“Communication on Standard Essential Patents: What is the impact for Innovation and Competition for Start-Ups and SMEs?”

By SME Europe

On 11th July 2017, SME EUROPE in cooperation with the EPP Group, hosted a Working Breakfast event in the European Parliament considering the following thematic: “Communication on Standard Essential Patents: What is the impact for Innovation and Competition for Start-Ups and SMEs?”. The event featured the following speakers: Paul Ruebig MEP, Honorary President of SME Europe and Vice-Chairman of STOA, Member of ITRE; Christian Ehler MEP, Member of ITRE; Michael Koenig, Acting Head of Unit of Intellectual Property, Fight against Counterfeiting, DG GROW, European Commission; Sangwoo Kim, President Corporate Affairs Europe of SAMSUNG; Sebastiano Toffaletti, Secretary General, European DIGITAL SME Alliance; Klaus Haft, President of European Patent Lawyers Association (EPLAW), and Ashok Ganesh, Director Innovation, CEN & CENELEC.


Paul Ruebig MEP, Honorary President of SME Europe as well as host and moderator of the event, welcomed speakers and guests expressing hope for a fruitful debate. He was the moderator of this Meeting.


Christian Ehler MEP, opened the topic with introductive remarks. Mr. Ehler pointed that in view of enhanced contacts between Korea and the EU the topic is of a special relevance. Common engagements in the framework of the EU-Korea Trade Agreement demand for a stronger concretion between Korea and Europe on standardization. It is clear that standardization faced on patents and protected technologies is a key instrument for industrial policy as well as a key component of free trade. In Europe standardization has been technically achieved. The key standards of today like Wi-Fi, Bluetooth would have not so long ago taken five to ten years to be developed. Nowadays new technologies are evolving yearly so it is of high importance to think about standards to go further in the negotiations with other countries. Mentioning the above it becomes clear that the final goal would be creating harmony by reforming standartisation.


Michael König remarked that the topic of Telecom Patents is particularly sensitive as our nowadays challenges include intersection between intellectual property and standardization. There are two sides to be well balanced: on one side, we have to create and maintain innovation and contribute to the top technologies standards, on the other side these top technologies have to operate fairly and to be accessible for everybody. SEP topic is not new and used to be focused mainly on smartphones. However with the developing of new trends like the Internet of Things through which more and more devices get connected, more gadgets require access to mobile communications so that the Commission is stepping outside of the Innovative Computer Technologies (ICT) sector working on all types of products (smart fridges, cars, etc) to help industries that have at the origin nothing in common with ICT but are familiar with standardization and are willing to bring their products under the category of ‘smart’. The position of SMEs in this sector is crucial as they are on both sides of interests as ones that hold key technologies and those willing to acquire them. SMEs can receive profits once found a balance. Mr. König believes there are three ingredients to provide a balance for SEPs: 1. With a particular degree of transparency; 2. Evaluation of Patents should lie under standard principles; 3. The focus is on negotiations. Mr. König finished his speech by saying that he thinks that this is an area which has not be legislated because this sector is moving too fast, but maybe some signposts should be given so that the communication improves.


Sangwoo Kim on his intervention brought up three points about the Standard Essential Patents (SEP): 1. A balance between the patent holder and the patent user should be established, which creates a dual position from the side of the license holder and user. Mr. Kim explained regarding the first point, that it is very clear that the holder is the innovator. However, a long lasting, controversial dispute exists, between the license holder and the implementer, regarding who the user is and who benefits from the innovation. Meaning that the balance is held between innovator, license holder, and society. It was stressed that if the compensation of this balance would be too small, the innovation would die, and society will lose the chance to enjoy the innovation in the future. On the other hand, if the compensation is too much, it is not the licensee or the implementer that will lose, but society as a whole. 2. Mister Kim second point was that the declaration of SEP will increase the value of patents. Once an SEP is declared, everybody and every player in the market must use their patent, but the difference increase by the declaration of SEP is not done by the patent holders only. It is the fruit of the negotiation, compromise, and collaboration of all players in the market, competitors and all market consumers. So, even though the value of SEP will increase significantly to the declaration of SEP, that value must go to all of society and all involved players, and not only to the SEP holders. It was stressed to be the only fundamental basic theory that needs to be remembered. 3. The last point brought up by Mr. Kim was regarding the players in the market, including some competitors giving up their own technology during the process of discussion, negotiation, and compromise, dedicating themselves to founding the SEP. Furthermore, it was emphasized that after the declaration of the SEP, the players of the market can get a license at any time, if they are willing to pay friend-loyalty, which means that the SEP can be given to any player in the market, including competitors and startups.

Additional points of interest mentioned by Mr. Kim:
1. Windows and Android are the most relevant digital platform in the market, and it is expected that in the next 5 years, 30 million devices will connect to both of these platforms. 2. Stressed that even though there is a clear market hegemony of windows and android, there is an open space to establish new digital platforms 3. New digital platforms should be of free access to the public, to guarantee fairness and balance in the digital market 4. New digital platforms should be monitored and controlled by government, to further help their success in market where hegemonies are established


Sebastiano Toffaletti from Digital SME Alliance remarked that his organization is working on many subjects like standardization cooperating with the European Telecommunications Standards Institute (ETSI) as well as companies (major and small) in order to have their point of view about SEPs. Mr Toffaletti considers for Digital SME Alliance to be a truly independent organization in order to balance between all interests and generate fair solutions. Mr. Toffaletti highlighted that SEPs is an opportunity not only opportunities for big companies but also for small ones. The statistics show SMEs participating and contributing to standardization have at least as many chances as big companies to get their patents transformed and accepted as SEPs. However unfortunately, there is not enough SMEs which are participating to the standardization process. As a conclusion, Mr. Toffaletti emphasized that one of the biggest issue is that there is a big asymmetry of information between SMEs and larger companies, for example to know how to fill SEP declarations.


Klaus Haft, President of European Patent Lawyer Association (EPLAW), discussed various factors found related in the field of the internet of things and influences upon the market, specifically elements influencing Small and Medium-sized Enterprises (SMEs). Mister Haft underlined some of the concerns SMEs are facing in the internet of things, which is an environment where difficulties are presented. Furthermore, he explained about product and wireless functionality, this innovation as being infrastructure and being standardized. He also brought up several points which underline the problematic found when consulting with SMEs. Primarily one of the practical difficulties lies with the SMEs being under the radar and not getting approached, which portrays quite some inevitable discrimination. Another evident factor that Mister Haft mentioned is the confidentiality of the license agreements, which leads to the situation of an undefined and unclear price tag with the innovation on the market. And lastly, he discussed the component of the difficulty of choosing the best version of a product with a suitable price.


Ashok Ganesh, Director Innovator, CEN & CENELEC, took the floor by referencing Christian Ehler and the average time for CENELEC today with delivering standards and solutions. He continued by discussing patents and standards, which he explained that in CEN & CENELEC he had been involved in standardization, as they hold a strong poly for patents in standards. Especially, as this policy is set out in line with organizations such as the ITU, that helped set out clear and fair conditions. Mister Ganesh then brought up the point about the world changing in terms of information technology (IT), meaning the European Industry Sectors are transforming, which will bring standards and patents much closer. Lastly, Mister Ganesh brought up the point about the importance of simplicity and team-work between stakeholders in order to more forward, and the importance of precision and establishing the disclosure of potential patents, and intentions in terms of promotion with the patent holder.