplier is pressured by
all its worried customers manufacturing not only smart meters but also payment terminals, wireless
charging, medical devices, tracking devices, etc. to keep the indemnification clauses and bear the
risk of SEP licensing.
An EU SME developed a robot assisting in construction works. It is innovative due to an inventive
electro-mechanical structure of the robot arm, wheel drive and motion control. The user controls
this robot with a tablet comprising a specific Human-Machine-Interface. The communication
between tablet and robot could be wired or preferably wireless. The most desired option would be
WiFi, but due to the SEP license, Bluetooth fully licensed at chip level will be implemented.
Another option is a wired USB connection, which also works but does not meet customers’
expectations.
An EU SME developed a smart home appliance for energy consumption control in a household. It
can lower energy cost and optimise usage of renewable energy (solar, wind…). Collected data is
sent to the company’s central server for analysis. Initially WiFi was considered to connect to a
router in a household. The company was not aware that WiFi is subject to a SEP licence. To avoid
SEP costs/litigation they chose a wired connection to a router instead.
An EU SME developed a smart meter which is now implemented in hundreds of projects. Data
between meters is sent using mostly Bluetooth, but for remote locations a chip with WiFi and 4G
functionality was embedded. The company was not aware that the chip was not licensed for WiFi
and 4G. If faced with litigation it will disable this chip in all its devices.
An EU SME developed a product to help individuals track their health metrics and report results
to their doctors in real-time. The SME and its competitors had a choice of technologies to choose
from when developing their product regarding wireless connectivity. After unsuccessful attempts
to license various wireless technology directly from known patent holders, the company built the
product. After a robust and successful market developed, and after the point in time when the
product design was “locked” in and could not be changed, numerous wireless patent holders
69
approached the company and demanded they take a license. This effectively deprived the SME of
choosing an alternative wireless technology and the patent holder did not consider other wireless
technology that could have been used as a comparable value when deciding the royalty rate that
was demanded.
An EU Global Navigation Satellite System (GNSS) receiver designer and wireless cellular modem
designer was asked by customers to reduce the “footprint” of their modules that were used in an
end product. The EU design company could not accommodate the request because it could not
directly license patents from the patent holders and the “have made” rights held by the end product
company did not allow the designer to innovate. It could only “make” the product design given to
it by the end product company. A non-EU competitor of the GNSS receiver and wireless cellular
modem designer seized the opportunity.
An EU Global Navigation Satellite System (GNSS) receiver designer and wireless cellular modem
designer was asked by its EU customers to reduce the “footprint” of their modules that were used
in an end product. The EU design company had a license with several cellular patent holders and
took on the project. However, the EU end product company was warned there would be a
significant price increase because their cellular patent license royalties were based on the average
sales price of the module/modem and the combined GNSS/cellular module average sales price
would be 3X higher. The EU end product company asked why the GNSS function was considered
when determining cellular royalty owed and not removed from the average sales price. They
learned it was standard practice in wireless licensing. The EU end product company abandoned
the design improvement request.
An innovative EU IoT wireless module company that had been licensed for years by cellular
wireless patent holders is now being denied licenses. The patent holders are changing to licensing
only at the end product level. The patent holders claim the value of the patents they hold has
increased by 4-6 times what the previous licenses demanded in royalties although many of the 3G
and 4G patents have expired/are expiring and new high-speed 4G patents are not needed by the
EU IoT company. The patent holders are demanding that the EU IoT companies license patents
from their patent pool and that the EU IoT company acts as an agent between their customers and
the patent pool, receiving a “kick-back” for doing so.
Supplier explained that its sales teams regularly get questions from prospective Cellular and Wi-
Fi IoT customers about “patents”, “IP rights” and “indemnification”. They consider themselves in
a vacuum because there is no easy way to obtain a licence or to even know the price of such licence.
It is unable to sell its products with all IP rights included, nor is it able to indemnify its customers
should they receive an infringement or license claim in the future. The company has lost several
Cellular IoT business opportunities to both EU and non-EU competitors making misleading or
false statements with regards to “selling a licensed product” or “providing full indemnification”.
Supplier: “Our company has seen several potential Cellular IoT module customers either choose
other wireless technologies, delay or even cancel development projects, because the license cost
for using the standards (LTE-M / NB-IoT) is totally unknown and also impossible to estimate.
Unless you sell high price products, like smartphones or automobiles, how are you going to build
a business case for a sensor device priced at EUR 15 when you have an unknown licence fee?”
70
Supplier: Not having SEP license adds to uncertainty both for us and for our customers. If we make
provision for estimated royalties and our competitors do not, we are at a disadvantage. Our module
customers generally do not understand the technology and want a solution with SEP
indemnification as they feel unable to navigate the licensing process. If we do not offer such
indemnification and our competitors do, we are at a disadvantage.
EU electric vehicle equipment manufacturer told us “Complex and often lengthy SEP negotiations
lead to delays and uncertainty in the development phase of our products as well as to legal
uncertainty which artificially inflates the product costs.”
Smart electric vehicle chargers of an EU SME need to communicate with cars, phones and
electricity networks to increase energy savings. Threats from one SEP holder are causing further
concerns to the firm that there may be other SEP holders claiming royalties. The company is now
reconsidering whether to include cellular functionality in its future accessories or products. The
firm says that SEP uncertainty is delaying technology adoption, hindering innovation and engaging
resources that could be productively used.
EU SME: It is said that large SEP holders ‘do not target SMEs’, our case shows that this is clearly
inaccurate. Even if some do not, the financial uncertainty SMEs face is unreasonable and unfair:
an SME has to wait and fear that any SEP holder can approach it at any time (perhaps when SME
becomes larger) and ask for payment of past royalties.
During negotiations for a FRAND licence for SEPs, a potential licensee offered binding arbitration
to the SEP holder for a global FRAND SEP cross-licence. The SEP holder, however, refused to
substantively engage in discussions over arbitration terms.
In 2020, a non-practicing entity (NPE) asserted 4G standard-essential patents against a potential
licensee. The NPE had acquired its 4G portfolio from another SEP holder, which had split its
portfolio and divested a small portion of its patents to the NPE. The NPE demanded more than 12
times the amount of royalties as the original SEP holder – even though the NPE held only a tiny
fraction of the number of patents that the original SEP holder retained. Despite ongoing licensing
negotiations, the NPE filed a series of patent infringement actions in Germany, seeking injunctions
on various SEPs in an effort to force the potential licensee to accept a non-FRAND licence. During
the litigation, it was revealed that the NPE was actually a trust that had acquired its patents from
the original SEP holder at a symbolic price and had assigned back the beneficiary share in the trust
to the very same SEP holder.
The Fair Standards Alliance (FSA) collected confidential testimonies from their members
Below is a summary by FSA about some of the reported issues:
Refusal to license
The practice of refusing to license willing licensees higher in the value chain is a recent phenomenon
and was not the industry practice when 2G and 3G were developed. The refusal to offer licenses in
the value chain is damaging innovation in sectors using telecommunications standards – it is not a
71
prevalent practice in relation to other standards. When licenses are offered to component suppliers,
these deals are incredibly efficient and meet the future needs of growth sectors, such as in the Internet
of Things.
Non-Disclosure Agreements
The use of non-disclosure agreements (NDAs) to protect confidential information in commercial
discussions is standard business practice. However, the experience of FSA members is that NDAs by
licensors in licensing negotiations are overly restrictive, and rather than protecting truly confidential
information are oftentimes used as an excuse not to share important information that should be
available or to refuse to respond to FRAND (counter) offers. The use of overly restrictive NDAs
allows licensors to exploit information asymmetries in negotiations to lock licensees into unbalanced
processes that lead to unfair outcomes. This in turn locks in unfair licensing terms that other potential
licensees are later compelled to accept. What is evident from members’ testimony is that NDAs
should not be used to redact information, both from a pricing as well as a technical perspective, that
potential licensees require to assess whether an offer is FRAND. It is evident from the testimony
provided that NDAs are used so that patent holders can unfairly discriminate between licensees. It
must be possible to share technical information within a supply chain so that companies are better
able to assess the technical merits of the patent claim.
Problems faced by SEP owners
An EU SEP holder reached out in 2016 to a car producer who was using cellular connectivity in
its cars. The SEP holder made several offers to the implementer which were rejected (for instance
the implementer was directing the SEP holder to license its suppliers instead). The SEP holder
spent tens of millions of euros on legal counsels and litigation – resources that could have been
spent on R&D. The two firms signed a licence agreement in 2021.
A smart meter producer began incorporating cellular technology in its products in 2014. A SEP
holder first contacted the company in 2017 to suggest the need for a SEP licence. While the
implementer raised the issue of licensing its suppliers, the main point of discussion was reducing
the price. The offer-counteroffer phase of discussions took two years. A license agreement was
concluded in 2022.
A SEP holder contacted in 2015 a producer of mobile payment terminals which uses cellular
connectivity. The implementer refused to enter negotiations for a cellular license and indicated that
SEP holder should speak to its suppliers. The SEP holder reached out several times to the
implementer with little success. Only in 2022, under threat of litigation, the implementer began
serious negotiations.
Since 2017, a SEP holder has been in discussions with X. Despite countless emails,
meetings/telephone conferences and a confidential third-party process X has not taken a licence.
X has engaged in various delay-tactics, including arguing that it should not pay royalties for its
past sales (meaning that X has a financial incentive to delay in concluding a licence for as long as
possible). The SEP holder understands that X operates without having taken a licence from any
European or Western SEP owner.
72
A SEP holder has been negotiating the renewal and extension of its existing patent license
agreement with a Chinese implementer that is also a SEP owner. The Chinese company did not
accept FRAND offers and did not make a FRAND offer to the SEP owner. The Chinese company
provided very limited material on its own SEP portfolio and it sought a significantly higher
valuation, which was also inconsistent with a third-party analysis. The SEP holder offered to
engage in neutral mediation or arbitration to agree on FRAND rates but the Chinese company
rejected those offers.
IP Europe collected a non-exhaustive list of negotiation delaying strategies based on case-law
• Strategy 1: Ignore notifications and other communications for months or years.223
• Strategy 2: Express willingness to take a FRAND licence – but only for each individual patent
for which infringement and validity is confirmed by the courts.224
• Strategy 3: Insist on obtaining unreasonable amounts of information (e.g. a claim chart for
every SEP in a portfolio) without appropriate confidentiality arrangements in place, and/or
refuse or delay signing an NDA agreement as a hold-out tactic.225
• Strategy 4: Claim to lack information or to not understand the licence offer, or repeatedly ask
for information that the SEP holder has already provided.226
• Strategy 5: Table counteroffers that are obviously unreasonable and unacceptable for the
rights holder (e.g. a licensing rate of just 0.001 per cent per patent family), or table a counter-
offer only once litigation has been initiated.227
• Strategy 6: Refuse to enter into a global licence agreement despite having a global business
for products that use standards.228
• Strategy 7: Direct the SEP holder to suppliers, or to a subsidiary or holding company, for
licences.229
• Strategy 8: Insist repeatedly that the licence offer is not FRAND without providing
substantive arguments to demonstrate why.230
223
For examples of this delaying strategy in practice, as evidenced in European case law, see Saint Lawrence v Deutsche
Telekom; Sisvel v ZTE; Tagivan (MPEG-LA) v Huawei; Philips v Wiko NL; Philips v Wiko DE; Sisvel v. Wiko; Sisvel v
Xiaomi; Sisvel v Haier.
224
See Sisvel v Haier; Nokia v Daimler.
225
See Pioneer v Acer; Philips v Acer.
226
See HEVC (Dolby) v MAS Elektronik.
227
See Archos v. Philips; Fraunhofer-Gesellschaft (MPEG-LA) v ZTE; Tagivan (MPEG-LA) v Huawei; Philips v Wiko
NL; Nokia v Daimler; Unwired Planet v Huawei; Sharp v Daimler. See Philips v Wiko, the Court analyzed Wiko's
counteroffer to Philips, involving a licensing rate of just 0.001 per cent per patent family, based on the proportion of SEPs
owned by Philips.
228
See Saint Lawrence v Deutsche Telekom; Pioneer v Acer; Philips v Acer; Unwired Planet v Huawei.
229
See Nokia v Daimler; Sharp v Daimler; Fraunhofer-Gesellschaft (MPEG-LA) v ZTE; Philips v Wiko NL.
230
See Philips v Wiko NL; Unwired Planet v Huawei; Sharp v Daimler.
73
ANNEX 3: WHO IS AFFECTED AND HOW?
1) Practical implications of the initiative
This initiative introduces a register for SEPs with essentiality checks, a process for determining an
aggregate royalty, and a mandatory pre-trial conciliation, combined with voluntary guidance on SEP
licensing and a central Competence Centre offering, among other services, also assistance to SMEs.
It is likely to reduce duration of license negotiations and the costs of the negotiation for both parties.
Transparency will inject trust into the system. Conciliation should limit the need for court trials.
Implementers are going to gain more predictability as regards their SEP exposure, allowing for proper
business planning. SEP holders are likely to reach a wider set of implementers therefore securing
adequate remuneration on their innovation.
Cost and benefits quantifications presented below are based on several assumptions and estimations
since data on SEP licensing is largely not observable (as explained in the problem definition). The
purpose of quantifications is to allow comparison of options and presenting relative impacts on
affected groups rather than provide an accurate figure. Details on quantitative analysis as well as all
the assumptions used for calculations are presented in Annex A7.1.
2) Summary of costs and benefits
I. Overview of Benefits (total for all provisions) – Preferred Option
Description Amount Comments
Direct benefits
Services provided by the
Competence Centre (e.g.
SME assistance and
trainings, studies, case-law
repository)
EUR 5.9 million231 Information provided for free.
Free trainings and assistance to SMEs.
Information of interest of both parties to license negotiations.
Access to SEP register with
information on essentiality
of patents and SEP owners’
portfolios
EUR 12.5 million232 Free access to basic information (e.g. SEP holders contact details,
number of SEP registered). Fee based access to information on
essentiality of individual patents, and essentiality rate of owners’
portfolio.
Information of interest of both parties to license negotiations.
Savings due to conciliation EUR 7.4 million233 Includes potential of up to 70% decrease in court cases; as well as
value of advice on FRAND rate.
Both parties to license negotiations are likely to benefit.
Saving in negotiation costs
due to published aggregate
royalty
EUR 25.4 million234 Published aggregate royalty should facilitate license negotiations.
Both parties to license negotiations are likely to benefit
Indirect benefits
EPO/NPO EUR 29 million Potential additional income from new patents (uncertain if it will
materialise)
231
Sum of benefits of PO1 for SEP implementers and owner. See Table 3. For disaggregation see Table 13.
232
Sum of benefits of PO2 for SEP implementers and owner. See Table 3.
233
Sum of benefits of PO3 for SEP implementers and owner. See Table 3
234
Sum of benefits of PO4 for SEP implementers and owner. See Table 3
74
Administrative cost savings related to the ‘one in, one out’ approach*
n/a SEP licensing is not regulated in the EU. Hence there are no
administrative cost savings
II. Overview of costs – Preferred option
Citizens/Consumers Businesses Administrations
One-off Recurrent One-off Recurrent One-off Recurrent
Action (a)
Direct adjustment
costs
Direct
administrative
costs
Direct regulatory
fees and charges
EUR
17.6 million235
Direct
enforcement costs
Indirect costs EUR
38.1 million236
Costs related to the ‘one in, one out’ approach
Total
Direct adjustment
costs
Indirect
adjustment costs
Administrative
costs (for
offsetting)
EUR 2.7
million237
3) Relevant sustainable development goals
III. Overview of relevant Sustainable Development Goals – Preferred Option(s)
235
Consists of the following average annual costs: Register access fee for implementers (EUR 0.6); fees for SEP
registration (EUR 1.4 million) and essentiality checks (EUR 13.7 million); cost of conciliations (EUR 1.5 million); cost
of aggregate royalty expert determination (EUR 0.4 million). For details see tables in Annex A7.1.
236
Consists of the following average annual costs for SEP owners: Cost of updates/preparation of claim charts for SEP
registration/essentiality checks (EUR 6.4 million); cost of filling the registration forms (EUR 2.7 million); potential
(uncertain) cost of registering and maintenance of additional patents (EUR 29 million). Cost in the initial year expected
to be higher, while in subsequent years lower, hence an average annual cost over a decade presented. For details see
tables in Annex A7.1.
237
Consists of the following average annual costs for SEP owners: cost of filling the registration forms (EUR 2.7 million).
Cost in the initial year expected to be higher, while in subsequent years lower, hence an average annual cost over a decade
presented. For details see tables in Annex A7.1.
75
Relevant SDG Expected progress towards the Goal Comments
SDG no. 7 - affordable and
clean energy, 13 - climate
This initiative has no direct environmental
impacts. Indirectly, by facilitating application of
new technologies it can help in the green transition
e.g. by contributing to a reduction of energy usage
(via smart grid, smart meters) or air pollution (e.g.
connected cars avoiding traffic jams).
Two thirds of respondents to the public
consultation considered that efficient SEP
licensing would i) increase employment and
keep a high level of competence in the EU
and ii) foster the EU’s transition to the green
economy. See Annex 9, Q66.
76
ANNEX 4: ANALYTICAL METHODS
This impact assessment is not using any econometric models.
All the assumptions are presented either in the annexes where they are used (for instance assumptions
on cost/benefit analysis are presented in Annex A7.1).
Assumptions used in supporting studies are not repeated in this document.
77
ANNEX 5: ADDITIONAL INFORMATION IN SUPPORT OF PROBLEM SECTION
A5.1 Market description
SEP owners
The number of companies that declared to own 10 or more patent families including potential SEPs
was, in 2021, around 261 based on search in IpLytics database.238
There were around 31 companies
from the EU.239
It was possible to match 27 of these companies to ORBIS database to obtain company
characteristics. Information on employment was available for 16 firms and on revenue for 18 firms,
out of which 3 were SMEs. Unfortunately, among these companies there are firms with huge turnover
that seems to be from other activities than SEP licensing (for firms such as Bosch, Deutsche Telekom
or Siemens), while for others with main activity in SEP licensing no data is available (e.g. Sisvel).
Therefore, below we present information only on two companies Nokia (FI) and Ericsson (SE).
Although licensing SEP is not the main source of their income, they are the largest SEP holders of
declared SEPs in the EU (responsible for around 80% of declared SEP). The two firms employed in
2021 around 190 000 persons, sold goods and services totalling EUR 45 billion and invested in R&D
around EUR 8 billion.
Figure 8: Share of declared SEPs by EU firms by country
Source: Commission own analysis based on IPLytics database (SEP holders with 10 SEPs or more only)
It is estimated that approximately 1 700 SEP licenses are concluded worldwide every year (the
approximation is based on several assumptions as information on number of licensing deals is not
observable).240
SEP implementers
There are no detailed statistics on the number of companies implementing SEPs into their products.
In order to approximate the number of firms potentially affected, we have used Orbis database – a
238
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 17, Figure 5. Not all declared potential SEPs are standard-essential. This
number does not include potential SEPs subject to blanket disclosures.
239
Identification of headquarters of all companies was not always possible due to generic or ambiguous name available
in the database.
240
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023, p. 138, Table 16.
0.2%
0.2%
1%
2%
6%
8%
33%
50%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Italy
Ireland
Luxembourg
France
Netherlands
Germany
Sweden
Finland
78
database containing information on companies worldwide. We have searched the database for
keywords that can describe a potential SEP using company,241
and selected only manufacturing firms
(NACE2 section C).
The result was that in 2022 there were around 47 500 potential SEP implementers worldwide, and
around 3 800 (8%) were located in the EU. Around a quarter of the companies were from DE, 13%
from IT, 11% from FR, 8% from ES and NL, and 5% from PL.
Among EU firms 16% were large and 84% were SMEs (based on employment). They employed 2.2
million persons. Average employment for large firms was around 4 200 persons (median 650), and
for SME – 50 persons (median 26). The combined turnover of these firms for the last available year
amounted to around EUR 600 billion (numbers based on the last available year). Average turnover
for large firms was around EUR 1.2 billion (median EUR 140 million) and for SMEs – EUR 21.5
million (median EUR 6.5 million)
For around 200 firms financial information on R&D expenses was available. Less than half (88 firms)
of these firms had been spending on R&D (in the last available year). Together they spent EUR 26
billion, on average 7% of their turnover, or around EUR 300 million per firm (median EUR 23 000).
It should be noted however, that we cannot attribute neither the share of revenue, employment nor
R&D expenses to products embedding SEP.
Figure 9: EU SEP implementers by country (share of total number of firms)
241
We have searched for '"IoT" or "Internet of things" or "smart meter" or "connected device" or "phone" or "mobile
phone" or "TV" or "television" or "TV decoder" or "DVD player" or "connected car" or "connected lorry" or "connected
truck" or "tracking device" or "connected machinery" or "connected medical device" or "payment terminal" or
"semiconductor" or "ICT" or "4G" or "5G" or "LTE" or "Wi-Fi" or "WiFi" or "NFC" or "HEVC" or "MPEG"' in the
following fields describing a company: Description and history, Full overview, Main activity, Primary business line,
Product and services, Secondary activity, Secondary business line, Trade description.
0.1%
0.1%
0.1%
0.2%
0.3%
0.4%
0.5%
1%
1%
1%
1%
1%
2%
2%
2%
2%
2%
2%
3%
4%
4%
5%
8%
8%
11%
13%
27%
0% 5% 10% 15% 20% 25% 30%
CY
LV
LU
EE
MT
LT
SI
DK
HR
BG
PT
SK
RO
GR
IE
AT
HU
BE
CZ
FI
SE
PL
NL
ES
FR
IT
DE
79
Note: Approximation based on key words search results. Total number 3 781 firms in the EU
Source: ORBIS database
Having an approximate estimate of the potential number of SEP implementers, we also wanted to
estimate the number of firms that actually takes a SEP license per year.
Based on public licensee lists of SEP patent pools we can estimate that around 20% of SEP licensees
are firms with headquarters in the EU, and another 17% are non-EU firms with subsidiaries in the
EU.242
This allows us to estimate that EU based firms conclude around 340 new SEP related licensing
agreements per year and non-EU based firms with subsidiaries in the EU conclude around 290 such
agreements. Subsequently, we assumed that among these firms, on average, per year one firm takes
1.5 new licenses243
(this is a very strong assumption and generalisation of complex reality which
includes large and small implementers producing devices implementing different number and type
of standards and taking licenses not every year) which would mean that approximately 230 EU based
firms and 190 non-EU based firms with subsidiaries in the EU conclude new license agreement per
year. Furthermore, we estimate that around 33% of EU based firms taking a new license are SMEs244
– resulting in around 80 EU SME. Many patent pools charge no royalty for small implementers,245
thus we assume that half of those SMEs will take a license but not be liable for any royalty.
Consequently, the number of new licenses granted per year to EU based firms is estimated at 285 and
the number of EU firms taking new license per year and paying royalties is estimated at 190
(composed of 150 large and 40 SMEs). It is important to stress that the figures presented in this
paragraph are approximations based on several assumptions and should be treated with caution.
A5.2 How standards are developed
Baumol and Swanson (2005) noted that “standard-setting exercises normally arise only when there
are technological alternatives to select among, and so, almost by definition, are likely to occur in
competitive – perhaps very competitive – technology markets. Even when conditions are competitive
before the selection of a standard, however, the act of selection may lead to increased ex-post market
power for owners of the IP necessary to practice the winning standard”.246
“[…] standards are set (and regularly updated) by Standard Setting Organisations (SSO). SSOs
include large established organizations – such as the European Telecommunications Standards
Institute (ETSI) for communications or the Institute of Electrical and Electronics Engineers (IEEE)
for electronics – but also a variety of ad hoc informal organizations – or industry consortia – that
have the same purpose but focus in general on complementary topics […]. They are open to all
242
The contractor compiled the current licensee lists of nine SEP patent pools (2790 firms), and drawn a quasi-random
sample from that list of 220 firms (quasi-random, as small pools were over-sampled, so that the sample is not dominated
by the codec pools with very large number of licensees). The sample was matched with ORBIS firm database to produce
a geographic distribution. This resulted in 199 (best) matches. It should be noted that best match may or may not be the
global ultimate owner of a corporate group. The estimated EU share among pool licensees is around 19.6%. Pool licensees
are smaller firms than other SEP licensees, and may or may not be representative of SEP licensees more generally.
However as systematic data on licensees of bilateral SEP licenses is not available, this is the best possible estimate of the
geographic distribution of SEP licensees.
243
Based on expert judgement.
244
In the sample of EU firms, 38% met SME definition (combination of employment below 250 and turnover below or
equal to EUR 50 000). As share of pool licenses is estimated at around 87%, and SMEs are unlikely to take part in
bilateral licence negotiations of major SEP holders, the share is reduced to 33%.
245
E.g. use of video coding standard AVC/H.264 for the first 100 000 units, or first 100 000 subscribers per year is
royalty-free. See https://www.mpegla.com/wp-content/uploads/avcweb.pdf.
246
Baumol, W. J. and Swanson, D. G., ‘Reasonable And Nondiscriminatory (RAND) Royalties, Standards Selection,
And Control Of Market Power’, Antitrust Law Journal, 2005, Vol. 73, pp. 1-58,
https://www.jstor.org/stable/40843669#references_tab_contents.
80
relevant stakeholders, have open and published processes, and typically publish and make standards
documentation available for use by all without discrimination. […]
Participants follow the standard setting process by regularly meeting in SSO working groups. They
may develop proprietary (usually patented) technology ahead of these meetings, in order to submit it
for inclusion in the standard […]. SSO members then discuss the technical merits of available
solutions and decide by consensus which one shall become a specification in the standard.
The Standard Essential Patents (or SEPs) that cover established standard specifications play an
important role in companies’ incentives to invest in standardization activities […]
FRAND commitments are voluntary contracts between each SEP holder and the SSO, with standard
implementers as third-party beneficiaries. Some SSO IPR policies tie the commitments with SSO
membership while others request that participants disclose the patents, they believe are standard-
essential along with a FRAND licensing commitment for each disclosure. […]”247
The table below explains the process in a basic manner.
Table 6: SEPs: from development to adoption
For 1 SEP Before
standard
development
During standard development After standard adoption
Innovator 1 Invest in R&D Contribution to
SDO
Nothing
Innovator 2 Invest in R&D Contribution to
SDO
May ask for
FRAND licence
SDO Select
contribution 2
Implementer Implement
contribution 2
May need
FRAND licence
Original source: Putnam, J. L., Economic Determinations in “FRAND rate” – Setting: A guide for the Perplexed, 2018, Fordham
International Law Journal, Volume 41, Issue 4 (modified)
ETSI standard development process and SEP:
During the proposal or development of a standard, ETSI members must inform in a timely fashion
if they are aware that they hold any patent that might be essential. SEP holders are requested to
provide an irrevocable undertaking in writing that they are prepared to grant irrevocable licenses
on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms and conditions. The ETSI
database allows, for information, public access to patents which have been declared as being
essential or potentially essential.248
In its Contribution to the Debate on SEPs, the SEPs Expert Group explains as follows: “Currently,
there is a lack of transparency as to the ownership and number of true SEPs covering an adopted
standard, which makes it difficult for implementers to determine what SEP licences they need for
their standard-compliant products or services. Some standard development organization (“SDO”)
declarations provide virtually no data with regard to specific SEPs. Other SDOs, such as the European
Telecommunications Standards Institute (“ETSI”), require declarations that are more detailed but
these are not regularly updated to reflect changes in the SEP landscape. Patent applications may be
247
Joint Research Centre, Institute for Prospective Technological Studies, Ménière, Y., Fair, Reasonable and Non-
Discriminatory (FRAND) licensing terms: research analysis of a controversial concept, Thumm, N. (editor), Publications
Office, 2015, pp. 9-10, https://data.europa.eu/doi/10.2791/348818.
248
https://www.etsi.org/intellectual-property-rights.
81
rejected, patents may be invalidated or expire or lose their essential character, as standards are
approved, supplemented or amended, affecting the accuracy of already-filed declarations.”249
A5.3 Trends in standards development
Standards are developed through the R&D efforts of a large and diverse set of companies
participating in the process.250
Historically, standards have been used extensively in the information
and communication technologies (“ICT”) sector, but they cover a variety of technology areas. The
figure below provides an overview of key technology categories for which SEPs are declared and
illustrates that such SEPs are by far more prevalent in the digital communication and computer
technology areas, followed by audio and visual technologies. This is not surprising considering the
need for interoperability to allow for (i) communication among devices and within networks, and (ii)
use of audio and visual content across a broad spectrum of devices. New and upcoming areas where
standards will be employed include medical technology, security and transportation, just to name a
few.
Figure 10: Number of declared SEPs as to technology category (IPlytics, 2022)
According to IPlytics, (a third-party source of aggregated data and information from the
ETSI IPR Database), the cumulative number of self-declared information and telecommunication
(ICT) SEP families251
surpassed 74 000 in 2021, indicating a five-fold increase in just 10 years
249
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021, Section II. Analysis of key issues and
proposals for improvement, https://ec.europa.eu/docsroom/documents/45217.
250
For example, the 3rd Generation Partnership Project (3GPP) was established in 1998 to offer a platform for seven
telecommunications SDOs (ARIB, ATIS, CCSA, ETSI, TSDSI, TTA, TTC) to jointly develop protocols for mobile
communications. As of April 2021, 3GPP had almost 700 individual members. Each year more than 3 000 delegates meet
nearly 100 times in different working group configurations and engage in standard development activities which result
in the submission of more than 84 000 technical documents annually.
251
A patent family is a set of patents obtained at different patent offices, but which cover the same invention.
82
(Figure above).252
The number of SEP holders included in the ETSI IPR Database has also risen from
99 in 2010 to 261 in 2021.253
Figure 11: Trends in SEP landscape
Note(s): Number of owners indicate number of declaring companies (considering only the highest parent of larger corporate groups)
with at least 10 declared patent families. Source: IPlytics Platform 2022
The implementation of potentially large numbers of SEP-encumbered standards in a single product
is no longer limited to traditional ICT industries. The automotive industry is one of the first sectors
to rely on Internet of Things (IoT) technologies, which connect devices, machines, buildings and
other items with electronics, software or sensors. Interconnectivity across multiple devices and
networks and interoperability of vehicle parts require the use of standards such as 4G, 5G, Wi-Fi,
video compression (HEVC/VVC), Digital Video Broadcasting (DVB) and Near Field
Communication (NFC), just to name a few (Figure below).
Figure 12: Connectivity standards implemented in vehicles
Source: Tim Pohlmann, Intellectual Asset Management, May/June 2017, pp. 22-27
With the introduction of the 5G standard into ICT devices and vehicles, and the expected
implementation in an increasing number of product categories, the need for a more efficient SEP
licensing regime has become more urgent. New issues in SEP licensing have emerged as a result of
252
Because ETSI offers the most detail in its IPR Database, the SEPs data referenced below is limited to information
gathered through that source and relates to cellular connectivity standards only. Similar analysis exists with regard to
other standards but is more questionable with regard to source and accuracy.
253
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023.
83
the broad applicability of the 5G standard to a wide variety of smart devices in countless industries.254
Whereas over the last two decades most high-stakes SEP disputes have centred around mobile
communication devices (i.e., smartphones), we are already witnessing more disputes in the
automotive sector and expect other IoT sectors to be similarly affected.
A5.4 Transparency of FRAND rate
The FRAND commitment requires not only fair and reasonable royalties, but also non-discrimination
among licensees. Non-discrimination does not mean that the exact same terms and conditions need
to be offered to every single licensee but has been interpreted as treating similarly situated licensees
similarly.255
Determining whether terms and conditions are fair, reasonable and non-discriminatory
such that they comply with the FRAND commitment is difficult if not impossible without certain
information.
However, licensing negotiations and resulting license agreements are maintained under strict non-
disclosure agreements (“NDAs”). On the one hand, SEP holders are unwilling to share detailed claim
charts (documents linking the standard to claims in the patents) with implementers without an NDA
for fear that those patents and claims will be examined carefully by other stakeholders with the
objective to destroy either the claim of essentiality or the validity of the patents in question. SEP
holders also need an NDA to share comparable agreements with implementers to justify their
FRAND royalty demands. On the other hand, implementers want to sign an NDA before disclosing
sensitive product information and value and volume of sales.
There is, therefore, very limited publicly available information regarding FRAND terms and
conditions, mainly from the following256
:
i. Leading SEP holders on occasion make ex-ante announcements with information on their
intended licensing terms. These announcements aim to provide implementers with some
indication of potential future licensing costs, and to contribute to more predictable and more
transparent royalty rates. These announcements are rather rare, and often do not reflect the
actual royalty rate the SEP holder is willing to offer (see below).
ii. Some SEP licensors offer ‘Standard licensing terms’, which they disclose on their websites.
Again, these may not be the actual terms they ultimately sign with particular licensees.
iii. In the absence of a licensing program with informative standard licensing terms,
implementers may rely on (limited) publicly available information as indication of
(FRAND) licensing terms that they are likely to be offered. Publicly available data on
licensing deals are scarce and incomplete due to strategic considerations.257
Publicly
available data may come from compulsory disclosures, e.g. earnings reports to the Securities
Exchange Commission (SEC) and from court cases in the UK and the US.
254
In 2019, there existed 7.6 billion Internet of Things (IoT) connected devices worldwide. The overall number of IoT
connected devices is forecast to grow from 7.6 billion in 2019 to 24.1 billion by 2030 with the share of devices connected
to cellular networks gradually increasing. McKinseyestimates that by 2030 IoT could enable $5.5 trillion to $12.6 trillion
in value globally, including the value captured by consumers and customers of IoT products and services.
255
Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential Patents
‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021, Part 3.3, Section 6,
https://ec.europa.eu/docsroom/documents/45217.
256
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023.
257
Generally, it is neither in the licensor nor the licensee’s best interest to disclose information on licensing deals.
Licensors may want to preserve their bargaining position and capacity to price discriminate in subsequent negotiations.
Licensees may want to avoid revealing information to competitors on inputs that conform their competitive advantage.
84
iv. Implementers can expect to receive a licensing offer at the beginning of SEP licensing
negotiations, in which SEP holders describe proposed licensing terms, and explain why these
terms are FRAND. The level of information that is voluntarily disclosed through bilateral
negotiations may often fall short of the level of disclosure on comparable licences that
potential licensees may achieve through FRAND litigation in a judicial system with pre-trial
discovery (such as the US or UK).258
Publicly available information is patchy, disaggregated, and of inconsistent quality. Any comparison
of the available data points, let alone aggregation of such information, is challenging due to the lack
of visibility to the varying terms and scope of the underlying licensing agreements.259
Patent pools may provide more information on FRAND royalties, if such are formed and typically
after standard implementing products are sold on the markets. Whether this information would be
sufficient depends on how many SEP holders participate in the pool. It also depends on whether
implementers have participated in the FRAND royalty determination as pools that do not manage to
offer an acceptable royalty may have difficulties to license.
There are at least two main reasons why it is important to have more information about existing
FRAND terms and conditions:
 Stakeholders (both SEP holders and implementers) should be able to estimate the aggregate
royalty, i.e. the sum of all FRAND royalties they would have to pay to SEP holders (individually
or as one or more groups) if they were to obtain rights to all SEPs covering a particular standard.
For example, if there are 10 SEP holders and each of them charges EUR 1, the aggregate royalty
will be EUR 10. Even though implementers would usually not have to pay all SEP holders for a
given technology260
, the total landscape of SEPs needs to be considered in determining the
aggregate FRAND royalty.
 Stakeholders should be able to assess whether the offer is discriminatory or not. Without access
to information on existing licences and licensees, this is difficult, if not impossible.
Table 7: Number of declared 5G patents per SEP owner, with publicly announced royalty levels
SEP holder
Declared 5G patent
families (pending and
granted)
Declared 5G patent
families (granted in
at least one office)
Price 5G
Multi-mode
handset
Price 5G multi-
mode for 200
USD handset
Huawei Technologies 6 954 5 717 max 2.5 USD261
max 2.5 USD
QUALCOMM Incorporated 5 051 3 559 max 3.25%262
max 6.50 USD
Samsung Electronics Co.
Ltd.
4 848 3 487
LG Electronics Inc. 4 141 3 040
ZTE Corp 3 747 1 911
258
As an example of the scope of comparable licenses information available during a FRAND trial in the US, the Court
of Appeal of the Federal Circuit rejected the District Court’s decision to unseal the financial terms of 109 licenses between
Uniloc and third parties, which were disclosed to the parties during litigation opposing Uniloc and Apple.
259
Terms that may vary from one license agreement to another, even if generally related to the same technology area,
include royalty structures, the definition and scope of covered technology or technologies, the geographical scope of the
license rights and the definition of licensed patents (e.g., SEPs, non-SEPs, individual patents or families, patent
portfolios).
260
Consider that the implementer may have its own relevant SEP portfolio and therefore will not have to pay itself, and
there may be SEP holders that for various reasons may not seek royalties.
261
Huawei Releases White Paper on Innovation and Intellectual Property 2020 – Huawei.
262
qualcomm-5g-nr-royalty-terms-statement.pdf.
85
SEP holder
Declared 5G patent
families (pending and
granted)
Declared 5G patent
families (granted in
at least one office)
Price 5G
Multi-mode
handset
Price 5G multi-
mode for 200
USD handset
Nokia 2 989 2 192 max 3 EUR263
max 3 EUR
Telefonaktiebolaget LM
Ericsson
2 544 1 467 2.5 to 5 USD264
max 5 USD
CATT Datang Mobile 2 431 1 685
Guangdong Oppo Mobile
Telecommunications Corp.
2 245 1 591
Vivo Mobile
Communication Co. Ltd.
1 827 1 221
Sharp Corporation 1 644 1 123
NTT DOCOMO, Inc. 1 573 913
Apple Inc. 1 280 598
InterDigital 687 417 max 0.60%265
max 1.20 USD
NEC Corporation 484 333
Total 42 445 29 254 max 18.20 EUR
Source: IP Lytics and public statements as per footnotes
The royalty stack of individual ex-ante announcements of only 5 SEP holders reported in above is
maximum EUR 18.20 of the sales price of a handset costing 200 EUR, which represents ca. 9% of
the value of a EUR 200 handset. Those 5 SEP holders hold 13.352 declared 5G patent families
(granted in at least one patent office) which represents 46% of all patent families granted in at least
one patent office for 5G Release 15. The fact that the other SEP holders listed in Table above have
not made ex-ante announcements does not mean that they will not license their SEPs on FRAND
terms and conditions. Even if even some of those SEP holders may not ask for royalty payments and
even if the 5 SEP holders who made announcements may claim to have a larger share in the aggregate
royalty than their share in the total number of SEPs, the “aggregate royalty” based on such
announcements appears to be above EUR 30 for a EUR 200 handset.
This issue is exacerbated in situations where a new market using the standard is developed and there
is no historical data available, and where new market entrants, especially SMEs, do not have the
resources to unilaterally obtain the necessary data on FRAND terms and conditions.
The following sources provide limited guidance on the concept of FRAND:
i. General advisory documents by policy makers. Some more recent guidance documents, for
example in Japan266
, provide more specific interpretations. There may be inconsistency across
different sources of guidance.267
ii. Most SDO policy provisions on FRAND licensing commitments are very general.
263
Nokia licensing rate expectations for 5G/NR mobile phones | Nokia.
264
Ericsson’s FRAND Licensing terms for 5G/NR in 3GPP Release 15.
265
InterDigital – Create. Connect. Live. Inspire.
266
In 2018, the Japanese Patent Office adopted a Guide to Licensing Negotiations Involving Standard Essential Patents,
see https://www.jpo.go.jp/e/system/laws/rule/guideline/patent/document/rev-seps-tebiki/guide-seps-en.pdf. Japan is also
the only government that took a position on those issues in its Guide to Fair Value Calculation of Standard Essential
Patents for Multi-Component Products. In July 2021, the Japanese Ministry of Economy, Trade and Industry (METI)
formulated an interim report that indicates the results of the discussion in the Study Group on Licensing Environment of
Standard Essential Patents and the direction of further consideration.
267
Baron, J., Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing,
European Commission, DG GROW, 2023.
86
iii. A number of court decisions address FRAND licensing commitments and more generally
different parties’ FRAND obligations. At the EU level, the existing guidance consists of the
CJEU judgment Huawei v ZTE and is focused on the seeking of injunctions and the FRAND
negotiation process rather than interpreting the concept of FRAND in general. Significant
heterogeneity exists in the implementation of this general framework by national courts.
iv. Although an impressive amount of scholarship has analysed or interpreted the FRAND
concept, this scholarship is characterized by persistent differences of opinion on key aspects
of the FRAND concept such as royalty evaluation methods and obligations to license certain
parts of the relevant industry.
The two key aspects i.e., who should take a license and how FRAND royalty rates are determined –
are often the subject of contentious licensing negotiations and litigation among SEP holders and
potential licensees.268
Those have not been resolved to date.
A5.5 Level of licensing
Royalty structure269
The terms of a licence agreement governing royalties are one of the primary aspects of the agreement.
A royalty payment can be structured in different ways – for example, as a one-time lump-sum
payment, periodical instalment payments, payments based on reported sales volumes or turnover, or
combinations of any of this.
In principle, a royalty amount may be determined using a royalty base and a royalty rate applied to
that base. However, in many instances, the final royalty amount is agreed upon by the parties,
possibly using the “base x rate” formula as a guide or starting point.
Royalty Base
A royalty base is the unit-base to which the royalty rate applies. No single methodology is uniformly
agreed upon by SEP holders and implementers. Thus, depending on the circumstances, the base could
range from the value of the entire final product that includes the patented technology,270
to the value
of the smallest saleable patent practicing unit incorporating the patented technologies (the SSPPU),
or anything in between.
Royalty
The royalty can be set as a percentage of the royalty base (ad valorem royalties)271
or as a set amount
per unit.272
In practice, SEP holders and implementers may adopt hybrid royalty schemes, for
example, ad valorem royalties subject to (per-unit) royalty caps.273
Licensing level
Considerable debate exists regarding the right level of the value chain at which to license SEPs, and
who should pay the royalty. For example, IoT includes a vast variety of products, and each may have
a different value chain structure. For the communications function, as shown below, a chip may be
268
See Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on Licensing and Valuation of Standard Essential
Patents ‘SEPs Expert Group’ (E03600): Contribution to the Debate on SEPs, 2021, Part 3.2 – Licensing in the value
chain, https://ec.europa.eu/docsroom/documents/45217.
269
Expert group report, Part 3.3, Section 3. The text contains excerpts from the expert group report.
270
The value of sales could in principle be calculated in different ways, depending on whether unit prices are defined as
ex-factory prices, FOB prices, net selling prices (NSP), average selling prices (ASP), retail prices, etc.
271
For example, X% of the unit value of sales of the SSPPU or Y% of the unit value of sales of the end product.
272
For example, €Z per SSPPU or end product unit.
273
For example, X% of the unit value of sales of the SSPPU or Y% of the unit value of sales of the end product subject
to a €Z per SSPPU or end product unit cap.
87
supplied directly to an end product manufacturer or may be included in a component that is sold by
a supplier to an end product manufacturer. In the automotive sector, the value chain is even more
complicated.
Figure 13: Examples of value chains
Source: Continental AG
The approach used to determine the royalty amount has a direct bearing on the volume of licensed
products captured and the total royalty revenue resulting from licensing the patents. Below is an
illustration of how royalties may differ depending on the level at which the license is granted and
which method is applied.
Table 8: Examples of methods for setting SEP royalties at different value chain levels
Royalty base Price in EUR274
Ad valorem royalty Royalty in EUR (per unit)
Chip 20 1 % 0,20
Component 200 1 % 2.00
End-product 2 000 1 % 20.00
Royalty base Price in EUR Per unit royalty Expressed as a % of price
Chip 20 10 50%
Component 200 10 5%
End-product 2 000 10 0.5%
Source: Illustrative example
It is possible to have the same royalty using different royalty bases, i.e. a higher royalty rate applicable
to a larger base or a higher rate applicable to a smaller base may result in the same royalty.
274
These are fictitious prices for the purpose of illustration and have no relation to real prices.
88
A5.6 SEPs and customs enforcement regulation
Regulation (EU) No 608/2013275
concerning customs enforcement of intellectual property rights
gives the right to any patent holder to request customs to detain or suspend the release of goods
suspected of infringing its patents. The Regulation contains solely procedural rules for customs
authorities. Accordingly, it does not set out any criteria for ascertaining the existence of an
infringement of an intellectual property right. In that sense, it is different from an infringement
procedure before a court and customs authorities are not in the position to ascertain whether the
mandatory negotiation steps set out in the CJEU judgment in Huawei v. ZTE were followed in a
specific case.
Where the customs authorities suspect, on the basis of reasonable indications, that goods under their
supervision or under their control infringe the intellectual property right, they will suspend the release
of or detain the suspected goods. Customs will request the patent holder to confirm whether in his
conviction the patent has been infringed. Customs will notify the declarant or the holder of the goods
of the suspension of release or detention of the goods, requesting its agreement to destruction of
goods suspected of infringing the patent276
. If the declarant or the holder of the goods oppose to the
destruction or if customs do not deem it to have confirmed its agreement the patent holder has 10
working days to initiate legal infringement proceedings. Otherwise, the goods will be released or
their detention will be put to an end by customs. In case court proceedings are initiated, suspected
goods will remain under customs’ control until their completion of the court proceeding, unless
certain conditions are fulfilled. Additionally, for certain IPR cases (and patents are concerned) where
the customs authorities have been notified that proceedings have been initiated to determine whether
the concerned right has been infringed, the declarant may request customs to release the goods
(subject to the payment of a guarantee) before the completion of the proceedings.
Customs enforcement provided for in Regulation 608/2013 already encompasses Standard Essential
Patent (SEP) taking into account the broad definition of patent in Article 2(1)(e) of Regulation
608/2013: “a patent as provided for by national or Union law”.
The Regulation does not make a distinction between a regular patent and a SEP. A request for a
preliminary injunction was brought to a German court277
by an importer, whose goods were seized
at customs at the request of a SEP owner. The court examined whether the SEP holder abused its
dominant position by using the customs enforcement regulation. It noted that such an abuse is
possible, if the SEP holder used the customs enforcement regulation in order to circumvent the
negotiating steps set out in the CJEU judgement Huawei v ZTE. That would also mean that a SEP
holder should have fulfilled the Huawei v ZTE conditions before applying for a customs action under
Regulation 608/2013.
The problem is that the customs enforcement regulation does not require such an examination. Such
an obligation for customs would contradict the character and purpose of Regulation 608/2013 which
establishes only procedural rules for customs authorities and not set out any criteria for ascertaining
the existence of an infringement of an intellectual property right. Customs cannot distinguish between
an essential and a non-essential patent and, most importantly, it is not an appropriate authority to
assess if the guidelines of the CJEU have been complied with since it does not have the competence,
275
Regulation (EU) No. 608/2013 of the European Parliament and of the Council of 12 June 2013 concerning customs
enforcement of intellectual property rights, OJ L 181, 29.6.2013, pp. 15-34, https://eur-lex.europa.eu/legal-
content/EN/ALL/?uri=celex%3A32013R0608.
276
Regulation 608/2013 solely contains procedural rules for customs authorities. Accordingly, this Regulation does not
set out any criteria for ascertaining the existence of an infringement of an intellectual property right.
277
Regional Court Düsseldorf, Judgment of 9 November 2017, Samsung v 3G Licensing, 14d O 13/17,
http://www.justiz.nrw.de/nrwe/lgs/duesseldorf/lg_duesseldorf/j2017/14d_O_13_17_Urteil_20171109.html.
89
se resources and expertise to establish whether the negotiating steps set out on the CJEU judgement
Huawei v ZTE were conducted.
In practice, this means that the recourse of customs detention, available to other patent holders, would
be available to SEP holders only with the fulfilment of the negotiating steps set out on the CJEU
judgement Huawei v ZTE.
ANNEX 6: ADDITIONAL INFORMATION ON OPTIONS DISCARDED AT AN EARLY STAGE
A6.1 SEP register without mandatory essentiality check (sub-option to PO1)
The EU may set up a register and build up a system of voluntary essentiality checks. It will also adopt
an EU methodology for conducting essentiality checks. SEP holders will be free to register their SEPs
or not and do voluntary essentiality checks using the EUIPO’s administrative structure. SEP holders
already have all the facilities to make registrations with their SDOs and to conduct essentiality
checks. And currently, the majority are not using those possibilities as explained in the baseline
scenario. There is no reason to believe that this will change, if the register and the essentiality checks
are totally voluntary.
A6.2 Voluntary conciliation (sub-option to PO3)
Under a completely voluntary conciliation there will not be any possibility for any reports and
recommendations without the agreement of both parties. This is currently the situation with regard
to both arbitration and mediation. It is questionable to introduce yet another alternative dispute
mechanism to those already existing, if it does not bring any real added-value. Such an option will
also not help resolve the current difficulty in the implementation of the customs enforcement
regulation. Moreover, currently existing voluntary alternative dispute settlement systems are not
widely used. This is partly because parties need to agree on the procedure of the mediation or
arbitration but also due to the fact that the results are not published and the arbitrators and mediators
have limited powers to request documents. The confidentiality of voluntary alternative dispute
settlement has been identified as particularly detrimental to providing more clarity and transparency
to the FRAND concept. Finally, with regard to costs and duration of the arbitration procedure is not
advantageous compared to court proceedings.
A6.3 Mandatory aggregate royalty after the adoption of a standard SEP (sub-option to
PO4)
The SEP owners’ ex-ante incremental contribution to the product value seems an appropriate upper
bound for the FRAND royalty, for three reasons:
• First, if SEP holders obtained more than their incremental contribution in a scenario of
complementary inputs, downstream innovators will receive a smaller proportion of their incremental
contribution, which may unduly suppress downstream innovation.
• Second, the ex-ante incremental value is relevant, as otherwise there would be a risk that upstream
innovators are over-rewarded: the ex-post incremental value may exceed the ex-ante incremental
value because technologies included in the standard in practice cannot be replaced by alternative
technologies any longer after standardisation. Of course, from a welfare perspective it would be
unreasonable to reward upstream innovators for the loss of competition from standardisation.
• Third, if inventions can be pursued by multiple firms, granting a patent to the first successful firm,
and setting the patentee’s reward equal to the social contribution associated with the invention (taking
competing technologies into account) results in wasteful duplication of effort, and in socially too
strong incentives to innovate. The lesson from the relevant research is that the reward should be
90
strictly less than the social benefit of an invention in a conventional patent system in which the first
firm to achieve the invention receives a reward in the form of exclusive rights.278
This insight seems
to be of particular importance for technologies integrated into standards, which are commonly
protected by patents.
It should be noted that before a standard is developed there are different technologies competing on
a market, while after a standard is created usually one technology dominates the market.279
Ex-post, all patents that are essential to the same standard are complements (at least with respect to
the implementations of that standard). Knowing that their patents are now needed for the standard to
be used, individual patent owners may expect higher royalties and the ex-post stack ends up being
higher than the ex-ante stack as any possibility for substitution has been eliminated.280
Aggregate
royalty negotiations at this stage will be extremely difficult and therefore, they need to involve the
whole industry.
Ex-post aggregate royalty determination is difficult also because the implementing products began
using the standard without knowing or taking into account the need to pay FRAND royalties. This
means that the FRAND royalties may have to be paid from profit expectations for those implementers
that have not provided for such royalties in their product costs. Such implementers will naturally
want the lowest possible FRAND royalties, whereas SEP holders (especially if not also implementers
liable for paying royalties as well) will try to obtain the highest possible FRAND royalties. In this
situation, it may be extremely difficult to bridge the interests and agree on an aggregate royalty. It is
likely that the establishment of an arbitral panel would become the default option.
A6.4 Oblige SEP holders to license their SEPs royalty-free (Option 6)
Royalty-free patent policies at SDOs may promote and accelerate innovation and competition
upstream, in technology for standards, and downstream, in products and services related to the
standard.281
Consumers would thus benefit from royalty-free standards because the prices of
downstream products are lower and investment in innovation may be higher.
So why not a mandatory governmental policy for royalty free standards?
From an economic perspective whether or not a standard should be royalty-free really depends on
whether or not standard contributors have an economic interest to contribute based on such IPR policy
and there cannot be general rules that would determine that.
The factors that determine this decision include: (i) whether there is significant investment in R&D;
(ii) whether there are a number of contributors that are not users of the standard; (iii) whether there
may be potential alternatives of the standard and (iv) whether the cost of licensing (and litigation)
would exceed any potential licensing revenue.
278
See Shapiro, C., ‘Patent Reform: Aligning Reward And Contribution’, Innovation Policy and the Economy, 2007,
Vol. 8, pp. 115-116, https://www.nber.org/papers/w13141. Intuitively, the R&D effort of each innovator imposes a
negative externality on competitors working on a similar innovation, which each firm individually does not take into
account.
279
Baumol, W. J. and Swanson, D. G., ‘Reasonable And Nondiscriminatory (RAND) Royalties, Standards Selection,
And Control Of Market Power’, Antitrust Law Journal, 2005, Vol. 73, pp. 1-58,
https://www.jstor.org/stable/40843669#references_tab_contents.
280
CRA, Régibeau, P., De Coninck, R. and Zenger, H., Transparency, Predictability, and Efficiency of SSO-based
Standardization and SEP Licensing: A Report for the European Commission, 2016, Section 3.2, pp. 28-30,
https://ec.europa.eu/docsroom/documents/48794?locale=en.
281
An economic analysis prepared by Charles River Associates (CRA) shows that royalty-free policies induce firms to
reduce prices and sell more units of products and services that use the standard.
91
Examples of royalty free standards are some internet standards, e.g., TCP/IP or HTML published by
IETF, W3C or some OASIS standards; and several data exchange standards such as Bluetooth282
or
USB (Intel). These standards are claimed not to be too R&D intensive. For example, USB establishes
specifications for cables and protocols for connection, primarily focused on interoperability. The
USB 3.2 Standard comprises nine documents of about 2 000 pages.283
Wireless cellular standards, in contrast, are claimed to be extremely complex and require long 10+
year cycles of R&D. Release 15 of the 5G Cellular standard, for example, comprises 1 131 separate
documents totalling tens of thousands of pages and around 100 000 contributions.284
Table 9: SEP for free or not?
Technology Examples Status*
Internet Transmission Control Protocol (TCP); W3C, Extensible Markup Language
(XML); Uniform Resource Locator (URL); Java Script
Free
Data storage and exchange CD, DVD Royalty
USB Free
Cellular standards 2G, 3G, 4G, 5G Royalty
Photo formats JPEG Royalty
(Short-range) wireless data
exchange
WiFi, Near Field Communication (NFC) Royalty
Bluetooth Free**
Video and audio
compression standards
MPEG, H.264/AVC, H.265/HEVC, H.266/VVC (Versatile
Video Coding)
Royalty
VP8, VP9, VP10 Free
* Free – free of charge; Royalty – royalty bearing
** Bluetooth requires membership and charges a small fee for its Bluetooth qualification process
Source: Prof. Dr. Joachim Henkel, Adrian Göttfried (TUM) presentation “Royalty-free standards”, May 2022
For SDOs to have something to standardize, contributors to the standard must first develop potential
contributions. The SDO technical committee would review all technical contributions and select the
best quality contribution. Table below explains the process in a basic manner.
Table 10: Standard development and usage – actions by different parties involved
For 1 SEP Before
standard
development
During standard development After standard adoption
Innovator 1 Invest in R&D Contribution to
SDO
Nothing
Innovator 2 Invest in R&D Contribution to
SDO
May ask for
FRAND licence
SDO Select
contribution 2
Implementer Implement
contribution 2
May need
FRAND licence
Original source: Putnam, J. L., Economic Determinations in “FRAND rate” – Setting: A guide for the Perplexed, 2018, Fordham
International Law Journal, Vol. 41, Issue 4 (modified)
The initial investment in R&D may be subject to high risk, in particular the risk that the related
contributions are not selected into the standard. This is a simplification that needs to be taken in
282
A fee is due under the Bluetooth qualification process.
283
See https://www.usb.org/document-library/usb-32-revision-11-june-2022.
284
https://www.3gpp.org/dynareport/SpecList.htm?release=Rel-15&tech=4&ts=1&tr=1.
92
perspective. For a large contributor, this risk would be somewhat offset since some of its
contributions will be accepted and some others will not.
R&D Investment <= Expected ROI (Product) + Expected ROI (Licensing)
If licensing royalties are zero, then there will be no licensing revenue from contributing technology
to standards. In that scenario, firms contributing to standards – typically product leaders – incur R&D
costs that their competitors – product followers – avoid.
Royalty-free patent policies at SDOs would thus facilitate entry and promote competition
downstream because they reduce uncertainty about royalties and other license terms for SEPs and
would thus benefit SMEs with limited or no SEP licensing experience. However, the product leaders
must be able to gain a sufficient first-mover or other competitive advantage to pay for the R&D
associated with standardization.
Obligatory royalty-free licensing may thus not promote the participation in the standardization
process of companies that do not implement the standardized technology such as research institutes.
Another consideration is whether certain product followers (implementers) of the dominant royalty-
bearing incumbent standard have an interest and ability to develop an alternative cheaper or royalty
free standard to avoid paying royalties (e.g., FireWire).
A decision to forego remuneration could also depend on the ability and cost related to licensing of
SEPs. SEP licensing involves significant cost and successful licensing may depend on a number of
factors such as ability to persuade implementers to take a licence.
A6.5 A uniform SEP royalty per standard irrespective of the use (Option 7)
In the public consultation a number of stakeholders call on the Commission to adopt an approach
based on a uniform FRAND royalty for a commercial standard, irrespective of the use of the
technology.285
Some stakeholders fear that differentiated royalties on SEPs could allow SEP holders to extract
excessive royalties from certain implementers of complex products, whose value encompasses much
more than just the patented technology under the threat of injunctions.
