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European Commission Seeks Comments on Revised Horizontal Guidelines Draft

On 1 March 2022, the European Commission launched a public consultation inviting stakeholders to comment on a revised Horizontal Block Exemption Regulations on Research & Development and Specialisation (HBERs) draft, as well as on a revised draft of the guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union (TFEU) to horizontal co-operation agreements (Horizontal Guidelines). Comments are due no later than 26 April 2022.

This more general antitrust public consultation aims at drafting revised versions of existing normative texts and should not be confused with the European Commission’s more targeted “Call for Evidence” regarding a new framework for standard-essential patents (SEPs). Comments in response to the Call for Evidence must be submitted by 9 May 2022, and the new framework “may combine legislative and non-legislative action.” (For more information on the European Commission’s Call for Evidence, click here.) While these two EU public consultations are separate, they and their corresponding EU policies overlap on the question of SEPs.

Chapter 7 of the revised Horizontal Guidelines draft concerns SEP antitrust issues, such as the question of standardisation agreements and their compliance with EU antitrust law. The public consultation provides stakeholders in the SEP licensing and standardisation fields an opportunity to ensure that their interests will be considered during the drafting process of the revised Horizontal Guidelines.

The overall objective of the Horizontal Guidelines is to provide guidance on the European Commission’s application of the general norms prohibiting anticompetitive market behaviour set out in Art. 101 (1) and 101 (3) of the TFEU. The Horizontal Guidelines are de facto binding as EU courts and businesses use them to comply with Art. 101 (1) and (3) of the TFEU and to anticipate the European Commission’s enforcement of these norms.

The revised draft of the Horizontal Guidelines takes into consideration the evaluation process following a public consultation in 2019 that gave stakeholders the opportunity to review the 2011 version of the Horizontal Guidelines, which is currently in force. In the revised draft, Chapter 7 focuses on standardisation agreements as follows:

 

  • The new draft proposes to introduce more flexibility in the effects analysis by allowing (under specific circumstances) more limited participation in the development of a standard.
    • A standardisation agreement should not be considered to lead to
      restrictive effects on competition under Article 101 (1) of the TFEU if
      the restriction on the participants is limited in time
      with a view
      to progressing quickly and if, at major milestones, all competitors have an
      opportunity to be involved in terms of continuing the development of the
      standard (marginal no. 496).
    • A standardisation agreement should be considered as removing potential
      negative effects resulting from limited participation stakeholders as long as
      stakeholders are kept informed and consulted on the work in progress. The
      objective is to promote procedures that recognize the collective representation
      [...]

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2022 IP Outlook Report: The Developments Shaping European IP Law

Key Takeaways and Outlook for 2022

While European intellectual property (IP) regimes have slowly digested the Brexit shock, brand owners are vacillating between optimism and apprehension in 2022 as they navigate continuous developments in IP law. At the forefront is the prospect of greater patent law harmonization with the entry into force of the Unified Patent Court (UPC) and the European patent with unitary effect. En route to this unification, however, are some anticipated challenges.

The actions initiated in 2021 that will continue to spark conversation (and controversy) in 2022 include:

  1. After a Multiyear Saga, UPC Nears Fruition
  2. SEPs and FRAND Laws Take Unexpected Turns Throughout Germany, Europe
  3. Luxe Cosmetic Brand Successfully Obtains Trademark Protection for 3D Lipstick Shape
  4. No Similarity Between Water and Alcoholic Beverages in the European Union
  5. German Patent Act Reform Poses Substantive Changes but Not a “Game Changer”

Read the full report.

Dominik Rissman, a trainee in the Dusseldorf office, also contributed to this report.




SEP Regulation: European Union Calls for Stakeholders’ Views

Following public consultation rounds on the regulation of standard-essential patents (SEPs) in the United States and the United Kingdom, the European Union followed suit and published a “Call for Evidence” concerning an impact assessment on the European Union’s new framework for SEPs on 14 February 2022.

