Exclusive-EU patent body to oversee tech-standard patent royalties -EU draft rule

FILE PHOTO: European Union flags flutter outside the European Commission headquarters in Brussels, Belgium, June 5, 2020. REUTERS/Yves Herman/File Photo

BRUSSELS (Reuters) -The European Union patent body will oversee a new process to set fair royalties on patents for technologies widely used in products like cellphones, according to a draft EU regulation that seeks to reduce litigation over royalty disputes.

Standard-essential patents cover technology that devices must include to comply with international standards like 4G, Wi-Fi and USB. Some standards entail thousands of essential patents, and their owners are required to offer licenses on fair and reasonable terms.

Users of the standards are usually producers of telecoms equipment, mobile phones, computers, tablets and increasingly, makers of connected cars, drones, payment terminals and other smart devices.

The royalty process to be overseen by the European Intellectual Office (EUIPO) is aimed at resolving disputes between patent holders and users of such standards.

"The FRAND determination procedure should simplify and speed up negotiations concerning FRAND terms and reduce costs. The EUIPO should administer the procedure," said the European Commission document seen by Reuters on Tuesday.

FRAND (fair, reasonable and nondiscriminatory) terms are often used in relation to technical standards developed through an industry-led standardisation process.

The FRAND-setting process should be concluded within nine months and is a mandatory step before patent holders can take legal action against infringements, the document said.

"This is necessary because disagreements about the FRAND terms are the main reason to seek recourse in courts," the document said.

The draft regulation requires EUIPO to set up a register of standard essential patents (SEP) and companies to sign up if they want to charge patent fees or take legal action.

"A SEP owner shall not be entitled to receive royalties or seek damages for infringement of a claimed SEP subject to registration," the document said.

To help SEP owners determine how much they can charge, the Commission wants companies to agree among themselves on an aggregate royalty, in effect the potential royalties for all SEPs covering a standard.

Independent evaluators will check whether a patent is crucial to the standard.

European Commission Vice President Margrethe Vestager is scheduled to announce the draft regulation on April 26, according to a Commission agenda.

The draft rules need to be agreed with EU countries and the European Parliament before they can become law.

(Reporting by Foo Yun Chee; Editing by Richard Chang and Cynthia Osterman)

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