As end products are complex and include many innovative technologies, there is furthermore a
concern that a differentiated royalty would become a “tax on innovations” carried out by
implementers. If a technology standard constitutes an enabling technology, the value that the standard
adds to different products depends i.a. on the value of the standard-compliant applications developed
by implementers. Suppose that a connectivity technology is implemented by two different end
product makers. One of these implementers develops innovative applications requiring the use of the
connectivity technology. After these R&D expenses are sunk, the connectivity technology adds
greater value to the products that include these innovative applications. Nevertheless, allowing patent
holders to charge the manufacturers of these enhanced products a higher rate reduces implementers’
incentives to invest in innovative implementations of a standard. If the different end product makers
are competing with each other, differentiated rates may furthermore unfairly erode some of the
competitive advantage created by producers’ innovations.
For this reason, some stakeholders consider that the same royalty should be charged for a particular
standardised technology irrespective of its use.
285
See Annex 9, Questions on FRAND.
93
The above are valid concerns. On the other hand, price differentiation is, however, the predominant
approach in SEP licensing. Price differentiation and uniform price could be explained with the
hypothetical examples below.
Different market segments have different willingness-to-pay for a SEP license. With price
differentiation, each segment A, B and C (illustration below) could be charged its willingness-to-pay.
The coloured area shows the revenues (600 €).
Figure 14: Example: Price differentiation
Source: Illustrative example
With a uniform price that ensures that all segments are served, revenues would be lower (300 €):
Figure 15: Example: low uniform price
Source: Illustrative example
A uniform price of 2 € maximizes revenues to 400 €, but implies that segment C is not served:
94
Figure 16: Example: higher uniform price
Source: Illustrative example
On the one hand, uniform pricing may thus exclude certain implementations of innovative technology
standards, and/or depress SEP owners’ royalty revenue such as to make the development of these
standards unprofitable. On the other hand, differentiating the royalty by the value of the final product
may allow SEP holders to extract the returns from investments undertaken by the upstream and
downstream manufacturers, and thus undermine implementers’ incentives to invest in the first place.
In its 2017 Communication, the Commission stated that FRAND terms and conditions should reflect
the value that the technology brings, should not depend on the success of the product, and may be
different from sector to sector. The public consultation indicated that there is a broad agreement that
the FRAND royalty may depend on the functionalities of the standard that are being implemented so
that a uniform price may not always be justifiable.
A uniform price for a commercial standard may thus not be the optimal option, so that certain form
of price differentiation may be necessary. However, it has to be underlined that licensing on FRAND
terms and conditions is not equal to maximising SEP owners’ revenues. The royalty should be fair
and reasonable to maintain innovation incentives for standard developing firms.
It should be noted that price differentiation increases transaction costs. In the IoT price differentiation
based on licensing to device makers (of which there may be more than 10 000 for cellular standards),
would lead to increased transaction costs in comparison to licensing upstream. Price differentiation
may be achieved not only on the device level but also on component level. Such an approach would
combine the advantages of price differentiation with lower transaction costs of upstream licensing.
95
A6.6 Choice of organisation to run the Competence Centre
The Competence Centre plays an important role in all the options considered. It will manage the
register and pool of evaluators conducting essentiality checks (PO2), manage FRAND determination
procedures and a roster of conciliators (PO3), conduct studies and SME support activities (PO1),
publish aggregate royalties (PO4) and act as one stop shop in PO5. The question arises which
organisation should be tasked with these activities.
Potential candidates include the European Union Intellectual Property Office (EUIPO), the European
Patent Office (EPO) (both of which are specialised in granting IP rights) and Standard Developing
Organisation (SDOs). When vesting an institution with the Competence Centre responsibilities a few
criteria should be considered. First, the body should have the technical capacity to fulfil the role of a
Competence Centre, which includes experience with managing registers and alternative dispute
processes. Second, the body should be accountable to the EU public, in particular the European
Parliament and should be under the jurisdiction of the CJEU. Third, the body needs to be aligned
with the EU’s overarching political values and current policy priorities (e.g. support for SMEs).
The EPO has extensive experience in examining patents. Some of its patent examiners are also
familiar with standard documents and can conduct essentiality checks. While the EPO has the
required expertise in managing registers, it currently builds up its expertise in alternative dispute
resolution. The EPO thus has the technical ability to perform the functions of a Competence Centre.
However, the EPO is not an EU body, it is an international organisation which has not been entrusted
by its members with any competence that would enable it to take the functions of a Competence
Centre and conduct essentiality checks. Such a mandate can only be granted by amending an
international agreement. The process for amendment of an international agreement under Article 218
TFEU is different from the process of adopting a Regulation under Article 114 TFEU. This would
require the consent of all members of the European Patent Organisation (39 countries, including 12
non-EU countries). Being an independent international organisation, the EPO is not directly
accountable to the EU Public and the European Parliament, and its decisions are not the subject of a
review by the CJEU. While it is aligned with overarching political values in the EU, it determines its
own policies. A majority of two thirds of respondents to the public consultation suggested that the
EPO is best placed to conduct essentiality checks, because it has the technical capacity, and it is likely
to produce unbiased results. The public consultation indicated, however, that the key criteria for
selecting EPO were that it is a public body, and it is independent.
Table 11: Which authority/body would be best placed for doing essentiality checks?
% replies
The EPO 63%
The national patent offices 28%
Specialised law firms 28%
Other organisation, please specify* 25%
A combination of the bodies listed above. If so, please specify which bodies and why in your view
both should be responsible for this task
11%
No. of replies 57
* Other suggestions included: WIPO or creation of a board of experts” (BOE) at SDO level
Source: Public consultations results, see Annex 9, Q33
There are many different SDOs specialising in developing standards in specific field(s), e.g. ETSI
(EU) develops communication standards, IEEE (US) develops the Wi-Fi standards, ITU-T
(Switzerland) develops the codecs standards. Therefore, vesting them with Competence Centre
responsibilities (or some of them, e.g. register with essentiality checks) would mean multiplication
of costs (many dedicated registers), risks for quality (more difficult to maintain the same level of
essentiality checks) and reduced user-friendliness (differently designed databases, implementers of
different standards would have to check several SDOs). The main task of SDOs is standard
development and not SEP licensing. Such organisations have no experience in essentiality checks
96
and alternative dispute resolution. They do not have experience in supporting SMEs with trainings
nor negotiations. Except for ETSI, CEN and CENELEC, all other relevant standard development
organisations such as the ITU, ISO or IEEE, are located outside of the European Union. The European
Union does therefore not have jurisdiction over all relevant SDOs and consequently cannot impose
obligations of Competence Centre on them (adoption of such obligation would be a voluntary choice
of non-EU SDO). This means that regulation would not be able to cover all relevant standards.
Finally, decisions of the SDOs are not subject to the review of the CJEU, nor to the scrutiny of the
European Parliament.
When looking at experience in administering IP rights, the EUIPO would be well equipped to take
up the role of the Competence Centre. EUIPO is already responsible, inter alia, for the single filing,
examination, grant and registration of the EU trademark and the registered Community design, two
unitary intellectual property rights valid across the 27 Member States of the EU. It also offers
alternative dispute resolution services such as mediation, conciliation, assisted negotiation and expert
determination.286
Finally, EUIPO has already in place funding mechanisms to support SMEs, such
as for instance the SME fund. The concerns regarding accountability and courts do not affect EU
agencies such as EUIPO.
Table 12: Merits of potential candidates for the Competence Centre
EUIPO EPO SDOs
EU body? Yes No No
Legal basis Art. 114 Article 218 TFEU No legal basis
Supervision by
the European
Parliament?
(+) Yes (-) No (-) No
Accountability to
the EU public
(++) Full, EU agency (0/+) Some, indirectly, as EU
MS have 70% of the votes
(0/+) Limited for CEN,
CENELEC and ETSI,
(European Commission
cannot vote)
Alignment with
the EU policies
(++) Implements EU
policy/legislation (e.g. EU
Trademarks or Designs)
(0/+) Policy reflects views of
all 39 member states; changes
require the majority of them
to agree
(0/+) CEN, CENELEC and
ETSI develop European
standards, others not
Technical
expertise
(++) experience with registers
and ADR
(+) expertise in European
patents and registers, does not
conduct essentiality checks
right now.
(+) Expertise in technology
and registers, currently do not
conduct essentiality checks
nor ADR
Decisions subject
to review of the
CJEU?
(+) Yes (-) No (EPO´s Board of
Appeal, instead)
(-) No
Other
considerations
x (+) 63% support in public
consultation
(-) functions of the
Competence Centre spread
among many organisations
The table above compares merits of different choices for the central authority. Against such a multi-
dimensional backdrop it seems that the best result in terms of the three criteria identified at the
beginning of this section could be achieved by the EUIPO. The EUIPO is a trusted body with a lot
of experience in managing registers and alternative dispute resolutions. It is an EU body able to build
up a system for essentiality checks that would guarantee lack of bias. It also has experience in
supporting SMEs in managing their intellectual property.
286
https://euipo.europa.eu/ohimportal/en/adr-service.
97
ANNEX 7: ADDITIONAL INFORMATION IN SUPPORT OF IMPACT ANALYSIS
A7.1 Cost-benefit analysis
As indicated in the problem definition chapter data on SEP licensing are scarce and rarely observable
(available in public domain) as negotiated license agreements are sensitive corporate information.
Hence, the below cost and benefits analysis is based on available literature, analysis of public
information, interviews, consultations and SEP experts judgements but it also required a large
number of assumptions. To our knowledge such estimates (e.g. as regards affected population size in
the EU) are not available in the literature. The analysis is based on estimated averages which strive
to capture the situation of both large multinational players and small companies, thus standard
deviation from these averages is expected to be large. Providing more granular information would
require even more assumptions, however whenever possible we try to show impact on SMEs. Taking
all the above into account the numbers presented below should be treated with caution. The purpose
of these calculations is to allow for comparison of different policy options rather than precise
estimation of impacts on each company affected.
All assumptions are presented below (more in Annex A5.1 Market descriptions). Presented figures
refer to annual cost and benefits. Setup and running cost of the Competence Centre are based on
EUIPO best possible estimations at this moment in time. EUIPO has vast experience with
management of applications, payments and registers (e.g. for EU Trademark or Registered
Community Designs), studies (European Observatory on Infringements of Intellectual Property
Rights), ADR and support to SMEs (SME Fund). Setup cost is depreciated over ten years period and
proportionally added to the annual running cost.
It is important to note that the regulatory proposal will not set any of the fees. Instead, they will be
established subsequently by an implementing act which will take into account not only calculations
presented in this impact assessment but also political considerations. The fees presented in the IA are
just an indication of the fees that would cover the costs of the Competence Centre (based on an initial
cost prognosis by the EUIPO). SME SEP holders and SEP implementers will both receive a reduction
in administrative fees.
The benefits are calculated as a value of service or information provided to stakeholders (using
average values, e.g. an average negotiation cost). Consequently, they do not necessarily represent
actual cost savings (e.g. in case a company will not engage in negotiations).
It is important to note that not all cost/benefits can be quantified due to uncertainties of outcomes.
For instance, impact on licensing revenue of SEP holders depends on whether this initiative will
trigger/contribute to changes in the level of aggregate royalties for standards and in number of
implementers taking a license. Nevertheless, discussion of potential implications on revenues of SEP
holders and final price for customers is also presented below.
Since options build on each other (each option contains all the elements of an earlier option) the
analysis below looks both at additional and cumulative costs and benefits of each option. Figures are
rounded whenever this does not distort calculated totals.
PO1: Voluntary guidance
Costs:
EUIPO estimates that setup cost of the Competence Centre would include defining scope and
procedures for new activities, including among others preparation of SEP related information and
training materials, design of courses, identification of experts / setting up a framework for launching
studies, screening and gathering existing public terms and conditions, licence agreements and case
law summaries. IT costs would include creation of a database for studies, case law as well as
Competence Centre’s webpage where all the information could be accessed.
98
The initial cost is estimated at around EUR 760 000 and IT setup at EUR 50 000.
Annual running cost of the Centre is estimated at EUR 430 000 with IT maintenance cost of EUR 10
000 and annual depreciation of the one-off costs of EUR 81 000. Cost of three studies per year is
estimated at around EUR 30 000 each. Total annual cost amounts to around EUR 611 000.
Since services of the Competence Centre will be free of charge, in case this option is the only
preferred choice a source for financing of setup and running expenses should be secured.
Benefits:
Based on estimated number of potential licensees per year, we expect that from 40 to 80 SMEs will
seek advice, participate in trainings and use dedicated resources. Additionally, up to 230 EU based
implementers and up to 190 non-EU based firms with subsidiaries in the EU, their legal counsels
(380), judges or conciliators (around 35) and both parties to each trial (2x35) involved in SEP court
cases, around 261 SEP holders as well as an unknown number of researchers, academia and other
interested parties might use Centre’s resources. This adds up to an audience of around 1 200 per year.
Value of a SEP licensing/negotiations training can be estimated at around EUR 1 500.287
Value of
access to around three new studies per year, a database of license agreements and case-law summaries
could be comparable to access cost to lower range commercial patent databases, around EUR
5 000.288
Thus, the annual benefits to users would amount to around EUR 5.9 million per year.
Table 13: Average incremental annual costs and benefits of PO1
no. affected benefit cost
Total
(+ saving, -
cost)
PO1 (guidelines and Centre)
SME trainings 80 1 500 0 120 000
Implementers EU 230 5 000 0 1 150 000
Non EU implementers with EU
subsidiaries
190 5 000 0 950 000
SEP owners 261 5 000 0 1 305 000
judges/legal counsels/other 480 5 000 0 2 400 000
Competence Centre costs 1 - 611 000 - 611 000
Total 5 314 000
Source: Own assessment based on studies and assumptions
Table 14: Average total annual costs and benefits of option PO1 by main categories of affected
parties and their origin
EU non-EU Total
SEP implementers
Costs
Benefits 1 870 000 1 550 000 3 420 000
Net 1 870 000 1 550 000 3 420 000
SEP owners
Costs
Benefits 375 750 2 129 250 2 505 000
287
For instance cost of “Patent Licensing: Strategy and negotiation” delivered by French European Institute for Enterprise
and Intellectual Property (IEEPI) costs around EUR 1300, while course on “Valuation and exploitation of intangible
assets” costs EUR 2400. See: https://www.ieepi.org/en/formations/.
288
Baron et al. report cost of access to commercial patent databases of between EUR 5 000 and 25 000, see Baron, J.,
Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing, European
Commission, DG GROW, 2023, p. 32.
99
Net 375 750 2 129 250 2 505 000
Subtotal (net effect for implementers and owners) 2 245 750 3 679 250 5 925 000
Competence Centre - 611 000 - 611 000
Total net benefit 1 634 750 3 679 250 5 314 000
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
PO2: SEP register with essentiality checks
Costs:
Competence Centre’s initial costs would include the following tasks: creation and validation of a
pool of SEP evaluators (including tasks such as drafting a call for interest, select candidates, creating
a process for updating the pool of experts, create a process to regularly communicate with the
experts…); setting up a case management/distribution system, management of conflicts of interest;
creating work instructions, templates and check lists; defining and implement quality controls (formal
checks); setting up performance management system (define indicators, define measuring system and
implement automatic measuring); trainings for evaluators (including materials); setting up SEP
examination outcome review mechanism (substantive quality controls); setting up examiners/experts
payment system. IT cost would include a database with interface, e-application and fee payment,
connection to patent databases (e.g. of EPO).
Recurring costs would include: admissibility check/formal checks of patents before registration; fees
management, maintaining a pool/network of active SEP examiners; case management/distribution to
examiners; conflicts of interest check; quality controls; performance management; trainings of SEP
checkers; SEP experts payment; register users management.
Assumptions:
Both setup and running cost of this option will depend on the number of patent families registered289
and checked for essentiality. In case the register would be only used by SEP holders to prove their
right to enforce SEPs against EU implementers the expected number of registered patents is rather
low and limited to patents most susceptible of being used in licensing negotiations (so called proud
list of patents owned by a SEP holder). In such scenario the number of patents registered is estimated
at 3 550 initially and 10% of it each year after. In case at least some SEP holders will use the register
as an indication of their portfolio strength, while others will not; and neither courts nor other third
parties will compel unwilling SEP holders to use the register to document their portfolio strength
(e.g. as evidence in infringement cases) – the number of patents registered initially is estimated at up
to 30 000 and 10% of that in subsequent years. Finally, in case the register becomes widely used by
all parties in SEP negotiations, including for approximation on royalties allocation by SEP holders
based on patent count, it is expected that nearly all patent families including European potential SEPs
are registered (around 60 000) and companies will further add up to 20% patents in an attempt to
improve their share of patents essential to a standard, resulting in approximately 72 000 patents
registered initially and 10% of that number in subsequent years. 290
. Especially in case this option is
selected in combination with options that follows, there’s higher likelihood that the register will be
289
Even if European patent family consist of patents in several Contracting States, all European patents gives its owner
the same rights as a national patent in each country for which it is granted. A SEP holder can register only one patent per
family and tag the remaining European family members using EPO patent database Espacenet
(https://worldwide.espacenet.com).
290
Baron, J., Essentiality Checks for Potential SEPs – Framework for Assessing the Impact of Different Policy Options,
European Commission, DG GROW, 2023. The study noted that the practice of numerical proportionality for allocating
royalty payments in SEP pools resulted in an increase in number of patents related to the underlying standard.
100
used to approximate stake of SEP holder in a standard during license negotiations and infringement
cases, e.g. by conciliators or facilitators (in PO3, PO4 and PO5) and judges. Thus, for the analysis
below we assume the maximum scenario of 72 000 patents registered. In case a lower number of
patent families is registered, the EUIPO back office costs would remain roughly the same while costs
of essentiality checks would be proportionally lower.
Essentiality check by an expert is estimated to take around 10 hours, and the wage of expert is
approximately EUR 500 per hour, making the total cost of assessment EUR 5 000.291
It is expected that claim charts for patents most susceptible of being used in negotiations are already
available (so called business as usual cost).292
For the remaining patents we assume that SEP holders
will perform a limited screening of their patents before registration but generally will tend to register
all (potential) SEP they have. Claim charts may (but do not have to) be provided by SEP holder for
the patents selected for essentiality check. Costs of producing a claim chart are assumed to be
equivalent to the costs of the essentiality check itself. We also assume that for roughly half of the
patents selected for essentiality checks SEP holders will decide to produce or update a claim chart.
Other costs of SEP holder including gathering all the information necessary for registration and cost
of filling in the registration form are estimated at EUR 200 per patent. Some information necessary
for registration should be already available to the SEP holders. For instance, some SDOs also require
owners of potential SEPs to identify the patent numbers of potential SEPs and the number of the
specifications to which these patents relate. Some information would also be repeated and some
would be identical for many different patents (e.g. name of the standard or nature of the licensing
FRAND commitment).
Sub-option i) Essentiality checks for all SEPs in the register
One-off costs of the Competence Centre to implement this option are estimated at around EUR
840 000 with associated IT costs of EUR 700 000, bringing total cost to around EUR 1.54 million.
The annual internal cost of the Competence Centre in an initial year(s) is expected to be higher due
to high number of patents that will go through the system. It is estimated at around EUR 5.2 million
(including IT maintenance of EUR 140 000 and depreciation of one-off cost of EUR 154 000).
We estimate that initially 72 000 patents will have to be checked for essentiality and that SEP holders
following negative essentiality outcome will demand recheck of up to 27 500 patents. Altogether
around 99 500 patents will have to be checked, requiring engagement of around 565 assessors. Given
the estimated number of experts in the field in the EU of 1 500 this should be feasible even in one
291
There are different estimates of the essentiality assessment costs. Bekkers et al. report that the typical fee charged by
patent pools for essentiality assessments of a European patent is EUR 5 000-10 000, see Bekkers, R., Tur, E. M., Henkel,
J., et al., Overcoming inefficiencies of patent licensing: A method to assess a patent’s essentiality for technical standards,
2021, https://pure.tue.nl/ws/portalfiles/portal/194804728/BEKKERS_et_al_2021_essentiality_assessments.pdf. CRA
estimated the cost of a “medium assessment” to be EUR 4 500, and the cost of a “full assessment” to be EUR 9 000, see
CRA, Régibeau, P., De Coninck, R. and Zenger, H., Transparency, Predictability, and Efficiency of SSO-based
Standardization and SEP Licensing: A Report for the European Commission, 2016,
https://ec.europa.eu/docsroom/documents/48794?locale=en. According to survey by Baron, the average cost of such an
assessment for the remuneration of the expert alone is EUR 4 159. Taking into account mass scale of assessment and
resulting specialisation we have proposed a cost figure at the lower end of the estimates proposed, that is at EUR 5 000.
see - Baron, J., Essentiality Checks for Potential SEPs – Framework for Assessing the Impact of Different Policy
Options, European Commission, DG GROW, 2023. Additionally we estimate the number of working hours per year at
1760. Meaning that one assessor could check 176 patents per year.
292
Many or most existing claim charts may relate to foreign, in particular US members of global potential SEP families,
and may have to be adapted to European patents. Source: Baron, J., Essentiality Checks for Potential SEPs – Framework
for Assessing the Impact of Different Policy Options, European Commission, DG GROW, 2023.
101
year, but it might take longer as well.293
The expert remuneration for assessing this amount of patents
is estimated at EUR 498 million.
In the subsequent years as the number of patents subject to checking is expected at 10% of the initial
volume, the costs will also be lower. Centre’s total costs are estimated at EUR 1.5 million (including
IT maintenance and depreciation as above) and remuneration of examiners at EUR 49.8 million.
Consequently, over the course of ten years (initial year plus nine subsequent years) the average annual
cost of this sub-option is estimated at EUR 96.4 million.
An average registration fee for this option that should cover the cost of the Centre is estimated at
EUR 140 per patent. Additionally, SEP holders will have to pay the cost of essentiality checks of
EUR 5 000 per patent (only one per patent family).
Internal costs of SEP holders connected to preparation of information necessary for registration and
filling of forms for all 72 000 patent families is estimated at EUR 2.7 million annually on average
during a decade. Additionally, SEP holders may want to submit claim charts for patents selected for
essentiality check. This cost is estimated at around EUR 34.2 million annually on average over the
course of 10 years.
Sub-option ii) Essentiality checks for up to a fixed number (e.g. 50-100) of patents selected by SEP
holder and a representative random sample of all SEPs.
One-off costs of the Competence Centre to implement this option are estimated at around EUR
710 000 with associated IT costs of EUR 700 000, bringing total cost to around EUR 1.41 million.
Costs are lower than in sub-option i) due to lower number of expected essentiality checks and
associated reduced workload (e.g. selecting/training examiners).
The annual cost of the Centre in an initial year(s) is expected to be higher due to high number of
patents that will go through the system. It is estimated at around EUR 3.7 million (including IT
maintenance of EUR 140 000 and depreciation of one-off cost of EUR 141 000).
We estimate that initially around 13 550 patents will have to be checked for essentiality (3 550 patents
selected by owners and additional 10 000 patents in order to estimate essentiality shares of patent
portfolios per standard and per owner). SEP holders following negative essentiality outcome will
demand recheck of up to 885 patents from the self-selected group (patents selected for random check
will not be rechecked in order to assure reliability of the sample).294
Altogether in the first year(s)
around 14 500 patents will have to be checked, requiring engagement of around 80 assessors. The
cost of assessing this amount of patents is estimated at EUR 72 million.
In the subsequent years as the number of patents subject to checking is expected at 10% of the initial
volume, the costs will also be lower. Centre’s internal costs are estimated at EUR 1.1 million
(including IT maintenance and depreciation as above) and remuneration of examiners at EUR 7.2
million.
293
Experts assess that in the EU the number of experts qualified in doing such an assessments stands at around 650 patent
attorneys and 800 patent examiners. Based on EPO register of patent attorneys, number of EPO patent examiners and
estimation on the number of examiners in the national patent office weighted by the share of EPO patent application in
the technical field of telecommunication (IPC H04).
294
Allowing for appeals to the assessments of randomly sampled patents produces few benefits, and significant costs –
appeals are likely to correct a significant share of random assessment error, which is a relatively benign and
inconsequential error for purposes of assessing firms’ relative portfolio size (false positive and false negative random
errors tend to cancel each other out). Appeals are however likely to exacerbate, rather than correct over-confirmation
bias, as negative assessments are significantly more likely to be appealed. By reducing random error and increasing bias,
appeals make the assessments of firms’ relative portfolio sizes less reliable. Source: Baron, J., Essentiality Checks for
Potential SEPs – Framework for Assessing the Impact of Different Policy Options, European Commission, DG GROW,
2023.
102
Consequently, over the course of ten years (initial year plus nine subsequent years) the average annual
cost of this sub-option is estimated at EUR 15.1 million.
An average registration fee for this sub-option that should cover the costs of the Centre is estimated
at EUR 100 per patent. Additionally, SEP holders will have to pay the cost of essentiality checks of
EUR 5 000 per patent.
Internal costs of SEP holders connected to preparation of information necessary for registration and
filling of forms for all 72 000 patent families is estimated at EUR 2.7 million annually on average
during a decade. Additionally, SEP holders may want to submit claim charts for patents selected for
essentiality check. This cost is estimated at around EUR 6.4 million annually on average over the
course of 10 years.
Costs for users of the register
The option assumes free access to the basic information in the register such as names of SEP holders
and their contact details for licensing, the number of SEPs they have registered and the essentiality
rate of all registered SEPs. There will be a fee however, for access to information on essentiality of
concrete patents or portfolios. The fees for accessing the register should at least cover the costs of the
Centre associated with its activities described under PO1 (which is also included in this option). Fees
could for instance take form of an annual subscription. In such case we assume that all implementers
that are likely to take a license will buy access. As described in Annex 5.1 these are expected to be
around 150 large and 40 EU based SMEs, and 190 non-EU firms with subsidiaries in the EU annually.
At this level of demand the minimum prices to cover PO1 costs are estimated at EUR 1 700 for large
firms and EUR 850 for SMEs and total access for all firms per year at EUR 0.61 million.
Benefits:
Implementers taking a license will benefit from information if patents that are presented to them
during negotiations can be more safely assumed to be actually essential. In the same vain, SEP
holders would find it easier to prove essentiality to their negotiating partners (also during the cross-
licensing negotiations).295
We estimate that essentiality checks may constitute up to 10% of an
average negotiation cost of EUR 108 000.296
Consequently the average benefits (e.g. cost saved or
value of information provided) amounts to up to EUR 10 800 (due to lower value of licenses entered
by SME implementers we estimated their benefit at half of this value). With implementers and SEP
holders entering an estimated 575 new SEP licenses in the EU per year, respectively, the cumulative
value amounts to a maximum of around EUR 6.2 million per year for implementers and the same
amount for SEP holders (this includes only licensing agreements concluded in the EU). It assumes
that essentiality checks are conducted for every new SEP license that is signed, or that implementers
that thus far were not conducting essentiality checks will use (benefit from having) such information
during their licensing negotiations. Moreover, free access to the database will be given to judges,
with around 35 cases per year concerning SEP licensing in the EU, the savings on expertise on
essentiality can amount to EUR 0.4 million.
SEP holders can eliminate identified non-essential patents from their portfolio and avoid payment of
patent renewal fees. Some patents would also be lost to validity challenges (as can happen to any
other patent). On the other hand, use of patent count for determination of aggregate royalty division
295
Non-monetary benefits of cross-licensing amount to EUR 4 billion per year, on top of monetary royalty income on
cellular standards of EUR 18 billion per year. See Market description.
296
Average negotiation cost for all SEP licenses granted per year (including both bilateral negotiations where costs can
reach millions of EUR and licensing through patent pools where it is close to zero). Own calculations based on Baron, J.,
Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing, European
Commission, DG GROW, pp. 138-139, Table 16.
103
is expected to incentivise patenting and increase patent fees.297
In case of sub-option i) the net effect
is reduction in the number of patents by around 300298
a year producing over a decade an average
annual savings on patent fees of EUR 11.6 million (which are a loss of revenue to the EU patent
offices). In case of sub-option ii) as only a sample of approximately 14% of patents will be checked,
the number of patents eliminated is lower than the new patents put into the register. Approximately
1 900299
new patents will be added to register a year producing over a decade an average annual fee
cost of EUR 29 million (which will become a new revenue to the EU patent offices: covering patent
examination cost, and net profit of patent offices).300
As explained in chapter 6, the materialisation
of these costs/benefits is however, uncertain.
Finally, it should be noted that only around 15% of the SEP holder costs presented above will apply
to firms with headquarters in the EU (based on share of declared SEPs).
Taking cost and benefits together sub-option i) is expected to deliver net costs at around EUR 121
million per year over a decade, while sub-option ii) net cost of EUR 12.3 million. As benefits of both
options (excluding the uncertain impact on the number of patents) are the same, option ii) is selected.
See tables below for details. The first table shows costs and benefits in the initial year, the subsequent
years and a ten-year annual average. The ten-year-average is used in the following tables as well as
throughout this document to describe impact of PO2. This is to facilitate reading and ensure
comparability with the impacts of other options (which are the same for an initial and subsequent
years).
Table 15: Total average incremental annual costs and benefits of PO2 in the initial year and in
subsequent years as well as a ten-year-average (PO1 not included)
PO2 (common)
no. licensing
negotiations Initial year
Subsequent
years
10 years
average
Implementers large EU 230 2 484 000 2 484 000 2 484 000
Implementers SME EU 55 297 000 297 000 297 000
Non EU implementers with EU
subsidiaries 290 3 132 000 3 132 000 3 132 000
SEP owners 575 6 210 000 6 210 000 6 210 000
No. of entities
Access fee large implementers (EU and
non-EU with subsidiaries in the EU) 340 - 578 000 - 578 000 - 578 000
Access fee SME implementers 40 - 34 000 - 34 000 - 34 000
judges 35 378 000 378 000 378 000
i) PO2 (all checked) patents
SEP holder (registration fee) -5 244 000 -1 494 000 -1 869 000
297
It should be noted that increase in patenting is not necessary connected with new innovation, but rather with the
number of patents that cover an invention.
298
Discontinuation of around 2 600 patents after approximately five years of maintaining them and registration of
approximately 2 300 new patents with intention to keep for 20 years (SEPs are kept longer than other patents due to their
value).
299
Discontinuation of around 400 patents after approximately five years of maintaining them and registration of
approximately 2 300 new patents with intention to keep for 20 years.
300
Based on EPO website: https://www.epo.org/applying/european/unitary/unitary-patent/cost.html and own
calculations. We estimate that an average annual fee for obtaining a patent in four EU Member States and maintaining it
for 20 years is around EUR 2 000. An average annual saving for discontinuing a patent after five years is around EUR
2 400. In order to assure comparability with other figures in this annex we present average savings over a decade. This
means that e.g. annual cost of a new patent acquired in the initial year applies for ten years, while annual cost of a patent
acquired in the fifth year applies just for half of that period – calculation not presented.
104
PO2 (common)
no. licensing
negotiations Initial year
Subsequent
years
10 years
average
SEP holder (essentiality checks)
72 000 patent families
registered and checked
initially (+27 500
rechecked), 10% of
that in subsequent
years -497 500 000 -49 750 000 -94 525 000
SEP holder, savings on patents
maintenance cost 11 600 000 11 600 000 11 600 000
SEP holder claim charts
update/preparation 50% of patents updated -180 000 000 -18 000 000 -34 200 000
SEP holder form filling
72 000 in 1st year, 10%
thereafter -14 400 000 -1 440 000 -2 736 000
EPO and NPO change in patent
revenue -11 600 000 -11 600 000 -11 600 000
total i) -685 255 000 -58 795 000 -121 441 000
ii) PO2 (50-100+sample) patents
SEP holder (registration fee)
72 000 patent families
registered initially,
10% of that in
subsequent years
-3 681 000 -1 091 000 -1 350 000
SEP holder (essentiality checks)
13 550 checked
initially (+885
rechecked), 10% in
subsequent years -72 175 000 -7 217 500 -13 713 250
SEP holder, cost of patents registration
and maintenance -29 000 000 -29 000 000 -29 000 000
SEP holder claim charts
update/preparation 50% of patents updated -33 875 000 -3 387 500 -6 436 250
SEP holder form filling
72 000 in 1st year, 10%
thereafter -14 400 000 -1 440 000 -2 736 000
EPO and NPO change in patent
revenue 29 000 000 29 000 000 29 000 000
Total ii) -112 242 000 -1 247 000 -12 346 500
Source: Own assessment based on studies and assumptions
Table 16: Ten-year-average incremental annual costs and benefits of PO2 (PO1 not included)
PO2 (common)
no. licensing
negotiations benefit cost
Total
(+ saving, - cost)
Implementers large EU 230 10 800 2 484 000
Implementers SME EU 55 5 400 297 000
Non EU implementers with EU
subsidiaries 290
10 800 3 132 000
SEP owners 575 10 800 6 210 000
No. of entities
Access fee large implementers (EU and
non-EU with subsidiaries in the EU) 340 1 700 - 578 000
Access fee SME implementers 40 1 500 - 60 000
judges 35 10 800 0 378 000
i) PO2 (all checked) patents
SEP holder (registration fee) 72 000 patent families registered and checked
initially (+27 500 rechecked), 10% of that in
subsequent years
-1 869 000
SEP holder (essentiality checks) -94 525 000
105
PO2 (common)
no. licensing
negotiations benefit cost
Total
(+ saving, - cost)
SEP holder, savings on patents
maintenance cost 11 600 000
SEP holder claim charts
update/preparation 50% of patents updated 5 000 -34 200 000
SEP holder form filling 72 000 in 1st year, 10% thereafter -2 736 000
EPO and NPO change in patent
revenue -11 600 000
total i) -121 441 000
ii) PO2 (50-100+sample) patents
SEP holder (registration fee)
72 000 patent families registered initially, 10% of
that in subsequent years -1 350 000
SEP holder (essentiality checks)
13 550 checked initially (+885 rechecked), 10% in
subsequent years -13 713 250
SEP holder, cost of patents registration
and maintenance -29 000 000
SEP holder claim charts
update/preparation 50% of patents updated 5 000 -6 436 250
SEP holder form filling 72 000 in 1st year, 10% thereafter 200 -2 736 000
EPO and NPO change in patent
revenue 29 000 000
Total ii) -12 346 500
Source: Own assessment based on studies and assumptions
Table 17: Summary of ten-year-average incremental annual costs and benefits of PO2 (PO1 not
included): A – sub-option i); B – sub-option ii)
A – sub-option i) EU non-EU Total
SEP implementers
Costs - 306 000 - 306 000 - 612 000
Benefits 2 875 500 3 226 500 6 102 000
Net 2 569 500 2 920 500 5 490 000
SEP owners
Costs -19 999 500 -113 330 500 -133 330 000
Benefits 2 699 850 15 299 150 17 999 000
Net -17 299 650 -98 031 350 -115 331 000
Subtotal (net effect for implementers and owners) -14 730 150 -95 110 850 -109 841 000
EPO/NPO benefit -11 600 000 -11 600 000
Total net benefit -26 330 150 -95 110 850 -121 441 000
B – sub-option ii) EU non-EU Total
SEP implementers
Costs - 306 000 - 306 000 - 612 000
Benefits 2 875 500 3 226 500 6 102 000
Net 2 569 500 2 920 500 5 490 000
SEP owners
Costs -7 985 325 -45 250 175 -53 235 500
Benefits 959 850 5 439 150 6 399 000
Net -7 025 475 -39 811 025 -46 836 500
Subtotal (net effect for implementers and owners) -4 455 975 -36 890 525 -41 346 500
EPO/NPO benefit 29 000 000 29 000 000
Total net benefit 24 544 025 -36 890 525 -12 346 500
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
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Table 18: Ten-year-average total annual costs and benefits of option PO2 (sub-option ii) by main
categories of affected parties and their origin (including PO1)
EU non-EU Total
SEP implementers
Costs - 306 000 - 306 000 - 612 000
Benefits 4 745 500 4 776 500 9 522 000
Net 4 439 500 4 470 500 8 910 000
SEP owners
Costs -7 985 325 -45 250 175 -53 235 500
Benefits 1 335 600 7 568 400 8 904 000
Net -6 649 725 -37 681 775 -44 331 500
Subtotal (net effect for implementers and owners) -2 210 225 -33 211 275 -35 421 500
EPO/NPO benefit 29 000 000 29 000 000
Total net benefit 26 789 775 -33 211 275 -6 421 500
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
PO3: SEP register with essentiality checks and conciliations
Costs:
Competence Centre’s initial cost would include creation of a “roster” of conciliators. IT cost would
include creating a secured channel for communication/exchange of documents between conciliators
and parties, creation of an internal secured register of conciliation reports, as well as payment system.
These costs are expected at around EUR 130 000 and EUR 40 000 respectively.
Recurring costs would include management of the choice of conciliators, payment processing and
providing other back-office support to conciliators. Additionally, there would be IT maintenance and
depreciation of one-off costs. These costs are estimated at EUR 30 000 (for around 70 conciliations
per year), EUR 8 000 and EUR 17 000 respectively, bringing the total of EUR 55 000 per year.
On average a conciliation is expected to take 40 hours of conciliator’s time, at hourly wage of EUR
500. The average cost of engaging a conciliator is estimated at EUR 20 000.
We expect around 35 conciliation per year (based on court litigation information) and another 35
conciliations to help in FRAND determination. At such demand, the average cost of conciliation to
cover all cost of the Centre and conciliator is estimated at EUR 20 800.
Benefits:
Based on WIPO experience alternative dispute resolution mechanism can reduce need for court
proceeding by up to 70%. This would mean that around 24 conciliations would result in agreement,
and court costs (first instance, estimated average at around EUR 170 000 in the EU)301
would be
avoided. While for 30% or 11 cases the matter would still end in court, albeit with additional evidence
from the conciliator’s report. In case of the remaining 35 conciliations the value of assistance in
reaching FRAND terms and conditions is estimated at around EUR 97 000 (accounting for
approximately 90% of an average negotiation cost of EUR 108 000).302
Taking also costs into account
the benefits delivered by this option are estimated at EUR 6 million per year. See table below for a
summary.
Table 19: Average incremental annual costs and benefits of PO3 (PO1 and PO2 not included)
301
There are strong variations around this average, court costs could be much higher.
302
Average negotiation cost for all SEP licenses granted per year (including both bilateral negotiations where costs can
reach millions of EUR and licensing through patent pools where it is close to zero). Own calculations based on Baron, J.,
Arque-Castells, P., Leonard, A., et al., Empirical Assessment of Potential Challenges in SEP Licensing, European
Commission, DG GROW, pp. 138-139, Table 16.
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PO3 no. affected benefit cost
Total
(+ saving, - cost)
Cases (that will not go to court) 24 170 000 4 080 000
Help in FRAND determination 35 97 200 3 402 000
Fees 70 20 800 -1 456 000
total 6 026 000
Source: Own assessment based on studies and assumptions
Table 20: Summary of average incremental annual costs and benefits of PO3 (PO1 and PO2 not
included)
EU non-EU Total
SEP implementers
Costs - 364 000 - 364 000 - 728 000
Benefits 1 870 500 1 870 500 3 741 000
Net 1 506 500 1 506 500 3 013 000
SEP owners
Costs - 109 200 - 618 800 - 728 000
Benefits 561 150 3 179 850 3 741 000
Net 451 950 2 561 050 3 013 000
Total net benefit 1 958 450 4 067 550 6 026 000
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
Table 21: Average total annual costs and benefits of option PO3 by main categories of affected
parties and their origin (including PO1 and PO2 sub-option ii)
EU non-EU Total
SEP implementers
Costs - 670 000 - 670 000 -1 340 000
Benefits 6 616 000 6 647 000 13 263 000
Net 5 946 000 5 977 000 11 923 000
SEP owners
Costs -8 094 525 -45 868 975 -53 963 500
Benefits 1 896 750 10 748 250 12 645 000
Net -6 197 775 -35 120 725 -41 318 500
Subtotal (net effect for implementers and owners) - 251 775 -29 143 725 -29 395 500
EPO/NPO benefit 29 000 000 29 000 000
Total net benefit 28 748 225 -29 143 725 - 395 500
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
PO4: Aggregate royalty for SEP
Costs:
Competence Centre’s initial costs would be entirely covered by PO3 as conciliators for the aggregate
royalty expert assessment panel would come from the roster created in PO3. IT cost would include
changes to the register web interface to publish aggregate royalties and are estimated at EUR 25 000.
Recurring costs would include back-office support for expert assessment, including publication of
call for interest, reception of position papers, preparation of meetings and management of payments,
all estimated at around EUR 40 000 for three expert determinations per year. Additionally, there
would be IT maintenance and depreciation of one-off costs of EUR 5 000 and EUR 2 500
respectively. Together the average costs are estimated at EUR 47 500 per year.
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With expected up to 3 expert assessments per year,303
the cost per assessment is estimated at EUR
135 800. It consists primarily of remuneration for an estimated 240 hours of work of conciliators
(hourly wage EUR 500) on each case, as well as a proportion of cost of the Competence Centre.
Benefits:
Publication of an aggregate royalty is expected to facilitate negotiations for all implementers who
currently take license in the EU and pay license fee. As estimated in Annex A5.1 these concern
around 575 new SEP licenses involving EU stakeholders signed per year. The value of information
on aggregate royalty is estimated to save around EUR 22 000 in negotiation costs (accounting for
approximately 20% of an average negotiation cost of EUR 108 000).304
Taking also costs into account the net benefits delivered by this option are estimated at EUR 25
million per year. See table below for a summary.
Table 22: Average incremental annual costs and benefits of PO4 (PO1, PO2 and PO3 not included)
PO4 no. affected benefit cost
Total
(+ saving, - cost)
Negotiation savings implementer EU 285 22 000 6 270 000
Negotiation savings implementer
non-EU with subsidiaries in the EU 290 22 000 6 380 000
SEP holders 575 22 000 12 650 000
Imp and SEP hold - Expert panel 3 135 800 - 407 400
total 24 892 600
Source: Own assessment based on studies and assumptions
Table 23: Summary of average incremental annual costs and benefits of PO4 (PO1, PO2 and PO3
not included)
EU non-EU Total
SEP implementers
Costs - 101 850 - 101 850 - 203 700
Benefits 6 270 000 6 380 000 12 650 000
Net 6 168 150 6 278 150 12 446 300
SEP owners
Costs - 30 555 - 173 145 - 203 700
Benefits 1 897 500 10 752 500 12 650 000
Net 1 866 945 10 579 355 12 446 300
Total net benefit 8 035 095 16 857 505 24 892 600
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
Table 24: Average total annual costs and benefits of option PO4 by main categories of affected
parties and their origin (including PO1, PO2 sub-option ii) and PO3)
EU non-EU Total
SEP implementers
Costs - 771 850 - 771 850 -1 543 700
Benefits 12 886 000 13 027 000 25 913 000
Net 12 114 150 12 255 150 24 369 300
303
It should be noted that it is expected that SEP holders will provide ex-ante aggregate royalty themselves in most cases,
and expert panel will be used only in case they did not or when there is a major disagreement on the level announced.
304
Cost savings may result from the fact that the Competence Centre’s guidance on an aggregate royalty reduces the need
for parties to carry out their own assessments of such an aggregate royalty, or from the fact that the availability of
objective benchmarks for a FRAND rate reduces the need for other expenses related to the conduct of SEP licensing
negotiations.
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EU non-EU Total
SEP owners
Costs -8 125 080 -46 042 120 -54 167 200
Benefits 3 794 250 21 500 750 25 295 000
Net -4 330 830 -24 541 370 -28 872 200
Subtotal (net effect for implementers and owners) 7 783 320 -12 286 220 -4 502 900
EPO/NPO benefit 29 000 000 29 000 000
Total net benefit 36 783 320 -12 286 220 24 497 100
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
PO5: SEP clearing house
Costs:
Competence Centre’s initial costs would include set up of clearing house’s process, criteria, accounts,
payments system and verification system. IT cost would be also connected to the payment and
royalties’ distribution system. These are estimated at EUR 260 000 and EUR 40 000 respectively.
Running costs of the clearing house would include managing all the payments and license agreements
including handling incoming payments from implementers, transferring proportionate amounts to
SEP holders, handling updates to information (e.g. on expected sales), control and verification of
payments. They are estimated at EUR 220 000 per year. Additionally, there would be IT maintenance
and depreciation of one-off costs of EUR 8 000 and EUR 30 000 respectively. Together the average
costs are estimated at EUR 258 000 per year.
In case SEP holders cannot reach an agreement over allocation of aggregate royalty among them,
they can request assistance of the Centre’s facilitator. Such request is expected to occur on average
1.5 times per year over a decade. Cost of conciliation is borne by SEP holders and amounts to EUR
120 000 (one conciliation, equivalent to remuneration for an average 240 hours of conciliator’s work
at EUR 500 per hour).
With expected average annual number of payments at around 3 000 during a decade,305
the
transaction processing cost to be borne by the implementer per payment is estimated at around EUR
95.
Benefits:
Clearing house can strongly reduce the need for SEP license negotiations. On top of negotiation
savings/benefits delivered by PO2 and PO4 it is expected to help to reduce the remaining 70% of an
average negotiation cost of 108 000 EUR. While the demand for use of clearing house services will
depend on the implementer’s assessment of its ability to get a better deal in bilateral negotiations, we
estimate that the majority of implementers will want to use the clearing house for at least some of the
standards they have. The reduction in number of licensing negotiations is thus estimated at 250 for
EU based firms and 250 for non-EU based firms with subsidiaries in the EU.
Taking also costs into account the net benefits/savings delivered by this option are estimated at EUR
76 million per year. See table below for a summary.
305
Assuming one payment per year, and that nearly all implementers that is around 300 EU-based and around 250 non-
EU based (with EU subsidiaries) will use this facility for at least some of their license agreements. Note that the number
of payments cumulate as in subsequent years not only new licenses are added but also payments for the existing ones
have to be made.
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Table 25: Average incremental annual costs and benefits of PO5 (PO1, PO2, PO3 and PO4 not
included)
PO5
no. licensing
negotiations benefit cost
Total
(+ saving, - cost)
Negotiation savings for EU
implementers 250 75 600 18 900 000
Negotiation savings for non-EU
implementers with subsidiaries in the
EU 250 75 600 18 900 000
SEP holders savings 500 75 600 37 800 000
Conciliators assistance in SEP
holders’ negotiations on division of
aggregate royalty (not obligatory, on
demand only) 1.5 120 000 - 180 000
Payment fees per year 2 750 94 - 258 000
total 75 162 000
Source: Own assessment based on studies and assumptions
Table 26: Summary of average incremental annual costs and benefits of PO5 (PO1, PO2, PO3 and
PO4 not included)
EU non-EU Total
SEP implementers
Costs - 129 000 - 129 000 - 258 000
Benefits 18 900 000 18 900 000 37 800 000
Net 18 771 000 18 771 000 37 542 000
SEP owners
Costs - 27 000 - 153 000 - 180 000
Benefits 5 670 000 32 130 000 37 800 000
Net 5 643 000 31 977 000 37 620 000
Total net benefit 24 414 000 50 748 000 75 162 000
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
Table 27: Average total annual costs and benefits of option PO5 by main categories of affected
parties and their origin (including PO1, PO2 sub-option ii), PO3 and PO4)
EU non-EU Total
SEP implementers
Costs - 900 850 - 900 850 -1 801 700
Benefits 31 786 000 31 927 000 63 713 000
Net 30 885 150 31 026 150 61 911 300
SEP owners
Costs -8 152 080 -46 195 120 -54 347 200
Benefits 9 464 250 53 630 750 63 095 000
Net 1 312 170 7 435 630 8 747 800
Subtotal (net effect for implementers and owners) 32 197 320 38 461 780 70 659 100
EPO/NPO benefit 29 000 000 29 000 000
Total net benefit 61 197 320 38 461 780 99 659 100
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
Competence Centre – summary of costs and fees
Anticipated costs of the Competence Centre were enumerated above for each option, this section
summarises these costs. It also summaries fees that are expected to cover the Centre’s costs.
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Table 28: One-off and recurrent costs of the Competence Centre per option and approximation of
fees to break even.
PO1 PO2 (sub-option ii) PO3 PO4 PO5 Preferred
option
PO1 to PO4
One-off costs (EUR thousands)
One off 760 710 130 0 260 1 600
One off IT 50 700 40 25 40 815
Total One off 810 1 410 170 25 300 2 415
PO1 PO2 (sub-option ii) PO3 PO4 PO5 Preferred
option
PO1 to
PO4**
Year 1 Year 2
to 10
10-year-
avg.
Recurrent costs (EUR thousands)
running costs 430 3 400 810 1 069 30 40 220 1 569
IT maintenance 10 140 140 140 8 5 8 163
depreciation of One-off* 81 141 141 141 17 2.5 30 241.5
total 521 3 681 1 091 1 350 55 47.5 258 1 973.5
Fee calculations (EUR) - to cover Centre’s costs (without external experts costs)
Action
Patent registrations:
Concili
ations
Expert
opinion
Payme
nts
Quantity per year 72 000 7 200 13 680 70 3 2 750
Fee per case*** (EUR,
rounded)
Free
****
50 150 100 800 15 800 95
* One-off cost depreciated over 10 years; ** PO2 using 10-year-average; *** total recurrent cost divided by quantity per year****
cost of PO1 (including additional external cost of EUR 90 000 for studies) will be covered by fees to access the PO2 register:
estimated at EUR 1 700 for large and EUR 850 for SMEs.
Source: Own assessment based on EUIPO input
Summary of estimated average remunerations of external experts:
 PO1: studies: avg. EUR 30 000 per study
 PO2: essentiality checks: EUR 5 000 per check
 PO3: conciliation: EUR 20 000 per average conciliation
 PO4: expert opinion: EUR 120 000 per average opinion
 PO5: conciliator to recommend aggregate royalty allocation method: EUR 120 000 per
average recommendation
Impacts difficult to assess – impact on royalties income of SEP holders and on price of SEP
embedding products for EU customers
There are impacts which are difficult to assess, such as whether or not this initiative will have impact
on the average royalties firms will have to pay for implementing standards, the number of SEP
holders actively licensing their SEPs, or the number of implementers paying royalties. Furthermore,
other market developments not related to this initiative (e.g. rise of IoT, new patent pools/patent pools
policies) may influence both royalties and number of implementers. These impacts may further
determine indirect effects, such as effects on firms’ incentives to contribute their innovative
112
technologies to standards development, or implement standards potentially subject to SEPs and
innovate at the product level.
Worldwide royalty income on cellular standards is estimated at USD 18 billion in 2015306
and if the
share of EU licensees in that royalty burden is proportional to the EU GDP in the world
(approximately 1/6) then EU firms pay approximately USD 3 billion (around EUR 3 billion assuming
currency parity) on SEP royalties each year.
In case global royalty levels (income) would go down by just 1% (or number of paying implementers
globally would go down by 1%), the savings for the EU implementers are estimated at EUR 30
million and almost equivalent or slightly lower figure represents losses of the EU SEP holders.307
In
case royalty levels increase, the impacts will be reversed. Thus, the impacts of changes to global SEP
royalty rates (or change in number of implementers paying current levels of royalties) on EU based
SEP holders and implementers largely cancel each other out. A different redistribution of economic
surplus may, however, affect innovation and standard implementation incentives in ways that are
difficult to predict.
In case change of royalty levels (or change in number of implementers) is limited only to the EU
based firms, the difference between impacts on the EU based implementers and SEP holder may be
more pronounced. For instance, if the share of SEPs held by EU based SEP holders continues to go
down and/or share of EU licensed implementers will increase, a cumulative negative impact on all
EU implementers will be more significant than the cumulative positive impact on the EU based SEP
holders (especially if the changes are significant, e.g. resulting in double digit change of royalty
income).
Impact on customers
Many implementers currently use standards without having a license. Thus, effect on availability of
SEP embedding products is unknow. We expect that lower transaction costs will promote license-
based applications and more implementers will take a license. It may be just a shift from unlicensed
products to licensed products, or real increase in technology take-up resulting in more SEP
embedding products on the market. Independently of the effects of this proposal, rise of the Internet
of Things (IoT) applications is expected to increase the number of SEP embedding products on the
market.
Impact on SEP price (royalties paid by implementers) is unknow as described above. Announcements
of aggregate royalties and FRAND determination process may (but do not have to) contribute to
lowering the royalties paid by implementers.
Consequently, we have two effects working in different directions: i) potentially more firms taking a
license (increasing implementers costs) and ii) potentially lower royalties paid (decreasing
implementers cost). Finally, the impact on prices for final customers will depend on the competition
on a given product market: any change in royalties paid by producers may be internalised by a firm
or passed on to final customers.
Impacts of the preferred option
The below table presents a summary of quantifiable costs and benefits brought by the preferred
option. The option is expected to produce annual savings of around EUR 24.5 million per year during
a decade.
306
CRA, Régibeau, P., De Coninck, R. and Zenger, H., Transparency, Predictability, and Efficiency of SSO-based
Standardization and SEP Licensing: A Report for the European Commission, 2016, p. 57,
https://ec.europa.eu/docsroom/documents/48794?locale=en.
307
Since we estimate revenue of the EU based SEP holder using an approximate share of their SEPs in the total number
of declared SEPs (15%) which is similar to the EU GDP share in global economy used to calculate implementers’ savings.
113
Table 29: Ten-year-average annual costs and benefits of the preferred option PO4 (consisting of
incremental costs and savings of each option it consists of)
no. affected benefit cost
Total
(+ saving, -
cost)
PO1 (guidelines and Centre)
SME trainings 80 1 500 0 120 000
Implementers EU 230 5 000 0 1 150 000
Non EU implementers with EU
subsidiaries
190 5 000 0 950 000
SEP owners 261 5 000 0 1 305 000
judges/legal counsels/other 480 5 000 0 2 400 000
subtotal PO1 5 925 000
PO2 (register, 50-100+sample)
no. licensing
negotiations
Implementers large EU 230 10 800 2 484 000
Implementers SME EU 55 5 400 297 000
Non EU implementers with EU
subsidiaries 290
10 800 3 132 000
SEP owners 575 10 800 6 210 000
No. of entities
Access fee large implementers (EU and
non-EU with subsidiaries in the EU) 340 1 700 - 578 000
Access fee SME implementers 40 1 500 - 60 000
judges 35 10 800 0 378 000
patents
SEP holder (registration fee)
72 000 patent families registered initially, 10% of that
in subsequent years -1 350 000
SEP holder (essentiality checks)
13 550 checked initially (+885 rechecked), 10% in
subsequent years -13 713 250
SEP holder, cost of patents registration
and maintenance -29 000 000
SEP holder claim charts
update/preparation 50% of patents updated 5 000 -6 436 250
SEP holder form filling 72 000 in 1st year, 10% thereafter 200 -2 736 000
EPO and NPO change in patent revenue 29 000 000
subtotal: additions of PO2 -12 346 500
PO3 (conciliation) no. affected
Cases (that will not go to court) 24 170 000 4 080 000
Help in FRAND determination 35 97 200 3 402 000
Fees 70 20 800 -1 456 000
subtotal: additions of PO3 6 026 000
PO4 (aggregate royalty)
no. licensing
negotiations
Negotiation savings implementer EU 285 22 000 6 270 000
Negotiation savings implementer non-
EU with subsidiaries in the EU 290 22 000 6 380 000
SEP holders 575 22 000 12 650 000
Imp and SEP hold - Expert panel 3 135 800 - 407 400
114
no. affected benefit cost
Total
(+ saving, -
cost)
subtotal: additions of PO4 24 892 600
Benefits/Savings of the preferred option PO4 24 497 100
Source: Own assessment based on studies and assumptions
The majority of quantifiable benefits will accrue to standards implementers, while SEP holders are
expected to face additional costs (mainly due to PO2). The European patent office/national patent
offices are also expected to benefit from new patent revenue. The tables below summarise the effects
of the preferred option i) in the initial year (when there will be significantly more patents registrations
and essentiality checks); ii) in the subsequent years (when the number of patent registrations and
essentiality checks will account for approximately 10% of the initial numbers) and iii) as a ten-year-
average annual costs and benefits – which is used throughout the document.
Table 30: Average annual costs and benefits of the preferred option PO4 in the initial year by main
categories of affected parties and their origin
EU non-EU Total
SEP implementers
Costs - 771 850 - 771 850 -1 543 700
Benefits 12 886 000 13 027 000 25 913 000
Net 12 114 150 12 255 150* 24 369 300
SEP owners
Costs -23 109 405 -130 953 295 -154 062 700
Benefits 3 794 250 21 500 750 25 295 000
Net -19 315 155 -109 452 545 -128 767 700
Subtotal (net effect for implementers and owners) -7 201 005 -97 197 395 -104 398 400
EPO/NPO benefit 29 000 000 29 000 000
Total net benefit 21 798 995 -97 197 395 -75 398 400
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
Table 31: Average annual costs and benefits of the preferred option PO4 in subsequent years by
main categories of affected parties and their origin
EU non-EU Total
SEP implementers
Costs - 771 850 - 771 850 -1 543 700
Benefits 12 886 000 13 027 000 25 913 000
Net 12 114 150 12 255 150* 24 369 300
SEP owners
Costs -6 460 155 -36 607 545 -43 067 700
Benefits 3 794 250 21 500 750 25 295 000
Net -2 665 905 -15 106 795 -17 772 700
Subtotal (net effect for implementers and owners) 9 448 245 -2 851 645 6 596 600
EPO/NPO benefit 29 000 000 29 000 000
Total net benefit 38 448 245 -2 851 645 35 596 600
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
Table 32: Ten-year-average annual costs and benefits of the preferred option PO4 by main
categories of affected parties and their origin
EU non-EU Total
SEP implementers
Costs - 771 850 - 771 850 -1 543 700
Benefits 12 886 000 13 027 000 25 913 000
Net 12 114 150 12 255 150* 24 369 300
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EU non-EU Total
SEP owners
Costs -8 125 080 -46 042 120 -54 167 200
Benefits 3 794 250 21 500 750 25 295 000
Net -4 330 830 -24 541 370 -28 872 200
Subtotal (net effect for implementers and owners) 7 783 320 -12 286 220 -4 502 900
EPO/NPO benefit 29 000 000 29 000 000
Total net benefit 36 783 320 -12 286 220 24 497 100
* concerns non-EU implementers with subsidiaries in the EU
Source: Own assessment based on studies and assumptions
Analysing geographical distribution of quantifiable impacts of the preferred option in the EU, the
benefits should outweigh the cost in case of companies from all but three (FI, SE and LU) EU
Member States.
