The Standard Essential Patent (SEP) seems to be the new buzzword in patent law given the rising trend in patent litigation arising from SEPs. Indeed, continuous technological advancements support the creation of SEPs, so this trend is likely to continue in the near future.
Thus, SEPs are a concept resulting from the interaction between patent rights, which provide for the exclusive use of an invention, and “standards” aimed at the generalized and compulsory use of this innovation on the market concerned.
SEP Licensing: FRAND Terms
Standards Development Organizations (SDOs) determine the technical specifications and standards that constitute a set of technical specifications in the relevant industry and aim to make these standards accessible to all industry players. As part of their governance rules, SDOs typically publish policies regarding intellectual property rights (IPRs).
IPR policies include requiring SDO members to identify their patents that may be essential to SDO standards. When a member identifies a potential SEP, they are also asked to declare whether they will agree to license the patent on fair, reasonable and non-discriminatory (FRAND) terms.
The precise terms of FRAND declarations vary between different SDOs and may vary from one registrant to another. In this regard, SDOs do not impose rigid IPR policies on their members, as their main objective is to increase membership and make SEPs available to as many stakeholders as possible. ‘industry.
The SEP holder has power over the party that wants to implement the standard since the person will not be able to implement the standard in case the SEP holder does not want to license the patent.
To balance this power of SEP owners and prevent monopolization, SDOs require SEP owners to agree to FRAND terms in their agreement with SDOs, which means that SEP owners agree to license in FRAND terms. to anyone wishing to implement the relevant standard in their business.
As the number of SEPs increased over time, patent litigation arising from SEPs also increased. Although SEP litigants suffer from a lack of detailed laws regulating the implementation of FRAND licenses, there are a number of decisions from different jurisdictions guiding litigants, including the well-known Huawei Technologies vs. ZTE and Nokia versus Daimler (Case 4c O 17/19) cases.
On February 14, 2022, the European Commission launched a public consultation aimed at creating a fair and balanced licensing framework for SEPs. The initiative also contains a ‘call for evidence for an impact assessment’ document setting out the policy context, the problem, the policy options and the likely impacts of an improved PM&E framework. Accordingly, industry stakeholders are allowed to submit their comments on the official website of the European Commission by May 9, 2022.
According to the European Commission document, the main problems in the sector stem from the lack of transparency; uncertainty about FRAND terms and high execution costs. The paper further explains that SEPs also suffer from a lack of predictability, as by the time the standard is adopted, SEP holders may not be aware of all potential applications of the standard. In this regard, the European Commission is proposing an improved framework that will enhance transparency on SEPs, clarify various aspects of FRAND and improve the effectiveness and efficiency of the application.
One of the most discussed concepts in SEP is “access to all” and “license to all” which attempts to address the point at which to allow SEPs into the production supply chain. In this respect, the “access to all” approach allows owners of SEPs to choose at which level of the production chain to license, which is usually the final product. Therefore, they ask for a fee per product whose standard is used.
However, this concept is criticized by manufacturers of finished products because companies located at a different level of the value chain benefit from having access to a standard without paying a royalty. Therefore, they propose another concept called “license for all” which provides that the value of a standard must be reflected by the components of the final product and, therefore, that FRAND licenses must be granted to component manufacturers (or to other suppliers at different levels of the supply chain), rather than the manufacturer of the final product.
Another topical discussion in SEP cases is the interpretation of the concept of “non-consenting licensee”. The prevailing question here is when a company implemented by the standard becomes an involuntary licensee. There are many possible answers to this question, such as when the alleged infringer is aware of the SEP but continues to use the unlicensed standard or when the alleged infringer withdraws from license negotiations although the terms of the license are FRAND .
These concepts are being discussed in a case between Nokia and Daimler in the Düsseldorf court and the court referred the detailed set of questions to the CJEU which would have enlightened SEP litigants. Unfortunately, these questions have remained unanswered since Nokia and Daimler settled in June 2021 and all patent litigation between the two companies was withdrawn as part of the settlement.