The Call for Evidence is part of the European Commission’s proposal for new EU legislation and non-legislative actions, which is expected to be adopted in the fourth quarter of 2022. While the European Union remains open on how exactly a system for licensing SEPs can be made more balanced, fair, transparent, predictable and efficient, there are already signs of a stricter approach in European competition policy towards dominant positions, including SEP holders, in high-tech markets. The European Commission stresses that the expected entry into force of the European unitary patent system requires an initiative at EU level, as initiatives at national level will not apply to unitary patents. Key elements of discussion include:

  • Enhancing transparency of SEPs by: (1) requiring the disclosure and update of certain information to improve publicly available information and (2) introducing a system for independent third-party assessments of essentiality under the management and control of an independent body
  • Providing clarity on various aspects of obligating SEP holders to offer licenses on fair, reasonable and non-discriminatory terms (F/RAND terms) by developing guiding principles and/or processes for clarifying the concept of F/RAND, negotiating F/RAND terms and conditions and determining appropriate level(s) of licensing in a value chain
  • Improving the effectiveness and efficiency of enforcement by incentivizing mediation, conciliation and/or arbitration.

The European Commission is accepting feedback in all 24 EU languages until 9 May 2022 (midnight Brussels time), and is particularly interested to hear opinions of SEP holders, SEP implementers, patent lawyers, legal practitioners, academics, patent-pool administrators, industry associations, start-ups, small and medium-sized enterprises (SMEs), standard development organizations (SDOs), consultants, policy makers and any other stakeholders that have experience with SEPs. All feedback will be published online.

Practice Note: Stakeholders should consider participating in the consultation, irrespective of whether they are more in the SEP holders’ or implementers’ camp, and even if their EU business may be limited. In times of global licensing campaigns, dialogues between the European Union and the United States on competition policy in the technology sector, and EU courts assuming jurisdiction in global SEP disputes, a future EU SEP policy will have an impact also elsewhere around the globe.




The Net Is Tightening on European SEP Regulation

The regulation of standard-essential patents (SEPs) has increasingly attracted the attention of policymakers in recent years. This includes the European Commission, which institutes multiple projects to profoundly review the European Union’s SEP and competition law framework. Some of these EU projects are still in the making, with the next public consultations coming up in early 2022.

EU review has been undertaken mainly for two reasons. The first is that the European Commission is responsible for the enforcement of European competition law. It is this set of rules that prohibits the abuse of a dominant market position in the European Union and, at least from an EU perspective, also obligates SEP holders to offer licenses on fair, reasonable and non-discriminatory terms (F/RAND terms). The second reason is the European Union’s goal to act as an international norm-setter in intellectual property (IP) protection.

In November 2017, the European Commission published an EU approach to standard-essential patents as part of its “IP Package.” The aim was to provide a clearer framework to incentivize and facilitate access to the key technologies enabling interconnection and connectivity.

These relatively narrow targets were made more concrete in November 2020 with the release of the “Intellectual Property Action Plan.” This plan sought to support the European creative and innovative industry sector in remaining a global leader. In the area of SEPs, the European Commission’s objective was to reduce friction and litigation between SEP holders and users by relying on potential regulatory reforms—in addition to industry-led initiatives—to clarify and improve the framework for SEP enrollment, licensing and enforcement. By providing incentives for good faith negotiations, the European Commission tried to reconcile the interests of SEP holders, standard development organizations (SDOs) and users of SEP-protected technologies.

In January 2021, the European Commission’s Group of Experts on Licensing and Valuation of SEPs published its contributions to the debate. This group, which consists of scholars, judges and stakeholders, proposed, inter alia, a number of principles for licensing SEPs, namely licensing at a single level of the value chain, a single F/RAND royalty, passing on F/RAND royalties downstream and establishing licensee negotiation groups. The European Commission’s next step in terms of a new framework for standard-essential patents is a public online consultation to be held in the first quarter of 2022.

Ahead of that event, on 2 February 2022, the European Commission presented its new Standardization Strategy, as well as a draft law amending EU Regulation No 1025/2012, with the aim of ensuring a balanced stakeholder representation within European SDOs and addressing the issue of agility and governance in the European standardization system. This strategy and the draft law highlight the European Union’s priority to defend its key position as a global standardization policymaker.

The EU Regulation of SEPs is also affected by the review of the EU Horizontal Block Exemption Regulation, which defines certain research and development (R&D) and specialization agreements that can be [...]

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European UPC All Set for Set Up as Protocol Enters into Force

On January 18, 2022, after recently joining the protocol on a European Unified Patent Court (UPC) on provisional application (PPA) as the decisive 13th EU Member State, Austria deposited its instrument of accession to the PPA. Thus, the countdown to the grand opening of the UPC has now started. (The actual opening may take place in late 2022 or—more likely—in early 2023.)