Table 33: Ten-year-average annual impact on costs and benefits of the preferred option PO4 by main
categories of affected parties and per EU Member States.
Member State SEP Owners SEP Implementers Net impacts
DE - 363 162 3 274 007 2 910 844
IT - 6 682 1 625 624 1 618 942
FR - 73 497 1 316 755 1 243 258
ES 933 108 933 108
NL - 259 402 916 852 657 450
PL 562 466 562 466
CZ 399 904 399 904
BE 256 849 256 849
HU 253 597 253 597
AT 211 331 211 331
IE - 7 075 201 577 194 503
EL 188 572 188 572
RO 182 070 182 070
SK 169 065 169 065
PT 165 814 165 814
BG 133 301 133 301
HR 94 286 94 286
DK 61 774 61 774
SI 58 522 58 522
LT 52 020 52 020
MT 42 266 42 266
EE 26 010 26 010
LV 13 005 13 005
CY 6 502 6 502
LU - 53 846 16 256 - 37 589
SE -1 413 739 487 687 - 926 052
FI -2 153 427 464 928 -1 688 499
Total -4 330 830 12 114 150 7 783 320
Assumptions: Distribution of cost per SEP holder according to estimated share of declared SEPs, distribution of benefits among
implementers according to estimated number of companies affected per country (see Annex A5.1)
Source: Own assessment based on studies and assumptions
The following table summarises the fees and other costs of the preferred option on market
participants.
Table 34: Summary of fees and other cost of the preferred option
Action: Approx. cost Total avg. annual cost (€ million)
Costs introduced by regulation
Patent registration €100 per patent 1.4
Essentiality checks € 5 000 per check 13.7
116
Action: Approx. cost Total avg. annual cost (€ million)
Conciliation fees and conciliator
remuneration
€800 fee of EUIPO, avg. €20 000
fee of conciliator
1.5
Aggregate royalty determination process €15 800 fee of EUIPO, avg.
€120 000 fee of conciliators panel
0.4
Register access fee (basic access for free) €1700 large firms, €850 SMEs 0.6
Total fees and expert remuneration: 17.6
Firms’ internal costs to comply
Filling forms (OIOO eligible cost) €200 per patent 2.7
Update claim charts €2 500 per patent 6.4
Total internal costs: 9.1
Source: Own assessment based on studies and assumptions
Are these costs significant for SEP holders?
Looking at the cost of the preferred option especially on SEP owners, one should put these numbers
into perspective. For instance, analysing just the cost applicable to the EU based SEP owners, which
amounts to around EUR 8.1 million per year (see Table 32), the share applicable to the SE and FI
SEP holders amounts to around EUR 6.7 million (as they own approximately 80% of EU SEPs). This
cost will fall on two EU firms, Nokia and Ericsson. As discussed in Annex A5.1 the combined annual
revenue of these firms amounts to EUR 45 billion, and R&D expenditures to EUR 8 billion. The
additional costs due to the preferred option will constitute respectively around 0.015% of the revenue
and 0.084% of R&D budget. Thus, it seems affordable to these firms.308
As regards other SEP holders also from outside of the EU, the cost of essentiality check amounts to
approximately 11% of the fees that should be paid for maintaining a European Patent for 20 years in
four Member States; 0.4% of the value of an essential patent if its use is limited only to the territory
of the EU and 0.06% when it is used globally.
Table 35: Cost of essentiality check in perspective of other costs or incomes on SEP
EUR
% of cost of an
essentiality check
Essentiality check per patent 5 000 100.0%
Cost of maintaining a European Patent for 20 years in four
Member States 44 420 11.3%
Value of an essential patent to SEP holder
(net present value for 10 years of collecting royalties)
Avg. 8 000 000
(EUR 6 to 10 million) 0.06%
Value of an essential patent to SEP holder (limited to EU only)
(net present value for 10 years of collecting royalties)
Avg. 1 350 000
(EUR 1 to 1.7 million) 0.4%
Source: EPO for European patent: https://www.epo.org/applying/european/unitary/unitary-patent/cost.html; Baron, J., Essentiality
Checks for Potential SEPs – Framework for Assessing the Impact of Different Policy Options, European Commission, DG GROW,
2023, p.45 on the value of an essential patent
The next figure compares the total average annual cost of the new SEP system (excluding benefits)
for SEP holders to the total annual estimated revenues on cellular standards.
308
Additionally, these two firms incur large expenditures on SEP related litigations. Thus, they could benefit more than
average firm from lowering of litigation costs brought by the preferred option.
117
Figure 17: Total average annual costs (for SEP owners) of the new system in comparison to estimated
annual revenues from cellular standards (EUR million + in brackets: cost of SEP initiative as % of
a value of a given line)
* CRA(2016), ** Sidak (2016), *** using EU GDP as a proxy (approx. 1/6 of 18 billion)
Note: USD values converted to EUR at 1:1.
Source: Own calculation based on studies
54 (100%)
3 000 (2%)
18 000 (0.3%)
22 000 (0.2%)
SEP initiative approximate annual costs for SEP owners
Approximate royalties from cellular standards in the EU***
Approximate royalties from cellular standards in the world*
Approximate royalties from cellular standards in the world* +
approximate non-cash value of cross licenses**
118
A7.2 Aggregate royalty
Results of Literature Analysis
An aggregate royalty for a standard is the royalty due for all SEPs on the standard. It is the starting
point in a top-down determination of the royalty to be paid for a given portfolio. Such an approach
was taken in the landmark decision by the U.S. District Court for the Central District of California in
the litigation between TCL Communications and Ericsson, which “offers a strong endorsement of
‘top down’ methodologies for the calculation of SEP royalties” (Contreras, 2017a).309
As Contreras
(2017b, p. 690)310
notes, “[t]op-down approaches avoid many drawbacks associated with bottom-up
approaches in which royalties for individual SEPs are assessed, often in an inconsistent and piecemeal
manner, without regard for the other SEPs that cover the standard.”
Economically, an aggregate royalty makes sense because implementers value the standard as a whole,
not a collection of inventions represented by some incomplete portfolio of SEPs. It may also help to
overcome problems of royalty stacking, a modern version of Cournot’s (1838)311
well-known
problem that the independent pricing of complementary goods – here: licenses to different SEP
portfolios on the same standard – leads to excessive prices, above those that a single party offering
all those goods jointly would charge. Geradin et al. (2008)312
, in “assess[ing] the case for royalty
stacking within standards […] find the evidentiary support weak at best.” In contrast, Lemley and
Shapiro (2007)313
“using third-generation cellular telephones and Wi-Fi as leading examples, […]
illustrate that royalty stacking can become a very serious problem, especially in the standard-setting
context where hundreds or even thousands of patents can read on a single product standard.” A clear
illustration of the problem of royalty stacking is provided by the decision of the U.S. District Court
of the Western District of Washington at Seattle in Microsoft Corp. v. Motorola, Inc. in 2013.
Commenting on Motorola’s royalty demands for its SEPs on the Wi-Fi (802.11) standard, the court
noted: “If each of these 92 entities [owners of Wi-Fi SEPs] sought royalties similar to Motorola's
request of 1.15 % to 1.73% of the end-product price, the aggregate royalty to implement the 802.11
Standard, which is only one feature of the Xbox product, would exceed the total product price. The
court concludes that a royalty rate that implicates such clear stacking concerns cannot be a RAND
royalty rate.”314
Contreras (2015)315
makes an observation that might reconcile the contradictory
pieces of evidence above: “A relevant factor in determining the incremental value of a particular
patented technology must be the number of additional patented technologies included in the same
product. […] What is less relevant is whether the accused infringer is then paying royalties to other
patent holders, and in what amounts.” This logic is plausible since, if some SEP holders do not
309
Contreras, J. L., ‘TCL v. Ericsson: The First Major US Top-Down FRAND Royalty Decision. Ericsson: The First
Major US Top-Down FRAND Royalty Decision. Patently-O, December 2017,
https://dc.law.utah.edu/cgi/viewcontent.cgi?article=1083&context=
scholarship.
310
Contreras, J. L., ‘Aggregated royalties for top-down FRAND determinations: revisiting “joint negotiation”’, The
Antitrust Bulletin, 2017, Vol. 62, Issue 4, pp. 690-709, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3051502.
311
Cournot, A. A., Recherches sur les principes mathématiques de la théorie des richesses, L. Hachette, 1838,
https://gallica.bnf.fr/ark:/12148/bpt6k6117257c.texteImage.
312
Geradin, D., Layne-Farrar, A., and Padilla, A. J., ‘The complements problem within standard setting: Assessing the
evidence on royalty stacking’, Boston University Journal of Science & Technology Law, January 2008, Vol. 14, Issue 2,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=949599. The authors acknowledge financial support from
Qualcomm.
313
Lemley, M. A., and Shapiro, C., ‘Patent holdup and royalty stacking’, Texas Law Review, 2007, Vol. 85, pp. 1991-
2049, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=923468.
314
Microsoft Corp. v. Motorola, Inc., Findings of Fact and Conclusions of Law, 2013 U.S. Dist. W.D. Wash., Apr. 25,
2013, at 456.
315
Contreras, J. L., ‘Standards, royalty stacking and collective action’, CPI Antitrust Chronicle, March 2015,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2587954.
119
demand royalties, there is no reason why those should be collected by other SEP holders that do
enforce their patents; rather, consumers should benefit through lower prices that will likely result
from a reduced SEP royalty burden. In any case, no matter if the problem of royalty stacking is weak
or serious, an explicit aggregate royalty should help to mitigate it.
Ex-ante aggregate royalty
As aggregate royalty would be determined before the development of the standard starts potential
contributors could decide whether they would like to contribute their technologies to the
standardisation process knowing the extent to which they may be rewarded if their contribution is
accepted into the standard. Further, having more certainty with such ex-ante aggregate royalty can
help address the issue of royalty stacking316
and possibly resolve any risks of hold-up, to some extent.
The ex-ante aggregate royalty does not create price competition between technologies competing for
inclusion into the standard (this is an aggregate royalty). Technical contributions will be selected
based on technical merit. There is, thus, less pressure on the individual potential royalties. The
likelihood that individual contributors will be dissuaded from contributing is lower.
“… coordinated pricing of strict complements may allow limiting potentially excessive royalty
requests on the part of individual licensors, thereby leading to lower final consumer prices and hence
more successful commercialization of end products. This mutual benefit is broadly recognised by all
parties.”317
Defining an aggregate royalty before a standard comes to the market benefits both standard
contributors and standard implementers as it increases business certainty in terms of cost planning
and potential benefits. It is, however, very difficult to establish a fair value for a standard before it is
even developed, and to predict the success, nature and scope of implementations. There may also be
a lack of visibility to future products that may use the standard, as is the case with emerging IoT
segments and their use of connectivity standards, for example. As a result, the ex-ante aggregate
royalty may either overestimate the significance of the technology (in which case the standard will
not be used, unless the aggregate royalty is reviewed and adapted) or underestimate (in which case,
the standards will lose potentially superior technologies which were not contributed because of the
low incentives to do so). A mechanism should therefore exist to adjust such ex-ante aggregate royalty
once the standard is actually being implemented.
316
In the literature on vertically related markets the royalty stacking problem is known as the double marginalization
problem: the pub would mark up on the price at which it buys the beer from brewer without taking into consideration that
this reduces the sales for the brewers. Consequently, beer prices to pub customers should go up when brewers are forced
to divest pubs.
317
For detailed explanation please see CRA, Régibeau, P., De Coninck, R. and Zenger, H., Transparency, Predictability,
and Efficiency of SSO-based Standardization and SEP Licensing: A Report for the European Commission, 2016,
Section 5.1.2, pp. 43-45, https://ec.europa.eu/docsroom/documents/48794?locale=en.
120
A7.3 WTO/TRIPS compatibility
To ensure effective IPR protection on an international level, the Agreement on trade related aspects
of intellectual property (TRIPS) is an essential part of the WTO agreement. The specifics of the rights
of the patent holder are outlined in Articles 27, 28, 41 and 44 of the TRIPS agreement. Article 28(1)
TRIPS establishes the basic rights of the patent holder, which is to preclude others without consent
from the acts of making, using, selling, offering for sale or importing the patented product, or using
the patented process (including importing products made with the process).
The imposition of an obligation to condition SEP enforcement upon registration in the SEP register
and to participate in a FRAND determination procedure before court litigation commences
(conciliation) could be seen as limiting the right of SEP holders to prevent the use of the SEP owner’s
patents without their consent.
However, the exclusive rights of the patent owner are not absolute rights, just like other property
rights. According to Article 30 TRIPS, limited exceptions to the exclusive rights conferred by a patent
in Article 28(1) TRIPS may be instituted by WTO Members. An exception to the exclusive rights
conferred by a patent is provided for in Article 30 TRIPS and should comply with three conditions:
(a) it has to be “limited”, (2) it should not “unreasonably conflict with a normal exploitation of the
patent”, and (3) it should not “unreasonably prejudice the legitimate interests of the patent owner,
taking account of the legitimate interests of third parties”. Additionally, TRIPS includes objectives
to promote technological innovation and the dissemination of technology to the mutual advantage of
the patent (SEP) holder and the user of the technology (Article 7) and principles of preventing the
abuse of intellectual property rights and adopting measures for public interest reasons (Article 8).
Interpretations of Article 30 TRIPS exceptions
The scope of permitted exceptions under Article 30 is the subject of some controversy and has been
interpreted only in one WTO dispute. The Panel in Canada - Patents318
acknowledged the object and
purpose of the TRIPS in Articles 7 and 8, but it did not apply them to interpret Article 30. The Panel's
assessment focused on whether the exceptions were ‘limited’. The Panel concluded that the term
‘limited exception’ enabled only a ‘narrow curtailment of the legal rights’ of a patent holder. It is
argued that the Panel's interpretation of the term ‘limited’ of Article 30 being a quantitative
assessment, devoid of normative considerations (including reasons justifying the exception)
artificially constrained the scope of Article 30319
. But, the Panel noted also that "the exact scope of
Article 30's authority will depend on the specific meaning given to its limiting conditions." To this
end, the goals enumerated in Articles 7 and 8.1 are relevant when doing so.
It should be noted that the Australia - Tobacco Plain Packaging decisions (Australia-TPP)320
, where
Articles 7 and 8 TRIPS were relied upon to interpret the term ‘unjustifiably’ in the special measures
provisions on trademarks under Article 20 TRIPS. The Panel found that public interest objectives
stated in Article 8(1), including public health, are legitimate objectives permitting encumbrance on
trade mark use.321
Since the Australia-TPP Panel referred to the report in Canada - Patents regarding
318
Panel Report, Canada-Patent Protection of Pharmaceutical Products, WTO WT/DS114/R of 17 March 2000.
319
Geiger, C., and Desaunettes-Barbero, L., ‘The Revitalisation of the Object and Purpose of the TRIPS Agreement: The
Plain Packaging Reports and the Awakening of the TRIPS Flexibility Clauses’, Centre for International Intellectual
Property Studies, 2020, Research Paper No. 2020-01, p. 36,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556585.
320
Panel Report in Australia–Certain Measures Concerning Trademarks, Geographical Indications and other Plain
Packaging Requirements Applicable to Tobacco Products and Packaging, cases WT/DS435/R, WT/DS441/R,
WT/DS458/R, WT/DS467/R of 28 June 2018; Appellate Body Report, case WT/DS435/R, WT/DS441/R of 9 June 2020.
321
Tesoriero, A.,‘Using the flexibilities of Article 30 TRIPS to implement patent exceptions in pursuit of Sustainable
Development Goal 3’, The Journal of World Intellectual Property, 2022, Vol. 25, Issue 2, pp. 516-535,
https://onlinelibrary.wiley.com/doi/full/10.1111/jwip.12239#jwip12239-note-0018.
121
the interpretation of the terms of Article 30 of the TRIPS Agreement in light of its object and purposes
of Articles 7 and 8, its findings may provide useful context regarding the interpretation of Article 30
TRIPS. The plain packaging measure restricted the use of the trademark, the TRIPS Agreement does
not grant a right to use the trademark. The Panel concluded that the right of the trademark owner to
prevent third parties not having its consent from using the trade mark, which is the right granted by
Article 16 of the TRIPS Agreement, was not limited. This was an important element to consider
whether the measure was TRIPS compliant.
The current initiative restricts the right of the patent owner to prevent use without consent but does
so only for a limited period of time.
In the SEP context
Certain proposed limitations on the rights of a SEP owner, including requirements to (i) register its
patents in a designated register prior to enforcement, and (ii) engage in a specified FRAND
determination process before enforcing its rights, would be consistent with the objectives of the
TRIPs agreement to promote technological innovation and the dissemination of technology to the
mutual advantage of the SEP holder and the user of the technology (Article 7). It would also be
consistent with its principles of preventing the abuse of intellectual property rights and adopting
measures for public interest reasons (Article 8):
- Standardisation is necessary to ensure interoperability and to promote the uptake of modern
technologies. Standards promote technological development which is in the public interest (as
acknowledged by Article 8 TRIPs).
- Standards, including those that include patented technology, promote the dissemination of that
technology (as formulated in Article 7 TRIPS).
Therefore, it seems to be justified to interpret the findings of the Panel in Canada - Patents bearing
in mind the goals and limitations of Articles 7 and 8 and in light of the specific context of SEPs.
An interpretation of Article 30 informed by Articles 7 and 8 would make strike an appropriate balance
between the legitimate interests of patent owners and the right of WTO Members to adopt measures
to promote their public interests in sectors of vital importance to their socioeconomic and
technological development.
The introduction of an enhanced legal approach for assessing FRAND terms and conditions in a
particular context – one which results in more certainty and predictability for the SEP holder and the
user of the standard – is a reasonable element in the effective exploitation of the patent rights of the
SEP owner. Such an exception arguably would not unreasonably conflict with the traditional means
of exploitation of the patent and does not unreasonably prejudice the legitimate interests of the patent
owner. On the other hand, the exception reduces the possibility of a SEP holder abusing its IP rights
in an anti-competitive fashion and results in a more balanced outcome by taking account of the
legitimate interests of the users of the technology and consumers as a whole.
The following factors are relevant to this analysis:
- Patent owners benefit from the adoption of the standard and therefore tolerate the
infringement of their patents to ensure the standard is widely used in products (especially if
they also contributed technology to the standard during development);
- When the SEP holder commits to license its patents under FRAND terms and conditions in
order to promote adoption of the standard, its objective is not to stop the sale of infringing
products but to collect royalties from such sales (although some SEP holders may choose not
to actively monetize or assert their SEPs);
122
- The normal exploitation of the patent in the context of standard-compliant products is to be
able to collect FRAND royalties; due to the unique nature of SEPs (i.e., patents cannot be
designed around because the technology is essential for implementing the standard in
products), exploitation rights are more strictly defined or limited because of concerns
regarding potential restrictions to fair competition and discrimination – i.e. behaviour that is
harmful to competition;
- Demands for royalties that are unreasonable undermine the objectives of standardisation, lead
to unnecessary litigation and slow down the process whereby patent owners can receive
adequate remuneration for the use of their patents.
Furthermore, pursuant to Article 40 TRIPs, Members may adopt, consistently with the other
provisions of TRIPS, appropriate measures to prevent some licensing practices or conditions
pertaining to intellectual property rights which restrain competition that may impede the transfer and
dissemination of technology. In this instance, the proposed FRAND determination process is
intended to address, among other issues, concerns about whether the demanded royalty is truly
FRAND, which may have potential anti-competitive effects. Such anti-competitive effects may
impede the adoption of the standardized technology mainly by new entrants and SMEs that lack the
resources to deal with such demands or pay potentially non-FRAND royalties. Any potentially
abusive practices in the licensing of IP rights may result in harm to the consumer and public interest.
Taking the above factors into account, it is important that processes be implemented that allow
stakeholders (SEP holders and implementers alike) to establish FRAND terms and conditions in a
reasonable and efficient manner, and to ensure that SEP holders are not abusing their IP rights by
demanding higher-than-FRAND royalties. Further clarity on FRAND also allows assessment of the
multiple demands and offers that may be made during a SEP licensing negotiation by all parties
involved, and to reach a balanced result that promotes continued contribution to and use of the
standard for the benefit of the consumer and in the public interest.
123
ANNEX 8: SMES AND SEPS
A8.1 Results of Literature Analysis
Regarding potential problems for SMEs in the licensing of SEPs, a distinction is in place between
SMEs as licensors and as licensees. Their role as licensors is less complex and will be addressed first.
Out-licensing patents is not uncommon for SMEs. In fact, de Rassenfosse (2012, p. 437)322
finds
based on a survey of SMEs conducted by the European Patent Office that SMEs “exhibit a much
stronger reliance on ‘monetary patents’ than large companies and nearly half of the SMEs in the
sample patent for monetary reasons.” Yet, in the context of SEP licensing a number of challenges
arise from SMEs’ resource constraints. Their managerial capacity may be too limited to engage in
licensing negotiations with several implementers, in particular if those negotiations are lengthy.
Taking legal action may furthermore be difficult or even impossible due to the potentially high cost
this entails. If, as is likely, an SME licensor’s SEP portfolio is small, then potential licensees might
– with some justification – doubt if the portfolio contains even a single patent that is actually essential,
infringed by the respective party (which does not necessarily follow from essentiality), and valid (i.e.,
legally robust). Demonstrating that this is indeed the case may require recourse to the courts, which
– as said above – may not be an option for the SME. As to the technical and patent-related competence
required to out-license SEPs, one may assume that an SME capable of developing SEPs and having
the patented inventions accepted into a standard should have a reasonable good understanding of the
essentiality of its patents. It may lack, however, an overview of the entire standard, and also of the
number of actual SEPs on the standard and of the level of the aggregate FRAND royalty. This might
make it hard for the SME to come up with an appropriate royalty demand for its portfolio (similar to
the problems that SMEs as SEP licensees face in this regard, see below). An option for an SME SEP
licensor to address these issues might be to join a patent pool, provided a suitable pool for the standard
at hand exists.
The role of SMEs as licensees is more complex. The challenges of in-licensing SEPs have been
addressed by various authors (Geradin, 2020, p. 17; Schneider, 2020; Borghetti et al., 2021, p. 4;
SEPs Expert Group, 2021, pp. 42, 158; Henkel, 2022).323
For SMEs, the in-licensing of SEPs is
particularly problematic, for several reasons. Consider the situation that an SME uses a certain
standard in its product, and that a patent owner offers the SME a portfolio of allegedly standard-
essential patents for licensing – or that, in turn, the SME seeks a license from a firm that claims to
have SEPs on a standard of interest to the SME. In order to negotiate on eye level with the patent
holder, the SME would need to evaluate the licensing offer. It would have to: (a) understand what
share of the portfolio patents are actually essential for the standard; (b) what share of all actual SEPs
on the standard the portfolio covers; (c) what a FRAND aggregate royalty for the standard is; and (d)
322
De Rassenfosse, G., ‘How SMEs exploit their intellectual property assets: evidence from survey data’, Small Business
Economics, September 2012, Vol. 39, Issue 2, pp. 437-452,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1726208.
323
Borghetti, J.-S., Nikolic, I., and Petit, N., ‘FRAND licensing levels under EU law’, European Competition Journal,
2021, pp. 205-268, https://www.tandfonline.com/doi/full/10.1080/17441056.2020.1862542. The authors acknowledge
financial support from 4iP Council. Geradin, D., ‘SEP licensing after two decades of legal wrangling: Some issues solved,
many still to address’, TILEC Discussion Paper No. DP2020-040, 2020, https://ssrn.com/abstract=3547891. Henkel, J.,
‘Licensing standard-essential patents in the IoT – A value chain perspective on the markets for technology’, Research
Policy, December 2022, Vol. 51, Issue 10, 104600, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4050472.
Schneider, M., ‘SEP licensing for the Internet of Things – Challenges for patent owners and implementers’, CPI Antitrust
Chronicle, March 2020, https://www.competitionpolicyinternational.com/sep-licensing-for-the-internet-of-things-
challenges-for-patent-owners-and-implementers/. Baron, J., Geradin, D., Granata, S., et. al., Group of Experts on
Licensing and Valuation of Standard Essential Patents ‘SEPs Expert Group’ (E03600): Contribution to the Debate on
SEPs, 2021, https://ec.europa.eu/docsroom/documents/45217.
124
what the process and rules of FRAND-licensing are. Furthermore, (e) the ownership of SEPs is for
many standards fragmented, and so the SME would potentially have to deal with a large and unknown
number of licensors. Fragmentation of the licensee industry – which is likely high if SMEs are
important – means that, on the level of the economy under consideration (here, the EU), the dyad-
level transaction costs of licensing need to be multiplied not only by the number of licensors, but also
by a large number of licensees. These points are problematic for SMEs for reasons that partly related
to characteristics of SMEs, partly to those of standards and SEPs, as will be explained in the
following.
Regarding (a), Geradin (2020, p. 17)324
notes in referring to implementers in general that “while
manufacturers of mobile communication devices have significant knowledge of mobile
communication technologies, it is not the case with respect to manufacturers of other connected
products […]”. This is problematic due to the ever increasing use of ITC standards, and mobile
communication specifically, in such “other connected products”, e.g. in the IoT context. Specific to
SMEs, the SEPs Expert Group (2021, p. 42) 325
notes regarding the use of ICT standards in the IoT
context that “[t]he population of licensees may thus not only be larger and more diverse, but the
number of small and medium-sized enterprises (‘SMEs’) requiring SEP licenses will likely be much
larger than in the industries where SEP licensing has taken place thus far. This is especially important
since SMEs may be less experienced with the complexities of FRAND licensing, and have very
limited resources to deal with such complexities.” In general, SMEs are characterized by a limited
diversity of competences, and it is highly likely that a given SME lacks the technical as well as the
patent-related competence needed to evaluate, even cursory, standard essentiality of a given portfolio.
As Schneider (2020) 326
notes, “many of these SMEs will not have the technical expertise required to
evaluate the viability of a technology owner’s license offer or the quality of value of the IP offered
in the license.” Similarly Bekkers et al. (2022)327
: “Implementers […] are confronted with dozens of
SEP holders with thousands of patents, and typically have limited or no knowledge about the details
of individual patents claiming to be SEPs.” SMEs as potential SEP licensees will in general also be
ignorant regarding the fact that, for cellular standards (and most likely for other standards as well),
the share of declared SEPs that are actually essential is on average considerably below 50 percent,
and that this share varies strongly between SEP holders (e.g., Bekkers et al., 2022, Section 3.1328
).
While large potential licensees that are not active in the standard’s technology field (e.g., device
makers in the IoT space) face the same problems, they can more easily afford to procure the required
expertise externally and can usually find at least some of the needed resources in-house (e.g., legal
expertise); SMEs cannot.
As to (b), also the understanding of what share of all SEPs on the standard the focal portfolio covers,
and how many other licensors there might be, requires competences that an SME typically lacks –
and, in fact, any implementer not active in the standard’s technology field. Commercial studies may
give indications as to the share a certain patent owner has in the standard’s overall SEP stack.
However, these studies tend to be highly priced, are not available for all standards, and may not
accurately capture the current SEP position of a given licensor. Related, “[m]any of these [non-ICT]
manufacturers and potential licensees […] may not be aware of the need to take licenses to specific
SEP portfolios” (Schneider, 2020)329
since they do not know the full list of SEP holders – a specific
324
See footnote 323.
325
See footnote 323.
326
See footnote 323.
327
Bekkers, R., Tur, E. M., Henkel, J., et. al., ‘Overcoming inefficiencies in patent licensing: A method to assess patent
essentiality for technical standards’, Research Policy, 2022, Vol. 51, Issue 10, 104590,
https://research.tue.nl/en/publications/overcoming-inefficiencies-in-patent-licensing-a-method-to-assess-.
328
See footnote 327.
329
See footnote 323.
125
instance of the more general problem of finding transaction partners for IP licensing (Arora and
Gambardella, 2010).330
Again, this will particularly be relevant for SMEs.
Regarding (c), even industry insiders and specialized courts find it typically hard to pin down a
standard’s aggregate FRAND royalty. It is harder still for SMEs that are implementers of a standard
– again for the reasons listed under the preceding points, i.e., limited competences and resource
constraints.
Point (d) is about the competence regarding patent licensing and the dos and don’ts of license
contracts, a subject that most SMEs will have little or no experience with. They will know even less
about the specificities of SEP licensing, which is governed among other things by the FRAND
requirement and, in the EU, the Huawei-ZTE rules. As Schneider (2020)331
puts it, “[m]any of these
manufacturers and potential licensees […] will be small and medium-sized enterprises (‘SMEs’)
without any licensing experience and perhaps no in-house legal expertise at all […]”. Henkel (2022,
Section 4.1.2)332
cites an interviewee from an IoT start up, stating “[…] how do you work with
licensing stuff, I don’t even know. We have never done that, we just buy [a module] and create a
system […].”
The final point (e) implies that the problems listed above may recur repeatedly for each SME licensee,
for an unknown and potentially large number of SEP owners. This creates not only cost and time
demands for an SME, but also uncertainty regarding cost and legal aspects. For instance, the SME’s
profit margin may be jeopardized by unexpected license demands (Henkel, 2022, Section 4.1.2).333
Also, customers may demand product delivery free of third-party rights and then turn to the SME in
case a SEP holder accuses them of infringement (Henkel, 2022, Section 4.4).334
Large implementers
will face similar issues but are better positioned to deal with them. SMEs lack the required financial
buffers and in-house legal competence.
The above implies that the playing field between a prospective licensor and an SME as licensee is
rather unbalanced. While information asymmetry in favour of the technology seller is a general issue
(Akerlof, 1970; Zeckhauser, 1996)335
, in the context of SEP licensing to SMEs those information
asymmetries are particularly strong and compounded by resource constraints. In turn, a potential
problem for a licensor is that an SME may simply refuse to take a license, and that – given the
relatively small licensing income that can be expected from an SME – it is not worthwhile to take
legal action. One should note, though, that aggressive licensors may well sue a certain number of
SMEs to create a precedent and build a reputation for “toughness” (e.g., Agarwal et al., 2009)336
that
subsequently makes other SMEs willing to take a license.
330
Arora, A., and Gambardella, A., ‘The market for technology’, Handbook of the Economics of Innovation, 2010, Vol.
1, pp. 641-678, https://www.sciencedirect.com/science/article/pii/S0169721810010154.
331
See footnote 323.
332
See footnote 323.
333
See footnote 323.
334
See footnote 323.
335
Akerlof, G. A., ‘The market for ‘Lemons’: Quality uncertainty and the market mechanism’, Quarterly Journal of
Economics, August 1970, Vol. 84, Issue 3, 488-500,
https://www.sciencedirect.com/science/article/pii/B978012214850750022X; Zeckhauser, R., ‘The challenge of
contracting for technological information’, Proceedings of the National Academy of Sciences of the United States of
America, November 1996, Vol. 93, Issue 23, pp. 12743-12748,
https://scholar.harvard.edu/rzeckhauser/publications/challenge-contracting-technological-information.
336
Agarwal, R., Ganco, M., and Ziedonis, R. H., ‘Reputations for toughness in patent enforcement: Implications for
knowledge spillovers via inventor mobility’, Strategic Management Journal, 2009, Vol. 30, Issue 13, pp. 1349-1374,
https://deepblue.lib.umich.edu/bitstream/handle/2027.42/64300/792_ftp.pdf;sequence=1.
126
The above problems are not just a theoretical possibility, but they matter in practice. In a study
involving 12 European IoT SMEs, mostly start-ups, Henkel (2022)337
found that four of them had
been approached by one or more SEP holders to take a license. Among the prospective licensors were
patent assertion entities and patent pools, but also a large, producing SEP holder. Thus, some SEP
holders do – or at least did in the recent past – approach IoT SMEs for SEP royalties. Some SEP
holders state that they would not seek to license SMEs – possibly, they realized that this approach is
not workable after failed attempts to license IoT SMEs (only one of the four SMEs mentioned above
took a license in the end, see Henkel 2022338
). However, in order to be helpful for SMEs a
commitment not to demand royalties from them would have to be public, legally binding, clearly
defined, and given by all SEP holders. None of these requirements is currently fulfilled. SME would
need legal certainty that they will not be approached by any SME holder up to, e.g., a certain threshold
of revenues or units sold per year. An alternative – in fact preferred by the participants in the SME
survey and also by those studied by Henkel (2022) – would be upstream licensing, which would give
SMEs (which most likely will be on the device, hence downstream level) the option to procure fully
licensed modules incorporating the respective standard. As Kühnen (2019, Section II)339
explains,
such upstream licensing would create legal certainty not only for the SME implementers on the device
level, but also for the upstream firms that supply the standard-practicing modules.
337
See footnote 323.
338
See footnote 323.
339
Kühnen, T., ‘FRAND licensing and implementation chains’, Journal of Intellectual Property Law & Practice,
December 2019, Vol. 14, Issue 12, pp. 964-975, https://academic.oup.com/jiplp/article/14/12/964/5625119.
127
A8.2 SME Test
Step 1/4: Identification of affected businesses
The scope of the initiative comprises firms of all sizes, including SMEs. The initiative does not target
SMEs specifically, but its (positive) impact on SMEs may be more substantial than that on larger
firms. The initiative affects both owners (hence, potential licensors) and implementers (hence,
potential licensees) of SEPs.
As the initiative concerns all SEPs, rather than a specific sector, only qualitative assessment
supplemented by indicative statistics about the distribution of firms by size among the affected
companies (both, for SEP holders and implementers) can be made:
• Due to the technical and procedural complexities of standard development, SMEs are
relatively few among the SEP owners/licensors. Out of 31 identified EU based SEP holders
with 10 or more patents families (so those most likely to license SEP), information on size
was available for 16 firms, out of which 3 were SMEs.
• Depending on the standard under consideration and the level of the value chain, the number
of SMEs that are implementers of a standard can be very large. This is the case, e.g., for
cellular standards on the device level of the value chain, where in the IoT context large
numbers of SMEs create a multitude of different applications. Among 3 800 potential SEP
implementers in the EU, 84% were SMEs.340
The impacts on both categories will be described below (under step 3).
Key question: To what extent is the initiative relevant for SMEs?
This initiative is considered relevant for SMEs and has been included by the SME envoys in the SME
filter. 341
While not being targeted at SMEs specifically, it solves several of the problems that the licensing of
standardized technologies (essentially, their SEPs) creates in particular for SMEs.
SME SEP holders do not currently have the resources to license their SEPs efficiently. The register
will give visibility of and a positive “stamp” on their SEP portfolio, the aggregate royalty would help
justify their royalty demands and the FRAND determination (conciliation) procedure will offer them
an opportunity to seek licensing without entering into expensive litigation (see explanation under
step 3). SME SEP holders will also benefit from reduced fees.
Innovative SMEs have already been creating multiple applications using standards such as cellular,
Wi-Fi, and NFC. Therefore, question of how to license those technologies is relevant for such SMEs.
While the initiative falls short of guaranteeing “one-stop licensing” for downstream implementers
(be it through a comprehensive patent pool or, even simpler, through upstream licensing342
), it does
address important problems, such as size of SEP portfolios, aggregate royalty, and FRAND
340
See Annex A5.1 Market description.
341
The network of SME envoys was set up in 2011 as part of the review of the small business act. Each EU country has
nominated a national SME envoy to complement the role of the EU SME envoy who chairs the network. The group of
SME envoys makes up an SME policy advisory group that promotes SME friendly regulation and policymaking in all
EU countries. The network of SME envoys filters EU initiatives (SME filter) and signals those that merit attention from
an SME perspective to the Commission. Initiatives that are listed in the SME filter will have to be accompanied by a
proportionate SME test.
342
If a licence to all relevant SEPs is taken by an upstream supplier, the SEPs are “exhausted” at that level and the SME
implementers do not longer need to license SEPs.
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determination. Additionally, the initiative will offer to SME implementers reduced fees for the use
of the services of the Competence Centre and free training and advice on SEPs.
Step 2/4: Consultation of SME Stakeholders
The public consultation (14 February 2022 and 09 May 2022) identified 26 respondents as SMEs out
of 72 respondents who identified themselves. The 26 respondents include nine companies, seven
business associations and five research institutions. The public consultation contained questions
specifically addressed to SMEs. For instance, on the question about the impact of SEP licensing costs
on SMEs and start-ups implementers, many answered that they would settle SEP dispute as quickly
as possible to avoid litigation cost, choose alternative technology, or even go out of business.343
SMEs
also stated they would not use a standard, if there was an alternative (cheaper) technology, if
negotiation and litigation were too expensive or if the requested royalty was too high. SMEs valued
more transparency about the FRAND royalties over transparency about the SEP essentiality and
ownership.344
Finally, the majority of SMEs agreed that efficient SEP licensing would foster
innovation by implementers.345
To gain further insight into views of SMEs the Commission held interviews with several
implementers (including SMEs and mid-caps). Examples of their anonymised accounts on SEP
licensing experiences are reported in Annex 2. In addition, the Commission conducted a targeted
SME survey run between October and December 2022. It was broadly distributed, among others by
the European Commission and EU agencies, the European Digital SME Alliance, various industry
associations, SME associations, and associations of SEP implementers. The survey yielded 39
responses. While it is not representative, it gives an impression of how SMEs perceive their situation
with respect to SEP licensing. It thus allows to infer how the initiative would affect this perception.
Fifteen of the respondents reported to have participated in standard setting, though mostly not for
complex ICT standards. Two reported to own SEPs. Motives to contribute to standard development
comprise improving the standard, influencing its development, promoting the firm’s own technology,
learning, and networking. Reasons not to contribute comprise a lack of resources and expertise, and
the domination of SDOs by large firms. The initiative will likely not affect this situation, neither
positively nor negatively.
Regarding their role as SEP licensees (i.e. implementers), respondents perceive various problems:
Notably, (a) a lack of knowledge what would be a fair (FRAND) royalty, (b) a lack of resources to
negotiate licenses, (c) uncertainty about infringement, and (d) fragmentation of SEP ownership.
Respondents considered device-level licensing acceptable only if it was (e) efficient (ideally one-
stop), at (f) publicly known royalties, and (g) consistently done across all implementers. Most
respondents expressed (h) a clear preference for upstream licensing, so that they could procure
components with all IP rights fully licensed. For details see Annex A8.3 SME survey.
Of these problems and preferences, the initiative will address (a) and (f) (due to the aggregate royalty
and possibly information about what share of a standard’s SEP a given portfolio corresponds to); (b)
indirectly, since license negotiations should become simpler (e.g. due to obligatory pre-trial FRAND
determination (conciliation) or assistance and training to SMEs provided by the Competence Centre);
(c), due to the register of checked SEPs. The initiative will not affect the problem of fragmented SEP
ownership (d).
343
See Annex 9, Q12.
344
See Annex 9, Q20.
345
See Annex 9, Q64.
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The initiative will not affect the points (d) and (e) on licensor fragmentation. It might gradually
improve the consistency of licensing (g), due to the fact that it will simplify licensing in general. It
will not address the preference of most respondents for upstream licensing (h). A guidance will be
given, however, that traditional level of licensing should be considered when deciding on SEP
licensing options.
Step 3/4: Assessment of the impact on SMEs
Impact on SMEs as owners of SEPs:
 Due to the technical and procedural complexities of standard development, SMEs are relatively
few among the SEP owners/licensors. Hence, considering only the number of firms affected, the
impact of the initiative on SMEs as owners of SEPs will be limited.
 Those SMEs that do own SEPs will typically have small portfolios. Licensing out a small
portfolio of presumed SEPs can be challenging because the potential licensee may doubt, with
some justification, that any of the patents in the portfolio are actually essential, legally robust
(i.e., would withstand a validity challenge), and indeed infringed by the potential licensee. Also,
for statistical reasons the share of patents that are actually essential, legally robust, and indeed
infringed will vary more strongly the smaller a portfolio is. Thus, owners of small portfolios of
presumed SEPs should be positively affected by the “stamp of approval” that the essentiality
check provides to patents that are found to be actually essential (PO2). This positive effect should
be stronger than for owners of large portfolios, since for those there will typically be little doubt
that they own at least some SEPs on the respective standard, and hence that the potential licensee
is indeed obliged to take a license.
 Another positive effect should be that the anchor of the announced aggregate royalty (PO4)
should make it easier for small licensors to explain the royalty demanded to potential licensees,
something that without reference to this anchor should be relatively more difficult for small than
for large licensors.
 Pre-trial conciliation (PO3) should help SME licensors in particular, since due to budget
restrictions litigation is often not an option for them.
 A negative effect for SMEs is that the upfront costs of registration and essentiality check
(PO2) will be relatively more important for SMEs than for larger firms, both due to budget
constraints and because for small portfolios the share of patents that will be assessed will likely
be higher than for large portfolios. However, the investment into the essentiality check should
pay off through the simplification of licensing.
Impact on SMEs as implementers of SEPs:
 Considering the likely number of firms affected, the impact of the initiative on SMEs as
implementers of SEPs will be substantial.
 For all implementer SMEs, irrespective of their position in the value chain, all aspects of the
preferred option should have a positive impact. The register for SEPs with essentiality checks
(PO2) helps them to assess if a prospective licensor has legitimate demands for royalties. The
aggregate royalty (PO4) helps to understand and take into account early on the total cost of
licensing the SEPs. In case the essentiality checks are done in such a way that they indicate each
licensor’s share in the overall SEP stack of the standard, then they may also facilitate determining
the share of the aggregate royalty that a licensor can demand. Mandatory pre-trial conciliation
(PO3), finally, helps to avoid litigation, which would typically be difficult and costly for SMEs.
130
While most of the benefits accrue also to larger firms, those are usually in a better position to
solve the respective problems themselves (e.g., by hiring expert lawyers or technicians).
 A distinction applies regarding the SMEs’ position in the value chain. Downstream firms
(device makers) will typically have no in-depth knowledge of the internal functioning of the
standardized technology, nor of the patents that might be essential to the standard. Thus,
information on which patents are actually essential on a standard and transparency with regard to
FRAND royalties, in particular, should be relevant for them in their negotiations. Upstream
firms are “closer” to the standardized technology (the most upstream implementer turns the
standard specification into technology, e.g. by designing a 5G baseband processor), and thus
understand the technology and its SEPs better. Furthermore, the number of SMEs that are
downstream implementers will typically be (much) larger than the number of SMEs that
are upstream implementers. For example, most or all makers of cellular baseband chips are
large firms (due to the high fixed cost involved in the business). Thus, the biggest impact of the
initiative on SMEs will be on downstream implementers.
 A potential negative effect of the initiative is that the simplification of licensing that it entails
may encourage more SEP holders to approach downstream SME implementers for
royalties. For those, dealing with several or even many licensors of a technology that they do not
understand is difficult, even if the initiative simplifies the process to some extent. However, this
effect depends on SEP owners’ strategies and its potential magnitude cannot be estimated.
Step 4/4: Minimising negative impacts on SMEs
The initiative will have its biggest impact on SMEs on the implementer side, more specifically on
downstream implementers (device makers). For those firms, the impact should largely be positive.
The potential negative effect mentioned in Step 3 (i.e., that the simplification of licensing that the
initiative entails may encourage more SEP holders to approach downstream SME implementers for
royalties) could be mitigated by encouraging SEP holders to exempt SMEs from paying royalties or
provide discounts to a certain annual production volume (PO1). Additionally, SMEs will benefit from
reduced fees for services provided by the Competence Centre and free training and advice from the
Competence Centre.
Reduced fees for services provided by the Competence Centre for SME SEP holders should lower
their burden as regards PO2.
Detailed overview of measures to help SMEs
The following measures and support will be available to SMEs:
General:
 SMEs will receive discounts for all administrative fees related to registration, essentiality
checks and conciliation.
 A general recommendation that special discounts for SMEs are considered during essentiality
evaluations and conciliations on a case by case basis.
 A general recommendation to SEP holders to provide to SMEs royalty-free licences or
discounts for small volume production (following existing practices of SEP pools).
Services offered free of charge by the Competence Centre to all companies:
131
 Access to basic information from the SEP register (name and contact details of SEP holders,
number of patents each SEP holder registered and the essentiality rate of all registered SEP
per standard).
 Studies concerning SEP-related issues (e.g. best valuation practices or best practices to handle
indemnification clauses) with which SMEs have most problems (based on information from
SMEs provided to the Competence Centre).
 Database with SEP-related policy information from key jurisdictions globally as well as case-
law summaries (including arbitrations) related to FRAND issues, also from foreign
jurisdictions.
Services offered free of charge by the Competence Centre to SMEs only:
 Advice on SEP licensing, negotiations, and conciliation process (both for SME SEP holders
and SME implementers).
 Training on SEP licensing/FRAND negotiations and how an SME can best represent itself
during negotiations/conciliations.
Services for a fee:
NOTE: the regulatory proposal will not set any of the fees. Instead, they will be established
subsequently by an implementing act which will take into account not only calculations presented in
this IA but also political considerations. The fees presented in the IA are just an indication of the fees
that would cover the costs of the Competence Centre (based on initial cost prognosis of the EUIPO).
SME SEP holders and SEP implementers will both receive a reduction in administrative fees.
 Implementers: access to detailed information on essentiality of concrete patents or portfolios
of concrete SEP holders at a reduced SME fee of EUR 850 (as opposed to EUR 1 700 for
large firms).
The relatively modest discount is to avoid circumvention of the standard fee by larger
companies through creation of an SME just to access the register.
 SEP owners: SEP registration costs for SME SEP holders will be also limited by the fact that
SMEs have a lower number of SEP to register.346
 Implementers and SEP owners: SEP conciliation cost will depend on the complexity of a case.
This impact assessment presents an average cost. It is likely that conciliations for SMEs will
be less demanding and thus the cost will be lower. In any case the final conciliation cost and
how it is shared between parties will be decided on a case-by-case basis with the help of the
conciliator. There will be a recommendation that SMEs receive a discount.
346
The three SME SEP holders with ten of more SEPs, have respectively 10, 11 and 18 SEPs. The initial registration
costs (both fees and internal costs) for these three firms will be no more than 1% of their annual turnover (turnover for
2021 from ORBIS database). Costs in the subsequent years (should they create new SEPs) will be just a fraction of the
initial figure.
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A8.3 SME survey347
About the survey and the analysis
The survey was distributed by the European Commission, directly and through various other channels
(number of respondents in brackets): European Digital SME Alliance (8); industry associations (8);
European Commission (6); SME associations (5); EU Agencies (4); Associations of SEP
implementers (2); other (6).
The survey was active from 25/10/2022 until 27/12/2022.
It obtained 39 responses in total. It is not representative but gives an impression of the issues start-
ups and SMEs face in the context of SEP licensing.
In the analysis, most responses are reported in detail. Questions with five or fewer responses are
omitted. In two cases, clearly inconsistent responses were corrected. Open comments are reported
verbatim, except for anonymization of company names and careful editing of obvious typos. Open
comments unrelated to the question at hand are omitted.
Demographics of participating firms
Question on Size
Answers %
Micro (1 to 9 employees) 13 33%
Small (10 to 49 employees) 15 38%
Medium (50 to 249 employees) 9 26%
Large (250 or more employees) 2 3%
 Country
Figure 18: Number of responses per country
Source: Own analysis
347
Prepared based on contract by Prof. Dr. Joachim Henkel, Technical University of Munich.
6
5
4
3
2 2 2 2 2
1 1
2
1
2 2
1 1
0
1
2
3
4
5
6
7
133
Q. Subsidiary/branch of a larger company?
Answers %
Not a subsidiary/branch 35 90%
Yes, a subsidiary/branch 4 10%
Q. Respondent
Answers %
General manager (e.g. CEO) 24 62%
Manager dealing with technology/innovation 6 15%
Company lawyer 4 10%
Other 5 13%
Q. Sector of activity: IoT, other
Answers %
ICT (Information and communication technologies) 24 62%
Connected machines within a factory 10 26%
Smart meters 9 23%
Fleet management, tracking of containers, etc. 8 21%
Banking 6 15%
Medical devices 6 15%
Smart home 6 15%
Automotive 5 13%
Other IoT 9 23%
Not active in IoT, but in other sector(s) 4 10%
Note: Multiple choices possible
Q. In-house specialists for patents, patent licensing
Answers %
Yes 8 21%
No, we used external specialist 26 67%
No, we do not have in-house, nor use external specialists 5 13%
Use of ICT communication standards
Q1. Standards that the firm develops, uses or innovates on
Answers %
2G, 3G, 4G, 5G 23 59%
Wi-Fi 21 54%
LPWAN networks (LoRaWAN, Sigfox, NB-IoT, LTE-M) 15 38%
NFC 12 31%
Video and audio codecs 10 26%
Wireless charging 6 15%
Other 13 33%
Not developing, using nor innovating on any standard 3 8%
No. of answers 39
Note: Multiple choices possible
Q2. Role of those standards in the firm’s business proposition
Answers %
134
Our firm buys ready-made components to integrate into our products that use those
standards
22 56%
Our firm has own unique innovation (IP) on top of the standard 16 41%
Our firm produces components that use those standards 16 41%
Our firm implements the standards by itself 12 31%
Our firm participates in standard setting 12 31%
Our firm buys a ready-made device to use in our product(s) that uses those standards 11 28%
Our firm contributes technology (patents) to standards 9 23%
Our firm exports components or devices that use those standards 7 18%
Our firm imports components or devices that use those standards 7 18%
Other (please specify) 2 5%
Standards do not play any role in my business 2 5%
No. of answers 39
Note: Multiple choices possible
Q3. Importance of the standardized technology to the firm’s services / products
Open question. 30 out of 39 respondents provided an answer.
Most answers (80%: 24 out of 30) stated the technologies were very important to the firm (e.g., “very
important”, “critical importance”, “vital”, “key”, “essential”, “indispensable”).
Some answers provided more specific information, highlighting the advantages of fully licensed
chipsets, SMEs’ lack of power to influence standards embedded on chipsets, a lack of standardisation
for edge computing, and the threat of an unknown number of SEP holders approaching implementers:
 “Bluetooth is a preferred option due to its availability fully SEP licensed in chipsets by the
implementer.”
 “We use Android as an operating system. We have zero say in what standards, or audio or
video codecs, are incorporated in the chipsets or the operating system. We do not have the
power as an SME to change the specifications of off the shelf developed chipset products.
Our in-house technology is valuable to us as our USP.”
 “Currently there is no standardisation for edge data centers that support the requirements of
the edge. Legacy data center technology, OCP is not suited for the edge. Europe can play in
important role for setting the standard for edge datacenters 1) since it can be based on
embedded technology 2) it can achieve much higher density and energy efficiencies than
current datacenter technology, 3) it can drive the technology innovation for Europe much
faster than technology set by USA and Chinese large companies. 4) it allows for a fast
integration with distributed intelligent infrastructures (electricity grid, water, transport, etc.)
it allows for a better controlled digital sovereignty and implementing GDPR, explainable AI
in the tactile internet.”
 “We need our smart EV chargers to communicate with cars, phones and electricity networks.
We do not have to use wireless or cellular, but we think the system will be better for the
consumer if we do, and there will be energy savings. Threats from [Name of SEP owner] are
causing concern to [firm] that there may be other claims from the hundreds of other SEP
owners, and we are therefore considering whether to even include cellular functionality in
future accessories or products, and what that might mean. That is delaying adoption and
hindering innovation (and costing development resource) in the EV sector – that is the last
thing that the EU needs as it targets Net Zero.”
135
The firm’s role as a patent licensee
Preferences regarding licensing of patents implemented in components
Q4. When buying components / importing devices incorporating such technologies do you…
in most
cases
sometimes never no
opinion
no
answer
prefer products/tech with all IP rights in the product fully
licensed?
25 8 0 1 5
prefer to deal myself with clearing IP rights? 5 6 16 3 9
not worry about IP rights? 4 5 14 6 10
in most
cases
sometimes never No. of
answers
prefer products/tech with all IP rights in the product fully
licensed?
76% 24% 0% 33
prefer to deal myself with clearing IP rights? 19% 22% 59% 27
not worry about IP rights? 17% 22% 61% 23
Note: “No opinion” and “No answer” not taken into account for calculation of percentages
Checking the licensing status of purchased components
Q5. If you prefer products/tech with IP rights licensed how do you check that?
oftenti
mes
sometimes never no
opinion
no
answer
I assume that since product is put on the market all rights
are cleared
14 7 5 1 12
Seller gives me a guarantee that all rights are cleared 10 11 6 1 11
Seller offers to give me an IP licence as well 3 13 7 2 14
Seller informs me that (some) rights are not cleared and I
have to do it myself
2 9 12 2 14
I do my own inquiries 8 10 6 1 14
oftentimes sometimes never No. of
answers
I assume that since product is put on the market all rights
are cleared
54% 27% 19% 26
Seller gives me a guarantee that all rights are cleared 37% 41% 22% 27
Seller offers to give me an IP licence as well 13% 57% 30% 23
Seller informs me that (some) rights are not cleared and I
have to do it myself
9% 39% 52% 23
I do my own inquiries 33% 42% 25% 24
Note: “No opinion” and “No answer” not taken into account for calculation of percentages
Awareness of potential need of SEP license
Q6. Are you aware that you may need a licence for standard essential patents for the use of such
technologies/standards?
Answers %
Yes 28 80%
No 7 20%
No answer 4
Note: “No answer” not taken into account for calculation of percentages.
136
Has firm taken any SEP license
Q7. Have you obtained any licences for standard essential patents?
Answers %
Yes 7 21%
No 21 62%
Other 6 18%
No answer 5
Note: “No answer” not taken into account for calculation of percentages
Those seven firms who answered “yes” named the following technologies:
Answers
2G, 3G, 4G, 5G 6
Video and audio codecs 5
Wi-Fi 5
LPWAN networks 4
NFC 3
Wireless charging 2
Note: Multiple choices possible
Reasons not to take a licence for (potential) SEPs
Q8. In case you have not obtained a licence for any (potential) standard essential patents, what are
the reasons for this?
Answers %
My firm assumes that it does not need to take a license because we purchase
components / device free of any rights of third parties (i.e., seller guaranteed me that
all rights are cleared)
15 58%
Difficulties to find out who owns the technology 10 38%
Too much effort to enter license agreements with all SEP owners 9 35%
To remain competitive (not increase price) 7 27%
A SEP holder approached me for a licence, but we cannot agree on the FRAND terms
and conditions.
3 12%
My firm asked for a licence but cannot afford to pay the requested royalty 2 8%
My firm is waiting to be approached by a SEP holder to take a licence 2 8%
My firm asked for a licence, but it was refused 1 4%
Other 5 19%
No. of answers 26
Note: Multiple choices possible
Reasons to take a licence for (potential) SEPs
Q9. In case you have obtained a licence for standard essential patent, what was the reason?
Answers %
My firm wants to sell SEP cleared products 4 67%
My clients will buy from me if my product is SEP cleared 3 50%
My firm was afraid it would be sued for patent infringement later 3 50%
My firm was approached by a SEP holder and saw a risk of not being able to sell my
products
2 33%
It will differentiate our products from competitors 1 17%
Other 1 17%
No. of answers 6
Note: Multiple choices possible
One respondent added: “We have had multiple SEP licensing requests. One license was obtained by
misrepresentation. Some have litigated (one litigation costing tens of thousands of Euros was for a
137
few thousand Euros of value). We have taken several licenses but we know we have unfairly paid
much more than others.”
Licensor – Pool or individual SEP owner
Q10. In case you have obtained a licence for standard essential patent, did you obtain the license(s)
through a SEP pool or through bi-lateral licensing negotiation(s) or through a combination of both
approaches?
pool bilateral
negotiations
combination
of both
approaches
2G, 3G, 4G, 5G 1 1 2
Wi-Fi 1 0 2
Video and audio codecs 1 0 3
Wireless charging 0 1 0
NFC 1 0 0
LPWAN networks 0 0 1
Q11. Experience with SEP licensing negotiations
Seven firms responded:
 “My firm negotiated what it felt was a fair license with the SEP owner” (3 answers)
o One firm commented: “We did already sign a number of license agreements.
Sometimes the license rates were published then we had the feeling the agreement
fulfils FRAND but often the license rates are not published then it is very difficult to
judge whether the agreements fulfil the FRAND requirements. We are not able to
analyse large portfolios which are usually negotiated.”
 “My firm accepted the price and conditions without negotiations” (2 answers)
o One firm commented: “As we are a small company we often do not even have the
option to negotiate.”
 Other: “NFC licence is part of the membership to the NFC association in which we contribute
to share experiences (not to set the standard)” (1 answer)
 Other: “We have had multiple SEP licensing requests. One license was obtained by
misrepresentation/fraud. Some have litigated (one litigation costing tens of thousands of
Euros was for a few thousand Euros of value). We have taken several SEP licenses but we
know we have unfairly paid much more than others. We are discriminated against as an
SME.” (1 answer)
Problems in negotiating with SEP owners
Q12. Was any of the below problems relevant to you when negotiating with SEP owner?
very
impor-
tant
rather
impor-
tant
neutral
rather
not
impor-
tant
not
impor-
tant at all
no
opinion
no
an-
swer
I did not know what would be a fair price for the
SEPs (FRAND)
15 3 2 0 0 10 9
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I did not have resources to negotiate with SEP
holder / engage in court proceedings
14 4 2 1 1 8 9
I could not clarify whether my product was actually
using the invention underlying the patent
13 5 2 0 1 9 9
I am not aware of any strategies how to defend
myself against SEP owners
13 3 1 1 1 10 10
I saw a threat to my production and sales
12 5 1 1 0 10 10
I did not know who owns SEPs relevant to my
implementation of the standard
12 4 3 0 1 10 9
I did not know if all the patents SEP holder
presented to me were essential to the standard
10 9 1 0 1 9 9
I did not understand the technology (e.g. of
component I use) to engage in meaningful
negotiations
8 2 3 1 4 10 11
Other 3 0 0 0 0 8 28
Important Neutral
Not
important
No. of
answers
I did not know what would be a fair price for the SEPs
(FRAND)
90% 10% 0% 20
I did not have resources to negotiate with SEP holder /
engage in court proceedings
82% 9% 9% 22
I could not clarify whether my product was actually using
the invention underlying the patent
86% 10% 5% 21
I am not aware of any strategies how to defend myself
against SEP owners
84% 5% 11% 19
I saw a threat to my production and sales
89% 5% 5% 19
I did not know who owns SEPs relevant to my
implementation of the standard
80% 15% 5% 20
I did not know if all the patents SEP holder presented to me
were essential to the standard
90% 5% 5% 21
I did not understand the technology (e.g. of component I
use) to engage in meaningful negotiations
56% 17% 28% 18
Other 100% 0% 0% 3
Note: “Important” consist of answers: “very important” and “rather important”, “Not important” consist of “rather not important”
and “Not important at all”; “No opinion” and “No answer” not taken into account for calculation of percentages.
