A. Legislative Developments
1. The EU SEP Regulation
To address challenges in SEP licensing as identified by the European Commission (the Commission), such as lack of transparency, complex FRAND determinations, and costly litigation, the legislator has proposed on 27 April 2023 the EU SEP Regulation. SEPs, which cover technologies essential to practice industry standards like 4G/5G, grant holders considerable market influence. Perceived licensing market failures have led to calls for strengthening regulatory oversight. Under the proposed EU regulation, SEP holders would have to register their patents and undergo essentiality checks, making SEP licensing more transparent and minimizing disputes over patent essentiality.
In addition to the registration and essentiality checks, a key aspect of the proposed regulation is a mandatory nine-month conciliation procedure aimed at setting FRAND license terms prior to litigation, limiting the SEP holder’s access to injunctions and aligning with Huawei/ZTE principles to balance negotiation power. The Huawei/ZTE framework, established by the Court of Justice of the EU (CJEU)―the highest judicial instance in the EU—outlines a structured process for SEP negotiations, requiring the SEP holder to notify the implementer of the alleged infringement, provide a detailed FRAND license offer, and allow the implementer to respond with a counteroffer before seeking injunctive relief. This sequential approach aims to ensure good-faith negotiations and prevent SEP holders from abusing their dominant market position through premature or unfair legal actions.
Another mechanism introduced by the proposed regulation is the determination of an aggregate royalty, which identifies the total costs of licensing all SEPs that are part of a given standard. Determining the aggregate royalty provides more clarity by establishing the total royalty burden for a standard, which helps assess the value of individual patents or SEP portfolios within that framework, facilitating fairer and more transparent licensing negotiations.
Despite the legislative interest behind adopting the EU SEP Regulation, opposing views have emerged. While supporters argue that the proposal addresses market imbalances and transparency issues, critics express concerns over potential restrictions on access to justice and question its necessity. Following the European Parliament’s approval in February 2024, the Council is currently reviewing the adoption process. Following the completion of the trilogue negotiations among the European Parliament, the Council of the European Union, and the European Commission, the regulation would take effect in 2026, with full applicability from 2028, reshaping SEP licensing across the EU.
2. The Article 102 Guidelines
In parallel with the SEP Regulation, the Commission has proposed new Article 102 Guidelines, a document that outlines the principles and priorities for the enforcement of Article 102 of the Treaty on the Functioning of the European Union (TFEU), which is the provision of EU competition law that prohibits dominant companies from abusing their market position. In 2023, the Commission also revised the Horizontal Guidelines, which clarify how EU competition law applies to cooperation agreements between competitors. Although these enforcement tools do not discuss SEPs directly, they offer more targeted guidance on the enforcement of prohibitions against SEP-related anti-competitive practices. In other words, these updates provide clarity on how SEPs can be handled within the broader framework of EU competition law, addressing potential abuses of market dominance by SEP holders.
3. The Technology Transfer Block Exemption Regulation and its accompanied guidelines
The Technology Transfer Block Exemption Regulation (TTBER) and its accompanying guidelines (TTGL) are presently being reviewed in light of their upcoming expiration in April 2026. The Commission is gathering feedback to determine whether to let them lapse, renew them, or significantly revise them. These tools were created to foster innovation and competition by exempting certain technology transfer agreements from general EU competition rules, which affects SEPs by providing a structured framework for licensing essential technologies.
Stakeholders generally are in favor of the existence of the TTBER, so renewal is expected. The possible revisions include clarifying FRAND obligations for patent pools, which are agreements where multiple patent holders license their essential, complementary patents as a single package. The goal is to ensure that patent pools adhere to the same fair terms as individual SEP licensors, preventing “bundling” practices, enforcing strict transparency requirements, protecting the right to individual licensing outside of pools, committing to license all willing participants, and implementing governance rules with competition oversight.
Contradictory views have been offered in relation to the inclusion of Licensing Negotiation Groups (LNGs), which are groups of implementers collaborating to negotiate licensing terms for SEPs. Proponents argue for a new regulatory framework for LNGs, similar to patent pools, to allow SEP implementers to pool resources, enhance buyer power, and address licensing inefficiencies and information asymmetries. This support structure, they believe, could balance the power dynamics between SEP holders and implementers, improving market efficiency. On the other hand, opponents warn that LNGs risk facilitating collusion, potentially violating Article 101(1) TFEU, which prohibits anti-competitive agreements.
In the coming year, the Commission will formulate its proposals for both patent pools and LNGs in the reviewed TTBER and TTGL. On 22 November 2024, the Commission has published a Staff Working Document summarizing its evaluation of the TTBER and TTGL, highlighting the need to address the role of LNGs in SEP licensing.
4. UK Legislative Developments: Assimilated TTBER and the Guidelines
Similar to the EU, the UK is also undergoing a review of its version of its Assimilated TTBER and the Guidelines. Following the UK’s exit from the EU, the EU block exemption regulations that were in force under EU law at the end of the Transition Period on 31 December 2020 were retained in UK law and are known as assimilated block exemption regulations. While the UK operates independently of the EU post-Brexit, it has continued to follow closely EU developments on SEP regulation. The UK’s review of TTBER will address whether modifications are needed to reflect evolving competition dynamics and will likely aim to align with, or at least complement, the EU’s approach, given the close market ties between the UK and EU.