Austria’s deposition marked the beginning of the Provisional Application Phase as of January 19, 2022, which will last at least eight months and includes preparatory work, particularly recruiting 90 legal and technical judges and administrative staff, testing the file management system, setting up the IT system, hosting inaugural meetings of the governing bodies and confirming the UPC’s budget. As Alexander Ramsay, chairman of the UPC Preparatory Committee, said in a press release issued January 19, 2022, the Provisional Application Phase will start with the inaugural meetings of the Administrative Committee, Advisory Committee and Budget Committee. In addition, following the United Kingdom’s withdrawal from the project, the Preparatory Committee must decide where to locate the UPC’s central division for pharmaceutical and chemical cases as the seat of this division was initially set to be in London.

As soon as the UPC member states are confident that preparations have progressed to the point where the UPC is functional, Germany will deposit its ratification of the UPC Agreement. Germany’s deposition will set the date for the start of the UPC’s operations and trigger the countdown to the UPC Agreement’s entry into force, which will be on the first day of the fourth month after the deposit. At that point, unitary patents (or European patents with unitary effect) will be available at the European Patent Office (EPO).

Once the Provisional Application Phase ends, a transitional period of seven years is triggered for European patent (EP) applicants and holders to decide whether they want to opt out of UPC jurisdiction and continue to pursue national patent litigation. Within this transitional period, EP applicants can opt in if their application is granted or even after the EP is granted—if no legal action has commenced before a national court.

The UPC will thus have competence for already existing EPs (if not opted out) and for the newly introduced unitary patents granted by the EPO. Both invalidity and infringement proceedings will be conducted before the UPC, which will consist of regional, national and central divisions as well as an Appeals Court and a Mediation Centre.

In a statement shared January 19, 2022, the EU Internal Market Commissioner Thierry Breton welcomed the start of the Provisional Application Phase, stressing the cost benefits of unitary patents: “For instance, a Unitary Patent covering a territory of potentially up to 25 Member States will cost less than €5,000 in renewal fees over 10 years, instead of the current level of around €29,000. The Unitary Patent will also reduce the gap between the cost of patent protection in Europe compared with the [...]

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European UPC Almost Ready to Launch as Austrian Parliament Approves Ratification

Austria became the 13th country to join the protocol on a European Unified Patent Court (UPC) on provisional application (PPA) when the second chamber of the Austrian parliament (Bundesrat) approved the PPA unanimously on December 2, 2021. The Austrian government is expected to formally deposit its ratification shortly.

As expected, Austria followed Slovenia as the last of the 13 EU Member States that were required to ratify in order for the PPA to take effect. This group mandatorily included Germany, Italy and France (i.e., the three Member States in which the most European patents were in effect in 2012).

With the upcoming Austrian ratification, the UPC Preparatory Committee (Committee) will be able to formally start its work. Although there is no timeline set for the initial provisional application stage, the Committee expects that stage to take approximately six to 10 months. As stated in a note published by the Presidency of the Council of the European Union on September 24, 2021, this stage includes the adoption of the secondary legislation of the UPC, including procedures, establishment of a budget, recruitment of judges and administrative staff, election of a president, final configuration and testing of the file management system and ensuring that all IT infrastructure is properly set up and secured. In addition, a working agreement with the European Patent Office (EPO) on patent application and validation remains to be completed. Many observers regard the timeline to complete preparations as challenging, noting that several of these steps will likely require significant discussion.

As noted in the Presidency of the Council’s statement, the UPC will be in force when these preparations are completed, which could be as early as the second half of 2022. The exact start date of the UPC and the Unitary Patent System depends on how long the initial provisional application stage takes. It also depends on when Germany formally deposits its UPC Agreement ratification, which has been withheld so far in order to give the committee time to complete its work. Once the UPC member states agree that the initial provisional application stage is almost complete (likely during the next two to six months), Germany will deposit its UPC Agreement ratification, which will trigger another four-month period before the UPC may officially take its first cases. The UPC will finally open its doors four months after that last instrument deposit. At that point, European patents with unitary effect could be available at the EPO.

Practice Note: Entities doing business in the European Union should check whether their intellectual property strategy is fit for the UPC entering into force and European patents with unitary effect becoming available.




Party May Not Veil EU Individual’s Information under GDPR at the TTAB

In a rare precedential opinion, the Trademark Trial & Appeal Board (TTAB, Board) ruled that the EU General Data Protection Regulation (GDPR) does not apply in Board proceedings. Chicago Mercantile Exchange, Inc. v. Intercontinental Exchange Holdings, Inc., Opposition Nos. 91235909; 91254514 (T.T.A.B. Sept. 27, 2021) (Faint, Interlocutory Attorney).