Cost of negotiating an SEP license
Q13. In case you have obtained a licence for standard essential patent, how much did you spend on
negotiating the licence (excluding the royalties), for example spent internal and external resources,
legal advice, as well as other expenses such as access to third party databases?
 “full time as legal counsel”
 “NFC license was part of the membership [firm] entered in anyhow due to the core technology
of the firm”
 “The costs vary but perhaps GBP 20 000 to GBP 40 000. Sometimes the work crosses over
between portfolios and claims (e.g. where the SEP has broken up the portfolio). Much
depends on whether there was litigation.”
 “We are permanently negotiating. I assume the negotiation costs are about between EUR
20 000 to EUR 40 000 per year. The negotiations are often very different.”
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Impact of SEP license
Q14. In cases you obtained a SEP licence: What was the impact on…
negative neutral / no
impact
positive
… profit margin of your products if sold within in the EU? 3 2 2
… profit margin of your products if sold outside of the
EU?
3 2 2
… your innovation? 2 4 1
… legal certainty (e.g. planning your product pricing
strategy)?
2 1 4
negative neutral /
no impact
positive No. of
answers
… profit margin of your products if sold within in the EU? 43% 29% 29% 7
… profit margin of your products if sold outside of the EU? 43% 29% 29% 7
… your innovation? 29% 57% 14% 7
… legal certainty (e.g. planning your product pricing
strategy)?
29% 14% 57% 7
Impact of not obtaining an SEP license
Q15. In cases you did not obtain a SEP licence: What was the impact on…
negative neutral /
no impact
positive no opinion
… profit margin of your products if sold within in the EU? 5 5 4 6
… profit margin of your products if sold outside of the EU? 4 8 2 5
… your innovation? 7 5 5 5
… legal certainty (e.g. planning your product pricing
strategy)?
7 4 4 5
negative neutral /
no impact
positive No. of
answers
… profit margin of your products if sold within in the EU? 36% 36% 29% 14
… profit margin of your products if sold outside of the EU? 29% 57% 14% 14
… your innovation? 41% 29% 29% 17
… legal certainty (e.g. planning your product pricing
strategy)?
47% 27% 27% 15
Note: “No opinion” and “No answer” not taken into account for calculation of percentages
Open comments (answers to “Other, please explain”):
 Positive effect: “Multisite certification is very necessary for the new production model based
on the collaborative economy for ‘projects of general interest’ that wish to remotely tele-
manufacture.”
 Negative effect: “It adds to uncertainty both for us and for our customers. If we make
provision for estimated royalties and our competitors do not, we are at a disadvantage. Our
module customers generally do not understand the technology and want a solution with SEP
indemnification as they feel unable to navigate the licensing process. If we do not offer such
indemnification and our competitors do, we are at a disadvantage.”
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Impact of uncertainty about SEP licensing
Q16. How does uncertainty about SEP licensing affect your business?
agree neutral disagree no opinion no answer
Any royalty payments will affect my competitive position on
the market.
18 9 1 3 8
Potential future SEP payments may make me unable to
compete.
13 11 3 3 9
If my competitors also pay the same royalties, licensing will
not affect my business significantly.
13 8 6 3 9
I try to use alternatives available on the market in order not to
pay for SEP (e.g. older technology, or free technology).
12 4 9 4 10
It is unlikely that SEP holders will be interested to license me. 8 9 8 4 10
My prices include a certain amount of estimated royalties. 7 5 13 4 10
I try to develop in-house alternatives in order not to pay for
SEP.
5 8 13 4 9
There is no SEP uncertainty. 5 4 17 4 9
agree neutral disagree
No. of
answers
Any royalty payments will affect my competitive position
on the market.
64% 32% 4% 28
Potential future SEP payments may make me unable to
compete.
48% 41% 11% 27
If my competitors also pay the same royalties, licensing will
not affect my business significantly.
48% 30% 22% 27
I try to use alternatives available on the market in order not
to pay for SEP (e.g. older technology, or free technology).
48% 16% 36% 25
It is unlikely that SEP holders will be interested to license
me.
32% 36% 32% 25
My prices include a certain amount of estimated royalties. 28% 20% 52% 25
I try to develop in-house alternatives in order not to pay for
SEP.
19% 31% 50% 26
There is no SEP uncertainty. 19% 15% 65% 26
Note: “No opinion” and “No answer” not taken into account for calculation of percentages.
Q17. Experience with SEP licensing – open comments
Twelve respondents provided open comments about their experiences with SEP licensing.
 “No experience with direct SEP licensing, only discussions with technology suppliers. These
have made us aware of the potential issues / licensing threats.
We have followed recent court cases and announcements from patent pool holders with
interest (and fear).”
 “[Firm] has no personal resources to manage SEP licensing, in particular to investigate
potential SEPs and related licensors to ask for a license and to evaluate of the ready
implemented communication cores freely sourced in from suppliers make use of SEP.
[Firm] has no chance of handling SEP licensing and estimating the potential costs with
reasonable costs. SEP management would have to be handled by outside attorneys and would
result in costs that are expected to far exceed the royalties to be paid in view of the sales
numbers.”
 “[Firm’s] executive and senior management together have decades long experience in SEP
licensing, from all sides of the SEP licensing equation. This expertise combined with the
company’s independence, allows [Firm] to be a true intermediary able to find licensing
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solutions that can be accepted by the market, SEP holders and implementers alike, no matter
if it concerns a comprehensive solution such as Avanci or a custom arrangement facilitated
via Innovius.
Avanci is an aggregate patent licensing solution that currently licenses the SEP portfolios on
cellular technology (2G, 3G, 4G, and soon 5G) of 52 patent owners to more than 80 auto
brands worldwide. Avanci was created as a solution for the IoT industry and as this sector
continues to develop, Avanci will successively add more licensing programs to its offering as
the IoT industry continues to develop and new, innovative products reach the market.
Aggregate patent licensing solutions are particularly attractive to start-ups and SMEs. SMEs
that are SEP implementers can be assured that their license contains the same terms and
conditions as a license with a much larger company. SMEs that are SEP holders may not have
the capacity to pursue licensing themselves and licensing platforms offer a simple and
efficient solution to generate a return on their investments and enable SME SEP holders to
continue to participate in the standardization process. Avanci thus contributes to creating a
global level playing field and its license provides predictability and certainty.
Having efficient licensing solutions available to SEP holders and implementers can be a factor
in promoting the uptake of standardized technology; vice-versa, inefficient or dysfunctional
licensing eco-systems can inhibit the uptake of standardized technologies and thus inhibit the
integration of, for example, faster and more energy efficient technologies.”
 “For an SME it is difficult to estimate whether the offered terms are FRAND, particularly if
the terms are not published. We try to urge the licensors by means of German case law to
provide us some information about already signed agreements. This we could do sometimes
by a third independent attorney who is bound to confidentially and to whom the information
was handed out so that he/she was able to judge whether the offer is FRAND. But this
procedure is not always accepted by the licensors.”
 “We have experienced a lot. Examples include but are not limited to:
o being lied to by an SEP holder who said ‘everyone paid the same royalties’. This was
untrue, as we later found out in public court case decisions;
o refusals to negotiate licenses;
o lies by SEP holders in negotiations;
o injunction threats when we pointed out we did not even use certain alleged SEP
features in a products;
o our distributors being refused SEP licenses when requesting them;
o unlawful seizure of products sold to our distributors at Customs based on a patent later
found to be not infringed by a Court, costing millions of Euros in damages and lost
sales (with criminal proceedings against the General Manager personally);
o being sued in America on alleged SEPs where the amounts claimed were a few
thousand dollars;
o pool administrators telling us that they advise other pools on pricing;
o outlandish claims being made as part of an SEP audit – even one where we were
offered a million dollar reduction if we changed lawyers;
o multiple NPE licensing requests arising from portfolio fragmentation (splitting up of
portfolios);
o NPE litigation in America.”
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 “The issue is completely out of scope. We have been advised by our legal / IP advisor, that
this might become an issue, but we do not really know how to deal with it.
 “Most of the small companies my company helps are leveraging patents so it is at the core of
their activities.
The companies I advise that only implement standards to build on top to create their own
services and added value solutions factor in the licensing fees into their pricing.”
 “[Firm’s] position is simple. [Name of SEP owner] (and other SEP holders in the future)
should not be harassing SME’s or others for this type of issue, which are not matters within
[Firm’s] expertise. [Firm] believes that [Name of SEP owner] (and other SEP owners) should
be required to grant SEP licenses to module suppliers that want a license like [Name of
supplier] (or their suppliers), so that [Name of supplier] and its distributors can give normal
and standard warranties of non-infringement for their cellular products. [Name of SEP owner]
has, or had, a practice of licensing modules for 2G and 3G and so there is no reason to change
that for 4G. [Name of SEP owner] also has, or had, a practice of licensing at chipset level.
The entire supply chain can be licensed at chipset level, which is where the economic value
of the patents can be realised, so [Name of SEP owner] should take this up with [Name of
supplier] and their suppliers. Licensing at the chipset level will also mean that all of [Firm’s]
competitors (across the globe, not just in the EU) will be paying the same for SEP licenses,
so that there is a level playing field for [Firm’s] market. If [Firm] took a license to [Name of
SEP owner] patents, how would it know whether its competitors were licensed and whether
everyone, including large multinational companies, were paying the same. In Unwired Planet
vs Huawei, Mr Justice Birss made clear that there should be no material difference in the
pricing of SEPs. Asian companies should pay the same as everyone, and that can be achieved
by selling with licenses paid at chipset level.
I have heard it said by various SEP holders and commentators that large SEP holders ‘do not
chase SME’s’, and that is clearly inaccurate. [Firm] has no idea how many similar licensing
requests have been sent out by [Name of SEP owner], and other SEP owners. Even if some
SEP holders did have a practice of leaving SME’s alone, it is unreasonable and unfair for
SME’s such as [Firm] to have the fear of waiting for a ‘tap on the shoulder’ by an SEP owner.
Indeed, if SEP holders did ‘leave SME’s alone’, there would remain a fear that SEP holders
would appear at a later date (perhaps when the SME was a larger company) and then make a
claim for past royalties going back 6 years. It is unfair and unreasonable to put that financial
uncertainty onto SME’s like [Firm]. The UKIPO might consider it appropriate to ask some of
the assertive SEP holders for details of the type of companies they have sent licensing requests
to, and how many have been sent out.
[Firm] takes the view that the solution is for the Commission to take active steps to ensure
that chipset and module suppliers can get SEP licenses, so they can pass the IP rights along
the supply chain to the SME customers.”
 “For a small company this type of extras, where patent holders are tying avoid terms with
module manufacturer and come after the end product companies are very bad for small
business:
o The amount of productive efforts in negotiations where the patent holder try to get as
much as possible of value, creates a very unpleasant environment, as you don’t have
a choice.
o Big companies will gain as they have legal departments that can help out.
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o European companies are at a disadvantage compared to foreign producers that might
fly under the radar.
o It is ridiculous that patent pools should come after each company doing some modern
radio technology, rather than settle cost per module with manufacturer.”
 “Standards should not be a shop-front for royalty payments to others. SEP are a huge break
on innovation and deployment of genuine standards in given areas.”
 “The IoT market is very fragmented. By 2025, the market is expected to represent 100s of
millions of units, but in our experience, a very large project is only a million units a year and
most projects we see directly are 100-200k units per year. So you can imagine that there are
thousands of projects and IoT companies with end solutions in this eco system.
i. Even large cellular technology vendors cannot address this number of customers
directly, and we are a small company with a small sales force, so we are partnering
with module vendors, technology partners and distributors to increase our market
reach.
ii. Increasingly we expect sales to go through partner channels, many of which also
sell primarily through distributors, meaning that we will not know who the end
customer is nor what their application is. Even today, we are not aware of all the end
uses of the customers of our module vendor partners.
iii. The end customers that we DO know generally have no idea how to evaluate
patents related to 4G/5G technology and have no idea how to go about licensing the
related SEPs.
In summary, the value chain has a small number of vendors of the cellular technology
solution, whether at the chipset or module level, and a very large number of companies
looking to provide IoT solutions that include cellular connectivity. The efficient solution
would be to license at the module level as the module contains all the technology in the
standard.
It is hard to imagine how we can have licensing rates differentiated based on end use – there
are too many end uses now and there will be new uses invented. And how will the SEP holders
try to capture the thousands of companies using SEP technology? Only the lawyers really
profit from all this.”
 “SEP holders should not be able to select the level in the value chain for licensing. This way
they can distort the competition among manufacturers of the same product by selectively
enforcing the patent on the basis of commercial considerations. If only one manufacturer will
pay royalties, this will produce distortion effect: either because it will remain the only lawful
competitor or because the others will have a competitive advantage at price level. In our view
a balanced licensing system should include an obligation for the SEP holder to license any
undertaking which requests it, independently from the level of the value chain they are in.
The appropriate level of licensing should therefore be at the component supplier level. The
component suppliers are able to pass the cost down the value chain, and in this way a level
playing field among manufacturers is preserved. Further, the component suppliers know best
which technology is incorporated and can assess relevant SEPs, thus being in the best position
to negotiate the royalties.
This market distortion is particularly problematic in a market such as technologies for smart
grids, where sales happen through public tendering procedure and where specific technologic
requirements are requested by EU law at reasonable economic costs (e.g. interoperability of
devices). If the SEP holder is allowed to claim royalties from manufacturers of smart energy
devices, it will be even more difficult to pass the cost down to the public undertaking.
Therefore, the royalty payment will cut margins and disincentivise innovation in this strategic
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market for the EU. Additionally, in order to preserve the level playing field, if the product is
sold through public tendering, royalty value should be the same for each manufacturer and
shall be disclosed with no confidentiality commitment.”
The firm’s role as a standard contributor and SEP holder
Most questions in this category received less than five answers; they are hence omitted in the analysis.
Participation in standard setting
Q18. Have you participated in standard setting?
Answers %
Yes 15 38%
No 23 59%
Other 1 3%
Ownership of SEPs
Q19. Do you own any standard essential patents?
Answers %
Yes 2 14%
No 8 57%
Other 4 29%
Note: No respondent explained the choice of “Other”
Motivation to contribute to standards
Q20. What were your motivations to make a technical contribution to protocols and technologies in
standards? Or for not doing so?
(Note: The answers were grouped according to themes that emerged from the responses.)
 Improving technology:
o “Agroblockchain Technology.”
o “Improve the Standard.”
o “To improve the standard for the good of all, and to ensure that everyone can
implement it without hindrance – to give confidence to all users of the standard that
this is genuinely open to all.”
o “Part of our role in the EU projects. It also strengthens the industry. Standards help
and give direction to innovation.”
 Facilitating adoption of own technology:
o “Since day 1 [Firm] has seen the standard as the only way to reach a massive market
as IoT. We believe that in the coming.”
o “Interest in have wide adoption of technology to create larger market for products.”
o “Most companies I advise want to contribute their technologies to standards if the IPR
policy of the SDOs is FRAND based. They want to be able to leverage their
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technologies in future cross licensing negotiations and/or monetise their potential
standards essential patents.”
o “Influencing the standards according to our technical choices or strategic choices or
IP choices.”
 Learning about technology and market:
o “Awareness of ongoing activities to proper align internal product development.”
o “We want to be abreast of the latest evolutions of the standard so that we can include
this in our product roadmap so we are members of ETSI and are active participants in
the meetings.”
o “Technology watch
- on future RFC and state of the art.
- understanding the strategy of the competitors / leading vendors, and especially
trying to understand their underlying strategy on IP / patents.
- understanding security agencies’ positions (US mostly).”
 Networking:
- “Create credibility for us and being well identified in the eco-system.
- “Participating to SDOs also allow the participants to create their network and have
direct access to the other representatives. This is really useful for SMEs.”
Considerations to contribute to standard development
Q21. If you have not yet contributed to standardisation, have you considered contributing to
standardisation? (e.g. by developing patents and declaring them as standard-essential; or
participating in Standard Development Organisation(s) committees and developing a standard?)
Answers %
Yes 7 32%
No 14 64%
Depends 1 5%
Comments:
 Firms answering “yes”:
o “If we can contribute, we are very much willing to do so!”
o “We made some requests of modification of the USD348
standard but are too small to
contribute ourselves.”
o “But as a SME it’s hard to get in!”
 Firms answering “no”:
(Note: The answers were grouped according to themes that emerged from the responses.)
o Lack of resources / expertise:
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USD is a standard for interoperability between 3D software solutions.
146
 “No personnel and financial resources.”
 “We are too small.”
 “Too expensive and standardisation is not our expertise. Our expertise is in
ruggedisation, and we work to ruggedisation standards (e.g. military grade
standards).”
 “No, we don’t have the resources.”
o Other reasons:
 “We are too small to garner the votes necessary for our patents to be adopted
by the standard setting bodies, which are dominated by the largest companies.”
 “In previous companies I have contributed to IETF standard protocols – I have
noted the IETF has a different approach to SEPs than (for example)
ITU/ETSI.”
 “We are not communication components developers. We contribute in
standard setting bodies as for mechanical gas products and metering systems
and as for other technical subjects in which we have specific expertise.”
 “There are hundreds of standards in EV charging from safety to durability to
automotive. The only standards we are having problems with is cellular.”
Potential reasons to contribute to standardization
Q22. Why would you think it may be useful for you to contribute to standardisation?
(Note: The answers were grouped according to themes that emerged from the responses.)
 Benefits of standards:
o “Standards are essential to enable innovation, as they create a larger market e.g. when
a standard infrastructure is available more devices can be brought to market. Generally
this benefits everyone, including those who have invested in the research to drive the
standard, as they are best placed to take advantage for their own products.”
o “It is necessary for a sector as AgroTech and sensoric, drone technology for
standards.”
o “The standard around Wi-Fi reconfigurability and radio reconfigurability in general,
as well as entrenched cybersecurity aspects, could have the potential to destroy or
foster the transition from a vertically integrated networking market to a horizontal
market. It’s critical that the standard is done keeping this in mind. As most
contributors to the involved standards seem influenced by large global hardware
companies, which are not necessarily interested to foster the transition to a horizontal
market (which should be considered positive for consumers, for the environment, for
SMEs, for European's sovereignty), [Firm], a European Digital SME, feels obligated
to contribute.”
o “Standards are necessary to create an ecosystem and finally a choice for the users.”
o “Certify the implementation of the standards generates user confidence and helps the
European market surveillance observatory. […]”
o “I feel that there is a big gap between what is expected from SME’s and especially
Start-ups and that the Start-up community is not at all aware of the issue.”
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o “Part of our role in the EU projects. It also strengthens the industry. Standards help
and give direction to innovation.”
o “Participate to the creation of global standards to enable interoperability.”
 Improve technology:
o “To get the best technological solution.”
o “Because we invent a lot of new applications. We build enormous amounts of
knowledge in special areas. We are very creative in solving difficult problems in the
field.”
o “Contribute my best technologies to the standards.”
o “Improve the Standard.”
o “It gives clarity to the market and designs clear responsibilities at any level of the
value chain. It helps ensuring safety and quality.”
 Influence technology development:
o “Set directions in the market.”
o “Generate competitive advantage to our company and limit disadvantages form
unfavourable directions.”
o “We are developing a new technology and it can be very useful for us if it becomes a
standard patent. We believe that what we are doing will change the world.”
o “The USD349
has become essential in our market and it is important to develop it to
meet our needs.”
 Learn about technology developments:
o “Awareness of ongoing activities to proper align internal product development.”
o “Create a strong network, learn from the other contributors.”
o “New experience for our company and new potential market.”
o “To know in advance the technology in details.”
Obstacles to contributing to standardisation
Q23. What are the obstacles for you to contribute to standardisation?
(Note: The answers were grouped according to themes that emerged from the responses.)
 Resource constraints (time, cost, people):
o “Effort and resources.”
o “Ability to dedicate time and resources.”
o “No personal and financial resources.”
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USD is a standard for interoperability between 3D software solutions.
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o “Contributing is a very slow, time-consuming, and complex process. It spans over
multiple years of activity and its results are not tangible in the typical lifetime of a
digital company/startup.”
o “We are too small.”
o “Time and resources... we are a small startup and we invest much more time on the
subject compared to our size and other EU groups. (Microsoft has a team of 400
people dedicated to this topic...)”
o “Money, resource, time.”
o “Internal capacity to dedicate to such topics.”
o “Efforts needed.”
o “Costs related to travels. Face to face meetings are required to allow efficient
negotiations and cannot be replaced by virtual meetings.”
o “Resources – just don’t have enough time or people.”
o “Time consuming and bureaucracy.”
o “Knowledge and experience.”
o “Cost”
o “Resources and focus.”
o “Financial and human resources; not big enough versus Qualcomm, Nokia, etc.”
 Standard-setting dominated by big players:
o “Closed standards groups (ETSI).”
o “Interest for Actors, Knowledge, Time to Participation of Process. Professional
Secrets and Industrial Secrets.”
o “Standard owners/developers who want to charge royalty fees do not want others to
participate. Standard developers are often not interested in developing open standards
and open-source their work.”
o “Overwhelming number of patents in existence makes it challenging to standardize.”
o “All USD350
contributors are large international companies. We are too small to be
listened to on our own proposals for changing the standard.”
o “How to get in against the big ones.”
 Complexity:
o “For us it is still very new, so we are learning by doing. Sometimes it gets a bit difficult
to understand how all the process work and what are the first steps to do and in which
timings.”
o “Don’t know where to start, need guidance to get an overview.”
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USD is a standard for interoperability between 3D software solutions.
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ANNEX 9: PUBLIC CONSULTATION – DETAILED SUMMARY
This document should be regarded solely as a summary of the contributions made by
stakeholders to public consultation on the Standard Essential Patents. It cannot in any
circumstances be regarded as the official position of the Commission or its services. Responses
to the consultation activities cannot be considered as a representative sample of the views of the
EU population.
This annex provides a detailed summary of the responses to the public consultations and call for
evidence on potential future European Commission initiative on the Standard Essential Patents
(SEP).
Call for Evidence
The consultation took place between 14 February 2022 and 09 May 2022. During that period 97
replies and 49 position papers were submitted.
All position papers are published351
and they are not susceptible to summary. Among the responses
with important additional elements are the contributions by Apple, Avvika AB, Boehmert &
Boehmert, DVB, InnovUp, Internet Society, National Standards Authority of Ireland (NSAI), Nokia,
Ordine dei Consulenti in Proprietà Industriale and PROSA.
Summary of replies to the Open Public Consultations
The consultation took place between 14 February 2022 and 09 May 2022. During that period 74
replies to the questionnaire arrived. Respondents were asked to provide basic information about
themselves such as country of origin, area of activity, registration in transparency register.
Subsequently they could reply on the following blocks of questions: general questions, questions on
the licensing process and related problems, questions on transparency of SEP licensing, on
essentiality of SEPs, on Fair, reasonable and non-discriminatory (FRAND) licensing terms and
finally questions on SEP enforcement.
Respondents’ characteristics
Two thirds of replies came from the European Union. The highest number of EU replies came from
Germany. The remaining one third of replies came from countries outside the EU, with the highest
number coming from the USA. The graph below (Fig.1) presents responses per country of origin.
Almost 60% of the 74 replies came from companies (39 replies) or business associations (7).
Followed by seven replies from academia, two from public authorities, one from non-governmental
organisation (NGO) and one from trade union. Six replies came from EU and non-EU citizens (see
Fig. 2).
Among 39 companies, 77% were large entities and 23% were small and medium-sized entities
(SMEs).
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https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13109-Intellectual-property-new-
framework-for-standard-essential-patents/feedback_en?p_id=28414115
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30% of respondents identified themselves as both SEP holders and implementers, 13% as only SEP
implementers and 4% as only SEP holders. Around 50% identified themselves as “other” (which
consists of for instance attorneys, advisers, academia…).
Around half of respondents (35) are registered in the transparency register.352
The Transparency
Register is a tool to allow European citizens to see what interests and on whose behalf the respondent
represents.
Figure 19: Distribution of responses per country of origin of respondent
Source: Commission own analysis
352
https://ec.europa.eu/transparencyregister/public/homePage.do.
23
6
5
3
2 2 2 2
1 1 1 1
11
5 5
1 1 1 1
0
5
10
15
20
25
151
Figure 19: Distribution of responses per country of origin of respondent
Figure 20: Distribution of responses by type of respondent
Source: Commission own analysis
Methodology
For the purpose of quantitative analysis, responses of stakeholders were grouped into broader
categories (using self-declarations of the respondents):
 replies of all respondents (table abbreviation: “All”),
 replies of respondents who identified themselves as “company/business organisation”
(abbreviation: “Companies”),
 replies of “business associations” together with “trade unions” (abbreviation:
“Associations/trade union”),
 replies of “public authorities”, “non-governmental organisations (NGO)”,
“academic/research institutions” and of “others” (abbreviation:
“Academia/Authorities/NGO/other”)
 replies of EU and non-EU citizens (abbreviation: “Citizens”)
To simplify presentation, in case of questions with more granular scale of possible answers (Likert
scale), answers pointing to the same sentiment were grouped together (e.g. “Fully agree” and
“Somewhat agree”).
Additionally, we wanted to present a summary of the views of SEP holders in comparison to those
of implementers. However, there is no clear delineation (based on the self-identification) between
those that are SEP holders and those that are implementers – i.e., in a large number of instances the
Company/business
organisation, 53%
Business
association, 9%
Academic/research
institution, 9%
EU citizen, 8%
Non-EU citizen, 8%
other, 7%
Public authority, 3%
NGO, 1% Trade union, 1%
152
submitter identifies as a SEP holder and an implementer353
. We have, therefore, compiled the views
into two groups based on replies to question two (Q2) and three (Q3) as proxies for Group A and
Group B responses354
. Using these proxies, we had 29 Group A respondents and 18 Group B
respondents. Group A are responses we perceive as promoting more of an implementer’s views, and
Group B are those that we believe promote primarily the views of a SEP holder. Note that in many
instances, companies may fall into Group A or Group B depending on their response to a particular
question.
For simplicity, we present their replies for each question in tables below under captions
“Implementers” and “SEP Holders” respectively.
Since there was a significant number of replies from outside of the EU, we present tables with replies
of EU and non-EU respondents. Self-declaration of the country of origin was checked and corrected
based on the headquarters localisation of the respondent.355
Replies of EU and non-EU citizens were
not taken into account in these tables. As the result of these corrections there were 40 respondents
from the EU and 22 from outside of the EU.
Finally in case of questions of special relevance to SMEs, replies of all those who identified
themselves as SMEs are presented.
Replies to general questions
Quantitative summary
Around 60% of respondents considered that the current legal framework sufficiently protects against
implementers “hold-out” (e.g. unreasonably delaying the conclusion of a licence by an implementer).
Around 30% had opposing views. The responses showed similar pattern across different
stakeholders’ groups (companies, associations, academia, respondents from the EU and non-EU
countries).
Respondents were divided on the issue whether the current legal framework provides sufficient
protection against SEP holders “hold-up” (e.g. using the threat of injunction to extract excessive
rents) with 48% agreeing and 43% disagreeing. Companies, citizens and non-EU respondents mainly
disagreed. While academia/authorities/NGOs/others, and EU based respondents tended to agree with
that the current legal framework provides sufficient protection against SEP holders “hold-up”.
The final question in this section asked about impact of the current SEP licensing framework on
SMEs and start-ups. Around half of all respondents assessed the impact as negative, a third thought
there is no impact, and around 5% deemed it positive. Responses showed similar pattern for all
analysed groups, except for associations, implementers and SEP holders. Around half of associations
and SEP holders considered that there was no impact, while around 80% of implementers thought
that impact is negative.
Tables with replies per question
353
Based on self-identification, there were only nine implementers (13% of replies) and three SEP holders (4% of replies),
while the remaining respondents identified themselves either as “both implementer and holder” (30% of replies) or as
“other” (52% of replies).
354
Those who agreed with Q2 (that current legal framework provides sufficient protection against implementers hold-
out) and disagreed, were neutral or had no opinion on Q3 (that current legal framework provides sufficient protection
against SEP holders hold-up) were included in Group A. Those who disagreed, were neutral or had no opinion on Q2 and
agreed with Q3 where included in Group B.
355
There were four corrections from EU to non-EU and one from non-EU to EU.
153
Q2. Do you consider that the current legal framework for SEPs356
provides sufficient legal protection
against “hold-out” (broadly opportunistic behaviour by SEP implementers such as delaying the
conclusion of a licence for as long as possible)?
All Companies
Associations/
trade union
Academia/Autho-
rities/NGO/other
Citizens
Agree 59% 56% 63% 57% 70%
Neutral 12% 11% 0% 29% 0%
Disagree 29% 33% 38% 14% 30%
No. of replies 68 36 8 14 10
Note: Agree composes of “Fully agree” and “Somewhat agree”; Disagree composes of “Rather disagree” and “Fully disagree”;
“No opinion / cannot answer” answers not taken into account.
Implementers
SEP
Holders
Agree 100% 0%
Neutral 0% 22%
Disagree 0% 78%
No. of replies 29 18
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
Agree 58% 55%
Neutral 16% 10%
Disagree 26% 35%
No. of replies 38 20
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
There are concerns regarding “hold-out”, some claiming it is a systemic issue and already sufficiently
addressed by the current framework, and others claiming there is no empirical evidence and that it is
an unproven theory that there is hold-out on the market.
Proponents of the current legal framework being sufficient legal protection:
356
Communication from the Commission to the European Parliament, the Council and the European Economic and Social
Committee on Setting out the EU approach to Standard Essential Patents, COM(2017)712 final, 29.11.2017,
https://ec.europa.eu/docsroom/documents/26583, endorsed by Council Conclusions on the enforcement of Intellectual
Property Rights, 6681/18, 1.3.2018, http://data.consilium.europa.eu/doc/document/ST-6681-2018-INIT/en/pdf;
Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual
property rights (“IPRED”), OJ L 157, 30.4.2004, pp. 45-86, http://data.europa.eu/eli/dir/2004/48/oj; Regulation (EU) No.
608/2013 of the European Parliament and of the Council of 12 June 2013 concerning customs enforcement of intellectual
property rights and repealing Council Regulation (EC) No 1383/2003 (“Regulation concerning customs enforcement of
IPRs”), OJ L 181, 29.6.2013, pp. 15-34, http://data.europa.eu/eli/reg/2013/608/oj; Regulation (EU) No. 1025/2012 of the
European Parliament and of the Council of 25 October 2012 on European standardisation (“Regulation on European
standardisation”), OJ L 316, 14.11.2012, pp. 12-33, https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A32012R1025&qid=1676580774315; Communication from the Commission –
Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-
operation agreements (notably chapter 7) (“Horizontal Co-operation Guidelines”), OJ C 11, 14.1.2011, pp. 1-72, CELEX:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52011XC0114(04); Communication from the
Commission – Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to
technology transfer agreements, OJ C 89, 28.3.2014, p. 3-50 https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=uriserv%3AOJ.C_.2014.089.01.0003.01.ENG; Judgment of the Court of Justice of the European
Union (“CJEU”) of 16 July 2015, Huawei Technologies Co. Ltd v ZTE Corp. and ZTE Deutschland GmbH, C-170/13,
ECLI:EU:C:2015:477, https://e-justice.europa.eu/ecli/ECLI:EU:C:2015:477; national patent laws and judgments of
national courts.
154
Proponents of the current legal framework urge the EC to reject claims that seek to position
appropriate negotiations by a potential licensee when approached by a SEP holder as ‘hold-out’.
According to those opinions, the current FRAND framework for the most part does not support hold-
out behaviour since implementers need to conduct diligence on the essentiality and validity of SEPs
before agreeing to take a licence. This may not constitute delay tactics. Where needed, SEP licensors
always retain the option of responding to perceived delay by accused infringers by asserting SEPs
and seeking a determination from a court regarding a reasonable royalty. European courts provide
sufficient legal protection and are effective against hold-out, but the system could be improved if it
were less expensive and quicker.
Some respondents claim that the national court practice increasingly favours SEP holders. This
particularly applies in Germany after the Sisvel v. Haier decisions of Germany’s Federal Court of
Justice. They ask that the New Framework for SEPs bring the licensing negotiations back in line with
the CJEU’s ruling and ensure that injunctions are available only in exceptional circumstances in the
SEP context.
Proponents for current framework not being sufficient for legal protection against hold-out:
Some respondents claim that they face significant hold-out from implementers who refuse to engage
in good faith negotiations aimed at concluding a FRAND licence. Even if the CJEU Huawei v ZTE
decision has brought some improvements as it reaffirms that there are obligations on both SEP
holders and implementers, there is still hold out according to such respondents, proving that the legal
protections are insufficient.
Respondents claim that hold-out is incentivized when it is difficult for innovators to obtain
injunctions and appropriate damages. In fact, according to some respondents there are no financial
consequences for bad faith implementers, as the worst they can get after years of hold-out is a
FRAND royalty rate determination. Such implementers, however, continue to benefit from
technologies that are covered by patent rights, thus denying the innovators the return on investment
which is necessary for sustaining the innovation cycle. Respondents explain that such behaviour
would disregard the emerging guidance from various courts in Europe cautioning against hold-out
behaviour. They warn against distortion of competition, discrimination against companies that
respect IP by taking a license, and weakening of the incentives for companies to innovate. Such
respondents consider that that EU courts should be able to issue injunctions and award royalties and
damages to incentivize implementers to settle rather than to hold out.
Some respondents caution that excessive protection and regulation could obstruct the competitive
market principles and should not be undertaken lightly. Such new framework should, however,
reduce the motivation for “hold-out” or create incentives for early licensing.
Q3. Do you consider that the current legal framework for SEPs provides a sufficient legal protection
against “hold-up” (broadly opportunistic behaviour by SEP holders such as using their market
power to extract excessive rents or terms from implementers)?
All Companies
Associations/trade
union
Academia/Autho-
rities/NGO/other
Citizens
Agree 43% 38% 43% 62% 40%
Neutral 9% 14% 0% 8% 0%
Disagree 48% 49% 57% 31% 60%
No. of replies 67 37 7 13 10
Note: Agree composes of “Fully agree” and “Somewhat agree”; Disagree composes of “Rather disagree” and “Fully disagree”;
“No opinion / cannot answer” answers not taken into account.
155
Implementers
SEP
Holders
Agree 0% 100%
Neutral 7% 0%
Disagree 93% 0%
No. of replies 28 18
Note: Implementers those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
Agree 47% 38%
Neutral 8% 14%
Disagree 44% 48%
No. of replies 36 21
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
Proponents for the current legal framework being sufficient:
Some respondents argue that SEP implementers do not need to acquire any technology from the SEP
holder to implement a particular SEP, since the technology is described in a public specification,
which can be implemented without delay.
Some respondents explain that the CJEU guidance in Huawei v ZTE and the subsequent decisions
from various courts in Europe provide a clear indication that there is sufficient legal protection against
‘hold-up’. They state that hold-up supposes the use of market power to extract excessive rents. As
noted by the UK Supreme Court in the Unwired Planet v Huawei decision, the threat of an injunction
cannot be employed by the claimants as a means of charging exorbitant fees, or for undue leverage
in negotiations, since they cannot enforce their rights unless they have offered to license their patents
on terms which the court is satisfied are fair, reasonable and non-discriminatory. According to such
respondents, there is still no abundant evidence available that establishes the existence of hold-up in
the FRAND context.
Proponents for the current legal framework being insufficient:
Respondents commented that the FRAND obligation is a good tool to protect licensees against hold-
up, but its ambiguity is used by SEP holders to maximize royalties. This harms innovation, SMEs
and the marketplace. According to them, hold-up is the fundamental reason there are so few
companies entering or able to maintain their businesses in this space against SEP holders who may
use SEP hold-up to distort markets, eliminate competition, and harm the European economy.
Some respondents believe that some courts have (mis)interpreted Huawei v. ZTE to impose
unrealistic requirements on implementers to prove their willingness [to license], while failing to
scrutinise whether the SEP owner’s licence offer is truly FRAND. This places undue pressure on
negotiations and may force the potential licensee to accept non-FRAND rates that go beyond the
value of the patented invention or pay for patents that are not standard-essential.
Some argue that the framework fails in three ways: (i) it allows injunctions in all cases; (ii) it fails to
require information necessary for FRAND licensing, e.g., full price and license terms; and (iii) it fails
to treat a standard as a whole (the “full stack”).
Some respondents argue that the current legal framework does not deal effectively with the issue that
some SEP holders only want to license manufacturers of “end products” and refuse to grant licenses
to upstream implementers. According to them, this strategy is aimed at maximizing the threat
resulting from injunctions at the level of the most valuable products to extract the highest possible
royalty rates.
156
Q4. What is the impact of the current framework for SEP licensing on start-ups and SMEs?
All Companies Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
It puts start-ups and SMEs at competitive
disadvantage
51% 52% 38% 53% 55%
It does not impact start-ups and SMEs
differently than other stakeholders
31% 26% 50% 27% 36%
It is more favourable to start-ups and
SMEs
5% 3% 0% 7% 9%
Other, please specify 14% 19% 13% 13% 0%
No. of replies 65 31 8 15 11
Implementers
SEP
Holders
It puts start-ups and SMEs at competitive disadvantage 79% 6%
It does not impact start-ups and SMEs differently than other stakeholders 13% 56%
It is more favourable to start-ups and SMEs 8% 6%
Other, please specify 0% 33%
No. of replies 24 18
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
SME Large
It puts start-ups and SMEs at competitive disadvantage 48% 52%
It does not impact start-ups and SMEs differently than other stakeholders 40% 21%
It is more favourable to start-ups and SMEs 0% 7%
Other, please specify 12% 21%
No. of replies 25 29
Note: SME: those who chose as organisation size: “Micro (1 to 9 employees)” or “Small (10 to 49 employees)” or “Medium (50 to
249 employees)”; Large: those who chose “Large (250 or more)”
EU non-EU
It puts start-ups and SMEs at competitive disadvantage 54% 41%
It does not impact start-ups and SMEs differently than other stakeholders 35% 18%
It is more favourable to start-ups and SMEs 3% 6%
Other, please specify 8% 35%
No. of replies 37 17
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
Positive impact
Some argue that SMEs benefit from standards. For example, in some cases such as the LTE patent
pool, SMEs are given preferential treatment in terms of licensing conditions, etc. SMEs can also be
the developers of standards. And they also benefit from the existence of standards and a balanced
SEP licensing framework.
Other respondents argue that start-ups and SMEs generally are "under radar" and too small for any
bigger licensor to be interested in them. They may continue infringing unnoticed. In practice, there
are hardly any litigation against start-ups/SMEs, as litigation would be inefficient for the SEP holder.
Negative impact
Some respondents explained that the SEP marketplace is not transparent enough for SEPs to be
identified and licences agreed before a product is launched, especially where the technology is time-
157
sensitive (e.g., the product life cycle is short), or for SMEs to provide for the accurate costing of SEP
licences in their business plans.
Some respondents claim that there is a negative impact because of power asymmetry and lack of
transparency puts SMEs at a disadvantage. SMEs face the same problems as larger companies;
however, they are less equipped to weather the legal risks, costs, and complexity of transacting with
SEP licensors as they do not have in-house expertise in all three areas of ICT, standardization and
patent licensing and cannot afford to external experts like larger companies. Also, SMEs could
probably not afford an injunction and therefore the mere threat of an injunction forces them to choose
between accepting potentially supra-FRAND rates or being excluded from the market.
A respondent explained that the current legal framework furthermore favours foreign companies
outside the EU. When those located outside the EU face injunction in the EU, they lose access to one
national market. But when start-ups and SMEs located in the EU face injunction in the EU, they may
lose their whole business. This may lead to limited innovation and delaying uptake of for example
IoT.
Questions on the licensing process
Quantitative summary
Around half of respondents reported seeking a licence before a SEP holder approaches them. SEP
holder usually contacted the respondents around 3 years after the first implementation of a standard
in a product. Licence negotiations with a large SEP holder concerned in general between 1 and 50
SEP.
Almost three quarters of respondents request a licence in order not to infringe a SEP and 60% to be
able to plan production and costs.
In terms of consequences of the current SEP licencing practices: Two thirds of all respondents and
majority of Implementers try to share SEP cost/risks with their suppliers. Around 40% of all
respondents, and two thirds of Implementers will try to settle with a SEP holder as quickly as possible
to avoid litigation or will search for other technology or royalty free standard. Around a third of
respondents (and a half of Implementers) will increase prices and may become less competitive.
The main reasons for licencing/having SEP are securing the return on investment (70% of answers),
followed by use of SEP for defensive/bargaining purposes (60%) and participation in standardisation
process in the future (40%).
SEP holders start contacting implementers on average two years after publication of a standard. On
average around 60% of contacted implementers, reply within one year. Around 70% take a licence
without any litigation. It takes on average 3 years and 3 months to conclude a licence.
Q5. What is the impact on your business of recent litigations in courts in different jurisdictions,
including China, Germany, India and the UK?
Summary of comments
Positive impacts
According to some, recent court decisions from the European and US courts can provide useful
guidance for parties negotiating in good faith to come to a licence agreement. Even if there are some
differences between decisions (as they are based on different factual circumstances), they do provide
further guidance.
Negative impacts
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According to others, injunctions for SEPs under FRAND commitment have become more readily
available. Such respondents pointed out in particular to the decision of the Germany’s Federal Court
of Justice Sisvel vs. Haier. They claim that the court effectively contradicted the CJEU’s judgment
Huawei v. ZTE and brought back the Orange Book Standard. It re-shifted the main burden of
negotiations on licensees and increased the availability of injunctions. Those respondents explain that
similar trends can be noticed in neighbouring jurisdictions (see, e.g., Philips v Wiko in the
Netherlands). They claim that this can lead to forum shopping since the different jurisdictions have
different opportunities for injunctions.
Furthermore, a litigator specialising in FRAND matters can see a split between the courts which
apply the law of the contract (China, India, US, UK, France) and those which either refuse (Germany)
or avoid the issue (NL). This has a major impact on both licensing-in and licensing-out strategies
because it creates lots of forum shopping strategies, therefore creating more confusion for the
legitimate players (licensors and implementers).
Some respondents see hold-up occur in the broader IT, mobile and automotive industry, and expect
litigation to emerge in the IoT sector soon as well. Those respondents consider potential hold-up
problematic considering the 5G rollout and widespread adoption of IoT devices. They see these issues
emerge in relation to a small set of SEP holders active in the narrow field of wireless communication
and codec standards.
Q6. In your experience, in licensing negotiations, how many SEPs are discussed technically between
an implementer and a SEP holder with a large portfolio?
All Companies
Associations/trade
union
Academia/Autho-
rities/NGO/other
Citizens
< 20 60% 53% 60% 57% 82%
20-50 21% 27% 20% 14% 9%
50-100 6% 7% 20% 0% 0%
100-200 4% 3% 0% 0% 9%
200-400 6% 3% 0% 29% 0%
> 400 4% 7% 0% 0% 0%
No. of replies 53 30 5 7 11
Average* 63 75 28 96 25
* Weighted average calculated using the middle of ranges, for the last open range value of 600 assumed.
Implementers
SEP
Holders
< 20 68% 53%
20-50 14% 24%
50-100 5% 12%
100-200 5% 6%
200-400 5% 6%
> 400 5% 0%
No. of replies 22 17
Average* 63 49
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
* Weighted average calculated using the middle of ranges, for the last open range value of 600 assumed.
EU non-EU
< 20 56% 53%
20-50 19% 33%
50-100 11% 0%
100-200 4% 0%
200-400 7% 7%
> 400 4% 7%
159
EU non-EU
No. of replies 27 15
Average* 70 77
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
* Weighted average calculated using the middle of ranges, for the last open range value of 600 assumed.
Summary of comments
Some respondents claim that it is very difficult to provide a realistic average as there are many
variables that impact the number. In some licensing negotiations claim charts of less than 20 SEP
families are exchanged, in others claim charts of more than 400 SEP families are exchanged.
Different elements may play a role, such as: contract renewal or not, number of standards covered,
the involved products, existence of cross licensing (SEP families of both parties involved), agreement
between the parties, etc. However, technical discussions between SEP holder and implementer
usually only take place based on so-called “proud lists” with claim charts.
QUESTIONS FOR SEP IMPLEMENTERS
Q7. Have you ever sought a licence before being approached by a SEP holder?
All Companies Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Yes 46% 50% 50% 40% 29%
No 20% 17% 0% 20% 43%
No opinion / cannot
answer
35% 33% 50% 40% 29%
No. of replies 46 30 4 5 7
Implementers
SEP
Holders
Yes 52% 67%
No 9% 11%
No opinion / cannot answer 39% 22%
No. of replies 23 9
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
Yes 44% 57%
No 20% 7%
No opinion / cannot answer 36% 36%
No. of replies 25 14
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
Yes
Some respondents underline that pursuant to Huawei v. ZTE SEP holders notify a user of a standard
that it is potentially infringing its patents – not the other way around. However, in some instances,
implementers may have proactively sought a SEP license or inquired about FRAND royalty rates,
for example, when required to make product development decisions or to renew a contract.
Furthermore, suppliers may also ask for licenses when their customers request indemnification as
part of the supply arrangement. Some note that if they approach SEP holders, they often do not obtain
a licence.
160
According to some respondents, proactively seeking a license works well when the licensor provides:
(1) detailed information about their SEP portfolio, (2) complete proposed license terms, and (3) a
rational price based on the value of the corresponding technology and their share of the patent stack
for the corresponding standard. Such examples illustrate how FRAND licences can, and should, be
transacted.
No
Some respondents explain that it would be impractical for implementers to seek licences first as there
are too many SEP holders. Because licensing negotiations take time, by time all licences are in place,
the licensed product may be obsolete. In addition, an implementer cannot know how many SEPs have
been declared until several years after the technical specification is published. An implementer would
also rarely know ex-ante the margin it will be able to make on its product. This is why, according to
those respondents, FRAND terms need to be negotiated ex-post.
Others claim that the existing lack of transparency about the SEPs, the royalties and the level of
licensing do not create an environment of trust conducive to a proactive approach from implementers
to SEP holders.
Respondents in the automotive sector do not approach SEP holders because they consider that
licences should be in principle acquired by upstream suppliers. Upstream licensing has long been,
and continues to be, the default in the automotive industry for both SEPs and non-SEPs since a single
vehicle can consist of over 10,000 individual parts supplied by specialised suppliers and it is neither
practical nor feasible for them to have detailed technical knowledge of each part. Upstream suppliers
know better the technology they implement than downstream users, and are therefore better placed
to assess the FRAND-ness of a licence offer. Further, implementers cannot evaluate patents owned
by other companies to see if they are valid rights and essential to certain standard.
Q8. If yes, how did that impact on your business?
All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
It had no impact 17% 27% 0% 0% 0%
It put me at competitive disadvantage 8% 13% 0% 0% 0%
It caused me delay of the time-to-
market
4% 7% 0% 0% 0%
It gave me competitive advantage 4% 7% 0% 0% 0%
Other, please specify 67% 47% 100% 100% 100%
No. of replies 24 15 3 3 3
Implementers
SEP
Holders
It had no impact 15% 33%
It put me at competitive disadvantage 0% 0%
It caused me delay of the time-to-market 0% 0%
It gave me competitive advantage 0% 17%
Other, please specify 85% 50%
No. of replies 13 6
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
It had no impact 17% 22%
It put me at competitive disadvantage 8% 11%
It caused me delay of the time-to-market 0% 11%
161
EU non-EU
It gave me competitive advantage 8% 0%
Other, please specify 67% 56%
No. of replies 12 9
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
Impact
There are positive and negative impacts from seeking SEP licenses early. Many respondents consider
it provided legal certainty (also to customers) over costs and enabled proper planning of business
activities and no competitive disadvantage assuming other implementers also pay similar royalties.
Some also claims that seeking SEP licenses early can also facilitate market entry at a reduced IP risk
and establish product differentiating features against business competitors.
Others note that at the same time, seeking SEP licenses early can hinder the ability for a business to
compete in the market when there is no chance for product differentiation and if business competitors
can effectively compete in the same market without having to take a license. Furthermore, some
respondents have experienced some cases in the past as an implementer where the SEP holder took
advantage of the fact that they proactively sought a license and asked for an excessively high royalty.
In such cases, it will take time to conclude the negotiation, and this could lead to a delay for entering
the market. Such behaviour seems less prevalent where the SEP holder is, at the same time, an
implementer of the same standard(s) and has a more balanced approach to royalty demands.
No impact
In other respondents’ opinion, this has had no real impact on the business; access to the standard is
ensured via the FRAND commitment and the exact timing of the start of license negotiations does in
principle not impact such access.
Q9. How much time after the first implementation of a standard in your products are you, on average,
contacted by a SEP holder with an invitation to take a licence?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
less than 6 months 4% 7% 0% 0% 0%
6 – 12 months 8% 7% 0% 50% 0%
1 – 2 years 8% 13% 0% 0% 0%
2 – 4 years 42% 47% 100% 0% 29%
4 – 6 years 8% 13% 0% 0% 0%
More than 6 years 12% 7% 0% 0% 29%
I was never approached 19% 7% 0% 50% 43%
No. of replies 26 15 2 2 7
Average years* 2.8 2.9 3.0 0.4 3.1
Avg. for those
approached**
3.4 3.1 3.0 0.8 5.5
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed; ** without “I was never
approached”
Implementers
SEP
Holders
less than 6 months 8% 0%
6 – 12 months 17% 0%
1 – 2 years 8% 20%
2 – 4 years 33% 60%
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Implementers
SEP
Holders
4 – 6 years 17% 0%
More than 6 years 8% 20%
I was never approached 8% 0%
No. of replies 12 5
Average years* 2.8 3.7
Avg. for those approached** 3.0 3.7
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed; ** without “I was never
approached”
EU non-EU
less than 6 months 0% 17%
6 – 12 months 8% 17%
1 – 2 years 15% 0%
2 – 4 years 46% 50%
4 – 6 years 15% 0%
More than 6 years 0% 17%
I was never approached 15% 0%
No. of replies 13 6
Average years* 2.4 3.0
Avg. for those approached** 2.9 3.0
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed; ** without “I was never
approached”
Summary of comments
Respondents note that there is no single answer to this question. Some claim that the timing depends
on the relevant standard, the behaviour of the SEP holder as well as the product concerned. Some
consider that the point in time when SEP holders contact can also differ depending on various
elements such as (i) market expansion of products and businesses employing the standard, (ii) volume
of products sold by implementers, and (iii) prosecution status of SEP holders' applications. According
to some, the most typical pattern is for SEP holders to wait until there is significant revenue from the
standard which follows irreversible product strategy and investment decisions from the standards
implementer perspective. Those respondents claim that the implementer therefore has little or no
visibility into royalty cost at the time these product development decisions need to be made. For
them, it follows that the implementation of the standard in products may not always be the ‘triggering’
event for the SEP holder to reach out. The distribution/commercialization of the standard compliant
product seems a more apparent ‘triggering’ event.
Q10. What would be the main reason for you to request a licence?
All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
Not to infringe a SEP without a licence 72% 71% 80% 67% 71%
To have legal certainty over my costs and plan my
business activities
60% 68% 60% 67% 29%
To be able to sell my products 35% 32% 60% 67% 14%
To be able to indemnify my customer 23% 21% 40% 67% 0%
To be able to carry our R&D and develop new
products
23% 25% 40% 33% 0%
To be able to compete with other suppliers 16% 14% 40% 33% 0%
Other (please specify) 19% 18% 20% 67% 0%
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All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
No. of replies 43 28 5 3 7
Note: multiple answers possible
Implementers
SEP
Holders
Not to infringe a SEP without a licence 82% 44%
To have legal certainty over my costs and plan my business activities 73% 56%
To be able to sell my products 45% 11%
To be able to indemnify my customer 32% 11%
To be able to carry our R&D and develop new products 27% 11%
To be able to compete with other suppliers 18% 22%
Other (please specify) 9% 44%
No. of replies 22 9
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
Not to infringe a SEP without a licence 74% 69%
To have legal certainty over my costs and plan my business activities 57% 85%
To be able to sell my products 30% 54%
To be able to indemnify my customer 22% 38%
To be able to carry our R&D and develop new products 22% 38%
To be able to compete with other suppliers 13% 31%
Other (please specify) 22% 23%
No. of replies 23 13
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
Respondents from the automotive industry explain that licences to SEPs are indispensable for the
automotive industry and automotive manufacturers would need to take them if SEP holders refuse to
license anybody else in the supply chain. Such respondents note that any company that decides to
market unlicensed products is exposed to injunctions, damages claims, civil and criminal liability
(for example, see Section 142, German Patent Act). For them, legal certainty is of particular
importance as they assemble thousands of individual parts delivered just-in-time.
Respondents who supply components note further that their customers typically want products free
of defects, including free of third-party rights. If the product is missing a license, the customer might
seek indemnification at a later point in time when the market has already settled. The indemnification
costs could then easily make an established business model unprofitable and wipe out extensive
investments. Planning upfront is also difficult without knowing the potential costs for necessary
licenses.
Some respondents noted that SMEs planning to use open standards request licenses for some or all
the listed reasons in this question. They note that open standards are developed in a spirit of
collaboration and transparency. However, licensing of those standards is “cloaked in secrecy and
obfuscation”. They claim that stopping the practise of requiring non-disclosure agreements to be
signed before licensing terms are received will bring much needed transparency to the process and
allow SME's to have legal certainty over their costs and business activities.
Q11. What are the average costs you incur for estimating your SEPs exposure per product that you
want to bring on the market? These costs include cost for searching patent databases on
enforceability, validity and ownership of the patent, assessing the essentiality of the patents, whether
164
there is an infringement, the potential number of true SEPs and the share of the individual SEP
holders in those.
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
< 10.000 euros 37% 46% 0% 20%
10.000-50.000 euros 21% 15% 0% 40%
50.000-100.000 euros 5% 8% 0% 0%
100.000-250.000 euros 11% 15% 0% 0%
250.000-500.000 euros 0% 0% 0% 0%
> 500.000 euros 26% 15% 100% 40%
No. of replies 19 13 0 1 5
Average (EUR)* 228,000 155,000 750,000 313,000
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 750,000 assumed, rounded to
thousands
Implementers
SEP
Holders
< 10.000 euros 33% 100%
10.000-50.000 euros 0% 0%
50.000-100.000 euros 0% 0%
100.000-250.000 euros 22% 0%
250.000-500.000 euros 0% 0%
> 500.000 euros 44% 0%
No. of replies 9 4
Average (EUR)* 374,000 5,000
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 750,000 assumed, rounded to
thousands
EU non-EU
< 10.000 euros 50% 33%
10.000-50.000 euros 13% 17%
50.000-100.000 euros 13% 0%
100.000-250.000 euros 13% 17%
250.000-500.000 euros 0% 0%
> 500.000 euros 13% 33%
No. of replies 8 6
Average (EUR)* 131,000 286,000
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 750,000 assumed, rounded to
thousands
Summary of comments
Some respondents claim that the costs in relation to ownership, enforceability, infringement etc. are
typically incurred by the SEP holder as it is the SEP holder that provides this information. Some
explain that for a SEP holder, there is a need to analyse the value of its own SEPs. To the extent that
bilateral negotiations are required, the values of both companies’ portfolios need to be analysed so
they can be reflected to achieve a cross-license value.
Some respondents note that they devote significant resources to evaluating SEPs that may be related
to their products, although they do not directly track these costs on a per product basis. These
expenditures include substantial costs for salaries of personnel, for SEP analytics services, for outside
attorneys, and for conducting SEP negotiations, ranging from travel to engaging outside experts to
assess the merits of SEPs.
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According to some, conditions also vary depending on the size of the portfolio, the products, and the
licensing circumstances for the relevant technical standard(s). If a viable patent pool does exist (e.g.,
capturing a significant amount of overall SEPs or potential SEPs), the cost for investigation may be
substantially reduced.
Other respondents note that significant costs may be imposed on licensees to evaluate the SEP
landscape and particularly so when SEP holders are not forthcoming regarding the details of their
SEP portfolios. Some respondents explain that, in theory, because there are some 100,000 patents
declared essential to 5G alone (many of which may not be essential), spending EUR 1000 (1 or 2
hours of attorney fees) to verify if 500 of those patents are valid, essential and infringed, would
already consume the upper limit of EUR 500,000 referred to in this question.
Some respondents explain that it may be impossible to remain a market leader without implementing
the latest technologies in light electronic appliances (such as computers, radios, audio equipment,
and televisions) and products on the IoT market. A new product would require FRAND negotiations.
Because of uncertainties about the scope of a SEP holder’s obligations to provide necessary
information to implementers, implementers must bear the costs of developing arguments for FRAND
negotiations. In addition, such FRAND arguments must be provided within a short time, costs tend
to be higher. According to that respondent, because of those costs, many implementers prefer to get
a license without pushing back on SEP holders’ demands.
Q12. What is the main effect for SEP implementers, in particular start-ups and SMEs, of the costs
involved in licensing SEPs (search, negotiation and litigation costs)?
All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
I ask my suppliers to indemnify me for possible
patent infringement
65% 63% 80% 50% 71%
I look for alternatives (e.g. not using standardised
technology or royalty free standards)
38% 38% 60% 25% 29%
I settle as quickly as possible for a SEP licence,
because it is cheaper than litigation
38% 25% 80% 25% 57%
I become less competitive 33% 25% 20% 25% 71%
I increase final price to my business or retail
customers
33% 29% 60% 50% 14%
I go out of business/change business 20% 21% 40% 25% 0%
I take licence only if absolutely necessary 18% 4% 20% 75% 29%
Other, please specify 38% 42% 40% 50% 14%
No. of replies 40 24 5 4 7
Note: multiple answers possible; “No opinion / cannot answer” answers not taken into account.