B. Case Law Developments
The cases discussed below highlight the complexities and challenges of SEP licensing and enforcement across jurisdictions, particularly across the EU and the UK. They illustrate how the procedural framework of the Huawei/ZTE is applied and tested, emphasizing the importance of good-faith negotiations and the risks posed by abusive injunctions. The cases also underscore jurisdictional tensions in cross-border disputes, the strategic use of legal systems to gain leverage, and the evolving role of FRAND determinations.
1. HMD Amicus
The HMD Amicus relates to a dispute between HMD Global, a Finnish smartphone manufacturer, and a patent holder Voice Age over the licensing terms for SEPs. The central issue that triggered the EU intervention is whether the SEP holder complied with the Huawei/ZTE framework, particularly regarding good-faith negotiations before seeking injunctive relief. HMD argued that the SEP holder sought an injunction prematurely, disrupting ongoing licensing negotiations. The court ruled in favor of VoiceAge, and the Commission intervened in the case on appeal. In its brief, the Commission emphasized that the Huawei/ZTE framework must apply in SEP licensing, highlighting that courts must follow all steps sequentially before issuing injunctions. The Commission stressed that injunctions should only be sought once the SEP holder has fully complied with the framework, including engaging in good-faith negotiations. By reaffirming the importance of this order, the Commission aims to prevent SEP holders from conducting abusive practices that would otherwise allow undue leverage by seeking injunctions to achieve supra-FRAND terms.
2. Lenovo/IDC
The Lenovo/IDC case illustrates how SEP holders can take advantage of Germany’s easier standards for granting injunctions. IDC initiated proceedings against Lenovo over SEP infringement in the UK, where the court ultimately set a lower FRAND rate than IDC’s demand. However, IDC also was granted an injunction in Germany, when the Munich Regional Court classified Lenovo as an “unwilling licensee”, setting a ban to its sales in the German market. This decision forced Lenovo to consider whether to agree on a costly settlement to avoid revenue losses in the major German market, or to accept supra-FRAND terms. This case demonstrates how SEP holders may exploit Germany’s bifurcated system, which separates patent validity and infringement proceedings into different legal tracks, to pressure implementers into accepting non-FRAND terms.
3. Panasonic/Xiaomi and Lenovo/Ericsson
In Panasonic/Xiaomi, Panasonic pursued injunctions in Germany and the Unified Patent Court (UPC)—a specialized, centralized court established by participating EU Member States to handle disputes relating to European patents and European patents with unitary effect (the so-called unitary patents)―while a UK court was determining FRAND terms. The UK Court of Appeal intervened by granting Xiaomi an interim license—a temporary solution to allow an implementer to continue using SEPs while negotiations or a court’s FRAND determinations are ongoing―to avert the German (both national and UPC) injunctions’ impact, criticized Panasonic’s conduct as a tactic to push for supra-FRAND terms. It considered that Panasonic’s approach was “illegitimate”, stating that such actions disrupt the negotiation process and risk non-FRAND determinations. This case illustrates how cross-jurisdictional actions by SEP holders can complicate FRAND negotiations. In Lenovo/Ericsson, the UK court declined to grant a declaration for an interim license, finding that Ericsson’s October 2023 offer was “comfortably within the FRAND range” and that there was no evidence that Ericsson conduct constituted bad faith or an attempt to extract supra-FRAND terms. The UK court highlighted that Lenovo’s request was primarily aimed at influencing foreign proceedings rather than preserving the negotiation process.
4. Tesla/Avanci
The intent to further solidify and expand the UK’s role as an independent jurisdiction for resolving global SEP licensing disputes is illustrated by the UK courts’ increasing activity in SEP-related cases. One of the high-profile cases during the present period is Tesla/Avanci, where a claim was brought before the English courts even though none of the parties or patents involved is of English origin (all are of U.S. origin). This case pushed critical questions regarding jurisdiction over SEP disputes within the patent pool setting, and whether the UK was the appropriate forum for global FRAND determinations. On 15 July 2024, the UK High Court ruled it lacked jurisdiction, referencing Vestel/Access Advance and emphasizing that free-standing FRAND claims without a substantive patent dispute are impermissible under UK law. Appeal to the UK Supreme Court is pending.
This decision underscores the complexities of cross-border SEP cases post-Brexit and the UK’s cautious approach in balancing independence from EU frameworks with the need for international alignment.
C. Conclusion
SEP developments in Europe highlight an attempt to ensure transparency and fairness in SEP licensing and enforcement. Legislative efforts like the EU SEP Regulation, the new Article 102 guidelines, and reviews of the TTBER/TTGL aim to create a more transparent and consistent framework for SEP holders and implementers. Recent case law in the EU and the UK underscores both the varied legal approaches and the importance of harmonizing SEP-related rules in a global market implying the need for a regulatory framework. As Brexit reshapes the UK’s legal landscape, the alignment of its SEP approach with the evolving framework on the European Continent remains of continued importance when resolving SEP licensing disputes, both in terms of achieving a FRAND process as well as FRAND results.