The Turkish Standards Institute (TSE) and the Information and Communications Technology Authority of Turkey (BTK) are the two main government-supported organizations dealing with standards in Turkey.
The TSE is a public establishment founded by Law No. 132 adopted on November 18, 1960 and endowed with a legal entity with exclusive competence, managed in accordance with specific legislative provisions.
The TSE is a full member of the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC), the Institute for Standardization and Metrology for Islamic Countries (SMIIC), the European Committee for Standardization ( CEN) and the European Committee for Electrotechnical Standardization (CENELEC).
Turkey’s relations with standardization organizations in the field of international telecommunications are conducted through the BTK, which has observer status with ETSI. Although TSE and BTK are members of OEN, they currently do not play an active role in setting standards in Turkey or publishing IPR policies.
Regarding SEP disputes, to our knowledge, there is no decision issued by Turkish courts on FRAND and/or SEP licenses to date. However, on December 26, 2019, the Turkish Competition Authority (TCA) issued its first decision regarding SEPs in the Vestel vs Philips case (19-46/790-344).
The TCA assessed the case with reference to European Commission decisions (in its decision, the TCA specifically referred to European Commission Decision No. AT.39985 between Apple and Motorola, the European Commission Decision No. At.39939 on Samsung and Huawei- ZTE CJEU Decision No. C-170/13) and at times the FRAND principles mentioned in EU case law have been implemented even more strict.
In its decision, the TCA concluded that Koninklijke Philips NV had abused its dominant position in the relevant market for TV technology by virtue of the provisions of the TV Patent Settlement and License Agreement signed by the parties in connection with series of MS litigation in Germany. The TCA concluded that some of these provisions such as the reversal of the burden of proof, excessive requests for information and the non-challenge of validity may constitute a violation of competition law.
The TCA further found that Koninklijke Philips NV had failed to provide a license on FRAND terms because it had failed to comply with the step of “referring to the independent third party for royalty determination” and therefore had not acted transparently in determining the license. costs.
In conclusion, the TCA decided that Koninklijke Philips NV had abused its dominant position and imposed a penalty of 0.75% of its annual gross revenue generated at the end of the 2018 financial year. On the other hand, the TCA decided that the Turkish subsidiary, Turk Philips Ticaret AŞ had not violated Law No. 4054 on competition. The TCA ruling will serve as a guideline for the assessment of antitrust issues as it is the first ruling in the context of SEPs under Turkish law.
Continued increase in MS litigation
It looks like MS litigation will continue to increase in the years to come. Although SEP holders appear to primarily prefer Germany, US and UK courts to enforce their SEPs due to the reliability and predictability of these jurisdictions, this trend may change in the future as tech companies continue to increase the number of production facilities in different parts of the country. the world every day by pursuing an expansionist policy under the effect of globalization and shortage crises.
Considering the investments and incentives in different industries and the high market potential, Turkey could become one of the jurisdictions to handle SEP disputes. Although the TCA has surprisingly looked into the specifics of patent law in its case law alone regarding SEPs, we will be watching closely if a case will be heard by an IP court in Turkey and if they will follow the TCA’s approach to dealing with FRAND Terms.
Ozge Atilgan Karakulak
Gun + Partners
T: + 90 212 354 00 24
Email: [email protected]
Özge Atılgan Karakulak is a partner at Gün + Partners.
Through the combination of Özge’s advisory and litigation expertise and in-depth knowledge of the life science industry, she advises clients through all phases of the life science product business cycle. , such as registration/clearance procedures, promotion practices, pricing and reimbursement regulations, distribution relationships and co-marketing agreements, as well as matters of merger control, restrictions vertical and abusive conduct.
Özge has handled many complex commercial and patent disputes and holds a master’s degree in business law from Galatasaray University in Istanbul.
Gun + Partners
T: +90 (212) 354 00 24
Email: [email protected]
Beste Turan is a partner at Gün + Partners. She specializes in patent and utility models, intellectual property and life sciences.
Beste holds a law degree from Istanbul Ozyegin University. She is a member of the Istanbul Bar Association.
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