Implementers
SEP
Holders
I ask my suppliers to indemnify me for possible patent infringement 90% 25%
I settle as quickly as possible for a SEP licence, because it is cheaper than litigation 62% 0%
I increase final price to my business or retail customers 57% 13%
I look for alternatives (e.g. not using standardised technology or royalty free standards) 52% 0%
I become less competitive 43% 0%
I go out of business/change business 38% 0%
I take licence only if absolutely necessary 14% 0%
Other, please specify 24% 75%
No. of replies 21 8
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion / cannot answer” answers not taken into account.
166
SME Large
I ask my suppliers to indemnify me for possible patent infringement 75% 60%
I settle as quickly as possible for a SEP licence, because it is cheaper than litigation 63% 24%
I increase final price to my business or retail customers 63% 28%
I look for alternatives (e.g. not using standardised technology or royalty free standards) 50% 36%
I go out of business/change business 38% 20%
I take licence only if absolutely necessary 38% 8%
I become less competitive 25% 24%
Other, please specify 25% 48%
No. of replies 8 25
Note: multiple answers possible; “No opinion / cannot answer” answers not taken into account.
EU non-EU
I ask my suppliers to indemnify me for possible patent infringement 63% 67%
I look for alternatives (e.g. not using standardised technology or royalty free standards) 33% 56%
I settle as quickly as possible for a SEP licence, because it is cheaper than litigation 29% 44%
I increase final price to my business or retail customers 25% 67%
I go out of business/change business 17% 44%
I become less competitive 13% 56%
I take licence only if absolutely necessary 13% 22%
Other, please specify 33% 67%
No. of replies 24 9
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “No opinion / cannot answer” answers not taken
into account.
Summary of comments
Some responded that the reason they settle as fast as possible is the high cost of litigation and
injunctions. For them it is better to accept a potentially non-FRAND agreement than pursue litigation.
Some noted that SMEs often do not have the resources to deal with larger enterprises holding
numerous SEPs. As a result, SMEs may face potential litigation with no predictable outcome or may
be forced to accept royalty demands made by the SEP holders. In the worst case, the SME may be
forced to change their product, or abandon their business plan altogether, if they cannot afford the
litigation or the potentially burdensome FRAND SEP licences. However, some responses claim that
SMEs and start-ups are rarely the primary focus of any licensing program.
One respondent suggested that licensing costs should already be included in the financial projections
("bill of licenses") for new products by any responsible SEP implementer, and hence budgeted for in
the final price to be paid by consumers. Provided there is a level playing field, this should not impact
an implementer’s competitive position. Others suggested that measures should be taken to protect
and guide SMEs during the licensing negotiations, e.g. licensing rates transparency and availability
of experts.
QUESTIONS FOR SEP HOLDERS
Q13. What are top three reasons for licensing/having SEPs?
All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
For return on investment in R&D 71% 72% 67% 50% 83%
For defensive purposes/better bargaining power 61% 60% 67% 25% 83%
For continuation of future participation in
standardisation
42% 44% 33% 50% 33%
For cross licensing 39% 36% 33% 25% 67%
It is our main source of income 26% 28% 0% 25% 33%
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All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
Other, please specify…. 24% 24% 33% 50% 0%
No. of replies 38 25 3 4 6
Note: multiple answers possible.
Implementers
SEP
Holders
For defensive purposes/better bargaining power 91% 58%
For cross licensing 73% 8%
For return on investment in R&D 36% 100%
For continuation of future participation in standardisation 27% 58%
It is our main source of income 0% 42%
Other, please specify…. 18% 25%
No. of replies 11 12
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.; multiple answers possible.
EU non-EU
For return on investment in R&D 78% 57%
For defensive purposes/better bargaining power 56% 57%
For continuation of future participation in standardisation 39% 50%
For cross licensing 28% 43%
It is our main source of income 22% 29%
Other, please specify…. 33% 21%
No. of replies 18 14
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; multiple answers possible.
Summary of comments
Some respondents explain that the reasons for having/licensing SEPs is a company's strategic choice
towards open innovation i.e. to contribute innovative technologies to standardization and debate
about it in the standardization context. It enables the emergence of open standards on the market
which are much more virtuous than proprietary standards. To enable this virtuous cycle, efficient
protection and enforcement of IP and in particular standard essential patents is necessary in order to
efficiently get an effective return on investment.
Some respondents claim that SEP holders seek to simplify access to technologies by reducing
licensing barriers and by lowering transaction costs. It is their belief that through efficient and
effective IP licensing, the necessary incentives for R&D are created, fostering a self-sustaining cycle
that can fund future R&D activities. Technological progress and the entire society would suffer
should the decision be made to reduce either (i) incentives to innovate or (ii) the comfort given to
innovators by strong IP protection required to fight free riders. In a market-based economy,
companies cannot keep making huge investments unless they make a reasonable return on their
successful inventions
Respondents explain that companies seek to own and maintain SEP portfolios to protect their
business – so they use their SEPs mainly for defensive purposes. Some claims that for some
technology areas, there has been benefit in owning and licensing SEPs to penetrate and drive adoption
of the technology/standard and therefore develop the market. For example, in the case of format
licenses, there was clarity in the licensing model at an early stage which led implementers to readily
adopting the technology and as a result the market developed rapidly.
168
Q14. On average, how much time after publication of a standard do you first start inviting SEP
implementers to take a license for applications known at the time of its adoption?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
less than 6 months 13% 19% 0% 0%
6 – 12 months 13% 13% 50% 0%
1 – 2 years 13% 13% 50% 0%
2 – 4 years 17% 19% 0% 17%
4 – 6 years 13% 13% 0% 17%
More than 6 years 8% 6% 0% 17%
Never 25% 19% 0% 50%
No. of replies 24 16 0 2 6
Average years* 2.1 2.0 1.1 2.7
Avg. for those who start** 2.8 2.5 1.1 5.3
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed; ** without “Never”
Implementers
SEP
Holders
less than 6 months 0% 38%
6 – 12 months 0% 0%
1 – 2 years 17% 25%
2 – 4 years 0% 13%
4 – 6 years 0% 25%
More than 6 years 17% 0%
Never 67% 0%
No. of replies 6 8
Average years* 1.6 2.1
Avg. years for those who start** 4.8 2.1
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed; ** without “Never”
EU non-EU
less than 6 months 25% 10%
6 – 12 months 13% 20%
1 – 2 years 13% 20%
2 – 4 years 25% 10%
4 – 6 years 25% 0%
More than 6 years 0% 10%
Never 0% 30%
No. of replies 8 10
Average years* 2.3 1.6
Avg. years for those who start** 2.3 2.3
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed; ** without “Never”
Summary of comments
The comments vary largely and are not susceptible to summary. With regard to patent pools a
respondent noted that the initial steps to create a patent pool often starts around the time of the
finalization of a standard. The process to create a pool includes understanding the viability of a pool,
engaging with the relevant patent owners, preparing the terms of the pool, evaluating patents and
generating an understanding of the market of the products that implement the standard. This process
may take up to 2 years and needs to be completed before corresponding licenses can be offered to
implementers.
169
Q15. Do you contact all known SEP implementers from the selected category?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Yes 32% 31% 0% 67% 25%
No 68% 69% 100% 33% 75%
No. of replies 25 16 2 3 4
Note: “No opinion/ no answer” answers not taken into account.
Implementers
SEP
Holders
Yes 29% 30%
No 71% 70%
No. of replies 7 10
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion/ no answer” answers not taken into account.
EU non-EU
Yes 38% 25%
No 62% 75%
No. of replies 13 8
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “No opinion/ no answer” answers not taken into
account.
Summary of comments
The comments differ on this question as well. Respondents note that there are significant costs
involved in searching the market to identify the infringing products and there are markets in which
new players come and go at a pace that cannot be fully addressed by any organization. It is not
possible to search the entire market, which - in the SEP ecosystem - is usually global. Typically,
because of this SEP holders leave out start-ups and SMEs.
Some do contact all SEP implementers known to them at a pace that is possible to handle for their
organization. Regarding patent pools, it depends on the individual case, contact would be made by
the patent pool administrator with as many implementers as practical.
Q16. What percentage of these SEP implementers reply within a year after sending the first letter?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
< 25% 31% 18% 0% 50% 100%
25-40% 0% 0% 0% 0% 0%
40-55% 13% 18% 0% 0% 0%
55%-70% 6% 9% 0% 0% 0%
70-85% 13% 18% 0% 0% 0%
> 85% 38% 36% 100% 50% 0%
No. of replies 16 11 1 2 2
Average %* 58% 64% 93% 53% 13%
Note: “It depends (please explain)” not presented
* Weighted average calculated using the middle of ranges, for the last open range value of 92.5% assumed.
Implementers
SEP
Holders
< 25% 0% 33%
25-40% 0% 0%
40-55% 0% 17%
170
Implementers
SEP
Holders
55%-70% 0% 17%
70-85% 33% 0%
> 85% 67% 33%
No. of replies 3 6
Average %* 88% 53%
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “It depends (please explain)” not presented
* Weighted average calculated using the middle of ranges, for the last open range value of 92.5% assumed.
EU non-EU
< 25% 43% 0%
25-40% 0% 0%
40-55% 0% 29%
55%-70% 14% 0%
70-85% 14% 14%
> 85% 29% 57%
No. of replies 7 7
Average %* 52% 78%
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “It depends (please explain)” not presented
* Weighted average calculated using the middle of ranges, for the last open range value of 92.5% assumed.
Summary of comments
There are differences e.g. between jurisdictions and industries, but overall in one respondent’s
experience, most of the letters they sent are replied within a year after they were sent. However, a
(swift) reply to a letter may not always be a sign of true willingness by the implementer. Respondents
claim that the replies received are often an attempt to postpone discussions as much as possible and
are rarely a clear indication of true willingness to take a license. Recent case-law offers a number of
indicative examples, in which the implementer’s response to a notification letter was not considered
to be an expression of a sincere willingness to obtain a FRAND licence (e.g. Sisvel v Haier, German
Federal Court of Justice).
Some argue that the effect from the Huawei v. ZTE CJEU judgment is that most SEP implementers
now respond without too much delay. Unfortunately, in many cases this is just stating/ posturing the
position that one is willing to take a license, without making significant further steps towards actual
signing up to a license.
Respondents explain that this works differently with patent pools because licensing negotiations are
conducted by licensing administrators under FRAND obligations. Licensing administrators may
suggest taking legal action if no response is received to their first letter after a certain time, never
exceeding one year. Given that such SEP pools include SEPs of many holders, the negotiation power
of SEP pools may be important.
Q17. What percentage of the SEP implementers that reply take a license without litigation?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
< 25% 14% 10% 50% 0%
25-40% 14% 10% 0% 50%
40-55% 0% 0% 0% 0%
55%-70% 7% 10% 0% 0%
70-85% 14% 20% 0% 0%
> 85% 50% 50% 50% 50%
No. of replies 14 10 0 2 2
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All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Average %* 68% 73% 53% 63%
Note: “It depends (please explain)” not presented
* Weighted average calculated using the middle of ranges, for the last open range value of 92.5% assumed.
Implementers
SEP
Holders
< 25% 0% 0%
25-40% 0% 20%
40-55% 0% 0%
55%-70% 0% 20%
70-85% 33% 0%
> 85% 67% 60%
No. of replies 3 5
Average %* 88% 75%
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “It depends (please explain)” not presented
* Weighted average calculated using the middle of ranges, for the last open range value of 92.5% assumed.
EU non-EU
< 25% 33% 0%
25-40% 17% 0%
40-55% 0% 0%
55%-70% 17% 0%
70-85% 17% 17%
> 85% 17% 83%
No. of replies 6 6
Average %* 48% 90%
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “It depends (please explain)” not presented
* Weighted average calculated using the middle of ranges, for the last open range value of 92.5% assumed.
Summary of comments
Some respondents consider that the statistics may not be meaningful as even if most of the
implementers take a license without litigation, the ones who do not are almost always the largest
implementers.
Some respondents explain that it is important to take into consideration the impact of litigation in
general on the willingness of implementers to take a license without litigation. The effect of a
litigation against a particular implementer may lead other implementers to take a licence. If patents
were not enforced, the vast majority of implementers would consider that there is no reason to take a
license.
Some respondents say that in their experience the greatest difficulty is with Asian-based companies,
where it has proven difficult to settle without litigation and the threat of injunction.
Q18. On average, how much time after your first letter do implementers take a licence?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
less than 6 months 0% 0% 0% 0%
6-12 months 0% 0% 0% 0%
1-2 years 26% 27% 100% 0%
2-4 years 53% 60% 0% 33%
4-6 years 11% 7% 0% 33%
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All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
More than 6 years 11% 7% 0% 33%
No. of replies 19 15 0 1 3
Average years* 3.3 3.1 1.5 5.3
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed.
Implementers
SEP
Holders
less than 6 months 0% 0%
6-12 months 0% 0%
1-2 years 100% 11%
2-4 years 0% 78%
4-6 years 0% 11%
More than 6 years 0% 0%
No. of replies 3 9
Average years* 1.5 3.1
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed.
EU non-EU
less than 6 months 0% 0%
6-12 months 0% 0%
1-2 years 14% 44%
2-4 years 71% 44%
4-6 years 0% 11%
More than 6 years 14% 0%
No. of replies 7 9
Average years* 3.5 2.6
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
* Weighted average calculated using the middle of ranges, for the last open range value of 8 assumed.
Summary of comments
Experience amongst the respondents with regard to handheld cellular devices shows that licensing
discussions may take up to 6 years, often involving litigation. In general, willingness to enter
meaningful discussions has been extremely low in the past decade. A respondent claimed that it could
be characterized as a “systemic hold-out”.
Respondents claim that there may not be typical timeframe within which a licence is concluded, as
the duration of a negotiation would depend on various factors. They claim that SEP licensing
negotiations are characterized by an information asymmetry. This asymmetry is magnified
significantly when licensees are smaller players and have limited experience and expertise in
negotiating SEP licences. SEP holders may withhold information without an NDA, and often the
negotiation of an NDA is prolonged for a long time due to unreasonable terms proposed by the
licensor (not allowing the potential licensee to verify information with suppliers, for example). SEP
holders may also not provide sufficient information to substantiate their FRAND offer. Licensing
negotiations may also be highly complex, e.g., when including cross licensing arrangements or other
commercial agreements unrelated to the SEPs at issue.
Some respondents explain that technology in brown goods357
, IoT and automotive is rapidly
advancing so negotiations usually proceed fast. Otherwise negotiated technology will be outdated
already at the time of obtaining a license. They claim that if licensing negotiations cannot be
357
Television sets, audio equipment, and similar household appliances.
173
concluded in a timely manner and no powerful objections are raised by the potential licensee, SEP
holders would resort to litigation, and in this case, almost all of the implementers immediately choose
to take a license, try to keep their costs at a minimum and avoid injunctions. In some cases,
counterclaims are brought, and licensing negotiations almost reach a stalemate because of conflicting
court decisions (which is possible e.g. if different jurisdictions are involved) or the refusal of
decisions by appeal courts. In such cases, the process generally takes 4-6 years.
Also here, respondents believe that the geographical location of the implementer correlates with the
implementer's timeliness in responding to our offer to license. In particular, it is stated that
implementers based in China are very slow to respond. There is a wide range, and as a result an
average figure is not informative; for instance, a respondent had experience with Chinese
implementers which ignored its communications for over a year or wait until other larger OEM’s
take a license or simply file suit in a Chinese court without any notice.
Another respondent indicated that a 6-18 months timeframe is an indicator of a willing licensee.
According to that respondent there could be a presumption that, absent specific circumstances, the
implementer is not willing 18 months after the start of the negotiations.
Questions on the problems related to SEP licensing
Quantitative summary
Lack of transparency on FRAND royalty rate, on SEP landscape (who owns SEP) and divergent court
rulings were named as the key problems by three quarters of all respondents, including all
respondents from “Implementers” group. For “SEP Holders” the main problems were hold out and
anti-suit injunctions.
Tables with replies per question
Q19. What problems do you encounter when it comes to SEP licensing?
“Agree and strongly agree” answers only All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
Lack of transparency on FRAND royalty rate 68% 61% 86% 75% 80%
Lack of transparency of the SEPs landscape in
general and of the share of the different SEP
holders
67% 66% 86% 56% 70%
Divergent court rulings 67% 64% 86% 50% 78%
Court rulings ordering to take a worldwide
licence
60% 52% 71% 50% 90%
Lack of guidance on the FRAND concept 57% 53% 86% 50% 60%
Lack of clarity on the level of licensing 55% 49% 57% 75% 60%
The licensing process is too expensive 53% 42% 67% 50% 90%
Injunctions 53% 49% 71% 38% 70%
Hold up / Unavailability of a licence 52% 47% 71% 50% 60%
Anti-suit injunctions 47% 44% 29% 75% 44%
Hold out 38% 34% 29% 67% 30%
No. of replies* 58-64 33-38 6-7 8-9 9-10
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
Lack of transparency on FRAND royalty rate 100% 19%
Lack of transparency of the SEPs landscape in general and of the share of the different
SEP holders
97% 13%
174
“Agree and strongly agree” answers only Implementers
SEP
Holders
Court rulings ordering to take a worldwide licence 96% 6%
Lack of guidance on the FRAND concept 93% 19%
Divergent court rulings 86% 38%
Hold up / Unavailability of a licence 86% 6%
Lack of clarity on the level of licensing 83% 13%
Injunctions 83% 6%
The licensing process is too expensive 68% 25%
Anti-suit injunctions 29% 81%
Hold out 4% 100%
No. of replies* 28-29 15-17
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
Lack of transparency on FRAND royalty rate 71% 58%
Divergent court rulings 70% 56%
Lack of transparency of the SEPs landscape in general and of the share of the different
SEP holders
69% 63%
Lack of guidance on the FRAND concept 59% 53%
Lack of clarity on the level of licensing 58% 47%
Anti-suit injunctions 56% 32%
Hold up / Unavailability of a licence 52% 50%
Court rulings ordering to take a worldwide licence 50% 61%
The licensing process is too expensive 50% 39%
Hold out 47% 26%
Injunctions 45% 58%
No. of replies* 30-35 18-19
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
Lack of transparency on FRAND royalty rate 68% 5% 27% 63
Lack of transparency of the SEPs landscape in general and
of the share of the different SEP holders
67% 6% 27% 64
Divergent court rulings 67% 17% 17% 60
Court rulings ordering to take a worldwide licence 60% 17% 22% 58
Lack of guidance on the FRAND concept 57% 13% 30% 63
Lack of clarity on the level of licensing 55% 13% 32% 60
The licensing process is too expensive 53% 32% 15% 60
Injunctions 53% 16% 31% 62
Hold up / Unavailability of a licence 52% 11% 36% 61
Anti-suit injunctions 47% 27% 27% 60
Hold out 38% 16% 46% 61
Other (please specify) 86% 14% 0% 7
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies” Agree Neutral Disagree No.
Lack of transparency of the SEPs landscape in general and
of the share of the different SEP holders
66% 5% 29% 38
Divergent court rulings 64% 17% 19% 36
Lack of transparency on FRAND royalty rate 61% 8% 32% 38
Lack of guidance on the FRAND concept 53% 8% 39% 38
Court rulings ordering to take a worldwide licence 52% 21% 27% 33
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“Companies” Agree Neutral Disagree No.
Injunctions 49% 22% 30% 37
Lack of clarity on the level of licensing 49% 11% 40% 35
Hold up / Unavailability of a licence 47% 14% 39% 36
Anti-suit injunctions 44% 28% 28% 36
The licensing process is too expensive 42% 36% 22% 36
Hold out 34% 17% 49% 35
Other (please specify) 75% 25% 0% 4
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Summary of comments
Some argue that any lack of transparency regarding the aspects identified above are of particular
importance for SMEs and start-ups, as they often do not have adequate knowledge and are unable to
take appropriate action against SEP holders.
Other respondents believe there is no lack of transparency and that the SEPs are accessible through
existing databases. Publicly and commercially available information, case law and government
policy may be relied upon for constructive SEP licensing discussions in good faith. Some consider
that absolute transparency is impossible to achieve.
Some believe that divergence on treatment of SEPs by national government policies and court
decisions, including valuation, availability of injunctive relief and antisuit injunctions render SEP
licensing difficult and costly. Others claim that court rulings within Europe are quite convergent,
however globally, there is still some divergence, particularly as it relates to availability of injunctive
relief.
Some respondents consider that it may be desirable to promote establishment of patent pools where
essentiality check, uniform licensing conditions and one stop-shop efficiency can be achieved.
QUESTIONS FOR SEPS IMPLEMENTERS
Q20. Under which circumstances would you consider not using a certain standard? Question of
particular relevance for start-ups and SMEs
“Agree and strongly agree” answers only All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
There is an alternative technology which is
available at better conditions
86% 87% 83% 67% 100%
There is no real need to implement the standard.
The standardised technology is a mere add on.
73% 81% 67% 67% 33%
The requested royalty is too high 70% 71% 67% 67% 67%
Licensing negotiations and litigation are too
costly
51% 52% 67% 33% 33%
The SEP holder refuses to give a licence 48% 50% 67% 50% 0%
It is not clear which patents are truly essential
and require a licence for a particular
implementation
29% 30% 33% 50% 0%
It is not clear which SEPs my products actually
implement/use
29% 30% 33% 33% 0%
No. of replies* 31-35 20-23 6 2-3 3
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
There is an alternative technology which is available at better conditions 90% 75%
176
“Agree and strongly agree” answers only Implementers
SEP
Holders
The requested royalty is too high 80% 29%
There is no real need to implement the standard. The standardised technology is a mere
add on.
74% 75%
The SEP holder refuses to give a licence 72% 0%
Licensing negotiations and litigation are too costly 67% 13%
It is not clear which patents are truly essential and require a licence for a particular
implementation
35% 0%
It is not clear which SEPs my products actually implement/use 33% 0%
No. of replies* 18-21 7-8
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
There is an alternative technology which is available at better conditions 78% 100%
There is no real need to implement the standard. The standardised technology is a mere
add on.
67% 100%
The requested royalty is too high 62% 89%
Licensing negotiations and litigation are too costly 52% 56%
The SEP holder refuses to give a licence 45% 75%
It is not clear which patents are truly essential and require a licence for a particular
implementation
30% 38%
It is not clear which SEPs my products actually implement/use 30% 33%
No. of replies* 20-23 8-9
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Disagree No.
There is an alternative technology which is available at better conditions 86% 14% 35
There is no real need to implement the standard. The standardised technology
is a mere add on.
73% 27% 33
The requested royalty is too high 70% 30% 33
Licensing negotiations and litigation are too costly 51% 49% 35
The SEP holder refuses to give a licence 48% 52% 31
It is not clear which patents are truly essential and require a licence for a
particular implementation
29% 71% 34
It is not clear which SEPs my products actually implement/use 29% 71% 35
Other (please specify) 100% 0% 5
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Disagree No.
There is an alternative technology which is available at better conditions 87% 13% 23
There is no real need to implement the standard. The standardised technology
is a mere add on.
81% 19% 21
The requested royalty is too high 71% 29% 21
Licensing negotiations and litigation are too costly 52% 48% 23
The SEP holder refuses to give a licence 50% 50% 20
It is not clear which patents are truly essential and require a licence for a
particular implementation
30% 70% 23
It is not clear which SEPs my products actually implement/use 30% 70% 23
Other (please specify) 100% 0% 3
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
177
“SMEs answers” Agree Disagree No.
There is an alternative technology which is available at better conditions 88% 13% 8
There is no real need to implement the standard. The standardised technology
is a mere add on.
75% 25% 8
Licensing negotiations and litigation are too costly 75% 25% 8
The requested royalty is too high 71% 29% 7
The SEP holder refuses to give a licence 63% 38% 8
It is not clear which patents are truly essential and require a licence for a
particular implementation
38% 63% 8
It is not clear which SEPs my products actually implement/use 38% 63% 8
Other (please specify) 0
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account. All respondents who identified themselves as SMEs (please note that only 1 SME that is a company
replied to this question)
Summary of comments
Some respondents noted that it was not unusual for companies, particularly start-ups and SMEs, to
seek to use an alternate standard or abandon plans for a product because of concerns over the amount
of royalties. According to them nearly all examples relate to cellular SEPs (versus other SEPs). The
exponential growth of the cellular ecosystem over the last 30 years underlines its attractiveness,
especially for innovative new businesses (including SMEs and start-ups).
Some respondents explain that OEMs are legally obliged to implement cellular communications
SEPs and must use them regardless of the circumstances described above. Emergency calling
(“eCall”) became a mandatory feature of all vehicles produced after April 2018. If the parts providing
eCall functionality are not supplied, no vehicle can leave the production line. Any injunction
prohibiting the use of connectivity standards in a car may indirectly also prohibit the sale of the car
as such.
Some respondents explain that suppliers are subject to instructions from their customers. In those
cases, inclusion of the standard is already required to market a competitive product.
Furthermore, respondents explain that they have no choice but to use a particular standard if they
want to ensure compliance to the function and cybersecurity of the product. For example, in the
telecommunication industry, it is usually not an option to use non-standard alternative technology.
One respondent explains that standard implementation decisions are made well before patent
licensing becomes an issue and that the question gets the timeline wrong. As an implementer, they
would not know the amount of the royalty, or the patents asserted until years after they make the
decision to implement a standard.
Q21. Which of the following behaviours would you assess as hold-up or opportunistic behaviour by
a SEP holder?
“Agree and strongly agree” answers only All
Compa
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
The SEP holder adopts discriminatory or exclusionary licensing
terms or practices
84% 86% 83% 67% 83%
The SEP holder requires implementers to pay royalties for rights
to patents that are not relevant to the implementer’s specific
products
83% 84% 83% 67% 83%
The SEP holder insists on a new licence at a higher price in the
context of a patent pool when the implementer has a licence for
the same patents of the same SEP holder.
79% 75% 83% 67% 100
%
178
“Agree and strongly agree” answers only All
Compa
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
The SEP holder requires implementers to pay royalties for rights
to patents that are not essential to the relevant standardized
technology
78% 74% 83% 67% 100
%
The SEP holder refuses to license 78% 77% 83% 67% 83%
The SEP holder refuses to disclose the terms of prior licences
with similarly situated companies
72% 65% 83% 67% 100
%
The SEP holder attempts to base the royalty owed on prior
licences that were not reasonably comparable (due to differences
in patents, duration, geographic scope, implementer type, etc.).
71% 63% 83% 67% 100
%
The SEP holder refuses to license to a certain level in the value
chain
64% 56% 83% 67% 83%
The SEP holder brings the accused infringer’s customers into the
licensing dispute, by either contacting them, threatening to sue
them, or actually suing them
60% 58% 50% 67% 80%
The SEP holder discloses the SEP to the Standard Development
Organisation (“SDO”) after the standard was adopted
51% 48% 67% 33% 60%
The SEP holder refuses to license at a certain price I find
commercially acceptable
48% 41% 67% 67% 50%
No. of replies* 42-46 28-32 6 3 5-6
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
The SEP holder requires implementers to pay royalties for rights to patents that are not
relevant to the implementer’s specific products
100% 67%
The SEP holder adopts discriminatory or exclusionary licensing terms or practices 100% 50%
The SEP holder refuses to license 100% 33%
The SEP holder requires implementers to pay royalties for rights to patents that are not
essential to the relevant standardized technology
100% 33%
The SEP holder insists on a new licence at a higher price in the context of a patent
pool when the implementer has a licence for the same patents of the same SEP holder.
100% 14%
The SEP holder refuses to disclose the terms of prior licences with similarly situated
companies
100% 0%
The SEP holder attempts to base the royalty owed on prior licences that were not
reasonably comparable (due to differences in patents, duration, geographic scope,
implementer type, etc.).
96% 0%
The SEP holder brings the accused infringer’s customers into the licensing dispute, by
either contacting them, threatening to sue them, or actually suing them
84% 0%
The SEP holder discloses the SEP to the Standard Development Organisation (“SDO”)
after the standard was adopted
82% 0%
The SEP holder refuses to license at a certain price I find commercially acceptable 74% 0%
The SEP holder refuses to license to a certain level in the value chain 96% 0%
No. of replies* 22-25 7-9
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
The SEP holder requires implementers to pay royalties for rights to patents that are not
relevant to the implementer’s specific products
84% 80%
The SEP holder adopts discriminatory or exclusionary licensing terms or practices 79% 93%
The SEP holder refuses to license 76% 79%
The SEP holder requires implementers to pay royalties for rights to patents that are not
essential to the relevant standardized technology
76% 73%
179
“Agree and strongly agree” answers only EU non-EU
The SEP holder insists on a new licence at a higher price in the context of a patent
pool when the implementer has a licence for the same patents of the same SEP holder.
70% 86%
The SEP holder refuses to disclose the terms of prior licences with similarly situated
companies
68% 67%
The SEP holder attempts to base the royalty owed on prior licences that were not
reasonably comparable (due to differences in patents, duration, geographic scope,
implementer type, etc.).
63% 73%
The SEP holder refuses to license to a certain level in the value chain 60% 63%
The SEP holder brings the accused infringer’s customers into the licensing dispute, by
either contacting them, threatening to sue them, or actually suing them
52% 67%
The SEP holder discloses the SEP to the Standard Development Organisation (“SDO”)
after the standard was adopted
50% 50%
The SEP holder refuses to license at a certain price I find commercially acceptable 43% 53%
No. of replies* 23-25 14-16
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
The SEP holder adopts discriminatory or exclusionary licensing terms or
practices
84% 11% 5% 44
The SEP holder requires implementers to pay royalties for rights to patents that
are not relevant to the implementer’s specific products
83% 11% 7% 46
The SEP holder insists on a new licence at a higher price in the context of a
patent pool when the implementer has a licence for the same patents of the same
SEP holder.
79% 12% 10% 42
The SEP holder requires implementers to pay royalties for rights to patents that
are not essential to the relevant standardized technology
78% 11% 11% 46
The SEP holder refuses to license 78% 4% 18% 45
The SEP holder refuses to disclose the terms of prior licences with similarly
situated companies
72% 4% 24% 46
The SEP holder attempts to base the royalty owed on prior licences that were
not reasonably comparable (due to differences in patents, duration, geographic
scope, implementer type, etc.).
71% 11% 18% 45
The SEP holder refuses to license to a certain level in the value chain 64% 6% 30% 47
The SEP holder brings the accused infringer’s customers into the licensing
dispute, by either contacting them, threatening to sue them, or actually suing
them
60% 11% 29% 45
The SEP holder discloses the SEP to the Standard Development Organisation
(“SDO”) after the standard was adopted
51% 14% 35% 43
The SEP holder refuses to license at a certain price I find commercially
acceptable
48% 23% 30% 44
Other (please specify) 86% 0% 14% 7
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
The SEP holder adopts discriminatory or exclusionary licensing terms or
practices
86% 10% 3% 29
The SEP holder requires implementers to pay royalties for rights to patents that
are not relevant to the implementer’s specific products
84% 10% 6% 31
The SEP holder refuses to license 77% 3% 20% 30
The SEP holder insists on a new licence at a higher price in the context of a
patent pool when the implementer has a licence for the same patents of the same
SEP holder.
75% 14% 11% 28
The SEP holder requires implementers to pay royalties for rights to patents that
are not essential to the relevant standardized technology
74% 13% 13% 31
180
“Companies answers” Agree Neutral Disagree No.
The SEP holder refuses to disclose the terms of prior licences with similarly
situated companies
65% 6% 29% 31
The SEP holder attempts to base the royalty owed on prior licences that were
not reasonably comparable (due to differences in patents, duration, geographic
scope, implementer type, etc.).
63% 17% 20% 30
The SEP holder brings the accused infringer’s customers into the licensing
dispute, by either contacting them, threatening to sue them, or actually suing
them
58% 10% 32% 31
The SEP holder refuses to license to a certain level in the value chain 56% 9% 34% 32
The SEP holder discloses the SEP to the Standard Development Organisation
(“SDO”) after the standard was adopted
48% 14% 38% 29
The SEP holder refuses to license at a certain price I find commercially
acceptable
41% 24% 34% 29
Other (please specify) 83% 0% 17% 6
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Summary of answers
Some respondents commented that the statement “The SEP holder refuses to license at a certain price
I find commercially acceptable” should read “The SEP holder refuses to license at a certain price I
find FRAND”.
Mostly agree
Some respondents proposed the inclusion of the following to the list under this question:
 SEP holders requiring potential licensees to enter into restrictive NDAs
 SEP holders refusing to disclose information necessary to evaluate essentiality, infringement
and validity
 SEP holders not explaining how terms are FRAND
 SEP holders heavily redacting comparable agreements to prevent comparison
 SEP holders seeking a global portfolio rate whilst threatening an injunction
 Defensive suspension
Mostly disagree
Some respondents explain that most of the practices listed are not opportunistic. A SEP holder that
refuses to license at all or refuses to license a particular implementer but takes no action to enforce
its patents is not engaging in hold-up. It is simply allowing the implementer to use its technology.
Regarding ‘excessive demands by the SEP owner’ some respondents explain that a royalty demand
by a SEP holder cannot be enforced without court intervention (and thus court
evaluation/adjudication) and as such hold-up is not possible where a FRAND commitment has been
given. Furthermore, a SEP holder can be bound by confidentiality clauses enforced upon demand of
an implementer.
With respect to post-standardization disclosures, IPR policies of SDOs do not require patent searches
and patent prosecution takes time, and therefore it is not uncommon for patent holders to have
insufficient information to make disclosures pre-standardization.
One respondent clarified that they understand the question “The SEP holder requires implementers
to pay royalties for rights to patents that are not essential to the relevant standardized technology” to
be forcing a license combining SEPs with non-SEPs or forcing payment for non-SEPs that are not
used. According to this and other respondents, it is possible that a SEP holder also has non-SEPs that
may be infringed. There is nothing opportunistic about requiring a license for implemented patents,
even if the product also practices SEPs.
181
QUESTION FOR SEP HOLDERS
Q22. Which of the following behaviours would you assess as hold-out or opportunistic behaviour by
implementers?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
Repeatedly ask for information that the SEP holder has already
provided
80% 89% 50% 75% 75%
Insist repeatedly that the licence offer is not FRAND without
providing substantive arguments to demonstrate why
78% 81% 50% 75% 100
%
Ignore notifications and other communications for months 76% 78% 50% 75% 100
%
Express a willingness to take a FRAND licence - but only for
each individual patent for which infringement, essentiality, and
validity is confirmed by the courts
63% 74% 33% 50% 50%
Refuse to accept licence terms that have been confirmed by an
EU court to be FRAND, and that are relevant and comparable for
that implementer.
63% 70% 33% 50% 75%
Refuse or delay signing a non-disclosure agreement as a hold-
out tactic
58% 65% 17% 75% 50%
Table a counter-offer only once litigation has been initiated 58% 63% 17% 75% 67%
Buy time by professing willingness to engage in constructive
licensing negotiations - even as behaviour suggests otherwise
56% 56% 33% 75% 75%
Refuse to enter into a global licence agreement despite having a
global business for products that use standards
54% 59% 17% 75% 50%
Insist on obtaining unreasonable amounts of information (e.g. a
claim chart for every SEP in a portfolio) without appropriate
confidentiality arrangements in place
51% 63% 17% 50% 25%
Table counter-offers that are obviously unreasonable and
unacceptable for the rights holder (e.g. a licensing rate of just
0.001 per cent per patent family)
46% 59% 17% 25% 25%
Claim to lack information or to not understand the licence offer 28% 35% 0% 25% 25%
Redirect the SEP holder to upstream suppliers for licences 24% 26% 0% 50% 25%
Redirect the SEP holder to a subsidiary or holding company 17% 19% 0% 25% 25%
No. of replies* 40-41 26-27 6 4 3-4
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
Repeatedly ask for information that the SEP holder has already provided 56% 100%
Insist repeatedly that the licence offer is not FRAND without providing substantive
arguments to demonstrate why
50% 100%
Ignore notifications and other communications for months 44% 100%
Express a willingness to take a FRAND licence - but only for each individual patent
for which infringement, essentiality, and validity is confirmed by the courts
28% 100%
Refuse to accept licence terms that have been confirmed by an EU court to be FRAND,
and that are relevant and comparable for that implementer.
28% 100%
Buy time by professing willingness to engage in constructive licensing negotiations -
even as behaviour suggests otherwise
17% 100%
Refuse or delay signing a non-disclosure agreement as a hold-out tactic 6% 100%
Refuse to enter into a global licence agreement despite having a global business for
products that use standards
6% 100%
Table a counter-offer only once litigation has been initiated 6% 100%
Claim to lack information or to not understand the licence offer 6% 50%
Redirect the SEP holder to a subsidiary or holding company 6% 31%
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“Agree and strongly agree” answers only Implementers
SEP
Holders
Insist on obtaining unreasonable amounts of information (e.g. a claim chart for every
SEP in a portfolio) without appropriate confidentiality arrangements in place
0% 100%
Table counter-offers that are obviously unreasonable and unacceptable for the rights
holder (e.g. a licensing rate of just 0.001 per cent per patent family)
0% 100%
Redirect the SEP holder to upstream suppliers for licences 0% 46%
No. of replies* 17-18 12-13
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
Repeatedly ask for information that the SEP holder has already provided 83% 79%
Insist repeatedly that the licence offer is not FRAND without providing substantive
arguments to demonstrate why
78% 71%
Ignore notifications and other communications for months 78% 64%
Express a willingness to take a FRAND licence - but only for each individual patent for
which infringement, essentiality, and validity is confirmed by the courts
74% 50%
Refuse to accept licence terms that have been confirmed by an EU court to be FRAND,
and that are relevant and comparable for that implementer.
70% 50%
Buy time by professing willingness to engage in constructive licensing negotiations -
even as behaviour suggests otherwise
57% 50%
Refuse to enter into a global licence agreement despite having a global business for
products that use standards
55% 53%
Refuse or delay signing a non-disclosure agreement as a hold-out tactic 52% 69%
Table a counter-offer only once litigation has been initiated 52% 64%
Insist on obtaining unreasonable amounts of information (e.g. a claim chart for every
SEP in a portfolio) without appropriate confidentiality arrangements in place
52% 57%
Table counter-offers that are obviously unreasonable and unacceptable for the rights
holder (e.g. a licensing rate of just 0.001 per cent per patent family)
48% 50%
Claim to lack information or to not understand the licence offer 32% 21%
Redirect the SEP holder to upstream suppliers for licences 26% 21%
Redirect the SEP holder to a subsidiary or holding company 17% 14%
No. of replies* 22-23 13-15
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
Repeatedly ask for information that the SEP holder has already provided 80% 7% 12% 41
Insist repeatedly that the licence offer is not FRAND without providing
substantive arguments to demonstrate why
78% 7% 15% 41
Ignore notifications and other communications for months 76% 10% 15% 41
Express a willingness to take a FRAND licence - but only for each individual
patent for which infringement, essentiality, and validity is confirmed by the
courts
63% 10% 27% 41
Refuse to accept licence terms that have been confirmed by an EU court to be
FRAND, and that are relevant and comparable for that implementer.
63% 10% 27% 41
Refuse or delay signing a non-disclosure agreement as a hold-out tactic 58% 8% 35% 40
Table a counter-offer only once litigation has been initiated 58% 15% 28% 40
Buy time by professing willingness to engage in constructive licensing
negotiations - even as behaviour suggests otherwise
56% 17% 27% 41
Refuse to enter into a global licence agreement despite having a global business
for products that use standards
54% 10% 37% 41
Insist on obtaining unreasonable amounts of information (e.g. a claim chart for
every SEP in a portfolio) without appropriate confidentiality arrangements in
place
51% 10% 39% 41
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“All answers” Agree Neutral Disagree No.
Table counter-offers that are obviously unreasonable and unacceptable for the
rights holder (e.g. a licensing rate of just 0.001 per cent per patent family)
46% 12% 41% 41
Claim to lack information or to not understand the licence offer 28% 35% 38% 40
Redirect the SEP holder to upstream suppliers for licences 24% 32% 44% 41
Redirect the SEP holder to a subsidiary or holding company 17% 37% 46% 41
Other (please specify) 100% 0% 0% 2
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
Repeatedly ask for information that the SEP holder has already provided 89% 7% 4% 27
Insist repeatedly that the licence offer is not FRAND without providing
substantive arguments to demonstrate why
81% 7% 11% 27
Ignore notifications and other communications for months 78% 11% 11% 27
Express a willingness to take a FRAND licence - but only for each individual
patent for which infringement, essentiality, and validity is confirmed by the
courts
74% 4% 22% 27
Refuse to accept licence terms that have been confirmed by an EU court to be
FRAND, and that are relevant and comparable for that implementer.
70% 7% 22% 27
Refuse or delay signing a non-disclosure agreement as a hold-out tactic 65% 4% 31% 26
Insist on obtaining unreasonable amounts of information (e.g. a claim chart for
every SEP in a portfolio) without appropriate confidentiality arrangements in
place
63% 7% 30% 27
Table a counter-offer only once litigation has been initiated 63% 15% 22% 27
Refuse to enter into a global licence agreement despite having a global business
for products that use standards
59% 11% 30% 27
Table counter-offers that are obviously unreasonable and unacceptable for the
rights holder (e.g. a licensing rate of just 0.001 per cent per patent family)
59% 7% 33% 27
Buy time by professing willingness to engage in constructive licensing
negotiations - even as behaviour suggests otherwise
56% 19% 26% 27
Claim to lack information or to not understand the licence offer 35% 38% 27% 26
Redirect the SEP holder to upstream suppliers for licences 26% 41% 33% 27
Redirect the SEP holder to a subsidiary or holding company 19% 44% 37% 27
Other (please specify) 100% 0% 0% 2
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Summary of answers
Agree
Courts in the EU have confirmed that almost all of the aforementioned examples may constitute hold-
out given the individual circumstances of the specific dispute. (e.g. the German Federal Court of
Justice and the UK Supreme Court indicate that “willingness” requires more than pure statements).
Disagree
Some respondents commented that the scenarios are very broad and subjective, and that the reasons
to such behaviour might be completely justified and acts in good faith (contrary to what is implied in
the questions). Some of the statements in the question (such as ‘buying time’) refer to subjective
assessments. What one party may perceive as ‘buying time’ may be good faith efforts trying to
understand and assess whether an offer is FRAND.
While no empirical evidence base points to their occurrence being widespread/systemic, some
respondents note that such instances are already fully addressable via judicial mechanisms under
today's system in the EU.
Questions on transparency
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Quantitative summary
Respondents asked for more public information on SEP as regards “patent and application number”
(88% of all responses), “relevant standard, version, section of the standard” (80%), “contact details
of SEP holder” (80%), “transfer of ownership” (77%), “licensing programs” (76%) and “standard
FRAND terms and conditions” (72%).
Patent pools should disclose “standards subject to pool licensing” (100%), “product royalties per
programme” (94%) and “list of SEP holders” (87%).
Around 70% of respondents considered that a confidential repository of licensing agreements could
help judges and arbitrators to determine a FRAND rate. Such repository should contain information
on “licensed SEPs” (96%), “royalties” (96%) and “methodology used to calculate the royalty” (94%).
Tables with replies per question
Q23. In your view, which of the information below should the SEP holder provide publicly?
“Agree and strongly agree” answers only All
Compa-
nies
Associati
ons/
trade
union
Academia/
Authorities/
NGO/other
Citizens
Patent and application number 88% 84% 86% 92% 100%
Contact details of SEP holder 80% 73% 86% 85% 100%
Relevant standard, version, section of the standard 80% 76% 86% 85% 89%
Transfer of ownership, if any 77% 72% 86% 83% 78%
Licensing programs 76% 73% 71% 80% 89%
Standard FRAND terms and conditions 72% 64% 86% 75% 89%
High-level claim charts 63% 54% 71% 67% 89%
Information on the enforceability of the patent (e.g.
application, granted, validity)
56% 59% 29% 56% 67%
Product categories that use the SEPs 52% 54% 29% 50% 67%
Essentiality confirmed by an independent third party 50% 51% 29% 55% 56%
List of licensees 46% 36% 43% 64% 67%
Detailed claim charts 45% 46% 43% 45% 44%
No. of replies* 62-66 36-37 7 9-13 9
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
Patent and application number 100% 65%
Relevant standard, version, section of the standard 100% 53%
Transfer of ownership, if any 96% 38%
Licensing programs 93% 50%
Standard FRAND terms and conditions 93% 41%
Contact details of SEP holder 89% 71%
High-level claim charts 86% 25%
Essentiality confirmed by an independent third party 75% 13%
Detailed claim charts 71% 0%
Information on the enforceability of the patent (e.g. application, granted, validity) 71% 19%
List of licensees 64% 12%
Product categories that use the SEPs 46% 50%
No. of replies* 28 16-17
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
185
“Agree and strongly agree” answers only EU non-EU
Patent and application number 86% 84%
Relevant standard, version, section of the standard 82% 74%
Contact details of SEP holder 82% 68%
Licensing programs 74% 74%
Transfer of ownership, if any 73% 83%
Standard FRAND terms and conditions 70% 67%
High-level claim charts 61% 56%
Essentiality confirmed by an independent third party 49% 50%
Information on the enforceability of the patent (e.g. application, granted, validity) 49% 67%
Product categories that use the SEPs 47% 56%
Detailed claim charts 46% 44%
List of licensees 34% 58%
No. of replies* 35-38 18-19
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
Patent and application number 88% 8% 5% 65
Relevant standard, version, section of the standard 80% 5% 15% 66
Contact details of SEP holder 80% 14% 6% 66
Transfer of ownership, if any 77% 6% 17% 64
Licensing programs 76% 8% 16% 63
Standard FRAND terms and conditions 72% 9% 19% 64
High-level claim charts 63% 9% 28% 65
Information on the enforceability of the patent (e.g. application, granted,
validity)
56% 18% 26% 62
Product categories that use the SEPs 52% 25% 22% 63
Essentiality confirmed by an independent third party 50% 22% 28% 64
List of licensees 46% 17% 37% 63
Detailed claim charts 45% 16% 39% 64
Other (please specify) 67% 17% 17% 6
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
Patent and application number 84% 11% 5% 37
Relevant standard, version, section of the standard 76% 5% 19% 37
Contact details of SEP holder 73% 19% 8% 37
Licensing programs 73% 11% 16% 37
Transfer of ownership, if any 72% 6% 22% 36
Standard FRAND terms and conditions 64% 17% 19% 36
Information on the enforceability of the patent (e.g. application, granted,
validity)
59% 14% 27% 37
High-level claim charts 54% 14% 32% 37
Product categories that use the SEPs 54% 19% 27% 37
Essentiality confirmed by an independent third party 51% 19% 30% 37
Detailed claim charts 46% 14% 41% 37
List of licensees 36% 25% 39% 36
Other (please specify) 67% 33% 0% 3
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Summary of comments
It is very much felt by implementers that most SEP holders do not provide enough information about
the essentiality of their SEPs to substantiate their claims that they are infringing their patents. As is
clear from the percentages above, most implementers would like to have most of the listed
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information to be provided by the SEP holders. For further details as to the information they would
like to receive when evaluating a licence offer, many implementers refer to Annex B “Documentation
Relating to Licensing Negotiations” of Consortium Workshop Agreement (CWA) 95000358
which
mentions in this regard that the details about the asserted patents (including ownership and validity)
and explanations why these are infringed and how the royalty rate is calculated should be provided
voluntarily and proactively by SEP holders. In addition, a respondent suggested that all such
information should be made available in one place, to allow implementers to compare SEP holders’
portfolios on essentiality, remaining lifetime, geographical scope, implementation levels, etc.
However, SEP holders prefer to keep most information confidential except for the data that is already
publicly available such as the patent number, standard details and details of the licensing program.
The more sensitive and confidential information, such as claim charts, third-party essentiality checks
or list of licensees, they consider better suited for provision under a properly executed non-disclosure
agreement (NDA) in the interest of both parties. It is mentioned that this is recognized as a general
practice in section 4.4 of the ETSI Guide on IPR. It does not alter the normal practice of entering into
a confidentiality agreement covering license negotiations where both parties typically exchange
confidential information. Indeed, they stress that also licensees are keen to maintain the terms and
conditions of the FRAND license strictly confidentiality in fear of being the next "target" for another
SEP holder and have intervened to that effect before the courts. Most SEP holders are particularly
reluctant to publicly disclose claim charts, or third-party essentiality checks. The latter in particular
shouldn’t be imposed without corresponding obligations on implementers to provide assessments of
products’ use of the standard.
As arguments in favour of as much transparency as possible it was mentioned that:
- Transparency is the foundation of an efficient market for SEP licences, in which costs are as
low as possible, SEP holders receive FRAND royalty payments as soon as possible, and
implementers have high certainty about the costs of SEP licensing. Information relevant to
setting FRAND rates and other terms should be publicly available, unless its disclosure would
plausibly damage a party. This will allow licensors and implementers to identify each other
and agree licence terms without undue delay.
- Transparency is the prerequisite of predictability of the full patent licensing cost of
implementing a standard before making the decision of whether to implement the standard
and it is consistent with the very spirit of the patent system, which is based on disclosure by
inventors of the content of their inventions and public access through patent offices to the
description of inventions and the status of patents.
- Detailed claim charts, sufficient information about the license offer and its economic key
points will be of particular relevance to start-ups, because they do not have the expertise in-
house to do in-depth technical evaluations and economic analyses of entire SEP-ecosystems.
The hold-up problem and appearance of hold-out result from a significant lack of transparency, which
creates information asymmetries and excessive leverage. Many of the problems raised in this survey
358
See CWA95000.pdf (standict.eu). In 2017, industry players under the auspices of CEN-CENELEC attempted to
establish business-led guidance in the form of a so-called ‘consortium workshop agreement’ (CWA). This Annex
provides a list of information and documents that may typically be required by a potential licensee in order to evaluate a
license offer, including: 1) Basic information that should always be voluntarily and proactively provided by the SEP
holder; 2) Information that should be made available upon request by the potential licensee; 3) Additional information
that should be made available when the asserted SEP’s include patents that are, or have previously been included in a
licensing program or patent pool.
187
would be resolved by making the FRAND rate transparent and making it easy for companies to verify
that an offered rate is FRAND and that the SEPs are actually standard essential and infringed.
Q24. In your view, which of the information below should patent pools make publicly available?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
Standards subject to pool licensing 100% 100% 100% 100% 100
%
Product royalties per programme 94% 94% 100% 80% 100
%
List of SEP holders 90% 89% 100% 100% 78%
List of certified SEPs 87% 86% 100% 73% 100
%
Standard licence agreement per programme 81% 75% 86% 82% 100
%
Duplicate royalty policy 79% 81% 100% 70% 67%
Process for evaluating SEPs to be included in the pool
(essentiality, validity etc.)
76% 69% 86% 70% 100
%
List of licensees 75% 75% 86% 73% 67%
Illustrative cross-references to standard explaining why the SEPs
are found to be essential
74% 72% 86% 70% 78%
Pool Administrators’ shareholders / ownership structure 70% 61% 83% 89% 78%
List of independent evaluators 63% 57% 71% 64% 78%
List of licensed products 48% 40% 29% 70% 67%
No. of replies* 56-63 31-36 6-7 9-11 9
Note: “Other (please specify)” and answers on the footnote to “Duplicate royalty policy” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
Standards subject to pool licensing 100% 100%
Product royalties per programme 100% 100%
List of certified SEPs 100% 81%
Standard licence agreement per programme 100% 63%
Duplicate royalty policy[1] 100% 50%
Process for evaluating SEPs to be included in the pool (essentiality, validity etc.) 96% 47%
Illustrative cross-references to standard explaining why the SEPs are found to be
essential
96% 47%
List of SEP holders 93% 94%
List of licensees 89% 63%
Pool Administrators’ shareholders / ownership structure 89% 33%
List of independent evaluators 79% 44%
List of licensed products 39% 29%
No. of replies* 27-28 10-16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No
opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
Standards subject to pool licensing 100% 100%
Product royalties per programme 92% 94%
List of SEP holders 92% 94%
List of certified SEPs 86% 83%
Duplicate royalty policy[1] 84% 75%
188
“Agree and strongly agree” answers only EU non-EU
Standard licence agreement per programme 78% 78%
Illustrative cross-references to standard explaining why the SEPs are found to be
essential
75% 71%
List of licensees 72% 83%
Pool Administrators’ shareholders / ownership structure 71% 65%
Process for evaluating SEPs to be included in the pool (essentiality, validity etc.) 69% 76%
List of independent evaluators 53% 76%
List of licensed products 40% 53%
No. of replies* 31-36 16-18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
Standards subject to pool licensing 100% 0% 0% 63
Product royalties per programme 94% 3% 3% 62
List of SEP holders 90% 3% 6% 63
List of certified SEPs 87% 5% 8% 63
Standard licence agreement per programme 81% 8% 11% 63
Duplicate royalty policy 79% 13% 9% 56
Process for evaluating SEPs to be included in the pool (essentiality, validity
etc.)
76% 19% 5% 62
List of licensees 75% 13% 13% 63
Illustrative cross-references to standard explaining why the SEPs are found to
be essential
74% 16% 10% 62
Pool Administrators’ shareholders / ownership structure 70% 15% 15% 60
List of independent evaluators 63% 26% 11% 62
List of licensed products 48% 23% 30% 61
Other (please specify) 100% 0% 0% 6
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
answers on the footnote to “Duplicate royalty policy” not included in the table
“Companies answers” Agree Neutral Disagree No.
Standards subject to pool licensing 100% 0% 0% 36
Product royalties per programme 94% 3% 3% 36
List of SEP holders 89% 6% 6% 36
List of certified SEPs 86% 8% 6% 36
Duplicate royalty policy[1] 81% 16% 3% 31
List of licensees 75% 11% 14% 36
Standard licence agreement per programme 75% 14% 11% 36
Illustrative cross-references to standard explaining why the SEPs are found to
be essential
72% 22% 6% 36
Process for evaluating SEPs to be included in the pool (essentiality, validity
etc.)
69% 25% 6% 36
Pool Administrators’ shareholders / ownership structure 61% 22% 17% 36
List of independent evaluators 57% 37% 6% 35
List of licensed products 40% 26% 34% 35
Other (please specify) 100% 0% 0% 3
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account answers on the footnote to “Duplicate royalty policy” not included in the table
Summary of comments
In general, respondents consider that patent pool administrators, as the licensing agent of SEP
holders, share the same obligations as the SEP holder and should readily provide necessary
189
information in the course of a SEP licensing negotiation. Some respondents are of the opinion that
patent pools may even face higher competition concerns than bilateral licensing due to their combined
market power, and as such it is appropriate for pools to be more transparent.
However, opinions differ as to what information should be made publicly available. For instance,
according to a patent pool administrator, most of the information needed for licensors and licensees
of all sizes to make informed decisions is already available through public means and can be
supplemented as needed through other appropriate channels where confidentiality or other
considerations need to be taken into account. In particular, SEP holders and patent pool
administrators differ of opinion as to access to information concerning the set-up and internal
workings of the pool. Where SEP holders and some patent pool administrators think that this info
should not necessarily be public, some implementers would like to know the details of the share of
patents held by each SEP holder, how royalties are shared amongst pool members and which other
mechanisms exist to compensate SEP holders.
In addition, many implementers stress the importance of disclosure of the royalty rates, together with
the explanation of their calculation and the justification why they are FRAND (by referring to
comparable licences). To avoid double dipping, some implementer respondents would also like
patent pool administrators to be transparent about already existing licenses in the value chain which
cover the products of the licensee.
Q25. Which of the information below should a SEP implementer of the standard provide publicly?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
An indication of the standard being used 52% 44% 14% 67% 100
%
Contact details of implementer 48% 40% 14% 60% 89%
An indication of the standard and the relevant version of the
standard
43% 35% 14% 58% 86%
An indication of the standard, the relevant version and section of
the standard
29% 17% 14% 50% 71%
An indication of the standard, the relevant version, section and
product category of the standard
25% 14% 14% 40% 71%
No. of replies* 61-63 35-37 7 10-12 7-9
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
An indication of the standard being used 38% 47%
Contact details of implementer 32% 56%
An indication of the standard and the relevant version of the standard 26% 47%
An indication of the standard, the relevant version and section of the standard 22% 29%
An indication of the standard, the relevant version, section and product category of the
standard
15% 19%
No. of replies* 26-28 16-17
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
An indication of the standard being used 47% 42%
An indication of the standard and the relevant version of the standard 41% 32%
Contact details of implementer 36% 47%
190
“Agree and strongly agree” answers only EU non-EU
An indication of the standard, the relevant version and section of the standard 28% 16%
An indication of the standard, the relevant version, section and product category of the
standard
24% 6%
No. of replies* 33-37 17-19
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
An indication of the standard being used 52% 11% 37% 62
Contact details of implementer 48% 13% 39% 61
An indication of the standard and the relevant version of the standard 43% 13% 44% 63
An indication of the standard, the relevant version and section of the standard 29% 18% 53% 62
An indication of the standard, the relevant version, section and product
category of the standard
25% 21% 54% 61
Other (please specify) 100% 0% 0% 5
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
An indication of the standard being used 44% 14% 42% 36
Contact details of implementer 40% 17% 43% 35
An indication of the standard and the relevant version of the standard 35% 14% 51% 37
An indication of the standard, the relevant version and section of the standard 17% 19% 64% 36
An indication of the standard, the relevant version, section and product
category of the standard
14% 24% 62% 37
Other (please specify) 100% 0% 0% 2
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Summary of comments
The majority of both SEP holder and implementer respondents do not see a need to publicly provide
detailed information about the use of the standard by implementers other than the standard
implemented (so the public can tell what systems the product will be compatible with) and
appropriate contact information.
Main argument is that the implementer of (certain) SEPs is not necessarily the licensee. For many
standard implementers, the components implementing parts of a standard come from another party
(e.g., an IC supplier), and so the standard implementer has little information beyond the mere fact
that the component purportedly practices the standard. As mentioned by some implementers in the
car sector, automotive OEMs only know the identity of their direct supplier and are unable to provide
contact details of other companies in the design chain. Also, the requirement would be costly, vast
and unwieldy if it extended to every company in a value chain. Moreover, as mentioned by a large
implementer, standards implementers have not made a FRAND commitment, and do not acquire
market power from using a standard. It is of the opinion that product suppliers should not be required
to publicly disclose what standards their products support. Information about the technologies or
standards that a product is implementing may be commercially and competitively sensitive
information. Where needed, sensitive information can be shared in bilateral negotiations, potentially
under NDA.
Another reason given by some respondents is that information about the use of standards in user
products is usually available from publicly accessible sources, e.g. via the internet, product data
sheets or functional descriptions for the product or when an implementer of an ETSI standard
undertakes conformance testing of products vis-à-vis a standard. In addition, experts on the standard
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usually know which applications come into question for the standard. Potential users can therefore
be identified relatively easily through market research.
Q26. How useful would the existence of a confidential repository of licensing agreements be to help
judges and arbitrators determine a FRAND rate?
All Companies
Associations/
trade union
Academia/Authorities/
NGO/other
Citizens
Very useful 21% 24% 29% 8% 22%
Useful 17% 15% 0% 31% 22%
Somewhat useful 32% 29% 29% 38% 33%
Not useful 30% 32% 43% 23% 22%
No. of replies 63 34 7 13 9
Note: “No opinion” answers not taken into account.
Implementers
SEP
Holders
Very useful 31% 12%
Useful 19% 0%
Somewhat useful 23% 53%
Not useful 27% 35%
No. of replies 26 17
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion” answers not taken into account
EU non-EU
Very useful 25% 11%
Useful 17% 17%
Somewhat useful 28% 39%
Not useful 31% 33%
No. of replies 36 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “No opinion” answers not taken into account
Summary of comments
Respondents arguing that it would not be useful
Respondents that considered that it would not be useful to have a repository of confidential licensing
agreements could be grouped in four different groups.
The first group claims that effective mechanisms already exist for courts, arbitrators and competition
authorities to obtain information they may require in determining FRAND rates. Those mechanisms
appropriately take into account various national legal considerations (including due process,
confidentiality and relevance).
The second group considers that as a matter of principle, private parties should always be free to
conclude commercial agreements in confidence. There should hence never be an obligation to submit
licensing agreements to a repository. A voluntary repository, however, would not be useful because
it could provide for a skewed data set.
And a third group considers that since everyone should pay the same amount for the same thing, and
that amount should be set in advance before standard implementation. A repository of licensing
agreements is not necessary to achieve this outcome.
Last but not least the fourth group expresses scepticism as to the quality, reliability and the
completeness of such a repository.
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Some respondents explain that as past practice has shown licensing agreements’ information content
is limited. In order to understand an agreement’s rationale and mathematics much more information
is needed as e.g. negotiation history, business history, complementary agreements. An agreement’s
pure numbers (royalty rate) are not good for a reference.
Some respondents claim that a license repository would be open to opportunistic conduct that would
likely make it ineffective. For example, SEP holders can control to which companies they first license
and can opportunistically choose targets more likely to acquiesce to create favourable examples. Such
licenses may not be truly FRAND as they may be concluded under the threat of an injunction or
litigation more generally. There are also dangers that side deals with related transactions (e.g.
agreements to buy goods and services) may not be properly reflected in the repository.
Respondents arguing that it would be useful
Those respondents argued that implementers can only assess whether they are discriminated against
if SEP holders disclose prior licences. SEP implementers need a clear legal framework for claiming
and enforcing disclosure of relevant licences and other agreements. Otherwise, discrimination will
remain the norm rather than an exception.
Some request that information on comparable licences is known at the earliest stage of a product
development by all stakeholders.
According to some respondents, a repository of licensing agreements would increase access to licence
agreements and information that is currently not shared with courts and arbitrators because of
confidentiality considerations. This would translate into better adjudication about FRAND terms and
increasing the level playing field and equal treatment of licensees.
Some argue that such repository should not be confidential at all. Transparency is key for efficient
licensing and the implementation of new technologies. SMEs which plan to upgrade their products
with connectivity must calculate their business case. Licensing costs have a significant impact. For
SMEs lack of transparency is unacceptable.
Finally, a respondent explains that proprietary databases on patent licences already exist but are
fragmented and incomplete since they rely on usually redacted financial disclosures and voluntary
submissions by the contract parties. Examples are KTmine, Royalty Range, RoyaltySource, IPScio,
Questel Orbit etc. Well-funded patent offices, such as the EPO, could be in the right position to
maintain such a confidential repository also because they already (yet ineffectively) impose the
recordation of patent licences and transfers into their official registers.
Q27. If there should be a repository who should have access to such confidential repository of
licensing agreements?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Judges 84% 82% 100% 92% 67%
Arbitrators 71% 65% 100% 75% 67%
Mediators 50% 56% 43% 50% 33%
Lawyers 48% 47% 57% 42% 56%
Public authorities 27% 26% 14% 33% 33%
Trustees 23% 24% 43% 17% 11%
Other (please
specify)
31% 26% 29% 33% 44%
No. of replies 62 34 7 12 9
Note: multiple answers possible
193
Implementers
SEP
Holders
Judges 92% 88%
Arbitrators 84% 65%
Lawyers 80% 12%
Mediators 60% 35%
Public authorities 48% 0%
Trustees 36% 12%
Other (please specify) 44% 18%
No. of replies 25 17
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; Holder: those who disagreed,
were neutral or had no opinion on Q2 and agreed with Q3; multiple answers possible.
EU non-EU
Judges 94% 72%
Arbitrators 83% 50%
Mediators 60% 39%
Lawyers 49% 44%
Public authorities 29% 22%
Trustees 29% 17%
Other (please specify) 26% 33%
No. of replies 35 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; multiple answers possible.
Summary of comments
The opinions on who should have access to the repository vary.
Public
Those that argue that such a repository must be public consider that it will enable willing licensees,
in particular SMEs to identify necessary licences and to determine the FRAND value for such a
licence. Every licensee will be enabled to calculate a business case for the provision of goods and
services it intends to provide. It furthermore will enable any customers to determine at an early stage
whether or not a supplier took all necessary licences. Licensors will not have the burden to search for
and contact every potential licensee. License negotiations will be accelerated as validity, relevance
and licensing terms and conditions will not have to be explained multiple times but just once.
(Partially) confidential
Others who consider that the repository should be confidential argue that when sharing data, it is
important to keep in mind the protection of business secrets and the fact that the data may have a high
market value.
Some consider that to protect the various interests and confidential information only judges,
arbitrators, mediators and public authorities should have access.
Others argue that if such repository is established, it is important to ensure that all parties to a
litigation have access to the information to make sure rights of defence are maintained. It is not
appropriate in an adversarial system for counsel not to have access to documents that the judge or
arbitrator will rely on to make decisions. Accordingly, counsel at least will need to have access which
will present a substantial danger of improper disclosure that will need to be addressed. In-house
counsels should not have access, as these agreements could include sensitive information from
competitors. Clients don't need to have access to the repository, but they should have access to the
anonymised database. Commercially sensitive information can be redacted or sufficiently
aggregated.
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Q28 Under what conditions should access to the confidential repository of licensing agreements be
granted?
Summary of answers
Some respondents explain that the repository could be used for pre-defined purposes, including (i)
assessing the value of SEP licensing offers, (ii) determining the FRAND value of SEP licences, and
(iii) determining whether there is any unjustified discrimination.
According to some respondents access could be granted on the following conditions: (i) only if the
implementer makes an unconditional commitment to take a license once a FRAND rate determination
is made; (ii) only to a limited number of outside attorneys and financial experts who agree to maintain
the confidentiality of the terms.
Other respondents consider that the confidential repository should be accessible to potential licensees
early in the negotiation process to balance information asymmetries and reduce transaction costs. To
protect confidentiality, access should be conditioned on (i) there being a valid negotiation between
two parties, and (ii) parties agreeing to destroy and actually destroying any information received from
the repository once the negotiation is complete. The confidential repository will do little to reduce
negotiating costs and increase transparency if it is only available in limited circumstances. Indeed, it
could increase litigation if that were the only avenue to get access to the confidential repository.
Q29. No licence agreement is the same. They are catered to the needs of the concluding parties and
the agreed terms and rates may be influenced by elements other than merely SEPs. If there were an
obligation to submit licensing agreements to a confidential repository and parties were obliged to
“unpack” the complex licensing agreements, i.e. provide a clear picture of the agreed terms and
conditions, which elements of the agreement would need to be explained in a form to be submitted to
the confidential repository of licensing agreements, summarising those agreements?
All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities
/NGO/
other
Citizens
Licensed SEPs 96% 96% 100% 90% 100
%
Royalties 96% 96% 100% 90% 100
%
Methodology used to calculate the royalty 94% 92% 100% 90% 100
%
Duration 87% 83% 100% 80% 100
%
Licensed product 87% 88% 100% 90% 78%
Geographical scope 85% 83% 100% 80% 89%
Discounts 83% 83% 100% 80% 78%
Grant-backs 81% 79% 100% 90% 67%
Parties 79% 79% 100% 80% 67%
Reciprocity obligations 74% 67% 100% 90% 67%
Defensive suspension (clause that allows a SEP holder to
terminate a licence upon the occurrence of a certain event, like
being sued for patent infringement by a implementer or
implementer’s customer)
70% 58% 100% 80% 78%
Patent related (validity) 64% 67% 50% 80% 44%
Payment conditions (term, interest for late payments) 64% 67% 25% 80% 56%
Legal (applicable law, competent forum/court) 62% 58% 75% 70% 56%
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All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities
/NGO/
other
Citizens
Non-disclosure requirements 60% 54% 75% 70% 56%
Compliance (reporting obligations and auditing conditions) 51% 46% 50% 60% 56%
No. of replies 47 24 4 10 9
Note: multiple answers possible
Implementers
SEP
Holders
Licensed SEPs 100% 91%
Royalties 100% 91%
Methodology used to calculate the royalty 100% 82%
Discounts 100% 73%
Geographical scope 95% 82%
Duration 91% 91%
Parties 91% 73%
Licensed product 86% 82%
Grant-backs 86% 82%
Reciprocity obligations 82% 73%
Patent related (validity) 82% 27%
Defensive suspension (clause that allows a SEP holder to terminate a licence upon the
occurrence of a certain event, like being sued for patent infringement by a implementer
or implementer’s customer)
77% 73%
Non-disclosure requirements 77% 27%
Legal (applicable law, competent forum/court) 73% 55%
Payment conditions (term, interest for late payments) 68% 45%
Compliance (reporting obligations and auditing conditions) 59% 36%
No. of replies 22 11
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; Holder: those who disagreed,
were neutral or had no opinion on Q2 and agreed with Q3; multiple answers possible.
EU non-EU
Licensed SEPs 93% 100%
Royalties 93% 100%
Methodology used to calculate the royalty 93% 91%
Discounts 85% 82%
Licensed product 85% 100%
Geographical scope 81% 91%
Duration 81% 91%
Parties 81% 82%
Grant-backs 78% 100%
Reciprocity obligations 70% 91%
Patent related (validity) 63% 82%
Defensive suspension (clause that allows a SEP holder to terminate a licence upon the
occurrence of a certain event, like being sued for patent infringement by a implementer
or implementer’s customer)
63% 82%
Legal (applicable law, competent forum/court) 63% 64%
Payment conditions (term, interest for late payments) 59% 82%
Non-disclosure requirements 52% 82%
Compliance (reporting obligations and auditing conditions) 41% 73%
No. of replies 27 11
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; multiple answers possible.
Summary of comments
196
Some respondents explain that first, the comparable licenses have to be identified. Once comparable
licenses are identified, it is necessary to unpack them to identify the one-way royalty paid for a license
to the SEP portfolio at issue. To do so, one must identify and isolate the value of other considerations
included in the license, which may be difficult or impossible. In addition, any “unpacking” rule that
requires only some terms of sometimes complex business arrangements to be disclosed is subject to
being gamed by parties wishing to avoid disclosure.
Some respondents claim that the list only contains elements from the licence agreement and does not
take into account potential interdependencies between elements and their relative importance.
According to those respondents, the list does not contain any element that relates to the general
background against which the licence agreement was signed. According to them FRAND requires
the licence to be considered as a whole (internally) against the circumstances in which it was
negotiated (externally). Such elements can include the overall economic situation (both general and
particular), the product market segment, etc. One example of such external situations can be found
in the decision of the German Federal Court of Justice in the Sisvel v Haier case (5 May 2020 - Case
No. KZR 36/17) where the “Court held that Sisvel had not discriminated against Haier by offering
different (higher) rates than those previously agreed with another licensee (allegedly) as a result of
undue pressure by foreign state authorities”. There might also be other commercial considerations
that can be part of the agreement. Given the many different product segments, geographies, and other
commercial and economic considerations, it is impossible to provide an exhaustive list of all the
elements that may be relevant for the unpacking of the agreement. Unpacking’ is a complex activity
that cannot be captured by a defined procedure or in an excel sheet.
Some respondents note that FRAND terms may also differ because the parties might agree on
different forms of monetary consideration which allow them to allocate commercial risk as they deem
appropriate. Parties might also negotiate non-monetary, yet still valuable, terms consistent with
FRAND.
Some respondents claim that an obligation for the parties to each license agreement submitted to the
repository to explain and “unpack” licenses would be complex and would likely result in biased and
incomplete views. It could also impact financial markets or impact other regulatory filings. Two
parties would each unpack the same agreement differently.
Some respondents in favour of a repository consider that such repository should include all listed
marked information, plus the information regarding the scope of the licence.
Should the repository be public or accessible to larger circle of authorised persons, the parties, the
licensed product and royalties should be included in redacted form similar to the ordinary non-
confidential versions of competition law decisions. For instance, instead of the explicit name of a
company, the license repository could indicate its size, turnover, sector, geographical presence and
so on.
The process of unpacking would need to be dynamic over time. It is not possible to represent the
dynamic effects in a form.
Questions on essentiality
Quantitative summary
Around 60% of all respondents and 90% of Implementers supported third party essentiality checks
as long as independent experts do them. Only 24% of SEP Holders supported such a solution. A third
197
of all respondents considered that essentiality checks should serve only an advisory role with no legal
consequences.
Around two thirds of all respondents and around 80% of Implementers thought that essentiality
assessment might help in assessing SEP exposure of a product and deciding whom to negotiate with,
smoothen licensing negotiation and prevent over pricing. More than half of SEP Holders disagreed
with these impacts, but agreed that checks might provide a reliable overview of the share of each SEP
holders’ essential patents.
As regards practical implementation, the respondents preferred that European Patent Office (EPO)
conducts the checks (63% of all replies) on just “one SEP per SEP family” (63%).
Tables with replies per question
Q30. The SEPs legal framework does not provide for third party checks outside of court of patents
declared essential to a standard. How useful would be to set up a system of essentiality checks?
All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
Useful, but only if the assessors would have the required
expertise and are totally independent
61% 66% 71% 54% 44%
Useful, but only if it would be advisory and have no legal
consequences
34% 34% 57% 31% 22%
Useful. It provides more transparency and reduces licensing
costs
34% 37% 43% 38% 11%
Not useful. It is sufficient to develop private solutions to identify
declared SEPs that are clearly not a true SEP.
10% 11% 0% 15% 11%
Not useful. It is sufficient, if SEP owners were obliged to update
their self-declarations (so as to remove declared SEPs that are no
longer SEPs)
7% 3% 0% 8% 33%
Not useful. It is sufficient, if SEP owners were obliged to submit
claim charts confirmed by an independent third party
0% 0% 0% 0% 0%
Other, please specify 19% 18% 14% 31% 11%
No. of replies 67 38 7 13 9
Note: multiple answers possible; “No opinion” answers not taken into account; “No opinion” answers not taken into account
Implementers
SEP
Holders
Useful, but only if the assessors would have the required expertise and are totally
independent
93% 24%
Useful, but only if it would be advisory and have no legal consequences 64% 0%
Useful. It provides more transparency and reduces licensing costs 46% 12%
Not useful. It is sufficient, if SEP owners were obliged to update their self-declarations
(so as to remove declared SEPs that are no longer SEPs)
7% 6%
Not useful. It is sufficient to develop private solutions to identify declared SEPs that
are clearly not a true SEP.
4% 18%
Not useful. It is sufficient, if SEP owners were obliged to submit claim charts
confirmed by an independent third party
0% 0%
Other, please specify 4% 41%
No. of replies 28 17
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; Holder: those who disagreed,
were neutral or had no opinion on Q2 and agreed with Q3; multiple answers possible; “No opinion” answers not taken into account;
“No opinion” answers not taken into account.
EU non-EU
Useful, but only if the assessors would have the required expertise and are totally
independent
63% 65%
198
EU non-EU
Useful, but only if it would be advisory and have no legal consequences 37% 35%
Useful. It provides more transparency and reduces licensing costs 37% 40%
Not useful. It is sufficient to develop private solutions to identify declared SEPs that
are clearly not a true SEP.
5% 20%
Not useful. It is sufficient, if SEP owners were obliged to update their self-declarations
(so as to remove declared SEPs that are no longer SEPs)
3% 5%
Not useful. It is sufficient, if SEP owners were obliged to submit claim charts
confirmed by an independent third party
0% 0%
Other, please specify 21% 20%
No. of replies 38 20
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “No opinion” answers not taken into account;
“No opinion” answers not taken into account.
Summary of comments
Proponents for a system of essentiality checks
The majority of all respondents (61%) consider the setting up of a system of essentiality checks as
useful, if the assessors would have the required expertise and are totally independent users of designs.
This is particularly true for those respondents who identified themselves as implementers, where 93%
considered this useful contrary to 24% of SEP holders.
Those in favour of such a system point out that third party essentiality checks would reduce
information asymmetry and make negotiation more efficient. Currently, the discrepancy between
declared and truly essential patents causes legal and commercial uncertainty for potential licensees,
who are unable to assess whether they need to acquire a licence, from whom, and what is the value
of the IPR that they need to obtain. The complex SEP landscape may lead to violations of competition
law, as SEP holders can use their position of unavoidable trading partners with respect to truly
standard essential patents to force SEP licensees to also pay for IPR that they do not need. Under the
current system, licensees need to bear the cost of establishing essentiality of SEPs for each individual
licence negotiation. It is a time consuming and expensive process that slows down licensing
negotiations. Third-party essentiality checks would smoothen SEP licence negotiations. However,
the trust of potential licensees would be essential to achieve these gains. Untrusted essentiality checks
would exacerbate the costs and inefficiencies of the current system. The legal framework must ensure
that the assessors are competent and not subject to capture nor forum shopping and are not funded,
or vetted, by SEP holders.
Proponents against a system of essentiality checks
Those respondents against a system of essentiality checks argue that making essentiality checks
available may not necessarily facilitate SEP licensing. First, a disadvantage of essentiality checks is
that they are not legally binding unless confirmed by courts. But even if essentiality is confirmed in
court, parties may dispute validity, the requested royalty rate and still refuse licenses. Second, it is
mentioned that the essentiality of a patent cannot be determined "objectively”. It is a question of
probability. Third, even if that is possible, determining essentiality ratios would be voluminous, very
costly and determinations will still not be legally enforceable. Finally, the SEP holders that seek to
monetize their portfolios have enough SEPs that at least some are essential to any given standard,
making the question of essentiality less important in the aggregate. In particular, patent pool
administrators point out that private solutions are available and sufficient. With the pool context in
mind, a starting point for a market driven approach may for instance be one that puts in place an
accreditation framework (rather than a single independent institution) where independent, specialised
third parties can seek accreditation based on a determined set of criteria.
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Q31. What would be the main advantage of third-party essentiality checks?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
It may help to be better informed about the actual SEP exposure
of a given product
65% 65% 71% 62% 63%
It may help to reduce the required amount of resources spent on
licensing of SEPs
65% 68% 71% 54% 63%
It may help to smoothen licensing negotiations 64% 62% 71% 69% 63%
It may help to negotiate a fair royalty (preventing over-pricing) 63% 59% 86% 69% 50%
It may help to provide a trustworthy and reliable overview of the
share of each SEP holders’ essential patents
63% 62% 86% 62% 50%
It may help in deciding with whom to engage in licensing
discussions
62% 59% 86% 62% 50%
It may facilitate the construction of better benchmarks to be used
in case of disputes
58% 57% 71% 60% 50%
It may make SEP declarants to become more selective in
submitting ‘potentially essential’ or ‘probably not essential’
patents
48% 46% 43% 62% 43%
It may help the SEP holder to meet its obligations as referred to
in Huawei v ZTE
41% 44% 29% 42% 38%
No. of replies* 59-67 32-39 7 10-13 7-8
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
It may help in deciding with whom to engage in licensing discussions 89% 24%
It may help to reduce the required amount of resources spent on licensing of SEPs 86% 29%
It may help to smoothen licensing negotiations 86% 35%
It may help to negotiate a fair royalty (preventing over-pricing) 86% 24%
It may help to provide a trustworthy and reliable overview of the share of each SEP
holders’ essential patents
85% 41%
It may facilitate the construction of better benchmarks to be used in case of disputes 82% 25%
It may help to be better informed about the actual SEP exposure of a given product 79% 35%
It may make SEP declarants to become more selective in submitting ‘potentially
essential’ or ‘probably not essential’ patents
59% 24%
It may help the SEP holder to meet its obligations as referred to in Huawei v ZTE 46% 25%
No. of replies* 27-28 16-17
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
It may help to provide a trustworthy and reliable overview of the share of each SEP
holders’ essential patents
70% 55%
It may help to reduce the required amount of resources spent on licensing of SEPs 68% 60%
It may help to smoothen licensing negotiations 66% 62%
It may help in deciding with whom to engage in licensing discussions 65% 60%
It may help to negotiate a fair royalty (preventing over-pricing) 65% 65%
It may help to be better informed about the actual SEP exposure of a given product 63% 68%
It may facilitate the construction of better benchmarks to be used in case of disputes 59% 60%
It may make SEP declarants to become more selective in submitting ‘potentially
essential’ or ‘probably not essential’ patents
49% 50%
It may help the SEP holder to meet its obligations as referred to in Huawei v ZTE 41% 41%
No. of replies* 34-38 17-21
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
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*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
It may help to be better informed about the actual SEP exposure of a given
product
65% 18% 17% 65
It may help to reduce the required amount of resources spent on licensing of
SEPs
65% 9% 26% 65
It may help to smoothen licensing negotiations 64% 13% 22% 67
It may help to provide a trustworthy and reliable overview of the share of each
SEP holders’ essential patents
63% 20% 17% 65
It may help to negotiate a fair royalty (preventing over-pricing) 63% 8% 29% 65
It may help in deciding with whom to engage in licensing discussions 62% 15% 23% 65
It may facilitate the construction of better benchmarks to be used in case of
disputes
58% 18% 24% 62
It may make SEP declarants to become more selective in submitting
‘potentially essential’ or ‘probably not essential’ patents
48% 28% 23% 64
It may help the SEP holder to meet its obligations as referred to in Huawei v
ZTE
41% 19% 41% 59
Other (please specify) 100% 0% 0% 2
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
It may help to reduce the required amount of resources spent on licensing of
SEPs
68% 5% 27% 37
It may help to be better informed about the actual SEP exposure of a given
product
65% 22% 14% 37
It may help to provide a trustworthy and reliable overview of the share of each
SEP holders’ essential patents
62% 27% 11% 37
It may help to smoothen licensing negotiations 62% 18% 21% 39
It may help in deciding with whom to engage in licensing discussions 59% 14% 27% 37
It may help to negotiate a fair royalty (preventing over-pricing) 59% 8% 32% 37
It may facilitate the construction of better benchmarks to be used in case of
disputes
57% 22% 22% 37
It may make SEP declarants to become more selective in submitting
‘potentially essential’ or ‘probably not essential’ patents
46% 35% 19% 37
It may help the SEP holder to meet its obligations as referred to in Huawei v
ZTE
44% 9% 47% 32
Other (please specify) 0
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Summary of comments
The majority of all respondents consider as important benefits of a system of third party essentiality
checks that it may (i) provide better information on the actual SEP exposure of a given product (65%),
(ii) reduce transaction costs (65%), (iii) smoothen licensing negotiations (64%), (iv) give insight in
the share of each SEP holders’ essential patents (63%), (v) help to negotiate a fair royalty (63%), (vi)
help in deciding with whom to engage in licensing discussions (62%) and (vii) facilitate the
construction of better benchmarks to be used in case of disputes (58%)
As particular advantages for start-ups and SMEs it is mentioned that third party essentiality checks
could be useful for SMEs as they would provide additional transparency and bring down negotiation
costs. Given the sheer size of SEP portfolios, potential licensees generally do not have sufficient time
for carrying out the necessary analyses of SEPs. This would be especially important for start-ups that
do not have the resources for analysing patents and standards. However, the risk of an ex-parte system
would be the lack of resources for start-ups and SMEs to rebut an existing but flawed essentiality
finding. A possible disadvantage of a system of third-party essentiality checks is that SMEs are
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usually not asked to take a license, so that essentiality checks standing alone may give unsophisticated
or unadvised SMEs a false impression of the possible costs to implement a standard.
Q32. If there were a legal obligation to conduct essentiality checks on all declared SEP families that
SEP holders intend to license, how should those be made?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
One SEP per family 63% 71% 67% 30% 71%
Only SEPs that are licensed on FRAND terms and conditions,
including cross licensing, excluding SEPs licensed on a royalty
free basis
45% 43% 71% 56% 14%
For worldwide SEPs 40% 41% 33% 38% 50%
Sampling of both ‘Numerator data’ and ‘Denominator data’. 37% 30% 14% 50% 71%
Sampling of ‘Numerator data’ (which is information on the
actual SEPs portfolio of a specific patent owner for a specific
standard).
35% 39% 14% 20% 57%
Sampling of ‘Denominator data’ (which is information on actual
SEPs owned by all relevant patent owners for a specific
standard).
33% 30% 29% 20% 71%
For European SEPs only 26% 27% 33% 38% 0%
One SEP per family that is being licensed on FRAND terms and
conditions
24% 24% 50% 0% 33%
No. of replies* 46-57 26-34 6-7 8-10 6-7
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
One SEP per family 54% 71%
Only SEPs that are licensed on FRAND terms and conditions, including cross
licensing, excluding SEPs licensed on a royalty free basis
60% 31%
For worldwide SEPs 57% 23%
Sampling of both ‘Numerator data’ and ‘Denominator data’. 44% 20%
Sampling of ‘Numerator data’ (which is information on the actual SEPs portfolio of a
specific patent owner for a specific standard).
39% 27%
Sampling of ‘Denominator data’ (which is information on actual SEPs owned by all
relevant patent owners for a specific standard).
48% 13%
For European SEPs only 40% 15%
One SEP per family that is being licensed on FRAND terms and conditions 18% 31%
No. of replies* 20-26 13-15
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
One SEP per family 71% 44%
Only SEPs that are licensed on FRAND terms and conditions, including cross
licensing, excluding SEPs licensed on a royalty free basis
59% 25%
For worldwide SEPs 41% 33%
Sampling of both ‘Numerator data’ and ‘Denominator data’. 38% 15%
Sampling of ‘Numerator data’ (which is information on the actual SEPs portfolio of a
specific patent owner for a specific standard).
38% 15%
Sampling of ‘Denominator data’ (which is information on actual SEPs owned by all
relevant patent owners for a specific standard).
32% 15%
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“Agree and strongly agree” answers only EU non-EU
For European SEPs only 32% 25%
One SEP per family that is being licensed on FRAND terms and conditions 29% 8%
No. of replies* 28-34 12-16
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
One SEP per family 63% 16% 21% 57
Only SEPs that are licensed on FRAND terms and conditions, including cross
licensing, excluding SEPs licensed on a royalty free basis
45% 11% 43% 53
For worldwide SEPs 40% 9% 51% 47
Sampling of both ‘Numerator data’ and ‘Denominator data’. 37% 20% 43% 54
Sampling of ‘Numerator data’ (which is information on the actual SEPs
portfolio of a specific patent owner for a specific standard).
35% 21% 44% 52
Sampling of ‘Denominator data’ (which is information on actual SEPs owned
by all relevant patent owners for a specific standard).
33% 27% 39% 51
For European SEPs only 26% 11% 63% 46
One SEP per family that is being licensed on FRAND terms and conditions 24% 22% 54% 50
Other (please specify) 75% 0% 25% 4
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
One SEP per family 71% 12% 18% 34
Only SEPs that are licensed on FRAND terms and conditions, including cross
licensing, excluding SEPs licensed on a royalty free basis
43% 10% 47% 30
For worldwide SEPs 41% 11% 48% 27
Sampling of ‘Numerator data’ (which is information on the actual SEPs
portfolio of a specific patent owner for a specific standard).
39% 18% 43% 28
Sampling of both ‘Numerator data’ and ‘Denominator data’. 30% 23% 47% 30
Sampling of ‘Denominator data’ (which is information on actual SEPs owned
by all relevant patent owners for a specific standard).
30% 30% 41% 27
For European SEPs only 27% 4% 69% 26
One SEP per family that is being licensed on FRAND terms and conditions 24% 24% 52% 29
Other (please specify) 0% 0% 100% 1
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Summary of comments
The majority of all respondents (63%) would prefer to check one SEP per family if there were a legal
obligation to conduct essentiality checks on all declared SEP families that SEP holders intend to
license. The approach of a SEP per family is best suited for this (although one should think about
selecting the family member from the jurisdiction in which litigation is already taking place or this
is at least foreseeable. The check should be done on a family member that successfully passed a full
examination (pref. with most limited claim) and in the mother application in case of
divisionary/continuation.
Respondents are moderately positive about sampling. Some, mainly “Implementers”, warn against
sampling in essentiality assessments since it would always give an approximate - not accurate - view
of the entire portfolio. If sampling were nevertheless used, it should be random (not selected by the
SEP holder), and large enough to provide a reliable indication of the overall strength of the portfolio
and be done in a statistically transparent manner, so that error margins are clear. Moreover, ex-post
sample-based methodologies have limited influence on over-declarations. Others, mainly “SEP
Holders”, stress that some level of sampling may be appropriate as essentiality checks on all SEPs
are cost-prohibitive and would undermine FRAND licensing. Moreover, essentiality checks on all
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SEPs that SEP holders “intend to license” would make no sense because implementers will demand
a licence to all disclosed SEPs in order to ensure full freedom to operate.
As to the geographical coverage of the patents, in particular SEP holders would be in favour of a
global scope of the essentiality checks since they tend to conclude global licenses for international
standards. Patent pool administrators explain that global checks are achieved within the context of
patent pools by mans of a full evaluation for each patent in certain significant countries and then a
system of certifications to those evaluated claims for family patents in other countries. However,
some argue against a global reach that a mandatory system of essentiality checks would risk taking
on a quasi-extra judicial role and could potentially cause tensions with foreign jurisdictions, even if
the outcome remains for informational purposes only.
Q33. If a system of third-party essentiality checks would be in place, which authority/body would be
best placed for doing such essentiality checks?
All Companies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
The EPO 63% 64% 83% 78% 33%
The national patent offices 28% 27% 33% 44% 11%
Specialised law firms 28% 30% 17% 22% 33%
Other organisation, please specify 25% 18% 17% 33% 44%
A combination of the bodies listed in letters a, b,
c or d. If so, please specify which bodies and
why in your view both should be responsible for
this task
11% 9% 0% 22% 11%
No. of replies 57 33 6 9 9
Note: multiple answers possible
Implementers
SEP
Holders
The EPO 73% 60%
The national patent offices 35% 0%
Other organisation, please specify 27% 13%
Specialised law firms 15% 47%
A combination of the bodies listed in letters a, b, c or d. If so, please specify which
bodies and why in your view both should be responsible for this task
15% 0%
No. of replies 26 15
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; Holder: those who disagreed,
were neutral or had no opinion on Q2 and agreed with Q3; multiple answers possible.
EU non-EU
The EPO 71% 64%
The national patent offices 32% 29%
Specialised law firms 21% 43%
Other organisation, please specify 18% 29%
A combination of the bodies listed in letters a, b, c or d. If so, please specify which
bodies and why in your view both should be responsible for this task
9% 14%
No. of replies 34 14
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; multiple answers possible.
Summary of comments
Of all respondents a majority (63%) consider the EPO as the best placed authority to do the
essentiality checks. Also, among Implementers and SEP Holders this authority is the preferred option
(71% and 64% respectively). As for the other possible assessing entities, more than a quarter of all
respondents (28%) consider the national patent offices and specialised law firms best placed to
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perform the checks. However, where Implementers seem to prefer national patent offices over law
firms (35% versus 15%), SEP Holders do not see a role for NIPOs as possible assessors and but
instead mention the law firms (0% versus 47%) as a second-best option after the EPO.
All respondents agree that the body in charge of the essentiality checks should be impartial and
independent, have the necessary expertise and access to standards and technical specifications
through arrangements with SDOs. For some, this means that the EPO would be their preferred choice,
be it alone or together with national patent offices. Others, however, are of the opinion that the EPO
and national patent offices are not the best authorities for performing the checks, as they lack
competence and their expertise concerns patentability, prosecution or patent validity. Other
arguments raised against patents offices as possible evaluators are that the authority granting a SEP
should not assess a SEP’s essentiality to ensure highest possible objectivity and may not have the
necessary resources to handle these checks.
Nevertheless, those respondents that opted for a combination of bodies, most saw a leading role for
the EPO, which could do the checks together with national patent offices or outsource the checks to
specialised firms under a possible certification framework. In such a case, the EPO should ensure the
quality of the checks, organize the assessment activities internally or with certified institutions and
ensure the independence and quality of engaged certified institutions.
Others see a role for a completely new organisation to be in charge of the essentiality checks. One
respondent suggested that patent offices are not the best in place to do the checks but that a specific
organisation could appoint several specialized law firms to perform these checks. Furthermore, there
was mention of WIPO and the creation of a board of experts” (BOE) at SDO level and a “SEP court”
that unlike the EPO, patent offices or private actors would be able to take decisions between two
positions defended by two adverse parties.
Q34. Please explain what are in your view the main challenges to set up such a system, in terms of
complexity and/or costs.
Summary of answers
SEP holders are mostly concerned by the costs of the system and who would have to pay for the
checks. Requiring the essentiality of each SEP within a portfolio to be subjected to a separate review
would inevitably impose significant costs and raise barriers to entry to effective licensing giving
companies with sufficient financial resources an advantage. It is therefore suggested by some to
establish incentives for patent owners to voluntarily initiate essentiality assessments. As an example,
it is proposed that implementers should agree to accept the findings of third-party essentiality checks
as a basis for signing up to the FRAND license. Translation costs are also to be taken into account.
The cost challenge is also closely linked to that of quality. In particular, some large SEP portfolio
holders stress the importance of high-quality checks. For a new system to be relevant it needs to be
rigorous, transparent and neutral. Less trust in the checks would reduce any benefit towards
improving licensing. However, it would be challenging to create a system of essentiality checks that
keeps the cost at a reasonable level while safeguarding quality.
As to the complexity of the system the respondents raise different concerns, concerning the scope,
neutrality and continuity of the system, the expertise of the checkers, quality and uniformity of the
checks, staffing capacity, possible abuse of the system and timing.
First, an issue of concern raised by all stakeholders, is the integrity of the organisation conducting
the checks, specifically the independence and impartiality of its members. One worry is that it would
be difficult to find staff with the required competencies that is not already engaged by an SEP holder
or SEP implementer. Another is the potential for bias due to the source of funding.
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The stakeholders also point to the choices to be made concerning the scope of the checks. Different
interests are at take concerning questions as to the legal effect of the checks and whether they can be
challenged, appealed or reassessed over time. Other questions that need to be answered are: which
patents (of a family) need to be checked and against which standards? From which regions and
SDOs? At what moment in time? What will be the definition of essentiality? And who decides which
patents are going to be checked?
Another key challenge would be to ensure the required expertise on a continuous basis to be able to
process huge numbers of potential SEPs in a uniform manner. There are not many engineers with
that specific knowledge and building up capacity cannot be done overnight. The number of external
lawyers would be limited, because they would have to meet such strict (predefined) criteria. If this
requires close cooperation and coordination among different IP authorities, a clear, centralised and
uniform procedure will need to be implemented to ensure consistent decisions. Moreover, there will
be challenges in determining the correct staffing level, particularly for smaller or less active standards
areas, as the workload will likely come in waves as new standards or versions of standards are
published.
Finally, a major challenge pointed out by the SEP holders is to design the system in such a way as to
avoid delaying tactics by implementers. Some see a risk of new opportunities of hold-out in case
implementers would decide to challenge the essentiality check. “We don’t want to take a licence yet
because we want to first see the essentiality checks for your Release 18 patents” is one example
mentioned by a major SEP holder association of how an implementer could use coercive essentiality
checks as a delaying tactic. Another SEP holder representative, namely a pool administrator, points
out that a situation where a legal obligation would be put in place with no further obligation put,
conversely, on the SEP implementers, would just generate costs and time waste without any real
benefit.
Questions on FRAND (Fair, Reasonable and Non-Discriminatory) terms and conditions
Quantitative summary
Between 55% and 75% of all respondents and from 85% to 100% of Implementers, consider that
SEP holder cannot refuse a licence following a request from an implementer. Majority of SEP
Holders were of the opposite view.
60% of all respondents and 93% of Implementers consider that licencing could take place at any level
of the value chain. Around 70% of SEP Holders consider that it should be at one level only (level
allowing for the best monitoring of applications).
Around three quarters of respondents (93% of SEP Holders) agreed that fair and reasonable terms
and conditions might depend on functionalities of the standard implemented in a product. Around
70% thought these terms could depend on the level of licencing.
For non-discrimination assessment, it matters if companies that use the same functionalities of the
standard in similar applications are put at a competitive disadvantage (around 75% of all answers,
and 94% of SEP Holders answers).
SEP Holders considered that discounts between 28% and 40% do not cause discrimination. For
Implementers reasonable discounts amount to between 5% and 10%.
70% of all respondents and 100% of Implementers argued that it is important to know reasonable
aggregate royalty rate for a product. Only 20% of SEP Holders shared that view.
Summary of comments
The summary of FRAND-related comments aims at explaining the main positions and pointing out
to some comments that may be helpful to further the discussion.
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I. Positions based on the principles “access to all”, licensing at only one level in a value
chain and FRAND terms and conditions based on end-use of the standardised
technology
1. “Access to all” and licensing in the value chain
The proponents of the principle “access to all” explain that the FRAND commitment is not an active
obligation to make an offer to license to all third parties. Rather, it requires SEP holders to allow
access to the standards. It is up to an SEP holder how to provide such access.
According to those respondents, patent law bestows exclusive rights on patent holders. Hence, SEP
holders have discretion who to license and at what level of the value chain, unless modified by a
FRAND commitment. Most FRAND commitments do not specify a licensing level. Competition law
(Article 102 TFEU) does not imply a preferred licensing level. Any intervention undermining a SEP
holder’s discretion over licensing level would likely contravene Articles 30 and 31 of the TRIPS
Agreement.
Furthermore, some respondents explain that courts in Europe and other jurisdictions have rejected
the contention that SEP holders are required to grant licenses to component and chip makers (See
Nokia v Daimler, LG Mannheim 18 August 2020 - Case No. 2 O 34/19; Sharp v Daimler, District
Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19; US Court of Appeal
for the Ninth Circuit in Federal Trade Commission v Qualcomm Inc., dated 11 August 2020.) See
also HTC v Ericsson (US Court of Appeal). The US Court of Appeals for the Fifth Circuit ruled on
28 February 2022 that the supplier does not have a legal right to a licence and that Avanci and its
licensors have not breached their FRAND obligations, No. 20-11032.
One respondent explained that FRAND commitments leave at least four possibilities to ensure access
to standards: (i) concluding a FRAND license; (ii) indirectly benefiting from a license by selling to
licensed end-device manufacturers holding so-called have-made rights; (iii) concluding non-assertion
agreements, or (iv) benefiting from the SEP owner’s policy of non-asserting patents at a certain level
of the production chain. Another respondent added that, within the same value chain, if a license is
provided upstream then lawful downstream access can be enabled via the principle of exhaustion.
The specificities of the different SEP implementing industries call for the preservation of FRAND
licensing flexibility.
A respondent notes that concerns may arise when an SEP holder seeks to enforce its SEPs towards a
specific implementer. Consistent with the CJEU judgment in Huawei v. ZTE, a SEP holder cannot
seek to exclude an implementer from the market without first offering a license on FRAND terms.
Thus, even if a SEP holder were to have a practice of licensing at one level of the value chain, parties
at other levels of the chain would have comfort that they would not be subject to a prohibitive order.
Within this constraint, SEP holders are best suited to determine how to license and from whom to
seek a royalty. A ‘refusal to license’ at a certain point in the supply chain, is not necessarily
exclusionary and does not automatically impact the use of the standardized technology.
Some respondents explain that a refusal of a licence by a SEP holder does not in itself deny access
to the technology, and it is therefore not problematic per se. In case a SEP holder is not ready to
license its SEPs for a new application (e.g., when valuation remains unclear), it would not be
unreasonable to not offer licenses until the market has developed. Doing so would prevent potential
over-valuation or under-valuation of a technical standard in a new application. Some respondents
also note that a SEP holder usually prepares a licensing program with an expected level of licensee
in the value chain to avoid double dipping or free riding. This would create certainty and clarity for
both the SEP holder and implementer (and others in the value chain). According to those views,
where a SEP holder is still preparing its licensing programme, it may be reasonable for a SEP holder
to temporarily refuse a request from implementer for a license.
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2. FRAND terms and conditions
Some respondents assert that SEP holders are generally well-suited to determine the best manner, in
which to license and they have the best understanding of their technology and its use in the
marketplace. According to them, making changes to currently accepted industry models would be
difficult to administer and would interfere with the ability of SEP holders to ensure consistent pricing
among similarly situated licensees. This is because the value of a standard as used in the market only
becomes apparent at the end-implementer level. In most cases it is then also logical that the royalties
are paid by the manufacturer/seller of the end-implementer product or service, although in some
markets it can be more practical to license at a different level (e.g. Tier 1 suppliers to automotive
industry). The price would, however, be determined based on the value to the end-implementer.
Those respondents consider that a SEP holder cannot be made responsible for the complexities of
modern opaque supply chains or be bound by agreements between various implementers in the value
chain.
Certain respondents also argue that prices need not to be uniform because terms may differ based on
the technology that is being licensed (based on standard or version of the standard). According to
them the royalties in a FRAND licence should reflect the economic value that the patented technology
adds to the end product.
Some respondents explain that in a market economy, price must be based upon the value conferred.
This means different prices for different applications. Critically, the value of a technology also
depends upon its application/use. 5G can be incorporated in a vending machine to occasionally report
stock levels. It can be used in a self-driving car. In the former, 5G is used occasionally and provides
a moderate benefit. In the car, 5G will be used continuously and will be responsible for mission-
critical safety features that benefit consumers, manufacturers, and society at large. Pricing 5G licence
the same for vending machines and self-driving cars would not be fair and reasonable. A self-driving
car licence would be too expensive for the vending machine provider. And a vending machine licence
applied to self-driving cars would not generate the value to justify investing in the cellular standards.
A respondent explains that the statement “FR TC may depend on the functionalities of the standard
that are being implemented” assumes incorrectly that it is obvious, or easily ascertainable, which
standard functionalities are implemented in which products. For example, the first HEVC license
offered a fixed rate for Main/Main10 implementations, with small additional charges for
implementation of any of the optional “extensions” (Range Extension, Multi-View, and Scalability).
The implementers (business people) often did not know whether their products implemented any of
the optional extensions. Basing FR TC on the “application of the standard” in particular products or
on “the functionalities of the standard that are being implemented” suggest a range of granular prices
specific to each product. The realities of the business require less granular pricing applied to a range
of products, averaged across the various permutations of application and function.
Some respondents note that the level of complexity of the negotiations will increase, if questions
about the products’ main function are included. That would be another obstacle to achieve an
agreement. The licensing negotiations should become easier, not more complex. If a question about
a product’s main function was clarified with one implementer, would it mean that all subsequent
implementers were bound by such finding?
Regarding the “ND” assessment, respondents note that European courts are increasingly aligned. In
the UK (Unwired Planet v Huawei) Judge Birss analysed in detail the non-discrimination prong of
FRAND, concluding that there is no requirement for “hard-edged” non-discrimination. Non-
discrimination in the FRAND context does not mean that every licensee is entitled to the same rate,
not even similarly situated competitors. This has been confirmed by the UK Supreme Court.
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Some respondents explain that for the ND assessment, it is relevant whether: (i) the entities are
competitors, and (ii) they would be put at a competitive disadvantage, if treated differently. Hence
the following are generally not determinative: those using the same functionalities of a standard;
those using the technology in the same applications; those using the same functionalities of a standard
in similar or same applications.
Some respondents argue that if entities are at the same level of the value chain ND is relevant,
provided they are competitors. Entities at different levels of the value chain are unlikely to be
competitors and not similarly situated. ND relevance has to be determined on a case-by-case basis
depending on whether they distort competition between similarly situated competitors in the relevant
market.
The aspects of non-disclosure requirements, compliance and patent related issues, none of which are
commercial in nature, seem unlikely to some respondents to distort competition (between
competitors), and thus may have little relevance to the ND part of FRAND.
Some respondents note that ND may also be determined by external factors such as the business
environment, the size of the business and the extent of competition. In the event of license
negotiations, besides the above situations, the negotiation process, such as all relevant reactions
during the negotiation process should be added to the factors in determining ND.
Some respondents argue that early bird discounts, volume discounts, early payment discounts and
annual royalty caps are unlikely to cause discrimination if they are offered to all similarly situated
implementers. As such, it is hard to say that any discount would be problematic. Such discounts serve
as an incentive to conclude a FRAND licence and to avoid litigation. What courts have avoided, and
policy makers should avoid, is a determination that ND operates as a most favoured nation clause
which causes discounts to be applied to all, even those that do not qualify.
3. Arguments against the “license to all” principle
Some respondents believe that compelling licensing at all levels of the value chain would be
inefficient and impracticable. Per the SEPs Expert Group report of January 2021 such a requirement
would significantly increase negotiation costs for SEP holders. To avoid issues such as double
dipping, licenses to component makers at each level would also have to accurately define and
delineate each SEP from others both with respect to scope and with respect to SEPs used. A final
difficulty would be that one would need to figure out the portion of the FRAND royalties that would
be borne for each component. The cost of administering this solution would be significant and,
therefore, the risk of hold-out would also be high.
Some respondents also note that licensing at multiple levels would create further undue
administrative burden for the SEP owner, geographical complications, and severe non-
compliance/under-reporting issues. If multiple parties are made responsible for payment, then usually
nobody does. If SEP holders lose control of who to license it would have profound implications on
efficiency, complexity, and cost of licensing. It will also be much more difficult to comply with the
non-discrimination limb of FRAND. If the SEP holder chooses the licensing level, similarly situated
parties can be licensed similarly.
Respondents warn that there would be a fundamental difficulty to implement this principle in
practice. They note that monitoring can only be achieved via contractual engagements. There may be
multiple end-use applications with potentially different values and the consequential challenge of
anticipating the proper licensing value at the upstream level. In order for such monitoring to work,
contractual engagements need to be in place at different levels granting the SEP holder enforceable
auditing rights. A first level where the licensee/implementer/manufacturer of upstream level
(intermediate) products, agrees with the SEP holder (licensor) that the license agreement will be
subject to the acceptance of auditing rights by the producer of end products to the benefit of the SEP
holder. Then a subsequent agreement whereby the producer of end products enters into a contractual
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arrangement with the SEP holder to provide such auditing rights for the duration of the SEP license
agreement and a reasonable term thereafter (as audit can only occur ex post). This is very difficult to
set up in practice and will increase costs substantially for everyone (incl. consumers), but without it,
monitoring upstream, the downstream activity in a global supply chain is not reasonably possible.
Barriers would include confidentiality and dynamic market factors requiring frequent updates of
supply chain information.
Some add that it also would also be difficult if not impossible for consumer product manufacturers
to track and report each supplier for every component in each product they manufacture.
A respondent notes that the first-to-request scenario could easily lead to different supply chains being
licensed at different levels, so competitors at the same level would not be treated similarly. Where
the choice of licensing level results in uncertainty regarding value or use, the party choosing the level
should bear the cost of such uncertainty.
4. Aggregate royalty
Some respondents argue that for an operating company, the decision to implement a particular
standard into a product is primarily driven by market needs and consumer demand. Thus, not knowing
the reasonable aggregate royalty for a standard, in most cases, would not impact implementation.
Respondents add that whether a consumer is willing to pay €25 or €250 to add connectivity is a
question for the market and such market decisions may not be known at first. Valuation declared ex
ante can over- or under-value standardized technology. Businesses, whether large or small, must be
able to operate without perfect information. But because the aggregate royalty will only be a small
fraction of €25 to €250 value created by the utilisation of the standard, it will not be a primary cause
of concern for businesses.
Respondents explains furthermore that hardly any company pays for all SEPs, thus the aggregate
royalty rate is a hypothetical phenomenon, not a realistic one. Much has been written on theoretical
"royalty stacks" but these are just that - theoretical. Tangible examples of the existence of such stacks
are hard to come by. According to such respondents in practice, a reasonable aggregate royalty has
never been known and this has presented no impediment to licensing or the adoption or
implementation of standards. As a matter of economics, an aggregate royalty acts as an artificial,
arbitrary cap that is advocated because it allows implementers to argue that royalties should be limited
irrespective of the economic value provided by the patented technologies. Since many SEPs holders
obtain returns on their R&D investments in ways other than by licensing their SEPs, such an
aggregate royalty would be purely hypothetical and essentially irrelevant.
Another respondent points to some important challenges to such determination, including who would
make it, when, whether it would be for the worldwide market, whether it would be updated on a
regular basis and what impact would it have on the license agreements.
Some respondents argue that an approach based on aggregate royalty and the apportionment thereof
may not be commercially feasible as it would require costly and time-consuming analysis. Top-down
analysis is only one of SEP valuation approaches. Putting excessive emphasis on top-down places
significant burden on the SEP licensing practice (e.g., requiring third party essentiality on all declared
SEPs). Exclusive reliance on top-down may also hamper innovation incentives.
A respondent notes that past attempts to determine such reasonable aggregate did not lead to a usable
outcomes.
Finally, respondents underlined that the aggregated royalty is just one aspect and has a limited
significance without knowledge of the number of all SEPs, number of licensors, their licensing
programs for a specific standard, ASP of products, volume and so on. If caps or lump-sum payments
are agreed the aggregated royalty is of even less significance.
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II. Positions in favour of a qualified “Licence to all” principle which may consider price
differentiation and one level of licensing in a particular value chain
1. “License to all” principle
Respondents note that open standards were developed as building blocks to foster innovation and
interoperability. The FRAND commitment, that any willing licensee should receive a license,
supports innovation and interoperability, encourages the take up of open standards. They claim that
the European Commission in its Horizontal Guidelines provide that licences should be available “to
all third parties”. A number of respondents argue that a refusal to offer a licence is contrary to the
purpose of the FRAND commitment, undermines the purpose of standardisation, violates
competition law, and harms innovation.
Respondents also argue that by voluntarily giving a FRAND-commitment, SEP-owners freely choose
to restrict their right to decide to whom they want to license their SEPs. Against this background,
“single point licensing” solutions cannot be imposed unilaterally by the SEP holder but would require
the consent of all affected stakeholders in a value chain who are interested in taking a license.
Moreover, any “single point licensing” solution would have to provide adequate protection against
patent infringement claims to all actors at all levels of the value chain.
According to some respondents, pro-active licensing is the opposite of patent hold-out. A willing
licensee should be able to reach the necessary level of certainty to calculate its business case and to
start providing innovative products to customers. Since the decision to seek a license could be driven
by the desire to enter new product markets using standardized technology and gain legal certainty,
the right to a licence should also not be limited by the licensing practice of the SEP-holder or its
decision to license its SEPs only to certain market-participants.
Some respondents explain that in principle, an implementer must be able to obtain a license for his
products. An implementer cannot be forced to infringe another party's SEP under patent law and
possibly commit a criminal act by doing so in certain jurisdictions, because it cannot take a licence.
It should also be able to sell its products legally within the meaning of Article 42 of the UN
Convention on Contracts for the International Sale of Goods (CISG), irrespective of the level of the
supply chain at which it is located. This applies especially if it wishes to sell its products to other
implementers who have not yet concluded a license agreement. If an implementer cannot request a
licence of its own, it may become dependent on licensed customers. In effect, the refusal to license
may restrict the economic freedom to operate of an implementer.
A number of respondents underline that licensing could take place at ANY level in the value chain,
not at EVERY level (to avoid double-dipping). The market should be able to determine at which level
licensing should take place. For different value chains, this level can be chosen differently. The most
appropriate level of licensing may differ by industry, products and market structure. The outcome
should minimize the effort of licensing, provide certainty to good faith implementers and licensors.
Some note that it has also to guarantee that the value of a license is not marginalized if licensing takes
place on a very low level of the value chain. Some respondents within this group consider that
discussions of this kind should include both SEP holders and implementers, and potentially other
industry stakeholders. Others argue, however, that the power to choose the level of licensing should
be vested in SEP implementers, as they know best the characteristics of a particular industry.
A number of respondents argue that component suppliers are best positioned to evaluate the value of
a SEP given their practical expertise in the standard. Further, component suppliers can centralize
licensing and act as a clearinghouse providing licensed products to disparate companies, enabling
access and furthering the adoption of the standard. If components are already licensed, then SMEs
and other innovators will be free to focus on their own innovations by incorporating standardized
functionalities without the fear of being sued and enjoined by SEP holders.
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Respondents argue that it should be possible to pass the cost of a license downstream just like any
other cost. However, they note two issues related to this. First, royalties are requested retroactively
for products already sold on the market. Second, implementers upstream may not have the negotiation
power to pass the costs downstream. Even if a licence is given downstream and "have made" rights
are granted, the component supplier may be obliged contractually to compensate the end-product
producer for the cost of the SEP royalties. Since the component manufacturer did not negotiate such
price, it cannot economically bear the royalty burden thus generated.
Also here, some respondents caution against introducing a ‘first to request’ approach to determining
the appropriate level of licensing in a value chain because this might open the SEP licensing process
to gamesmanship. If the first entity to ask for a license can determine the level of licensing, the
implementer is in a disproportionally weaker position. SEP holders know first of their SEPs before a
manufacturer can assess whether its product uses a given SEP. They claim that such a right of
determination of another would inadmissibly interfere with the right to obtain one's own license and
thus restrict the freedom of one's own independent economic activity.
2. FRAND terms and conditions
A number of respondents argue that the licensing terms must bear a clear relationship to the economic
value of the patented technology also in conjunction with all the other technologies incorporated in
the company’s products at the selected licensing level.
Some argue that FR TC can be best determined based on the products which main function is that of
the standardised technology. In particular, royalties should not capture the value of downstream
innovation and investment by other undertakings. The role of connectivity SEPs is limited to enabling
technology, they provide the ability of components to connect and transmit voice or data. This
function is exactly the same in vehicles as in mobile handsets. The FR TC should therefore not differ
depending on the application or use of the product.
Respondents argue that FR TC can, however, differ depending on the functionalities of the standard
that are being implemented. R&D investments from SEP holders could then be rewarded if they lead
to functionalities that are specifically relevant for a dedicated application. Definition of
"functionalities" should, however, be clarified and may correspond to a specific set of sections of a
standard.
Some respondents propose that the FR TC, including royalties, may be different depending on the
percentage of implementation of the standard. If the standard is only partially implemented, only the
patents applying to that portion are applicable, implying that the royalty cannot be the same for the
entire SEP portfolio. Some respondents add that the FR TC could be different if the intensity of use
of the standard is not the same. For example, a device that only transmits a few bytes of technical
data in 5G, as opposed to a smartphone that would be used to do 5G intensive video streaming,
downloading, conferencing etc., would not be subject to the same level of royalty.
With regard to the ND aspect of FRAND some respondents explain that it is intended to counteract
a distortion of competition, which by definition is "between competitors." Therefore, a SEP holder
should not discriminate between similarly situated competitors. SEP implementers active in various
regions may be similarly situated. However, ND does not require that license terms offered or agreed
to be identical between similarly situated licensees. Companies using the same functionality of a
standard and those using the technology in the same applications are not necessarily competitors.
Therefore, it is uncertain whether the ND aspect of FRAND applies. Companies at different levels of
value chains are generally not likely to be competitors in the relevant market and therefore unlikely
to be in a similar situation.
Other respondents claim that similarly situated entities are those that use the same functionalities of
the standard. The use of the technology in different applications may not justify different treatment.
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The choice of the level of licensing is neutral for the determination of FRAND terms and conditions.
Such respondents caution against a general conclusion that discrimination is permitted as long as a
company is not similarly situated to another.
Respondents note the following as justification for discriminatory treatment: licences limited to
certain territories and local legal requirements.
Some respondents consider discounts for early bird, volume, etc. reasonable when (i) the
implementers help to promote or contribute to the diffusion of the relevant standard (i.e., drive
widespread implementation of the relevant technology in the market); and (ii) such discounts are
made available in a non-discriminate manner to all implementers in a similar situation around the
same time. The reasonable range of discount should be determined on a case-by-case basis depending
on the market circumstances. When evaluating where discounts can be non-discriminating and/or
anti-competitive, it is important to consider the particular timing and circumstances under which the
discounts are offered to the implementers.
Some respondents note that significant early bird discounts without transparency (i.e., as to duration
and amount) runs the risk of being discriminatory, so cannot speak to discount amount alone. A non-
discriminatory example is the licensor publicly announcing a 20% discount during the first year. In
contrast, the licensor using a secret, sweetheart deal with an early adopter to create adoption and lock-
in would be discriminatory if higher rates are then charged to later adopters, or to future renewals.
According to some respondents, volume discounts and annual royalty caps distinctly favour larger
implementers over smaller ones. Any early payment discount that is not reflective of the risk-adjusted
time value of money favours the more liquid implementers over those less so and thus may be
discriminatory.
3. Arguments on “license to all” principle
Some respondents explain that the doctrine of patent exhaustion provides that the initial sale of a
patented item terminates all patent rights to that item. Once the patent holder sells a product covered
by a patent, that patent can no longer be asserted against a downstream buyer or implementer of the
product. The patent exhaustion doctrine is critical in providing certainty to patent rights, and to
preventing improper ‘double dipping’ in the context of SEP licensing.
Some respondents note that it would be preferable if all parties agreed on the licensing level and
could agree on one level in line with proposals no. 28-33 of the EU expert report. Until such an
agreement has been reached, an implementer should only be able to determine the licensing level for
itself as long as no other license agreement has been concluded for the same licensed product at any
other level. The SEP holder should be able to demand the acquisition of licenses from other
implementers as long as the products manufactured, used or distributed by said implementers are not
completely covered by license agreements of the SEP holder at another level of the supply chain
(upstream = exhaustion, downstream = double dipping or have-made rights) or corresponding license
agreements are requested by implementers at another level. If several license agreements are
nevertheless concluded at different levels in a supply chain, the SEP holder should inform the
licensees belonging to the supply chain and do the necessary to avoid double dipping due to
overlapping licensing.
Some respondents consider that transparency of licensing rules should be sufficient to avoid double
dipping. Furthermore, some respondents believe that SEP holders should provide clear information
about existing licensees (who they are, license scope, license duration, etc.), and provide licensing
mechanisms (e.g., clear sublicense rights in upstream licenses, precise definitions, appropriately
limited audit rights) to accommodate situations where a licensee is paying for only some of the
products they produce because others are already covered through upstream licenses.
Such respondents also note that component suppliers that sell licensed components have an incentive
to make their customers aware that they are receiving licensed components. Developing mechanisms
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to ensure customers avoid the paying unnecessary royalties would quickly become a competitive
necessity for component suppliers.
Some respondents claim that accounting for double dipping would not be a major a concern and
should not be an impediment to licensing upstream in the value chain. SEP holders and pools already
need to account for cross-licenses and other arrangements that result in existing licenses. The SEP
holder knows who it has licensed, or the potential licensee can ask its suppliers. It is common during
negotiations for potential licensees to determine whether an upstream supplier is licensed (e.g., as in
WiFi). Indeed, potential licensees are currently the ones verifying whether licenses already exist and
persuading SEP holders to account for the existing licenses. SEP holders should maintain an auditable
record of licensees so double dipping can be detected and remedied even in hindsight. According to
those statements the burden is manageable (and has been managed) given the sums being paid. Some
respondents note that where complex distribution and retail chains make exact monitoring practically
impossible, the parties may agree on reasonable estimates for the share of sales into different
applications. Respondents also point to proposal No. 35 of the EU Expert Report which provides for
a specific marking of licensed products, which would allow monitoring.
4. Aggregate royalty
A number of respondents consider that it is critical for any company to have realistic estimates of its
costs. Otherwise, it is unlikely to enter a market. SEP royalties are a key cost and thus it is important
for a company using a standard to understand aggregate SEP royalties. Transparency in relation to a
reasonable aggregate royalty is important for SMEs and start-ups wishing to engage in R&D and
innovation of products implementing SEPs. Uncertainty as to the potential overall cost exposure
resulting from licensing demands of SEP-holders against the SMEs/start-ups has a strong deterrent
effect for standard-based innovation.
Some respondents also explain that opacity on costs that can turn a business case into deep red and
royalties which can accumulate over years and have to be paid at one point in time can destroy the
entire company. For start-ups the knowledge of licensing costs can be essential to collect money from
investors. Furthermore, transparency on the reasonable aggregate royalty avoids patent hold-up,
enables a qualified decision on which technology to choose and by that fair competition between
alternative standards.
Some respondents stress that the aggregate royalty is also relevant for the assessment of an offer
provided the SEP owner, which has to reflect his share of the overall stack of the relevant SEP
portfolio accordingly.
Respondents note that the aggregate royalty may be per product, all standards included, or per
standard. In both cases, this allows a SEP implementer: (i) to know his total exposure for a given
standard, or for the totality of the standards implemented in its product, and (ii) to oppose to each
SEP holder a ratio between the number of SEPs that this holder holds on the total of the SEPs of the
standard versus the total amount of royalties attributed to the standard, or to the standards,
implemented.
Respondents also note that by adding up the royalties claimed for the same standard by different SEP
holders, the total amount of royalties may become prohibitive. For example, the aggregate royalty
claimed for Blu-Ray technology was so high that almost none of the implementers had the economic
leeway to implement this technology into their products and the end-implementers continued to use
DVDs and then decided to satisfy their need for data space via HDDs. As a consequence, only
implementers that are also SEP holders implemented this superior standard into their products,
thereby stifling innovation and harming consumer welfare in the sense of access to better products.
Some respondents suggest that the aggregate royalty be determined in a process by both SEP holders
and SEP implementers before individual licences are concluded. Preferably, the process could be led
by a leading patent pool and a licensing negotiation group. Other respondents suggest that there could
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be a mechanism, for example an SEP Royalty Court, that would ensure that the aggregate royalty
burden for an entire standard is adjudicated in a single proceeding. Such a mechanism would reduce
transaction costs and ensure predictability with respect to the cost to implement a particular standard.
These proceedings should be open, transparent, and inclusive, permitting all SEP holders and all
implementers to participate.
Some respondents also note that regulators may not be well suited to determine and impose aggregate
rates for standards because they generally lack the expertise.
III. “License to all” principle based on a single value of the standardised technology
irrespective of the use and licensing the smallest saleable patent practicing unit
(SSPPU)
Respondents argue that all SEPs should be licensed at the top of the value chain, and patent
exhaustion should apply to subsequent purchases of the licensed technology. If the license is granted
at the level of the SEP implementer manufacturer of the smallest saleable unit implementing the SEP
(case of the IEEE statutes), then there is no need to license downstream implementers in view of the
exhaustion of the right. This will “clean up” the market, avoid abuses and secure the electronic
components industry. The appropriate royalty base would thus be the smallest saleable patent
practicing unit (“SSPPU”). In this context, it is important to note that the necessity to monitor this
data would only arise if and when the parties have agreed to differentiate royalties according to the
end use (‘application-specific licensing’).
Some respondents argue that standards are often not industry-specific or product-specific.
Communication standards, for example, can be implemented in phones, cars, planes, thermostats,
watches, appliances and hundreds or thousands of other devices. All of these very different
downstream devices can incorporate the same components that implement the same standards.
According to those views, SEPs generally cover only discrete aspects of particular components, and
rarely if ever end devices employing the applicable standard. As such, basing royalties on the value
added by others’ downstream innovations would overcompensate SEP holders to the detriment of
other industry participants and customers.
Some respondents refer to the Commission’s SEP Communication stating that licensing terms have
to bear a clear relationship to the economic value of the patented technology. The value primarily
needs to focus on the technology itself and in principle should not include any element resulting from
the decision to include the technology in the standard.359
According to those views, royalties should
not be based on the market power that a SEP holder obtains from the selection of its technology as
part of the standard.
Some respondents argue that FRAND should not depend on the level of licensing or the value of
products at a certain level of a value chain, but only on the value of the patented technology as such.
Consequently, all standard-implementers that are seeking a license and make use of the patented
technology for the same purposes/functionalities should be considered as similarly situated for the
purpose of the “ND”- assessment.
According to them, the concept of non-discrimination is an important part of a SEP holder’s
commitment to license its SEPs under FRAND terms. SEP licensees have a legitimate expectation
(based on the SEP holder’s commitment) that they will be able to take SEP licenses on terms and
conditions that are similar to other implementers of the standard. FRAND, however, can be a range
and licensing terms need not be identical to be non-discriminatory.
Some argue that it is incorrect to suggest that discrimination is permitted as long as a company is not
‘similarly situated’ to another. For example, it would be inappropriate for a small market entrant to
359
com-2017-712_en.pdf.
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face discriminatory licensing demands as compared to larger, existing competitors, as such
approaches would restrict competition and market entry.
IV. Qualitative royalty apportionment criteria
With respect to aggregated patent licensing pools and platforms, some respondents explain that there
may be several criteria to determine royalty distribution among licensors. For example, there may be
criteria that measure quality in addition to quantity, such as, inter alia, contributions to standards and
past licensing success. Some respondents explain that perceived market value is the key criteria.
Positive litigation track record and active licensing efforts increase the value of a patent portfolio.
Other criteria that could be considered include comparable licenses, technical importance of the
claimed subject matter to the product, technical contributions to the standard, technical contributions
to key features of the standard. It may also be important to consider whether a SEP holder is actively
licensing/looking to license or enforce their rights or whether they simply hold SEPs for other
strategic reasons. Some respondents note that the age of the portfolio is also an important factor if
the license agreement is valid several years as is typically the case.
Some respondents note that person hours spent on a standard is not connected to the value of patents
and not a proper basis for royalties. Metrics such as forward citation or jurisdictions are generally
subject to manipulation and do not accurately gauge patent value. Forward citations, contribution to
the standard, etc. are no significant criteria.
V. Comments on the CJEU Huawei v. ZTE negotiation process
According to some respondents further detailing of the Huawei v ZTE process would not be helpful.
More detail would increase the problem of hold-out through workarounds.
Other respondents consider that ambiguities arise with regard to the availability of injunctions when
the SEP holder has not made a FRAND offer. Such respondents claim that in some cases, courts grant
injunctive relief based on an examination of whether the implementer’s courter offer is FRAND,
without first examining whether the SEP holder's prior is FRAND. Furthermore, they argue that
ambiguities remain as to the amount of the security, if the SEP holder and the implementer make
different offers, each of which is FRAND in its own right.
Most respondents consider that while all steps should be conducted without undue delay, it would be
difficult to provide exact time frames for the individual steps. The appropriate amount of time
required to complete each step would depend in the circumstances of each individual case.
Tables with replies per question
Q35. In your view, can a SEP holder refuse to licence in the following situations?
“No” answers only
All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
An implementer asks for a licence, the SEP holder is already
licensing (or negotiating the licensing of) the application at
another level of the value chain but has not provided “have
made” rights to that implementer
75% 70% 83% 86% 78%
An implementer asks for a licence for an application, for which
the SEP holder has not yet sent any letter inviting any
implementer to take a licence
71% 66% 86% 71% 80%
An implementer asks for a licence for using an optional part of
the standard, for which the SEP holder has not yet sent any letter
inviting any implementer to take a licence
67% 65% 86% 63% 67%
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“No” answers only
All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
An implementer asks for a licence, the SEP holder is already
licensing (or negotiating the licensing of) the application at
another level of the value chain and has provided the so called
“have made” rights to that implementer
61% 59% 71% 57% 67%
An implementer asks for a license for a limited number of
products and the SEP holder prefers to avoid licensing costs by
providing guarantees that it will not enforce its patents.
54% 43% 83% 71% 56%
No. of replies* 50-57 28-34 6-7 7-8 9-10
Note: “No opinion” answers not taken into account; so the residual to 100% is Yes answers.
“No” answers only Implementers
SEP
Holders
An implementer asks for a licence, the SEP holder is already licensing (or negotiating
the licensing of) the application at another level of the value chain but has not provided
“have made” rights to that implementer
100% 33%
An implementer asks for a licence, the SEP holder is already licensing (or negotiating
the licensing of) the application at another level of the value chain and has provided
the so called “have made” rights to that implementer
97% 0%
An implementer asks for a licence for an application, for which the SEP holder has not
yet sent any letter inviting any implementer to take a licence
93% 27%
An implementer asks for a licence for using an optional part of the standard, for which
the SEP holder has not yet sent any letter inviting any implementer to take a licence
93% 20%
An implementer asks for a license for a limited number of products and the SEP holder
prefers to avoid licensing costs by providing guarantees that it will not enforce its
patents.
85% 8%
No. of replies* 26-29 13-16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. ““No opinion” answers not taken into account; so the residual
to 100% is Yes answers.
*range, different number of replies per question
“No” answers only EU non-EU
An implementer asks for a licence, the SEP holder is already licensing (or negotiating
the licensing of) the application at another level of the value chain but has not provided
“have made” rights to that implementer
73% 75%
An implementer asks for a licence for an application, for which the SEP holder has not
yet sent any letter inviting any implementer to take a licence
65% 80%
An implementer asks for a licence for using an optional part of the standard, for which
the SEP holder has not yet sent any letter inviting any implementer to take a licence
61% 80%
An implementer asks for a licence, the SEP holder is already licensing (or negotiating
the licensing of) the application at another level of the value chain and has provided
the so called “have made” rights to that implementer
56% 69%
An implementer asks for a license for a limited number of products and the SEP holder
prefers to avoid licensing costs by providing guarantees that it will not enforce its
patents.
46% 69%
No. of replies* 28-32 13-16
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; ““No opinion” answers not taken into account;
so the residual to 100% is Yes answers.
*range, different number of replies per question
“All answers” Yes No No.
An implementer asks for a licence, the SEP holder is already licensing (or negotiating the
licensing of) the application at another level of the value chain but has not provided “have made”
rights to that implementer
25
%
75
%
55
An implementer asks for a licence for an application, for which the SEP holder has not yet sent
any letter inviting any implementer to take a licence
29
%
71
%
56
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“All answers” Yes No No.
An implementer asks for a licence for using an optional part of the standard, for which the SEP
holder has not yet sent any letter inviting any implementer to take a licence
33
%
67
%
55
An implementer asks for a licence, the SEP holder is already licensing (or negotiating the
licensing of) the application at another level of the value chain and has provided the so called
“have made” rights to that implementer
39
%
61
%
57
An implementer asks for a license for a limited number of products and the SEP holder prefers
to avoid licensing costs by providing guarantees that it will not enforce its patents.
46
%
54
%
50
Note: “No opinion” answers not taken into account
“Companies answers” Yes No No.
An implementer asks for a licence, the SEP holder is already licensing (or negotiating the
licensing of) the application at another level of the value chain but has not provided “have made”
rights to that implementer
30
%
70
%
33
An implementer asks for a licence for an application, for which the SEP holder has not yet sent
any letter inviting any implementer to take a licence
34
%
66
%
32
An implementer asks for a licence for using an optional part of the standard, for which the SEP
holder has not yet sent any letter inviting any implementer to take a licence
35
%
65
%
31
An implementer asks for a licence, the SEP holder is already licensing (or negotiating the
licensing of) the application at another level of the value chain and has provided the so called
“have made” rights to that implementer
41
%
59
%
34
An implementer asks for a license for a limited number of products and the SEP holder prefers
to avoid licensing costs by providing guarantees that it will not enforce its patents.
57
%
43
%
28
Note: “No opinion” answers not taken into account
Q36. How would you assess the following statements for the determination of the level in the value
chain for licensing of a SEP?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO
/other
Citizens
Licencing could take place at every level of the value chain 60% 51% 71% 56% 90%
Licensing should take place at one level of the value chain only 47% 56% 50% 25% 30%
The implementers in a value chain should be able to determine
the level of licensing
42% 49% 33% 38% 30%
The SEP holder is the only one who should be able to determine
the level of licensing
28% 31% 14% 33% 22%
Both SEP holders and implementers should determine the level
of licensing
24% 15% 0% 50% 50%
The level of licensing should be determined by the person who
asks for a licence first. If an implementer asks first, implementers
determine the level of licensing. If the SEP holder asks first, it
determines the level of licensing.
0% 0% 0% 0% 0%
No. of replies* 58-63 34-37 6-7 8-9 9-10
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
Licencing could take place at every level of the value chain 93% 13%
The implementers in a value chain should be able to determine the level of licensing 68% 0%
Licensing should take place at one level of the value chain only 36% 69%
Both SEP holders and implementers should determine the level of licensing 19% 13%
The SEP holder is the only one who should be able to determine the level of licensing 3% 63%
The level of licensing should be determined by the person who asks for a licence first.
If an implementer asks first, implementers determine the level of licensing. If the SEP
holder asks first, it determines the level of licensing.
0% 0%
No. of replies* 27-29 15-16
218
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
Licencing could take place at every level of the value chain 55% 55%
Licensing should take place at one level of the value chain only 52% 47%
The implementers in a value chain should be able to determine the level of licensing 41% 53%
The SEP holder is the only one who should be able to determine the level of licensing 27% 33%
Both SEP holders and implementers should determine the level of licensing 23% 12%
The level of licensing should be determined by the person who asks for a licence first.
If an implementer asks first, implementers determine the level of licensing. If the SEP
holder asks first, it determines the level of licensing.
0% 0%
No. of replies* 31-33 17-20
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
Licencing could take place at every level of the value chain 60% 8% 32% 63
Licensing should take place at one level of the value chain only 47% 18% 35% 60
The implementers in a value chain should be able to determine the level of
licensing
42% 7% 51% 59
The SEP holder is the only one who should be able to determine the level of
licensing
28% 8% 63% 60
Both SEP holders and implementers should determine the level of licensing 24% 10% 66% 58
The level of licensing should be determined by the person who asks for a
licence first. If an implementer asks first, implementers determine the level of
licensing. If the SEP holder asks first, it determines the level of licensing.
0% 3% 97% 59
Other (please specify) 75% 0% 25% 4
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No
opinion” answers not taken into account
“Companies answers” Agree Neutral Disagree No.
Licensing should take place at one level of the value chain only 56% 17% 28% 36
Licencing could take place at every level of the value chain 51% 8% 41% 37
The implementers in a value chain should be able to determine the level of
licensing
49% 9% 43% 35
The SEP holder is the only one who should be able to determine the level of
licensing
31% 9% 60% 35
Both SEP holders and implementers should determine the level of licensing 15% 15% 71% 34
The level of licensing should be determined by the person who asks for a
licence first. If an implementer asks first, implementers determine the level of
licensing. If the SEP holder asks first, it determines the level of licensing.
0% 6% 94% 34
Other (please specify) 50% 0% 50% 2
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Q37. If licensing were taking place at one level of the value chain only, what could be some guiding
principles for the determination of that level of licensing?
“Agree and strongly agree” answers only All
Compa
nies
Associ
ations/
trade
union
Academia/
Authorities/
NGO/other
Citizens
Licensing should take place at the level of the product which
main function is that of the standardised technology
49% 49% 67% 33% 57%
Licensing should take place at the most upstream level of the
value chain
38% 39% 40% 13% 67%
219
“Agree and strongly agree” answers only All
Compa
nies
Associ
ations/
trade
union
Academia/
Authorities/
NGO/other
Citizens
Licensing should take place at the level of the product that
incorporates most functionalities of the standardised technology
36% 33% 40% 44% 33%
Licensing should take place where the transaction costs are most
efficient
35% 37% 14% 56% 17%
Licensing should take place at the end level product of the value
chain
34% 33% 33% 33% 43%
Licensing should take place where the SEP holder is able to
monitor in which application the licenced technology is used
30% 31% 17% 44% 17%
Licensing should take place where the licensed technology
affects a significant proportion of the value-inducing
functionalities of the licensed product
26% 14% 25% 56% 50%
Licensing should take place at a component (intermediate) level
of the value chain
20% 22% 20% 25% 0%
No. of replies* 54-58 35-36 4-7 8-9 6-7
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
Licensing should take place at the level of the product which main function is that of
the standardised technology
78% 6%
Licensing should take place at the most upstream level of the value chain 69% 0%
Licensing should take place at the level of the product that incorporates most
functionalities of the standardised technology
42% 24%
Licensing should take place at a component (intermediate) level of the value chain 31% 0%
Licensing should take place where the transaction costs are most efficient 25% 53%
Licensing should take place where the licensed technology affects a significant
proportion of the value-inducing functionalities of the licensed product
17% 47%
Licensing should take place where the SEP holder is able to monitor in which
application the licenced technology is used
7% 76%
Licensing should take place at the end level product of the value chain 0% 88%
No. of replies* 24-28 16-17
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No
opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
Licensing should take place at the level of the product which main function is that of
the standardised technology
47% 50%
Licensing should take place at the end level product of the value chain 38% 26%
Licensing should take place where the SEP holder is able to monitor in which
application the licenced technology is used
34% 28%
Licensing should take place where the transaction costs are most efficient 33% 44%
Licensing should take place at the most upstream level of the value chain 30% 42%
Licensing should take place at the level of the product that incorporates most
functionalities of the standardised technology
26% 53%
Licensing should take place where the licensed technology affects a significant
proportion of the value-inducing functionalities of the licensed product
23% 22%
Licensing should take place at a component (intermediate) level of the value chain 13% 37%
No. of replies* 30-33 18-19
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
220
“All answers” Agree Neutral Disagree No.
Licensing should take place at the level of the product which main function is
that of the standardised technology
49% 23% 28% 57
Licensing should take place at the most upstream level of the value chain 38% 18% 44% 55
Licensing should take place at the level of the product that incorporates most
functionalities of the standardised technology
36% 23% 41% 56
Licensing should take place where the transaction costs are most efficient 35% 44% 21% 57
Licensing should take place at the end level product of the value chain 34% 16% 50% 58
Licensing should take place where the SEP holder is able to monitor in which
application the licenced technology is used
30% 21% 48% 56
Licensing should take place where the licensed technology affects a significant
proportion of the value-inducing functionalities of the licensed product
26% 17% 57% 54
Licensing should take place at a component (intermediate) level of the value
chain
20% 32% 48% 56
Other (please specify) 80% 0% 20% 5
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
Licensing should take place at the level of the product which main function is
that of the standardised technology
49% 20% 31% 35
Licensing should take place at the most upstream level of the value chain 39% 19% 42% 36
Licensing should take place where the transaction costs are most efficient 37% 49% 14% 35
Licensing should take place at the end level product of the value chain 33% 14% 53% 36
Licensing should take place at the level of the product that incorporates most
functionalities of the standardised technology
33% 22% 44% 36
Licensing should take place where the SEP holder is able to monitor in which
application the licenced technology is used
31% 23% 46% 35
Licensing should take place at a component (intermediate) level of the value
chain
22% 39% 39% 36
Licensing should take place where the licensed technology affects a significant
proportion of the value-inducing functionalities of the licensed product
14% 20% 66% 35
Other (please specify) 0% 0% 100% 1
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Q40. How would you assess the following statements with regard to fair and reasonable terms and
conditions (“FR TC”)?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
The FR TC may depend on the functionalities of the standard that
are being implemented.
75% 74% 100% 67% 70%
The FR TC are independent of the level of licensing. 68% 70% 67% 70% 60%
Implementers upstream should be able to pass the cost of the
licence downstream.
67% 70% 50% 60% 78%
The FR TC may be different for the different applications of the
standard.
56% 56% 29% 80% 50%
The FR TC are determined based on the added value that the
patented technology brings to the product implementing the
standard.
48% 44% 33% 60% 60%
The FR TC should be the same irrespective of how the standard
is used.
34% 38% 43% 11% 33%
No. of replies* 52-61 27-34 6-7 9-10 9-10
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
221
“Agree and strongly agree” answers only Implementers
SEP
Holders
The FR TC may depend on the functionalities of the standard that are being
implemented.
75% 93%
The FR TC are independent of the level of licensing. 74% 75%
The FR TC should be the same irrespective of how the standard is used. 67% 0%
Implementers upstream should be able to pass the cost of the licence downstream. 66% 89%
The FR TC are determined based on the added value that the patented technology
brings to the product implementing the standard.
37% 60%
The FR TC may be different for the different applications of the standard. 25% 100%
No. of replies* 27-29 9-16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
The FR TC may depend on the functionalities of the standard that are being
implemented.
81% 67%
The FR TC are independent of the level of licensing. 71% 67%
Implementers upstream should be able to pass the cost of the licence downstream. 67% 63%
The FR TC may be different for the different applications of the standard. 56% 58%
The FR TC are determined based on the added value that the patented technology
brings to the product implementing the standard.
40% 55%
The FR TC should be the same irrespective of how the standard is used. 31% 39%
No. of replies* 27-32 16-20
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
The FR TC may depend on the functionalities of the standard that are being
implemented.
75% 15% 10% 60
The FR TC are independent of the level of licensing. 68% 12% 20% 59
Implementers upstream should be able to pass the cost of the licence
downstream.
67% 29% 4% 52
The FR TC may be different for the different applications of the standard. 56% 10% 34% 61
The FR TC are determined based on the added value that the patented
technology brings to the product implementing the standard.
48% 20% 32% 60
The FR TC should be the same irrespective of how the standard is used. 34% 14% 53% 59
Other (please specify) 100% 0% 0% 3
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
The FR TC may depend on the functionalities of the standard that are being
implemented.
74% 18% 9% 34
The FR TC are independent of the level of licensing. 70% 12% 18% 33
Implementers upstream should be able to pass the cost of the licence
downstream.
70% 30% 0% 27
The FR TC may be different for the different applications of the standard. 56% 6% 38% 34
The FR TC are determined based on the added value that the patented
technology brings to the product implementing the standard.
44% 21% 35% 34
The FR TC should be the same irrespective of how the standard is used. 38% 9% 53% 34
Other (please specify) 100% 0% 0% 2
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
222
Q41. How would you assess the following statements for the assessment of non-discrimination
(“ND”)?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
For the ND assessment, it matters whether a similarly situated
entity is put at a competitive disadvantage
76% 74% 100% 67% 78%
Similarly situated entities are those that use the same
functionalities of a standard in similar or same applications
76% 74% 100% 67% 78%
Entities at a different level in the value chain may be similarly
situated if the FR TC are independent of the level of licensing
50% 57% 40% 38% 44%
Similarly situated entities are those that use the standardised
technology in the same applications
43% 39% 29% 44% 67%
Similarly situated entities are those that are located at the same
level in the value chain
42% 36% 33% 56% 56%
For the ND assessment, it matters whether a licence was taken at
the same period of time
41% 44% 33% 40% 38%
Similarly situated entities are those that use the same
functionalities of a standard
41% 38% 33% 44% 56%
No. of replies* 52-59 30-34 5-7 8-10 8-9
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
For the ND assessment, it matters whether a similarly situated entity is put at a
competitive disadvantage
76% 94%
Similarly situated entities are those that use the same functionalities of a standard in
similar or same applications
76% 94%
Entities at a different level in the value chain may be similarly situated if the FR TC
are independent of the level of licensing
65% 27%
Similarly situated entities are those that use the standardised technology in the same
applications
57% 27%
Similarly situated entities are those that use the same functionalities of a standard 56% 21%
Similarly situated entities are those that are located at the same level in the value chain 48% 33%
For the ND assessment, it matters whether a licence was taken at the same period of
time
16% 76%
No. of replies* 25-28 11-17
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
For the ND assessment, it matters whether a similarly situated entity is put at a
competitive disadvantage
90% 50%
Similarly situated entities are those that use the same functionalities of a standard in
similar or same applications
90% 50%
Entities at a different level in the value chain may be similarly situated if the FR TC
are independent of the level of licensing
46% 60%
Similarly situated entities are those that use the same functionalities of a standard 45% 25%
For the ND assessment, it matters whether a licence was taken at the same period of
time
45% 35%
Similarly situated entities are those that use the standardised technology in the same
applications
39% 38%
Similarly situated entities are those that are located at the same level in the value chain 38% 44%
No. of replies* 28-33 15-17
223
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
For the ND assessment, it matters whether a similarly situated entity is put at a
competitive disadvantage
76% 13% 11% 55
Similarly situated entities are those that use the same functionalities of a
standard in similar or same applications
76% 22% 24% 59
Entities at a different level in the value chain may be similarly situated if the
FR TC are independent of the level of licensing
50% 19% 31% 52
Similarly situated entities are those that use the standardised technology in the
same applications
43% 29% 28% 58
Similarly situated entities are those that are located at the same level in the
value chain
42% 23% 35% 57
Similarly situated entities are those that use the same functionalities of a
standard
41% 23% 36% 56
For the ND assessment, it matters whether a licence was taken at the same
period of time
41% 38% 21% 56
Other (please specify) 100% 0% 0% 4
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
For the ND assessment, it matters whether a similarly situated entity is put at a
competitive disadvantage
74% 13% 13% 31
Similarly situated entities are those that use the same functionalities of a
standard in similar or same applications
74% 26% 24% 34
Entities at a different level in the value chain may be similarly situated if the
FR TC are independent of the level of licensing
57% 17% 27% 30
Similarly situated entities are those that use the standardised technology in the
same applications
39% 30% 30% 33
Similarly situated entities are those that are located at the same level in the
value chain
36% 27% 36% 33
For the ND assessment, it matters whether a licence was taken at the same
period of time
44% 28% 28% 32
Similarly situated entities are those that use the same functionalities of a
standard
38% 28% 34% 32
Other (please specify) 100% 0% 0% 1
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Q42. What is the reasonable range of discounts that would not cause discrimination in the context of
a licensing of a SEP?
Discounts are “Always are discriminatory” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities
/NGO
/other
Citizens
Annual Royalty Caps 38% 36% 0% 0% 67%
Volume discount 33% 25% 0% 0% 67%
Early bird discount (taking a licence at the beginning of a
licensing programme)
29% 25% 0% 0% 50%
Early payment discount (making upfront payments of royalties) 29% 23% 0% 0% 50%
No. of replies* 21-24 11-13 1-2 1 6-8
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account. The residual to 100% shows
those who choose rage between 1% and 50%
*range, different number of replies per question
224
Discounts are “Always discriminatory” answers (column %)
and average reasonable discount (column Avg.)
Implementers SEP Holders
% Avg.* % Avg.*
Annual Royalty Caps 50% 5% 0% 38%
Volume discount 50% 6% 0% 32%
Early bird discount (taking a licence at the beginning of a licensing
programme)
43% 10% 0% 33%
Early payment discount (making upfront payments of royalties) 22% 6% 0% 28%
No. of replies** 7-9 8-10
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. ““Other (please specify)” not included in the table; “No
opinion” answers not taken into account. The residual to 100% shows those who choose rage between 1% and 50%
* Weighted average calculated using the middle of ranges, value of 0% for “Always discriminatory”
**range, different number of replies per question
Discounts are “Always discriminatory” answers (column %)
and average reasonable discount (column Avg.)
EU non-EU
% Avg.* % Avg.*
Annual Royalty Caps 27% 24% 50% 23%
Early bird discount (taking a licence at the beginning of a licensing
programme)
21% 23% 0% 45%
Early payment discount (making upfront payments of royalties) 21% 21% 0% 6%
Volume discount 15% 24% 50% 23%
No. of replies** 11-14 1-2
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account. The residual to 100% shows those who choose rage between 1% and 50%
* Weighted average calculated using the middle of ranges, value of 0% for “Always discriminatory”
**range, different number of replies per question
“All answers”
Always
discriminatory
1 to
10%
10 to
20%
20 to
30 %
30 to
40%
40 to
50 %
No. Avg.
*
Annual Royalty Caps 38% 14% 5% 14% 5% 24% 21 17%
Volume discount 30% 13% 9% 26% 4% 17% 23 18%
Early bird discount (taking a licence at the
beginning of a licensing programme)
29% 10% 10% 24% 5% 24% 21 20%
Early payment discount (making upfront
payments of royalties)
25% 38% 0% 13% 8% 17% 24 16%
Other (please specify) 50% 0% 0% 17% 0% 33% 6 19%
Note: “No opinion” answers not taken into account
* Weighted average calculated using the middle of ranges, value of 0% for “Always discriminatory”
“Companies answers”
Always
discriminatory
1 to
10%
10 to
20%
20 to
30 %
30 to
40%
40 to
50 %
No. Avg.
*
Annual Royalty Caps 36% 9% 0% 27% 0% 27% 11 20%
Volume discount 25% 0% 17% 42% 0% 17% 12 20%
Early bird discount (taking a licence at the
beginning of a licensing programme)
25% 0% 8% 42% 8% 17% 12 22%
Early payment discount (making upfront
payments of royalties)
23% 31% 0% 23% 15% 8% 13 16%
Other (please specify) 33% 0% 0% 0% 0% 67% 3 30%
Note: “No opinion” answers not taken into account
* Weighted average calculated using the middle of ranges, value of 0% for “Always discriminatory”
Q43. Which of the following aspects of the licence terms and conditions are more likely to impact the
non-discrimination part of FRAND? Please indicate their (relative) impact in the overall ND
assessment below. The proposed rating below should describe the relative impact in the overall ND
assessment.
225
“High” and ”Very high” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities
/NGO
/other
Citizens
Royalty rate 82% 76% 60% 100% 100
%
Territorial scope of the licence 54% 48% 60% 71% 56%
Product scope of the licence (narrow or broad, end-product
and/or modules)
54% 52% 60% 75% 40%
Payment conditions (term, interest for late payments, discounts) 49% 38% 60% 86% 50%
Patent related issues (validity) 45% 44% 40% 57% 40%
Term of the license (e.g. a particular time-period) 34% 32% 40% 63% 11%
Non-disclosure requirements 33% 24% 40% 43% 50%
Legal (applicable law, competent forum/court) 21% 10% 40% 13% 50%
Compliance (reporting obligations and auditing conditions) 19% 7% 20% 25% 50%
No. of replies* 47-53 25-30 5 7-8 9-10
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“High” and ”Very high” answers only Implementers
SEP
Holders
Royalty rate 100% 46%
Territorial scope of the licence 72% 8%
Product scope of the licence (narrow or broad, end-product and/or modules) 68% 15%
Patent related issues (validity) 63% 9%
Payment conditions (term, interest for late payments, discounts) 56% 25%
Non-disclosure requirements 48% 0%
Term of the license (e.g. a particular time-period) 43% 8%
Legal (applicable law, competent forum/court) 32% 0%
Compliance (reporting obligations and auditing conditions) 32% 0%
No. of replies* 23-25 11-13
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“High” and ”Very high” answers only EU non-EU
Royalty rate 73% 87%
Territorial scope of the licence 58% 47%
Product scope of the licence (narrow or broad, end-product and/or modules) 48% 73%
Payment conditions (term, interest for late payments, discounts) 46% 53%
Patent related issues (validity) 44% 50%
Term of the license (e.g. a particular time-period) 37% 43%
Non-disclosure requirements 27% 33%
Legal (applicable law, competent forum/court) 19% 7%
Compliance (reporting obligations and auditing conditions) 7% 19%
No. of replies* 25-27 12-16
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers”
High
Some
Low or
no
No.
Royalty rate 82% 16% 2% 51
Territorial scope of the licence 54% 30% 16% 50
Product scope of the licence (narrow or broad, end-product and/or modules) 54% 29% 17% 52
Payment conditions (term, interest for late payments, discounts) 49% 35% 16% 51
Patent related issues (validity) 45% 23% 32% 47
Term of the license (e.g. a particular time-period) 34% 44% 22% 50
226
“All answers”
High
Some
Low or
no
No.
Non-disclosure requirements 33% 16% 51% 51
Legal (applicable law, competent forum/court) 21% 29% 50% 52
Compliance (reporting obligations and auditing conditions) 19% 25% 57% 53
Other (please specify) 100% 0% 0% 4
Note: High composes of “High” and “Very high”; “Low or no” composes of “Low”, “Very low” and “No impact”; “No opinion”
answers not taken into account
“Companies answers”
High
Some
Low or
no
No.
Royalty rate 76% 21% 3% 29
Product scope of the licence (narrow or broad, end-product and/or modules) 52% 38% 10% 29
Territorial scope of the licence 48% 41% 10% 29
Patent related issues (validity) 44% 32% 24% 25
Payment conditions (term, interest for late payments, discounts) 38% 48% 14% 29
Term of the license (e.g. a particular time-period) 32% 46% 21% 28
Non-disclosure requirements 24% 17% 59% 29
Legal (applicable law, competent forum/court) 10% 38% 52% 29
Compliance (reporting obligations and auditing conditions) 7% 23% 70% 30
Other (please specify) 100% 0% 0% 1
Note: High composes of “High” and “Very high”; “Low or no” composes of “Low”, “Very low” and “No impact”; “No opinion”
answers not taken into account
Q44. How important is it to know the reasonable aggregate royalty for all SEPs relevant to a
potentially licensed product?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Important 70% 61% 86% 73% 89%
Neutral 17% 19% 14% 18% 11%
Not important 13% 19% 0% 9% 0%
No. of replies 63 36 7 11 9
Note: Important composes of “Important” and “Very important”; “Not important” composes of “Not so important” and “Not
important”
Implementers
SEP
Holders
Important 100% 20%
Neutral 0% 40%
Not important 0% 40%
No. of replies 29 15
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. Important composes of “Important” and “Very important”;
“Not important” composes of “Not so important” and “Not important”
EU non-EU
Important 67% 67%
Neutral 19% 17%
Not important 14% 17%
No. of replies 36 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; Important composes of “Important” and “Very
important”; “Not important” composes of “Not so important” and “Not important”
Q45. How important is it to have a fair process for the determination of a reasonable aggregate
royalty for all SEPs relevant to a licensed product?
227
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Important 69% 61% 71% 73% 90%
Neutral 17% 22% 29% 9% 0%
Not important 14% 17% 0% 18% 10%
No. of replies 64 36 7 11 10
Note: Important composes of “Important” and “Very important”; “Not important” composes of “Not so important” and “Not
important”
Implementers
SEP
Holders
Important 93% 25%
Neutral 3% 38%
Not important 3% 38%
No. of replies 29 16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. Important composes of “Important” and “Very important”;
“Not important” composes of “Not so important” and “Not important”
EU non-EU
Important 67% 61%
Neutral 22% 17%
Not important 11% 22%
No. of replies 36 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; Important composes of “Important” and “Very
important”; “Not important” composes of “Not so important” and “Not important”
Q46. The aggregate royalty may be apportioned among the various SEPs or SEP portfolios based
on an estimate of the declared SEP that are actually essential (“true SEPs”). What could be an
appropriate additional criterion for the apportionment of the aggregate royalty among the various
SEPs or SEP portfolios?
All
Compa-
nies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
Number of “true” SEPs belonging to sections of the
standard identified as of significant value
65% 62% 71% 44% 89%
Number of jurisdictions in which “true” SEPs are
protected
47% 38% 43% 56% 78%
Number of significantly different claims 27% 27% 29% 33% 22%
Number of sections of the standard covered by “true”
SEPs
18% 19% 14% 22% 11%
Man hours spent in contributing in the development of the
standard at the SDO
6% 8% 0% 11% 0%
Forward citations360 5% 3% 0% 22% 0%
Other, please specify 35% 35% 29% 44% 33%
No. of replies 62 37 7 9 9
Note: multiple answers possible
Implementers
SEP
Holders
Number of “true” SEPs belonging to sections of the standard identified as of
significant value
89% 40%
360
A citation is a reference to a previous work (prior art) that is considered relevant to a current patent application.
Forward citations are patents that cite a specific patent.
228
Implementers
SEP
Holders
Number of jurisdictions in which “true” SEPs are protected 52% 40%
Number of significantly different claims 33% 20%
Number of sections of the standard covered by “true” SEPs 22% 20%
Man hours spent in contributing in the development of the standard at the SDO 4% 0%
Forward citations 4% 7%
Other, please specify 15% 53%
No. of replies 27 15
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; Holder: those who disagreed,
were neutral or had no opinion on Q2 and agreed with Q3; multiple answers possible.
EU non-EU
Number of “true” SEPs belonging to sections of the standard identified as of
significant value
62% 58%
Number of jurisdictions in which “true” SEPs are protected 44% 37%
Number of significantly different claims 32% 21%
Number of sections of the standard covered by “true” SEPs 21% 16%
Man hours spent in contributing in the development of the standard at the SDO 9% 5%
Forward citations 6% 5%
Other, please specify 32% 42%
No. of replies 34 19
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; multiple answers possible.
Q47361
. If there were an obligation to complete the “steps” provided in the Judgment of the Court of
Justice of the European Union (“CJEU”) of 16 July 2015, Huawei v. ZTE362
within certain time
limits, which period would be reasonable? Please note that we ask for average reasonable time limits
with due account taken of the fact that the analysis would have to be conducted on a case-by-case
basis363
.
“Fixed time limits are not desirable” answers only All
Compa
nies
Associ
ations/
trade
union
Academia/
Authoritie
s/NGO
/other
Citiz
ens
The implementer expresses its willingness to conclude a
licensing agreement on FRAND terms
46% 52% 86% 33% 0%
The SEP holder presents to the implementer a specific, written
offer for a licence on FRAND terms
44% 45% 86% 44% 0%
The implementer responds to that offer (potentially with a
counter offer)
45% 50% 86% 33% 0%
If applicable, the SEP holder rejects the counter offer 41% 42% 86% 44% 0%
If applicable, the implementer provides appropriate security 42% 45% 86% 33% 0%
If applicable, parties may agree on arbitration 42% 47% 86% 33% 0%
If applicable, the SEP holder requests an injunction 44% 43% 100% 44% 0%
No. of replies* 57-66 33-42 7 9 8-10
361
Please note that there was an error in encoding this question into the EUSurvey system. The answers “3 to 5 months
after the prior step”, “5 to 7 months after the prior step” and ““more than 7 months after the prior step” appeared in two
columns each instead of one. That is e.g. there was a separate column allowing for answering “3 to 5 months” followed
by column “after the prior step”. For the purpose of numerical analysis, these two columns were added together.
362
Judgment of the Court of Justice of 16 July 2015, Huawei Technologies Co. Ltd v ZTE Corp. and ZTE Deutschland
GmbH, C-170/13, ECLI:EU:C:2015:477, https://e-justice.europa.eu/ecli/ECLI:EU:C:2015:477.
363
The reasonable amount of time needed for the implementer to express its willingness to obtain a license may vary
depending on a number of factors, such as the number of patents at issue, the complexity of the technology, the level of
knowledge the implementer may have about the technology and other.: The implementer expresses its willingness to
conclude a licensing agreement on FRAND terms.
229
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account.
*range, different number of replies per question
Implementers
Fixed time
limits are
not
desirable
Months after the prior step OtherNo. Avg.
months
*
1 to 3 3 to 5 5 to 7 > 7
The implementer expresses its willingness to conclude
a licensing agreement on FRAND terms
67% 15% 19% 0% 0% 0% 27 1.0
The SEP holder presents to the implementer a specific,
written offer for a licence on FRAND terms
64% 14% 11% 4% 4% 4% 28 1.2
The implementer responds to that offer (potentially
with a counter offer)
68% 11% 4% 7% 7% 4% 28 1.4
If applicable, the SEP holder rejects the counter offer 57% 13% 17% 7% 7% 0% 30 1.8
If applicable, the implementer provides appropriate
security
57% 3% 23% 10% 7% 0% 30 2.1
If applicable, parties may agree on arbitration 64% 7% 18% 7% 4% 0% 28 1.5
If applicable, the SEP holder requests an injunction 64% 0% 11% 7% 7% 11% 28 1.6
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3;“No opinion” answers not taken
into account
* Weighted average calculated using the middle of ranges, for the “Fixed time limits are not desirable” value of 0, for the last open
range value of 8 assumed; “Other” column not taken into account for average calculation.
SEP Holders
Fixed time
limits are
not
desirable
Months after the prior step OtherNo. Avg.
months
*
1 to 3 3 to 5 5 to 7 > 7
The implementer expresses its willingness to conclude
a licensing agreement on FRAND terms
31% 50% 6% 0% 0% 13% 16 1.1
The SEP holder presents to the implementer a specific,
written offer for a licence on FRAND terms
38% 44% 13% 0% 0% 6% 16 1.2
The implementer responds to that offer (potentially
with a counter offer)
31% 38% 13% 6% 0% 13% 16 1.6
If applicable, the SEP holder rejects the counter offer 33% 33% 17% 6% 6% 6% 18 2.1
If applicable, the implementer provides appropriate
security
39% 22% 22% 6% 6% 6% 18 2.1
If applicable, parties may agree on arbitration 30% 10% 30% 15% 10% 5% 20 3.2
If applicable, the SEP holder requests an injunction 40% 10% 15% 20% 10% 5% 20 2.9
Note: Holder: those who disagreed, were neutral or had no opinion on Q2 and agreed with Q3; “No opinion” answers not taken into
account
* Weighted average calculated using the middle of ranges, for the “Fixed time limits are not desirable” value of 0, for the last open
range value of 8 assumed; “Other” column not taken into account for average calculation.
“Fixed time limits are not desirable” answers (column %)
and average reasonable period in months (column Avg.)
EU non-EU
% Avg.* % Avg.*
The implementer expresses its willingness to conclude a licensing
agreement on FRAND terms
47% 1.4 65% 0.7
The SEP holder presents to the implementer a specific, written offer
for a licence on FRAND terms
46% 1.9 58% 1.6
The implementer responds to that offer (potentially with a counter
offer)
48% 1.6 58% 1.3
If applicable, the SEP holder rejects the counter offer 43% 1.9 58% 1.5
If applicable, the implementer provides appropriate security 43% 2.3 57% 1.9
If applicable, parties may agree on arbitration 52% 1.8 48% 2.5
If applicable, the SEP holder requests an injunction 54% 1.8 43% 3.0
No. of replies** 32-35 17-23
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account. The residual to 100% shows those who choose rage between 1% and 50%
* Weighted average calculated using the middle of ranges, for the “Fixed time limits are not desirable” value of 0, for the last open
range value of 8 assumed; “Other” column not taken into account for average calculation.
**range, different number of replies per question
230
“All answers”
Fixed time
limits are
not
desirable
Months after the prior step OtherNo. Avg.
months
*
1 to 3 3 to 5 5 to 7 > 7
The implementer expresses its willingness to conclude
a licensing agreement on FRAND terms
46% 30% 14% 0% 2% 9% 57 1.3
The SEP holder presents to the implementer a specific,
written offer for a licence on FRAND terms
44% 24% 13% 6% 5% 8% 62 1.8
The implementer responds to that offer (potentially
with a counter offer)
45% 23% 8% 8% 5% 10% 60 1.8
If applicable, the SEP holder rejects the counter offer 41% 25% 19% 6% 6% 3% 64 2.1
If applicable, the implementer provides appropriate
security
42% 17% 22% 9% 6% 3% 64 2.3
If applicable, parties may agree on arbitration 42% 11% 25% 9% 8% 5% 64 2.5
If applicable, the SEP holder requests an injunction 44% 8% 12% 14% 11% 12% 66 2.6
Note: “No opinion” answers not taken into account
* Weighted average calculated using the middle of ranges, for the “Fixed time limits are not desirable” value of 0, for the last open
range value of 8 assumed; “Other” column not taken into account for average calculation.
“Companies answers”
Fixed time
limits are
not
desirable
Months after the prior step OtherNo. Avg.
months
*
1 to 3 3 to 5 5 to 7 > 7
The implementer expresses its willingness to conclude
a licensing agreement on FRAND terms
52% 18% 18% 0% 3% 9% 33 1.4
The SEP holder presents to the implementer a specific,
written offer for a licence on FRAND terms
45% 18% 16% 11% 8% 3% 38 2.2
The implementer responds to that offer (potentially
with a counter offer)
50% 17% 11% 11% 6% 6% 36 1.9
If applicable, the SEP holder rejects the counter offer 42% 18% 21% 8% 8% 3% 38 2.3
If applicable, the implementer provides appropriate
security
45% 8% 20% 15% 10% 3% 40 2.7
If applicable, parties may agree on arbitration 47% 11% 21% 8% 11% 3% 38 2.4
If applicable, the SEP holder requests an injunction 43% 5% 17% 12% 14% 10% 42 2.9
Note: “No opinion” answers not taken into account
* Weighted average calculated using the middle of ranges, for the “Fixed time limits are not desirable” value of 0, for the last open
range value of 8 assumed; “Other” column not taken into account for average calculation.
Q48364
. Do you consider that the scope of the obligations imposed on both the SEP holder and
implementers by CJEU Huawei v. ZTE is clear or needs to be clarified with regard to the following
aspects?: The initial offer of the SEP holder must be FRAND
“Unclear” answers only All
Compa
nies
Associa-
tions/
trade
union
Academia/
Authorities
/NGO
/other
Citizens
The initial offer of the SEP holder must be FRAND 43% 39% 71% 20% 63%
The amount of the security should be fair and reasonable 36% 42% 57% 0% 38%
The counter offer of the implementer must be FRAND 36% 35% 57% 0% 63%
A SEP holder cannot request an injunction before making a
FRAND offer, even if the implementer has not expressed its
willingness to take a licence
31% 31% 40% 33% 25%
No. of replies* 51-56 29-31 5-7 9-10 8
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
364
Please note that there was an error in encoding this question into the EUSurvey system. It was not possible to select
answer “Not clear”. The tables below present thus only those who chose “Somewhat unclear” responses.
231
“Unclear” answers only Implementer Holder
The initial offer of the SEP holder must be FRAND 78% 13%
The counter offer of the implementer must be FRAND 67% 7%
The amount of the security should be fair and reasonable 63% 7%
A SEP holder cannot request an injunction before making a FRAND offer, even if the
implementer has not expressed its willingness to take a licence
48% 27%
No. of replies* 23-27 15
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Unclear” answers only EU non-EU
The initial offer of the SEP holder must be FRAND 42% 33%
The counter offer of the implementer must be FRAND 36% 20%
The amount of the security should be fair and reasonable 36% 36%
A SEP holder cannot request an injunction before making a FRAND offer, even if the
implementer has not expressed its willingness to take a licence
39% 17%
No. of replies* 31-33 12-15
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Unclear Neutral Clear No.
The initial offer of the SEP holder must be FRAND 43% 16% 41% 56
The amount of the security should be fair and reasonable 36% 33% 31% 55
The counter offer of the implementer must be FRAND 36% 18% 46% 56
A SEP holder cannot request an injunction before making a FRAND offer, even
if the implementer has not expressed its willingness to take a licence
31% 24% 45% 51
Note: Unclear composes of “Not clear” and “Somewhat unclear”; Clear composes of “Clear” and “Somewhat clear”; “No opinion”
answers not taken into account
“Companies answers” Unclear Neutral Clear No.
The amount of the security should be fair and reasonable 42% 35% 23% 31
The initial offer of the SEP holder must be FRAND 39% 19% 42% 31
The counter offer of the implementer must be FRAND 35% 23% 42% 31
A SEP holder cannot request an injunction before making a FRAND offer, even
if the implementer has not expressed its willingness to take a licence
31% 21% 48% 29
Note: Unclear composes of “Not clear” and “Somewhat unclear”; Clear composes of “Clear” and “Somewhat clear”; “No opinion”
answers not taken into account
Q49. Which of the behaviours of an implementer listed below could indicate “willingness” to take a
licence, and to what extent is that behaviour relevant?
“Somewhat relevant” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
Submits a FRAND counter-offer 93% 94% 86% 100% 88%
Agrees in writing to be willing to take a licence on FRAND terms
and conditions, while reserving the right to challenge
essentiality, validity, and infringement in Court
88% 91% 86% 100% 67%
Provides a security at a fair and reasonable amount 75% 77% 86% 91% 38%
When reference materials provided by SEP holder are not
sufficient, such as not identifying the SEPs or not including claim
charts, promptly requests the SEP holders to provide such
materials
70% 63% 67% 89% 78%
Agrees on arbitration of the FRAND terms and conditions 51% 50% 29% 80% 38%
232
“Somewhat relevant” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
Informs the relevant SDO that it uses the standard, version,
section and product category
33% 23% 14% 67% 44%
If it disagrees with the scope of the licence (in particular the
validity and essentiality of the patents), it files relevant court
proceedings in a timely manner
20% 19% 14% 33% 14%
No. of replies* 55-59 30-33 6-7 9-11 7-9
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Somewhat relevant” answers only Implementers
SEP
Holders
Agrees in writing to be willing to take a licence on FRAND terms and conditions,
while reserving the right to challenge essentiality, validity, and infringement in Court
100% 71%
Submits a FRAND counter-offer 92% 94%
Provides a security at a fair and reasonable amount 73% 88%
When reference materials provided by SEP holder are not sufficient, such as not
identifying the SEPs or not including claim charts, promptly requests the SEP holders
to provide such materials
73% 63%
Agrees on arbitration of the FRAND terms and conditions 27% 69%
Informs the relevant SDO that it uses the standard, version, section and product
category
27% 29%
If it disagrees with the scope of the licence (in particular the validity and essentiality
of the patents), it files relevant court proceedings in a timely manner
15% 25%
No. of replies* 26-27 14-16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Somewhat relevant” answers only EU non-EU
Agrees in writing to be willing to take a licence on FRAND terms and conditions,
while reserving the right to challenge essentiality, validity, and infringement in Court
93% 89%
Submits a FRAND counter-offer 94% 95%
Provides a security at a fair and reasonable amount 84% 76%
When reference materials provided by SEP holder are not sufficient, such as not
identifying the SEPs or not including claim charts, promptly requests the SEP holders
to provide such materials
61% 79%
Agrees on arbitration of the FRAND terms and conditions 45% 67%
Informs the relevant SDO that it uses the standard, version, section and product
category
33% 25%
If it disagrees with the scope of the licence (in particular the validity and essentiality
of the patents), it files relevant court proceedings in a timely manner
13% 33%
No. of replies* 28-32 16-19
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers”
Somewhat
relevant
Not
relevant
Unrela-
ted
No.
Submits a FRAND counter-offer 93% 7% 0% 59
Agrees in writing to be willing to take a licence on FRAND terms and
conditions, while reserving the right to challenge essentiality, validity, and
infringement in Court
88% 12% 0% 58
Provides a security at a fair and reasonable amount 75% 21% 4% 57
233
“All answers”
Somewhat
relevant
Not
relevant
Unrela-
ted
No.
When reference materials provided by SEP holder are not sufficient, such as
not identifying the SEPs or not including claim charts, promptly requests the
SEP holders to provide such materials
70% 23% 7% 56
Agrees on arbitration of the FRAND terms and conditions 51% 39% 11% 57
Informs the relevant SDO that it uses the standard, version, section and
product category
33% 35% 33% 55
If it disagrees with the scope of the licence (in particular the validity and
essentiality of the patents), it files relevant court proceedings in a timely
manner
20% 60% 20% 55
Other (please specify) 100% 0% 0% 4
Note Not relevant composes of “Rather not relevant” and “Not relevant”; “No opinion” answers not taken into account
“Companies answers”
Somewhat
relevant
Not
relevant
Unrela-
ted
No.
Submits a FRAND counter-offer 94% 6% 0% 33
Agrees in writing to be willing to take a licence on FRAND terms and
conditions, while reserving the right to challenge essentiality, validity, and
infringement in Court
91% 9% 0% 32
Provides a security at a fair and reasonable amount 77% 19% 3% 31
When reference materials provided by SEP holder are not sufficient, such as
not identifying the SEPs or not including claim charts, promptly requests the
SEP holders to provide such materials
63% 31% 6% 32
Agrees on arbitration of the FRAND terms and conditions 50% 41% 9% 32
Informs the relevant SDO that it uses the standard, version, section and
product category
23% 33% 43% 30
If it disagrees with the scope of the licence (in particular the validity and
essentiality of the patents), it files relevant court proceedings in a timely
manner
19% 59% 22% 32
Other (please specify) 100% 0% 0% 1
Note Not relevant composes of “Rather not relevant” and “Not relevant”; “No opinion” answers not taken into account
Q50. Which of the behaviours of a SEP holder listed below could indicate “willingness” to grant a
licence on FRAND terms and conditions, and to what extent is that behaviour relevant?
“Very and somewhat relevant” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities
/NGO
/other
Citizens
Provides a FRAND offer that (i) sets a time limit allowing for a
reasonable period of time for consideration and (ii) explains how
the royalty is calculated or (iii) alternatively, demonstrates that
the licence offer is on FRAND terms and conditions.
97% 94% 100% 100% 100
%
Provides a list of the SEPs (patent numbers, the names of the
standards at issue, the geographical scope of the patents) together
with a high level claim chart to indicate the correlation between
products that are actually manufactured and patent claims,
specifying the way in which the SEPs have been infringed
85% 80% 86% 89% 100
%
Provides a list of the SEPs (patent numbers, the names of the
standards at issue, the geographical scope of the patents) together
with information to which section of the standard they refer to,
specifying the way in which the SEPs have been infringed
83% 80% 86% 90% 88%
Provides its standard FRAND terms and conditions (not subject
to non-disclosure requirements)
76% 74% 43% 89% 100
%
Provides a list of the SEP (patent numbers) with certificate from
an independent third party confirming their essentiality,
specifying the way in which the SEPs have been infringed
68% 63% 71% 78% 75%
Agrees on arbitration of the FRAND terms and conditions 55% 57% 29% 75% 50%
234
“Very and somewhat relevant” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities
/NGO
/other
Citizens
No. of replies* 58-60 34-35 7 8-10 8
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Very and somewhat relevant” answers only Implementers
SEP
Holders
Provides a FRAND offer that (i) sets a time limit allowing for a reasonable period of
time for consideration and (ii) explains how the royalty is calculated or (iii)
alternatively, demonstrates that the licence offer is on FRAND terms and conditions.
100% 94%
Provides a list of the SEPs (patent numbers, the names of the standards at issue, the
geographical scope of the patents) together with a high level claim chart to indicate
the correlation between products that are actually manufactured and patent claims,
specifying the way in which the SEPs have been infringed
96% 63%
Provides a list of the SEPs (patent numbers, the names of the standards at issue, the
geographical scope of the patents) together with information to which section of the
standard they refer to, specifying the way in which the SEPs have been infringed
93% 63%
Provides a list of the SEP (patent numbers) with certificate from an independent third
party confirming their essentiality, specifying the way in which the SEPs have been
infringed
93% 25%
Provides its standard FRAND terms and conditions (not subject to non-disclosure
requirements)
85% 56%
Agrees on arbitration of the FRAND terms and conditions 41% 63%
No. of replies* 27 16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Very and somewhat relevant” answers only EU non-EU
Provides a FRAND offer that (i) sets a time limit allowing for a reasonable period of
time for consideration and (ii) explains how the royalty is calculated or (iii)
alternatively, demonstrates that the licence offer is on FRAND terms and conditions.
94% 100%
Provides a list of the SEPs (patent numbers, the names of the standards at issue, the
geographical scope of the patents) together with information to which section of the
standard they refer to, specifying the way in which the SEPs have been infringed
85% 78%
Provides a list of the SEPs (patent numbers, the names of the standards at issue, the
geographical scope of the patents) together with a high level claim chart to indicate
the correlation between products that are actually manufactured and patent claims,
specifying the way in which the SEPs have been infringed
85% 78%
Provides its standard FRAND terms and conditions (not subject to non-disclosure
requirements)
70% 78%
Provides a list of the SEP (patent numbers) with certificate from an independent third
party confirming their essentiality, specifying the way in which the SEPs have been
infringed
61% 78%
Agrees on arbitration of the FRAND terms and conditions 53% 61%
No. of replies* 32-34 17-18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers”
Relevant Not
relevant
Unrela-
ted
No.
Provides a FRAND offer that (i) sets a time limit allowing for a reasonable
period of time for consideration and (ii) explains how the royalty is calculated
or (iii) alternatively, demonstrates that the licence offer is on FRAND terms
and conditions.
97% 3% 0% 59
235
“All answers”
Relevant Not
relevant
Unrela-
ted
No.
Provides a list of the SEPs (patent numbers, the names of the standards at
issue, the geographical scope of the patents) together with a high level claim
chart to indicate the correlation between products that are actually
manufactured and patent claims, specifying the way in which the SEPs have
been infringed
85% 14% 2% 59
Provides a list of the SEPs (patent numbers, the names of the standards at
issue, the geographical scope of the patents) together with information to
which section of the standard they refer to, specifying the way in which the
SEPs have been infringed
83% 15% 2% 60
Provides its standard FRAND terms and conditions (not subject to non-
disclosure requirements)
76% 20% 3% 59
Provides a list of the SEP (patent numbers) with certificate from an
independent third party confirming their essentiality, specifying the way in
which the SEPs have been infringed
68% 32% 0% 59
Agrees on arbitration of the FRAND terms and conditions 55% 31% 14% 58
Other (please specify) 100% 0% 0% 6
Note Relevant composes of “Very relevant” and “Somewhat relevant”; Not relevant composes of “Rather not relevant” and “Not
relevant”;
“No opinion” answers not taken into account
“Companies answers”
Relevant Not
relevant
Unrela-
ted
No.
Provides a FRAND offer that (i) sets a time limit allowing for a reasonable
period of time for consideration and (ii) explains how the royalty is calculated
or (iii) alternatively, demonstrates that the licence offer is on FRAND terms
and conditions.
94% 6% 0% 34
Provides a list of the SEPs (patent numbers, the names of the standards at
issue, the geographical scope of the patents) together with a high level claim
chart to indicate the correlation between products that are actually
manufactured and patent claims, specifying the way in which the SEPs have
been infringed
80% 17% 3% 35
Provides a list of the SEPs (patent numbers, the names of the standards at
issue, the geographical scope of the patents) together with information to
which section of the standard they refer to, specifying the way in which the
SEPs have been infringed
80% 17% 3% 35
Provides its standard FRAND terms and conditions (not subject to non-
disclosure requirements)
74% 23% 3% 35
Provides a list of the SEP (patent numbers) with certificate from an
independent third party confirming their essentiality, specifying the way in
which the SEPs have been infringed
63% 37% 0% 35
Agrees on arbitration of the FRAND terms and conditions 57% 29% 14% 35
Other (please specify) 100% 0% 0% 1
Note Relevant composes of “Very relevant” and “Somewhat relevant”; Not relevant composes of “Rather not relevant” and “Not
relevant”;
“No opinion” answers not taken into account
Questions on enforcement
Quantitative summary
Respondents estimated that court costs could range from approximately EUR 2.1 million for
essentiality, EUR 6.6 million for injunction and EUR 7.1 million for FRAND disputes.
Arbitration (53% of all answers) was deemed more useful than mediation (35%) for FRAND
assessment, especially by SEP Holders and academia/authorities/NGOs.
236
Two thirds of respondents were of the opinion that efficient SEP licencing would foster innovation
by implementers, increase employment and allow for keeping high level of competence in the EU as
well as foster transition to green economy.
Tables with replies per question
Q51. What is the average cost for you of a dispute (advice and litigation costs) in court, excluding
the value of the SEPs licenses and any damages?
Average*
EUR millions
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Related to an
Injunction
6.6 6.4 0.8 1.5 9.9
Related to FRAND 7.1 7.8 7.8 0.8 7.9
Related to Essentiality 2.1 1.3 2.9
No. of replies** 11-26 5-12 0-9 1-3 2-5
Note: “Other (please specify)” not included in the table and calculations.
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed.
**range, different number of replies per question
Implementers
Related to an
Injunction
Related to FRAND Related to
Essentiality
Up to 500,000 euro 22% 0% 0%
From 500,000 euro to 1,000,000 Euro 11% 25% 20%
From 1,000,000 euro to 2,000,000 Euro 33% 0% 60%
From 2,000,000 euro to 3,000,000 Euro 11% 13% 20%
From 3,000,000 euro to 6,000,000 Euro 0% 25% 0%
From 6,000,000 euro to 10,000,000
Euro
11% 0% 0%
From 10,000,000 to 20,000,000 Euro 0% 0% 0%
Above 20,000,000 Euro 11% 13% 0%
Other please specify 0% 25% 0%
No. of replies 9 8 5
Average (EUR millions)* 5.1 7.2 1.6
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed, “Other (please
specify)” not included in average calculations
SEP Holders
Related to an
Injunction
Related to FRAND Related to
Essentiality
Up to 500,000 euro 0% 6% 0%
From 500,000 euro to 1,000,000 Euro 20% 13% 25%
From 1,000,000 euro to 2,000,000 Euro 20% 13% 25%
From 2,000,000 euro to 3,000,000 Euro 20% 6% 0%
From 3,000,000 euro to 6,000,000 Euro 0% 13% 0%
From 6,000,000 euro to 10,000,000
Euro
0% 6% 25%
From 10,000,000 to 20,000,000 Euro 0% 19% 0%
Above 20,000,000 Euro 40% 6% 0%
Other please specify 0% 19% 25%
No. of replies 5 16 4
Average (EUR millions)* 13 7.6 3.4
Note: Holder: those who disagreed, were neutral or had no opinion on Q2 and agreed with Q3
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed, “Other (please
specify)” not included in average calculations
Average* (EUR millions) EU non-EU
Related to an Injunction 4.1 10.8
237
Average* (EUR millions) EU non-EU
Related to FRAND 6.4 9.4
Related to Essentiality 1.3
No. of replies** 6-19 0-5
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the table
and calculations.
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed.
**range, different number of replies per question
“All answers”
Related to an
Injunction
Related to FRAND Related to
Essentiality
Up to 500,000 euro 17% 8% 9%
From 500,000 euro to 1,000,000 Euro 22% 15% 18%
From 1,000,000 euro to 2,000,000 Euro 22% 8% 36%
From 2,000,000 euro to 3,000,000 Euro 11% 8% 18%
From 3,000,000 euro to 6,000,000 Euro 0% 15% 0%
From 6,000,000 euro to 10,000,000
Euro
6% 4% 9%
From 10,000,000 to 20,000,000 Euro 0% 12% 0%
Above 20,000,000 Euro 17% 8% 0%
Other please specify 6% 23% 9%
No. of replies 18 26 11
Average (EUR millions)* 6.6 7.1 2.1
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed, “Other (please
specify)” not included in average calculations
“Companies answers”
Related to an
Injunction
Related to FRAND Related to
Essentiality
Up to 500,000 euro 17% 8% 20%
From 500,000 euro to 1,000,000 Euro 25% 0% 20%
From 1,000,000 euro to 2,000,000 Euro 17% 8% 40%
From 2,000,000 euro to 3,000,000 Euro 17% 8% 20%
From 3,000,000 euro to 6,000,000 Euro 0% 25% 0%
From 6,000,000 euro to 10,000,000
Euro
0% 0% 0%
From 10,000,000 to 20,000,000 Euro 0% 8% 0%
Above 20,000,000 Euro 17% 8% 0%
Other please specify 8% 33% 0%
No. of replies 12 12 5
Average (EUR millions)* 6.4 7.8 1.3
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed, “Other (please
specify)” not included in average calculations
Summary of comments
Most respondents replied that the costs vary depending on the complexity of the specific case (e.g.
the number of patents at issue, the number of jurisdictions where enforcement actions are taking place
etc.), but in general SEP litigation costs are high. One respondent stated that if it is a global FRAND
“war” costs can exceed 75 million dollars. Furthermore, most respondents believe that it is hard (if
not impossible) to determine a response to this question, as companies typically do not maintain data
based on the proposed categorizations (separating costs related to injunctions vs. FRAND vs.
essentiality).
In general, some respondents have acknowledged that the costs are higher in the UK and US than in
Europe.
Q52. What is the average cost of the dispute (advice and litigation costs) in arbitration, excluding
the value of the SEPs licenses and any damages?
238
Average*
EUR millions
All Companies
Association
s/trade
union
Academia/
Authorities/
NGO/other
Citizens
Up to 500,000 euro 11% 18% 0% 0%
From 500,000 euro to 1,000,000 Euro 17% 27% 0% 0%
From 1,000,000 euro to 2,000,000 Euro 22% 9% 50% 40%
From 2,000,000 euro to 3,000,000 Euro 17% 27% 0% 0%
From 3,000,000 euro to 6,000,000 Euro 6% 0% 50% 0%
From 6,000,000 euro to 10,000,000
Euro
6% 0% 0% 20%
From 10,000,000 to 20,000,000 Euro 22% 18% 0% 40%
Above 20,000,000 Euro please specify 0% 0% 0% 0%
No. of replies 18 11 0 2 5
Average (EUR millions)* 4.9 3.8 3.0 8.2
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed
Implementer
s
SEP
Holders
Up to 500,000 euro 0% 0%
From 500,000 euro to 1,000,000 Euro 20% 13%
From 1,000,000 euro to 2,000,000 Euro 40% 25%
From 2,000,000 euro to 3,000,000 Euro 40% 13%
From 3,000,000 euro to 6,000,000 Euro 0% 13%
From 6,000,000 euro to 10,000,000 Euro 0% 0%
From 10,000,000 to 20,000,000 Euro 0% 38%
Above 20,000,000 Euro please specify 0% 0%
No. of replies 5 8
Average (EUR millions)* 1.8 7.0
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed
EU non-EU
Up to 500,000 euro 20% 0%
From 500,000 euro to 1,000,000 Euro 20% 33%
From 1,000,000 euro to 2,000,000 Euro 10% 33%
From 2,000,000 euro to 3,000,000 Euro 30% 0%
From 3,000,000 euro to 6,000,000 Euro 10% 0%
From 6,000,000 euro to 10,000,000 Euro 0% 0%
From 10,000,000 to 20,000,000 Euro 10% 33%
Above 20,000,000 Euro please specify 0% 0%
No. of replies 10 3
Average (EUR millions)* 3.1 5.8
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
* Weighted average calculated using the middle of ranges, for the last open range value of EUR 30 million assumed
Summary of comments
Most respondents replied that the costs vary depending on the case. Some respondents explain that
arbitration is not necessarily cheaper than court proceedings. Other respondents argue that when the
parties agree to arbitration, they narrow the scope of what is actually in dispute. This reduces the cost
and the time.
One respondent took the opportunity to comment that arbitration or mediation is not an effective
resolution mechanism in SEP disputes. First, arbitration lacks the formal scaffolding of rules that
apply in court, allowing for a wide range of effectively ad hoc judgments. Second, arbitrations do
not generate transcripts or publicly available opinions, so therefore provide little guidance for future
disputes.
239
Q53. How would you assess the use of mediation for FRAND assessments?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Not useful 16% 21% 0% 0% 33%
Neutral 38% 35% 50% 44% 33%
Useful 35% 32% 33% 56% 17%
Other, please specify 11% 12% 17% 0% 17%
No. of replies 55 34 6 9 6
Note: “No opinion” answers not taken into account
Implementers
SEP
Holders
Not useful 13% 27%
Neutral 50% 27%
Useful 17% 47%
Other, please specify 21% 0%
No. of replies 24 15
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
Not useful 13% 17%
Neutral 39% 39%
Useful 42% 28%
Other, please specify 6% 17%
No. of replies 31 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
Mediation can help to limit the number of issues for later adjudication if the parties cannot resolve
the dispute consensually and can be seen as a sign of good faith in negotiations. Many respondents
find that mediation can be a useful tool only in a situation where both parties are acting in good faith
and are willing to conclude a FRAND licence, and where only FRAND terms are subject of the
mediation process and no other or few other issues are in dispute.
Some respondents underline that mediation can be useful if it is conducted by an experienced
mediator who would be able to identify each party’s strengths and weaknesses or in cases whether
one or both parties do not have the required expertise to assess licensing conditions appropriately. To
make mediation more effective, some respondents consider providing the mediator with a more active
role (e.g., the possibility to review and assess comparable licenses) or potentially attaching certain
effects to the outcome of the mediation on the further negotiations or litigation between the parties.
However, it has been also held that the non-binding nature of mediation might affect the effectiveness
of this procedure, as well as the fact that due to the complexity of SEP disputes, mediation can be a
process with a low likelihood of a conclusive outcome. Transparency, predictability and creditability
of mediation might be lower than the court's decisions that can deal with SEPs.
Almost all respondents agree that the use of mediation should be voluntary and not imposed upon the
parties. Moreover, a respondent finds that a party that chooses not to participate in ADR should not
be considered ‘unwilling’ on that basis.
A few respondents with mediation experience in FRAND cases report that none of them was
successful or led to a resolution of the dispute. In their view, larger entities tend to prefer litigation
240
in their negotiation process. In general, mediation is perceived as useful that helps to clarify each
party’s position because mediation allows parties to put aside some negotiation posturing.
Some respondents argue that ADR would only prolong the negotiations.
Q54. How would you assess the use of arbitration for FRAND assessments?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Not useful 14% 18% 25% 0% 0%
Neutral 33% 39% 25% 13% 33%
Useful 53% 43% 50% 88% 67%
Other, please specify 0% 0% 0% 0% 0%
No. of replies 43 28 4 8 3
Note: “No opinion” answers not taken into account
Implementers
SEP
Holders
Not useful 31% 8%
Neutral 38% 15%
Useful 31% 77%
Other, please specify 0% 0%
No. of replies 16 13
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
Not useful 9% 22%
Neutral 32% 33%
Useful 59% 44%
Other, please specify 0% 0%
No. of replies 22 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
For almost all respondents, arbitration (or for some respondents ADR in general) may be appropriate
albeit only in situations where both parties are voluntarily interested in solving the dispute or limit
the contested issues between them and are able to agree on an appropriate process. It is clear for all
respondents that arbitration should not be mandated, some respondents find that the decision to enter
into arbitration or not should not be used as an indication of willingness or reasonableness because
parties should always have the option to resolve a dispute in the competent court. It has been stressed
that there is no one-size-fits-all approach appropriate in all circumstances. Some respondents point
to the fact that arbitration is also not necessarily faster or less costly than litigation. Some respondents
even see limited value in arbitration as it can be used to create further delay in negotiations, while
portraying to be “willing”. It may for example be used for hold-out purposes.
Some respondents observe that since arbitration requires both parties to agree to it, it is unfortunately
rarely used to settle FRAND disputes as it is often difficult to agree to the terms under which it will
be conducted. Also, respondents find that due to the complexity of SEP disputes it is important that
the arbitrators and institutes appointed have experience in dealing with these types of disputes, as
well as handling technical issues.
241
Arbitration is also seen as unfit to contributing to a wider understanding of FRAND, including
because the proceedings are confidential. Arbitration may not compel discovery of third parties.
Arbitrators are faced with the absence of clear rules, which will result in unsatisfactory decisions that
are not subject to appeal.
Other respondents find that the ‘portfolio component’ of SEP negotiation renders arbitration
particularly helpful as proceedings can be shaped in a way to address these disputes at once, thus
avoiding parallel litigation. Arbitration would also allow the parties to resolve FRAND value without
having to deal with issues such as infringement, validity, or essentiality of individual patents.
However, respondents report that lack of transparency and no right to appellate review would affect
confidence in the usefulness of arbitration. Moreover, arbitration might advantage large market
players as they have the financial and knowledge resources. Some respondents even suggest that it is
almost impossible to find good arbitrators in patent matters. One respondent argued that arbitrating
SEP licensing disputes requires a high level of expertise in a variety of fields, including patent
technology, patent law, and commercial (non-SEP) licensing.
Q55. What would be a credible independent arbitration body for making FRAND assessments?
All
Compa-
nies
Associations
/trade union
Academia/
Authorities
/NGO
/other
Citizens
WIPO Arbitration and Mediation Center 57% 54% 33% 67% 63%
(the future) Patent Mediation and Arbitration Centre of
the Unified Patent Court
45% 46% 33% 44% 50%
The International Court of Arbitration of the
International Chamber of Commerce (“ICC”)
43% 46% 33% 56% 25%
An independent EU body designated to conduct this
function
39% 46% 0% 22% 50%
The London Court of International Arbitration
(“LCIA”)
27% 25% 33% 33% 25%
An ad hoc arbitration from a list of impartial arbitrators
endorsed by a public authority
11% 8% 0% 0% 38%
Other (please specify) 23% 17% 33% 33% 25%
No. of replies 44 24 3 9 8
Note: multiple answers possible
Implementers
SEP
Holders
WIPO Arbitration and Mediation Center 69% 43%
An independent EU body designated to conduct this function 56% 21%
(the future) Patent Mediation and Arbitration Centre of the Unified Patent Court 44% 43%
The International Court of Arbitration of the International Chamber of Commerce
(“ICC”)
31% 64%
An ad hoc arbitration from a list of impartial arbitrators endorsed by a public authority 25% 7%
The London Court of International Arbitration (“LCIA”) 19% 29%
Other (please specify) 25% 14%
No. of replies 16 14
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; Holder: those who disagreed,
were neutral or had no opinion on Q2 and agreed with Q3; multiple answers possible
EU non-EU
WIPO Arbitration and Mediation Center 63% 42%
(the future) Patent Mediation and Arbitration Centre of the Unified Patent Court 54% 25%
242
EU non-EU
The International Court of Arbitration of the International Chamber of Commerce
(“ICC”)
50% 42%
An independent EU body designated to conduct this function 46% 17%
The London Court of International Arbitration (“LCIA”) 21% 42%
An ad hoc arbitration from a list of impartial arbitrators endorsed by a public authority 4% 8%
Other (please specify) 8% 50%
No. of replies 24 12
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; multiple answers possible
Summary of comments
The majority of respondents find that any existing arbitration body agreed to by both parties should
provide a credible FRAND assessment. A credible independent arbitration body for making FRAND
assessments should have substantial experience handling large, complex, international disputes. In
general, to maintain equity in the process, arbitration bodies that are independent and non-
governmental will generally be preferable to bodies that are affiliated with national or multi-national
governmental bodies. Costs should be affordable to SMEs. Some respondents caution against
recommending or designating any particular arbitration body as one that must be used for SEP
licensing disputes. Parties should be able to voluntarily choose arbitration bodies based on their needs
and common agreement.
For most respondents ICC and LCIA meet the important qualifications. The ICC and LCIA have
extensive experience in dealing with large, complex, commercial disputes. As such, they presently
stand as the most credible bodies (in the above list) for FRAND disputes, which are functionally
commercial in nature. Depending on the parties and issues, these potentially could include WIPO,
and others, such as JAMS or ICDR. Some respondents show preference for WIPO as it is specialized
in IP and technology disputes. The Singapore International Arbitration Centre (“SIAC”), the Hong
Kong International Arbitration Centre (“HKIAC”), and the International Arbitration Center in Tokyo
(“IACT”) have also been mentioned. The qualities of the arbitrators are highly critical for addressing
SEP licensing disputes through arbitration.
One respondent indicated that the WIPO Arbitration and Mediation Centre would offer a platform
specifically tailored for FRAND disputes giving parties leeway to shape the procedure and even
avails a database of more than 2000 neutral experts for parties to choose from. Regarding
incentivising arbitration, there would be a government-led initiative in the US i.e. Protecting
American Innovation and Development Bill of 2021, seeking to formalise an approach where a
refusal to arbitrate could be regarded as unwillingness.
One respondent argues that members of SDOs, either in disputes between themselves or in disputes
with third parties like implementers, should be required to resort to ADR mechanisms prior to any
court litigation. For example, a “board of experts” could be established at the SDO level. Some SDOs
have introduced an obligation to use arbitration in their IPR policies. The Geneva based DVB (Digital
Video Broadcasting Group) has had such a policy in place for close to 30 years. To date it has never
been used.
Other respondents do not consider SDOs as a suitable body to resolve this kind of commercial
disputes. Not all parties to a licensing negotiation are members of SDOs. Furthermore, access to
courts is a fundamental right (Article 47 EU Charter) and needs to remain available.
Some respondents argue that expert boards may be better positioned to evaluate a FRAND value for
a licence than courts since finding a FRAND value for a licence is an economic rather than a legal
243
matter. Such expert panels can quickly and effectively provide a reasoned assessment without being
bound by requests for evidence.
Other respondents note that ad hoc arbitration is unrealistic given the already existing difficulty of
parties agreeing the terms of arbitration under the rules of a recognized arbitration institute.
Nevertheless, a public list of impartial arbitrators with experience in FRAND disputes would be
useful and could be used for selecting arbitrators by existing arbitration institutes or the parties to the
proceedings.
Q56. What would be appropriate procedural rules for arbitration of FRAND disputes?
All
Compa-
nies
Associations
/trade union
Academia/
Authorities/
NGO/other
Citizens
ICC Rules of Arbitration of the International Court of
Arbitration
47% 48% 50% 38% 50%
The rules of the WIPO Arbitration and Mediation Center 47% 48% 25% 50% 50%
The rules agreed by the parties ad hoc 37% 40% 50% 25% 33%
The FRAND ADR case management guidelines proposed
by the Munich IP Dispute Resolution Forum
21% 24% 0% 25% 17%
United Nations Commission on International Trade Law
(“UNCITRAL”) Arbitration Rules
16% 12% 0% 25% 33%
Other (please specify) 33% 32% 25% 50% 17%
No. of replies 43 25 4 8 6
Note: multiple answers possible
Implementers
SEP
Holders
The rules agreed by the parties ad hoc 63% 33%
The rules of the WIPO Arbitration and Mediation Center 47% 25%
ICC Rules of Arbitration of the International Court of Arbitration 37% 58%
The FRAND ADR case management guidelines proposed by the Munich IP Dispute
Resolution Forum
21% 8%
United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration
Rules
16% 0%
Other (please specify) 32% 25%
No. of replies 19 12
Note: Implementer: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; Holder: those who disagreed,
were neutral or had no opinion on Q2 and agreed with Q3; multiple answers possible
EU non-EU
The rules of the WIPO Arbitration and Mediation Center 50% 38%
ICC Rules of Arbitration of the International Court of Arbitration 46% 46%
The rules agreed by the parties ad hoc 42% 31%
The FRAND ADR case management guidelines proposed by the Munich IP Dispute
Resolution Forum
25% 15%
United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration
Rules
8% 23%
Other (please specify) 21% 62%
No. of replies 24 13
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; multiple answers possible
Summary of comments
Many respondents suggested ICC or LCIA (even though it was not included in the list) as preferred
rules in this type of context (and WIPO, if WIPO is used). Some respondents even suggested that the
Commission should make guidelines for these types of litigations. Also, one respondent highlighted
244
that as SEPs are more widely used within vertical markets new arbitration bodies with particular
sector expertise and appropriate procedural rules may come into being. Another respondent replied
that if the Commission decides to have independent expert boards they should be hosted by existing
institutions (like WIPO, EUIPO etc.) and the experts appointed in such cases should preferably be
licensing experts and economists.
Other respondents mean that the biggest freedom possible should be allowed for the parties. When
both parties agree to make use of arbitration, they should remain free to agree between themselves
on the most appropriate arbitration body and also related procedural rules for their purpose. Still, it
would be important for those rules not to shortcut validity or essentiality assessments.
Most respondents deem it crucial that whatever arbitration rules are used (WIPO, ICC, LCIA,
UNCITRAL etc.), the procedures established by the tribunal for the specific FRAND dispute at hand
allow for detailed consideration of the merits of the IP at issue, provide sufficient opportunity for
discovery, and allow each party a reasonable opportunity to present the arguments and evidence it
deems relevant to the tribunal’s assessment.
Q57. How could arbitration be incentivised for making a FRAND assessment?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities
/NGO
/other
Citizens
Create a list of trusted arbitrators 48% 46% 33% 44% 71%
Consider agreement to arbitrate and to accept outcome of
arbitrator’s determination of royalty rate as an indication that the
party is “willing” to license
44% 38% 17% 67% 63%
Consider agreement to arbitrate and to accept outcome of
arbitrator’s determination of royalty rate as an indication that the
party is “willing” to license but explicitly providing for a review
of any such FRAND assessment, if a court later finds some of
the patents non-essential or invalid.
27% 21% 17% 75% 13%
SDOs to introduce such an obligation to use arbitration in their
IPR policies
18% 17% 14% 20% 25%
No. of replies* 50-55 28-30 6-7 8-10 7-8
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
Create a list of trusted arbitrators 25% 81%
Consider agreement to arbitrate and to accept outcome of arbitrator’s determination of
royalty rate as an indication that the party is “willing” to license
18% 50%
Consider agreement to arbitrate and to accept outcome of arbitrator’s determination of
royalty rate as an indication that the party is “willing” to license but explicitly
providing for a review of any such FRAND assessment, if a court later finds some of
the patents non-essential or invalid.
14% 13%
SDOs to introduce such an obligation to use arbitration in their IPR policies 13% 7%
No. of replies* 20-23 14-16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
Create a list of trusted arbitrators 50% 35%
Consider agreement to arbitrate and to accept outcome of arbitrator’s determination of
royalty rate as an indication that the party is “willing” to license
29% 63%
245
“Agree and strongly agree” answers only EU non-EU
Consider agreement to arbitrate and to accept outcome of arbitrator’s determination of
royalty rate as an indication that the party is “willing” to license but explicitly
providing for a review of any such FRAND assessment, if a court later finds some of
the patents non-essential or invalid.
25% 40%
SDOs to introduce such an obligation to use arbitration in their IPR policies 10% 29%
No. of replies* 26-30 15-17
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent. “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
“All answers” Agree Neutral Disagree No.
Create a list of trusted arbitrators 48% 20% 32% 50
Consider agreement to arbitrate and to accept outcome of arbitrator’s
determination of royalty rate as an indication that the party is “willing” to
license
44% 21% 35% 52
Consider agreement to arbitrate and to accept outcome of arbitrator’s
determination of royalty rate as an indication that the party is “willing” to
license but explicitly providing for a review of any such FRAND assessment,
if a court later finds some of the patents non-essential or invalid.
27% 18% 55% 51
SDOs to introduce such an obligation to use arbitration in their IPR policies 18% 20% 62% 55
Other (please specify) 100% 0% 0% 4
Note: Agree composes of “Agree” and “Strongly agree”; “No opinion” answers not taken into account
“Companies answers” Agree Neutral Disagree No.
Create a list of trusted arbitrators 46% 21% 32% 28
Consider agreement to arbitrate and to accept outcome of arbitrator’s
determination of royalty rate as an indication that the party is “willing” to
license
38% 21% 41% 29
Consider agreement to arbitrate and to accept outcome of arbitrator’s
determination of royalty rate as an indication that the party is “willing” to
license but explicitly providing for a review of any such FRAND assessment,
if a court later finds some of the patents non-essential or invalid.
21% 10% 69% 29
SDOs to introduce such an obligation to use arbitration in their IPR policies 17% 20% 63% 30
Other (please specify) 0
Note: Agree composes of “Agree” and “Strongly agree”; “No opinion” answers not taken into account
Summary of comments
Some respondents find that creating incentives for parties to resolve differences in arbitration could
have positive effects. If the methodology of FRAND assessment is publicly available it may
incentivise arbitration. Moreover, arbitration that is known to be swift, neutral, transparent,
reasonably priced and of high quality would incentivise its use and speed up licensing agreements.
Arbitration can be effective to achieve global SEP licensing resolution. Some respondents find that
not only incentivising arbitration may be appropriate but that also an offer or refusal to arbitrate could
be taken into account in assessing willingness to conclude a license. However, this would apply if
the agreement to arbitrate is reasonable and complete and if there is an agreement to take a license at
the terms decided by such arbitration. Some respondents observed that otherwise arbitration might
lead to delay in negotiations.
However, other respondents reject the idea of mandating arbitration. ADR should be incentivised
with caution, avoiding penalising a refusal to agree to arbitration as an indication of unwillingness or
unreasonableness, since parties should retain the right to seek redress in courts. Moreover, the
willingness to enter a license agreement must be explicitly declared. Mandatory arbitration may
circumvent built-in safeguards against a potential licensee having to license non-essential, invalid or
non-infringed patents, in circumstances where very few litigated patents meet all these criteria. Some
246
respondents indicate that mandatory arbitration may affect the fundamental right of access to
justice/court and the national jurisdictions to rule over national, public rights associated with each
patent. They emphasise that parties should be able to choose voluntarily arbitration and arbitration
bodies based on their needs and common agreement, and prescription of any particular process may
be inappropriate.
Some respondents are against incentivising arbitration or ADR in general as well as against
recommending or designating any particular arbitration body as one that must be used for SEP
licensing disputes. It is argued that it may be contributing to reducing transparency and predictability
of outcomes.
Some respondents argue that an arbitration award that is subject to review based on future invalidity
or non-infringement would be appropriate only in portfolios involving few patents and even then, if
the arbitrators are obligated to presume that all of the patents are proven valid and infringed in making
their award. Otherwise, a reassessment of the award would negate the arbitration at significant cost.
Q58. What transparency requirements should be attached to arbitration on FRAND assessments?
“Agree and strongly agree” answers only All
Compa-
nies
Associa-
tions/
trade
union
Academia/
Authorities/
NGO/other
Citizens
The arbitral tribunal shall disclose the methodology used for the
calculation of a FRAND rate
86% 77% 100% 89% 100
%
Information on specific licensing rates but no third-party
confidential information or other party confidential information
shall be disclosed
66% 56% 86% 78% 75%
Information on the name of the parties and patent registration and
application numbers
58% 52% 71% 56% 75%
No. of replies* 55-56 31-32 7-8 9 8
Note: “Other (please specify)” not included in the table; “No opinion” answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only Implementers
SEP
Holders
The arbitral tribunal shall disclose the methodology used for the calculation of a
FRAND rate
100% 73%
Information on specific licensing rates but no third-party confidential information or
other party confidential information shall be disclosed
92% 29%
Information on the name of the parties and patent registration and application numbers 75% 21%
No. of replies* 24-25 14-15
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “Other (please specify)” not included in the table; “No opinion”
answers not taken into account
*range, different number of replies per question
“Agree and strongly agree” answers only EU non-EU
The arbitral tribunal shall disclose the methodology used for the calculation of a
FRAND rate
83% 83%
Information on specific licensing rates but no third-party confidential information or
other party confidential information shall be disclosed
65% 65%
Information on the name of the parties and patent registration and application numbers 50% 65%
No. of replies* 30-31 17-18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “Other (please specify)” not included in the
table; “No opinion” answers not taken into account
*range, different number of replies per question
247
“All answers” Agree Neutral Disagree No.
The arbitral tribunal shall disclose the methodology used for the calculation of
a FRAND rate
86% 5% 9% 56
Information on specific licensing rates but no third party confidential
information or other party confidential information shall be disclosed
66% 2% 32% 56
Information on the name of the parties and patent registration and application
numbers
58% 15% 27% 55
Other (please specify) 86% 0% 14% 7
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
“Companies answers” Agree Neutral Disagree No.
The arbitral tribunal shall disclose the methodology used for the calculation of
a FRAND rate
77% 10% 13% 31
Information on specific licensing rates but no third party confidential
information or other party confidential information shall be disclosed
56% 3% 41% 32
Information on the name of the parties and patent registration and application
numbers
52% 23% 26% 31
Other (please specify) 100% 0% 0% 1
Note: Agree composes of “Agree” and “Strongly agree”; Disagree composes of “Disagree” and “Strongly disagree”; “No opinion”
answers not taken into account
Summary of comments
Some respondents find that it is in public interest to disclose all the details of FRAND arbitration and
publish awards related to SEPs, especially regarding royalty rates. Every decision increases the
transparency of the SEP landscape and provides benchmarks for potential licensees to assess whether
a given licence offer is FRAND. The new framework for SEPs should ensure that data on essentiality,
validity, and FRAND-ness of licences continue to enter the public domain also when disputes are
adjudicated by arbitrators.
The majority of respondents find that transparency in an arbitration body’s approach and
methodology would be important to contribute to a broader understanding of FRAND terms and
could aid in comparability exercises. SEP licensing information should be transparent, but at the same
time, confidentiality is an important advantage of arbitration which should be preserved to strike a
balance.
Some respondents indicate, however, that disclosure of specific licensing rates is unlikely to be
helpful without confidential information, as various confidential factors will likely be taken into
account in determining the rates; thereby limiting the usefulness of this disclosure to those without
access to the confidential information (such as commercial information of sensitive nature). Any
obligation to disclose rates would make arbitration less attractive and thereby discourage arbitration
as a method to resolve FRAND disputes. Disclosure of royalty rates or lump sum royalty payments
may not be sufficient as those can be incorrectly interpreted if relevant aspects of the decision are not
also considered in analysing the resulting award.
There should not be transparency requirements on arbitration unless arbitration is mandatory. If
arbitration is mandatory, then transparency obligations modelled on those of courts (i.e., general
public disclosure with an opportunity to protect confidential information) may be appropriate.
However, mandatory application of arbitration rules undermines the broadly accepted public legal
system.
248
Q59. Should it be possible to request authorities to “report” on imports of unlicensed products, if
some conditions are fulfilled?365 This does not concern detentions of imports under the regular
intellectual property rights’ enforcement procedures by customs.
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Yes 31% 27% 14% 43% 60%
No 53% 57% 71% 43% 20%
Depends (please
explain)
16% 17% 14% 14% 20%
No. of replies 49 30 7 7 5
Note: “No opinion” answers not taken into account
Implementers
SEP
Holders
Yes 8% 53%
No 88% 13%
Depends (please explain) 4% 33%
No. of replies 24 15
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
Yes 24% 33%
No 55% 60%
Depends (please explain) 21% 7%
No. of replies 29 15
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
Some respondents find this solution somewhat useful, as they would provide an indication of the
scope of the ongoing infringement. In theory this could, with the right framework and procedures,
help identify imports of unlicensed products. Such a measure could be a useful complement to the
licensors’ own efforts in screening the market for unlicensed products and would be helpful in
ensuring a level playing field for good-faith implementers. Some note that if licensing takes place at
end-product level, it should be ensured that the import of unlicensed components is not reported.
The majority of respondents find that authorities should not be entrusted with reporting on imports
of unlicensed products. Such information can already be obtained through a court proceeding
adjudicating the merits with appropriate safeguards in place. The European Commission should
promote the protection of intellectual property, the licensing thereof and a global level-playing-field
for (European) implementers who have taken licenses. However, a list of unlicensed products being
imported into the European Union would require a detailed legal and technical analysis to determine
whether a product is “unlicensed” or counterfeit. The verification by authorities that unlicensed
products are being imported may be more difficult than proving counterfeit products. It is
questionable whether public authorities, such as custom offices, are in a position to determine
whether a given product implements a particular SEP, and whether this SEP is in fact essential and
valid. It also would require significant administrative effort not only by authorities but also by
365
Such conditions could for example be a proof that a SEP holder asked an implementer to take a licence, provided the
necessary information on the SEPs concerned and its FRAND terms and conditions and the implementer did not respond.
249
importers that would ultimately negate any potential benefit of such an endeavour. It is also unclear
why such reporting would be reserved to SEPs as opposed to other patents.
Other respondents caution that it would not be clear how this would work or how it would not be
open to abuse for obtaining commercially sensitive information on imports. It would be further
unclear who would determine if a license offer is FRAND compliant and how the FRAND terms and
conditions would be judged. Further, since product distribution information is generally
commercially available, the proposed report may not meaningfully provide additional information to
SEP holders or improve SEP licensing. The only conceivable purpose of such reports could be to
stop such imports, i.e. to effectively enforce an injunction. That should only ever be possible in the
context of legitimately enforcing an injunction issued by a court. Additionally, there would be no
justification for treating SEPs differently from non-SEPs in this respect.
Some respondents also warn that such reporting should not include the right to seize goods. To
minimize the risk of a company being unfairly targeted by such reporting and to encourage a more
balanced playing field, maybe the “reports” could also be shared in some way with the unlicensed
implementer (if it desires to receive such information) to demonstrate that others are licensed.
Respondents note that Regulation No 608/2013 concerning customs enforcement of intellectual
property rights currently entitles customs authorities to detain unlicensed products. It is therefore
unclear what this proposal envisages in addition to current EU rules. Although border seizures follow
specific rules that take into consideration both the implementer’s and SEP holder’s interests, it has
been observed that border detentions would de facto be injunctions enforced by customs authorities,
and as such highly problematic when enforced in relation to SEPs for which a FRAND commitment
has been provided.
It is unclear to what extent a report might encourage good licensing behaviour. Another possibility
could be to create a parallel route for enforcement through an administrative measure such as an EU-
wide customs embargo, based on an administrative finding of essentiality or a national court finding
of infringement.
Q60. Would a positive list of licensed implementers be important?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Important 43% 46% 0% 56% 50%
Neutral 19% 20% 33% 11% 13%
Not important 38% 34% 67% 33% 38%
No. of replies 58 35 6 9 8
Note: Important composes of “Very important” and “Important”; Not important composes of “Not so important” and “Not
important”;
Implementers
SEP
Holders
Important 35% 36%
Neutral 15% 29%
Not important 50% 36%
No. of replies 26 14
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3.
EU non-EU
Important 41% 44%
Neutral 19% 22%
250
EU non-EU
Not important 41% 33%
No. of replies 32 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent.
Summary of comments
Some respondents support the idea of a positive list. Such a list would enable to select only those
suppliers having a license, thus reducing the exposure to patent-related risk. It may also identify
competitors that are not licensed, incentivize other implementers to take a license as it would be
public that they are unlicensed, helping to ensure that no company is at a relative disadvantage. Such
a list would enhance the reputation of the listed companies for respecting IP rights and making clear
to more reluctant potential licensees that they cannot resist licensing on the basis that their
competitors are not licensed. It would also help authorities to observe if implementers are holding
out.
It was also mentioned that such a list would enable SMEs and start-ups to determine whether or not
taking a license would be a competitive advantage or disadvantage. Such list would help to determine
which portfolios should be regarded as established and needed in the industry.
Some respondents take a more cautious approach, arguing that a list would help licensing parties
determine a risk of double dipping. It is also observed that such lists are often provided by patent
pools, unless both parties agreed otherwise. In the context of a patent pool, it would be easy to
generate such a list of licensed implementers because the licensing point is identical. In that case,
having a list of licensed implementers can help SEP holders and good-faith implementers to monitor
the licensing situation to ensure a levelled playing field in the market. For bilateral licenses, on the
other hand, it would be more difficult as licensees tend to not want to disclose their license status.
This may be so because having such a list would incentivize more SEP holders to initiate license
discussions with them.
Some respondent’s question the basis of a positive list. It is unclear whether the positive list should
be prepared by the SEP holder or the implementer and what the aim of such list should be. And even
if these problems were resolved, question arise, whether this list would be constituted voluntarily or
mandatory. The other question is whether such a list would be compatible with the NDAs put in
place.
Some respondents note that there is also a question about the information needed to properly
understand such a list (e.g., licensed product scope, licensed patent scope, licensed geographical
scope, current or expired license, etc.). They also explain that in theory this may be helpful, however
in practise difficult to keep up to date and costly to maintain. The focus should be on reducing the
complexity and barriers to licensing encourage the use of SEPs.
Some note that it could be useful if such a list was created for "licensed products", instead of "licensed
implementers".
Q61. If infringement of SEP is confirmed, the court may (i) order an injunction for the future and (ii)
grant damages for the past. The injunction for the future would in principle lead the infringer to take
a licence, if it wants to continue to sell its products. In that context, should the court be empowered
(under certain conditions – see following question) to order the parties to submit any disagreement
on the FRAND terms and conditions to arbitration.
251
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Yes 17% 18% 0% 25% 20%
No 68% 74% 100% 38% 40%
Depends (please
explain)
15% 9% 0% 38% 40%
No. of replies 53 34 6 8 5
Note: “No opinion” answers not taken into account
Implementers
SEP
Holders
Yes 16% 14%
No 72% 71%
Depends (please explain) 12% 14%
No. of replies 25 14
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion” answers not taken into account
EU non-EU
Yes 13% 22%
No 77% 61%
Depends (please explain) 10% 17%
No. of replies 30 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “No opinion” answers not taken into account
Summary of comments
The majority of respondents find that courts should not be able to order the parties to submit any
disagreement on the FRAND terms and conditions to arbitration under any conditions. Arbitration
should remain voluntarily and only upon a mutual agreement of the parties concerned. When an
injunction is obtained, arbitration or negotiation under the threat of enforcement of an injunction
raises issues of fairness.
Courts should not be able to order the parties to submit disagreements on FRAND terms to arbitration,
as that would effectively preclude access to the court. Parties remain free to resolve their dispute by
the court. However, if either party does not accept arbitration of FRAND terms during licensing
negotiations, such may be an indication of bad faith with corresponding consequences under Huawei
v ZTE.
It has also been argued that the question of "empowering the court to submit a disagreement to
arbitration" is well beyond the remit of the European Commission's competencies. For some
respondents, arbitration can be useful when both parties are acting in good faith with a view to
conclude a license agreement and only a specific, limited set of open items remain. Some find it
confusing why arbitration would be a useful tool in a situation where a court is already adjudicating
a case. Furthermore, this idea raises many potential issues (legal basis, right of access to courts, what
arbitration rules, confidentiality to name just a few) and does not seem to solve a specific problem.
Furthermore, ADR is not useful when parties disagree on virtually all terms and conditions. Finally,
the process whereby both courts and arbitration panels have to work on the same case, would
substantially increase the cost of a FRAND adjudication.
Generally, if the court is issuing an injunction, such an implementer has already been deemed
unwilling, which also presupposes that the SEP-holder’s offer was FRAND. Thus, a further
arbitration would be a waste of resources. It was observed that referring to arbitration at least to
252
determine FRAND royalties would be an unreasonable burden for the SEP holder, and further hold-
out tactics.
It has been argued on the other hand that the possibility for national courts to refer disputes regarding
FRAND-terms to arbitration could alleviate this problem and help to overcome the reluctance of
some national courts to review/set FRAND-terms themselves.
Some respondents propose that the court should not be obliged to refer the parties to arbitration but
should be able to refer them to a state mediation body staffed with independent experts. This body
should not be allowed to make a binding decision on the dispute but should be required to issue a
vote in favour of an agreement that is justified in the same way as an expert opinion. Then there is a
good chance that the parties will agree to it. If they do not agree, the vote can be used like an expert
opinion in the proceedings to be continued. This would be similar to the procedure before the
arbitration boards at the German Patent and Trademark Office for employee inventor compensation
and for copyright compensation under the German Collecting Societies Act.
Q62 Under what conditions should the court be able to order the parties to submit any disagreement
on the FRAND terms and conditions to arbitration?
Summary of comments
Respondents argue that Huawei v ZTE provides clarity on when injunctions are available to SEP
holders against unwilling licensees. It has also been referred to the CJEU decision in Phoenix Contact
v Harting on the availability of preliminary injunctions under EU law. Issues with the TRIPs
Agreement EU Charter of fundamental Rights have been raised. Extra procedural layers do not make
an efficient SEP licensing ecosystem. A SEP holder has a right to access the courts. The parties can,
during court proceedings, agree to mediation, arbitration, or to conclude a commercial agreement.
As with the previous question almost all respondents indicate that neither party in litigation should
be forced into arbitration. Some of the respondents reiterate the lack of clarity of the exact problem
that such a dual procedure would solve and how the many legal challenges attached to this exercise
could be addressed. Such a measure would deprive the judicial system of its function and, in
particular, would deprive the parties of the availability of remedies. It is not desirable to make private
justice compulsory; it must remain optional and at the choice of the parties.
Respondents that find a referral to arbitration not per se excluded observe the following: A competent
court should be able to take such an action if there is reasonable doubt about FRAND-ness and a lack
of clarity about the license agreement offered by the SEP holder. Obviously, arbitration needs to be
done under NDA. The decision made in arbitration should also be legally binding on the parties to
truly end the dispute. The first condition should be that the court has determined that the patent in
question is a true SEP and that it is valid. The second condition should be that parties at least have
undertaken reasonably efforts to reach an agreement about a FRAND license, but that a certain gap
remained which could have not been solved in the litigation process.
It has been also held that once a SEP holder has obtained an injunction, its bargaining power increases
significantly, and neutral arbitrators could be a means to focus on the value of the SEPs rather than
determining royalties based on the enhanced bargaining power from the injunction.
Some respondents point out that some countries already have the discretion or even an obligation to
offer or order mediation at certain points in the litigation process. Given the consensual nature of
mediation and associated costs, inviting the parties to consider mediation may be viewed as the
preferred approach. However, what is key is that any court facilitated mediation takes place under
253
the guidance of a neutral expert FRAND mediator, in order to maximize the prospect for a conclusive
outcome or an effective narrowing of the issues.
Q63. If a SEP holder refuses to make a FRAND offer (for whatever reason), should the implementer
be empowered to request a court to rule on the legality of the refusal?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Yes 75% 63% 86% 100% 89%
No 14% 22% 14% 0% 0%
Depends (please
explain)
11% 16% 0% 0% 11%
No. of replies 57 32 7 9 9
Note: “No opinion” answers not taken into account
Implementers
SEP
Holders
Yes 96% 33%
No 4% 40%
Depends (please explain) 0% 27%
No. of replies 28 15
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion” answers not taken into account
EU non-EU
Yes 75% 69%
No 22% 6%
Depends (please explain) 3% 25%
No. of replies 32 16
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “No opinion” answers not taken into account
Summary of comments
Many respondents confirm the possibility pointing out that this would be the current law.
Some respondents observe that FRAND commitment requires SEP holders to make a FRAND
licence offer to any willing licensee, regardless of its position in the supply chain or any other feature
of a licensee. It is argued that the rules of most SSOs do not include any qualification of potential
licensees or an explicit (or implicit) limitation to the catalogue of parties that can benefit from the
FRAND commitment. At the contractual level, the FRAND commitment raises the legitimate
expectation on part of third parties that a SEP holder will in fact grant licences on FRAND terms. At
the competition law level, refusal to license SEPs may violate Articles 101 and 102 TFEU (see
Huawei vs. ZTE, para. 54).
Other respondents hold that the fundamental right of access to justice in the EU does not imply that
there is a positive obligation to offer a license to all implementers. Courts should be empowered to
rule on cases where a SEP holder refuses to offer a licence and determine if the SEP owners’
behaviour is in line with its FRAND commitment. Courts should have the discretion and latitude to
determine whether a refusal to offer a licence is legitimate. A user of the standard should also be
empowered to ask the court for a ruling that the SEP holder must agree to a specific licensing
agreement as found to be FRAND by the court. But it also been stated that where a patent holder is
not asserting its SEPs against a party, there is no harm from the refusal to make a FRAND offer to
that party.
254
Some respondents argue that the new framework for SEPs should expressively confirm that the SEP
implementer has the right to request a court to rule on the legality of the refusal and grant a
compulsory licence.
One respondent cites § 315 of the German Civil Code. Under this mechanism, a willing licensee may
leave the actual license terms to be set by SEP holder and – unless the willing licensee agrees to the
SEP holder’s suggestion – the terms would be finally determined by a court. This mechanism requires
the consent of both parties but minimizes the dispute in comparison to “full” infringement litigation
with a FRAND defence. It focuses the dispute on finding FRAND license terms, and it avoids the
risk of an injunction. However, each party, on its own, should be able to file an action for
determination of FRAND license terms before a court.
Q64. Would you agree that efficient SEP licensing would also foster innovations by implementers,
including start-ups and SMEs?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Yes 66% 61% 29% 89% 89%
No 5% 8% 0% 0% 0%
There is no direct link 15% 11% 43% 11% 11%
Other (please specify) 15% 19% 29% 0% 0%
No. of replies 61 36 7 9 9
Note: “No opinion” answers not taken into account
Implementers
SEP
Holders
Yes 70% 56%
No 4% 0%
There is no direct link 7% 25%
Other (please specify) 19% 19%
No. of replies 27 16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion” answers not taken into account
SME Large
Yes 60% 63%
No 0% 9%
There is no direct link 30% 6%
Other (please specify) 10% 22%
No. of replies 20 32
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion” answers not taken into account
EU non-EU
Yes 70% 47%
No 3% 11%
There is no direct link 15% 16%
Other (please specify) 12% 26%
No. of replies 33 19
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “No opinion” answers not taken into account
Summary of comments
Some respondents find that efficient licensing benefits SEP holders, both small and large, because it
allows them to obtain a timely and fair compensation for contributing their inventions to the standard,
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which in turn enables them to keep investing in R&D to develop new advanced technologies that will
underpin future standards. They also believe that efficient licensing also helps implementers, by
allowing them to obtain the benefit of a FRAND agreement, allowing it to efficiently allocate
resources towards developing products and services that take advantages of the advanced features
enabled by the standard.
Some respondents clarify that "efficient" SEP licensing means license negotiations conducted in good
faith, neither hold-up nor hold-out. Efficient licensing can also benefit from transparency regarding
the essentiality of SEPs, the overall SEP landscape of the standard, and the respective shares of SEP
holders. A framework for fair negotiation should be established, with which judicial enforcement can
be avoided. For efficiency, standard licensing programs established close in time to the adoption of
the standard and early formation of patent pools can also be beneficial.
Many respondents also find that if the term ‘efficient SEP licensing’ means ‘efficient SEP licensing
on FRAND terms’ at the single appropriate level in the value chain where the license is broad enough
to encompass all actions throughout the value chain, it can help market uptake of a standard. It will
provide assurance to market entrants that their investments will not be undermined by excessive and
unfair SEP practices, FRAND– if properly applied and followed – can incentivise investment,
innovation, and market development, especially for SMEs or start-ups. However, current lack of
transparency for the total licensing costs for a particular product is one of the main obstacles in
particular for start-ups and SMEs, to develop smart products.
Some respondents demand more detailed rules on non-discrimination to improve the level playing
field. Otherwise, SEP holders might seek to charge higher royalties from SMEs that happen to make
more profit or are more prominent in the market, which would in effect penalise market success.
A respondent explains that some of the various aspects which may create efficiencies are: (1) Any
entity asking for a FRAND SEP license should get a FRAND offer. (2) Licensing upstream in the
supply chain is usually more efficient than licensing downstream. (3) SEP holders who seek to create
SEP licensing revenue should at an early stage publish their standard TCs including the FRAND rate.
(4) Patent pools may facilitate efficient licensing, provided their rate is FRAND and published and
the pool reaches a critical mass with respect to covered licensors and covered patents. (5) FRAND
rates should be moderate to foster dissemination of the standard in many industries and applications.
(6) Essentiality checks conducted by an independent trusted entity can enhance transparency and
facilitate negotiations. (7) If set-up appropriately, licensing negotiation groups may facilitate efficient
FRAND licensing.
One respondent observes that European SMEs are not pursued for SEP licensing. In emerging IoT,
SMEs are far more likely to develop software that needs no SEP licensing than make hardware like
IoT modules that are mostly made in China and might be the target for SEP licensing.
Q65. Would you agree that efficient SEP licensing would increase employment and keep a high level
of competence in the EU?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Yes 65% 62% 29% 70% 100%
No 3% 6% 0% 0% 0%
There is no direct link 17% 15% 43% 20% 0%
Other (please specify) 15% 18% 29% 10% 0%
No. of replies 60 34 7 10 9
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Note: “No opinion” answers not taken into account
Implementers
SEP
Holders
Yes 63% 56%
No 4% 0%
There is no direct link 15% 25%
Other (please specify) 19% 19%
No. of replies 27 16
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion” answers not taken into account
EU non-EU
Yes 58% 61%
No 3% 6%
There is no direct link 24% 11%
Other (please specify) 15% 22%
No. of replies 33 18
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “No opinion” answers not taken into account
Summary of comments
The majority of respondents find that efficient licensing is essential for licensors and licensees to
foster innovation. Innovation supports the introduction of entire classes of new products.
Some respondents note that efficient SEP licensing promises to save transactions costs which, in turn,
can be reinvested in research and development of new technologies, standardisation activities, as well
as new applications and products using these standardised technologies. Efficient SEP licensing is a
key part of the innovation cycle and plays an important role in stimulating new investments and
employment.
Some respondents argue that cellular standards play a significant role for innovation and the creation
of employment. If companies that contribute their best technology to a standard for the use by all are
not adequately compensated for such contributions on reasonable terms, then the system is not
commercially viable. Whilst it is true that innovation occurs both in the standardisation context as
well as in the implementation of the standards, fundamental research in the cellular industry very
often takes place in the former. A robust IP and legal system that rewards invention and stops the bad
faith behaviour has been mostly by implementers holding-out and forcing litigation would no doubt
increase employment and maintain or increase the high levels of competence in the EU.
Other respondents argue that a FRAND framework that ensures fair licensing and eliminates holdup
would increase employment and keep a high level of competence in innovation in the EU. A narrow
definition of efficiency over fairness will serve the narrow interests of a limited number of SEP
licensors that focus on monetizing cellular SEPs over the interests of a much broader constituency of
companies that are interested in using standards to fuel innovation.
Some respondents note that efficient SEP licensing is necessity for ensuring that the EU maintains
its leadership in manufacturing after its transition into the IoT. The SEP licensing framework is
outdated and sways in the direction of SEP holders. Transparency is a necessity for ensuring efficient
licensing. The number of European SEP holders is decreasing year by year. More than every third
5G declaration nowadays comes from a Chinese company. European manufacturing will suffer by
facing foreign companies that are vertically integrated and can get cheaper access to IPR. European
manufacturing industries dependent on the policies of foreign patent holders.
257
It has been underlined that he global app ecosystem, worth more than €1.5 trillion, is responsible for
more than one million European jobs, and serves as a key driver of the €7 trillion IoT revolution. An
efficient SEP licensing framework keeps SMEs and start-ups in business, and therefore, increases
employment and keeps high levels of competence in the EU.
Some respondents point to the fact the given the current shortage of microchips in many industries
demonstrates, it is important to have manufacturing facilities located within the EU rather than being
highly dependent from components manufactured in other regions. Therefore, it is important to build
a robust, reliable FRAND licensing framework for SEPs in the EU in which users of the standard as
licensees can trust that they are not put at a competitive disadvantage versus SEP users in other
regions of the world.
A respondent notes that most SEP-related disputes, although hidden behind the argument of
“inefficiency,” concern the distribution of rents between SEP holders and implementers. Shifting
rents from SEP holders to implementers, or the other way around, is not going to expand the economy
or increase the number of jobs.
Finally, some respondents consider that it is unclear what the concept of “efficient” SEP licensing
refers to. Without this notion being defined and specified, it is impossible to agree or disagree.
Q66. Would efficient SEP licensing foster the EU’s transition to the green economy enabling projects
related to, for example, smart manufacturing, smart grids and energy and smart mobility?
All Companies
Associations/
trade union
Academia/
Authorities/
NGO/other
Citizens
Yes 66% 62% 29% 88% 89%
No 5% 6% 0% 0% 11%
There is no direct link 17% 18% 43% 13% 0%
Other (please specify) 12% 15% 29% 0% 0%
No. of replies 58 34 7 8 9
Note: “No opinion” answers not taken into account
Implementers
SEP
Holders
Yes 64% 60%
No 4% 0%
There is no direct link 12% 27%
Other (please specify) 20% 13%
No. of replies 25 15
Note: Implementers: those who agreed with Q2 and disagreed, were neutral or had no opinion on Q3; SEP Holders: those who
disagreed, were neutral or had no opinion on Q2 and agreed with Q3. “No opinion” answers not taken into account
EU non-EU
Yes 64% 56%
No 3% 6%
There is no direct link 21% 19%
Other (please specify) 12% 19%
No. of replies 33 16
Note: EU – respondents from EU except citizens; non-EU – respondents from non-EU countries except citizens. Corrections to self-
identification have been made based on the headquarters location of the respondent; “No opinion” answers not taken into account
Summary of comments
Many respondents confirm that a well-functioning, ‘efficient SEP licensing on FRAND terms’ at the
appropriate level in the value chain is necessary to ensure broad adoption and interoperability of the
258
technologies that will drive the EU’s transition to the green economy, including smart manufacturing,
smart grids and energy, and smart mobility. Fair licensing would empower a much larger group of
companies to enter new fields, launch new products, and spur widespread innovation that will help
power the transition to a green economy. Likewise, it has been held that disputes arise especially in
the context of licensing SEPs relating to mobile communication standards, in particular 5G, which
are essential for smart manufacturing, smart grids, energy and smart mobility. A predicable legal
framework would clearly boost innovation based on such standards and thus foster EUs transition to
a green economy.
An efficient SEP licensing regime will encourage SMEs to use open standards such as those
generated by ETSI. Use of these open standards will ensure interoperability between applications
within vertical markets such as Mobility, Energy and Manufacturing. This interoperability will
encourage data sharing and analysis within and between markets, driving innovation, leading to more
efficient use of limited energy resources. The current dysfunctional licensing system is benefitting a
few SEP holders at the expense of the majority of implementers.
Other respondents note that the transition to the green economy is a vast topic that contains many
different projects which require collaboration. The collaborative model of open standardization,
based on FRAND licensing, can play a role in the vast effort that the transition requires. For example,
energy efficiency is central in the development of the future ICT standards (for instance see the ITU-
T Focus Group on "Environmental Efficiency for Artificial Intelligence and other Emerging
Technologies" (FG-AI4EE)).
Such respondents find that efficient licensing is ensuring the availability of remedies that
disincentivize hold-out behaviour. And ensuring that innovators are properly rewarded for their
inventions, participation in standardisation bodies, enabling future investments in new technologies,
better versions of standards and new standards. Without the ability to recoup these investments, there
is no incentive to innovate and to further invest in the necessary technologies needed to facilitate the
transition to green economy enabling projects. Access to efficient licensing solutions ensures wide
uptake of standardised technologies and R&D in new smart and greener applications and products.
New standardised technologies are often more energy efficient.