This was a consolidated proceeding between Chicago Mercantile Exchange and New York Mercantile Exchange (collectively, CME) and Intercontinental Exchange Holdings (ICE) and brought before the TTAB. CME sought to amend the Board’s standard protective order (SPO) to allow in-house access to information and materials designated by ICE as “Confidential – Attorney’s Eyes Only” and asked the TTAB to find that the EU GDPR does not apply in the proceedings.

The Board’s SPO is automatically imposed in all inter partes proceedings. In order for the Board to disturb their SPO, CME needed to show that protection of ICE’s trade secrets will impair CME’s prosecution of its claims. ICE asserted that CME failed to show good cause for modification of the SPO and the Board agreed. As an initial matter, CME failed to provide information sufficient for the Board to determine in-house counsel’s responsibilities, including whether those responsibilities included competitive decision-making such that disclosure to in-house counsel would competitively harm ICE. Secondly, CME failed to clearly demonstrate that there was a need for access to the highly sensitive competitive information to adequately prepare its case. Accordingly, the Board denied CME’s motion to amend the protective order.

CME next raised the issue of whether ICE may redact names, email addresses and other information from documents and electronically stored information (ESI) originating in the European Union prior to its production on the basis that the GDPR requires such redaction. CME argued that because ICE waited more than 18 months to assert this objection, the objection is waived, that CME will be severely prejudiced if ICE’s objection stands and that the GDPR does not apply in inter partes Board proceedings.

For background, the GDPR is an EU regulation made effective May 25, 2018, in order to protect the privacy and security of EU citizens’ personal data by limiting the transfer of such information among member states of the European Union, as well as between the European Union and other countries, including the United States. The broad definition given to “personal data” in the GDPR encompasses “any information relating to an identified or identifiable person.” However, this class of information (an individual’s name, position, job title and email address) is generally required to be produced in discovery pursuant to the Fed. R. Civ. Pro. 26(b)(1).

In this precedential decision, the Board, citing the 1987 Supreme Court case Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court, established that a foreign country’s law precluding disclosure of evidence in US courts and tribunals will generally not deprive those courts and tribunals of “the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute.”. Additionally, the GDPR does not per [...]

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Only One More Ratification Needed: European UPC Might Be Ready to Launch

The German parliament recently passed the Approval Act (the Act) regarding the planned European Unified Patent Court (UPC) and the protocol on a UPC on provisional application (PPA). The Act was passed after Germany’s Federal Constitutional Court rejected applications for a preliminary injunction directed against the Act. The instrument of Germany’s ratification of the PPA (not of the UPC Agreement (UPCA)) has been deposited with the European Council. The UPC Preparatory Committee published a report calling Germany’s ratification “a decisive step on the establishment of the Unified Patent Court after the work has been on hold for several years during the examination of the Agreement by the German Federal Constitutional Court.”

The PPA will only come into effect after at least 13 EU Member States (which must include Germany, Italy and France, i.e., the three Member States in which the most European Patents were in effect in 2012) ratify the PPA and deposit their respective instrument with the European Council. The PPA must also ratify the UPCA (or at least have parliament’s approval to do so) and deposit this second instrument with the European Council. In this complex scheme, the German ratification was previously the main legal hurdle.

Now, after publication of Slovenia’s Approval Act in its National Law Gazette and the expected deposit of its PPA and UPCA instruments, only one more national ratification and instrument deposit is needed to reach the required 13 ratifications. According to a note published by the Presidency of the Council of the European Union on September 24, 2021, Austria is likely to move next, whereupon the project will reach the minimum number of ratifying Member States. The Austrian Government submitted a draft for an approval act to its parliament in July 2021 and expects approval.

Upon the complete ratification of the UPCA and PPA, the UPC will form on a provisional basis and commence its existence as a legal entity. The UPC Preparatory Committee (Committee) can then formally start its work. Although there is no timeline set for the initial provisional application stage, the Committee expects that stage to continue for approximately six to 10 months following ratification. As stated in the note by the Presidency of the Council, this stage includes the adoption of the secondary legislation of the UPC, including procedures, establishment of a budget, recruitment of judges and administrative stuff, election of a president, the final configuration and testing of the file management system and ensuring that all IT infrastructure is properly set up and secured. In addition, a working agreement with the European Patent Office (EPO) on patent application and patent validation remains to be completed. Many observers regard the timeline to complete preparations as challenging, noting that several of the above points will likely require significant discussion. With these issues in mind, the Competitive Council (Council) met on September 29, 2021, to discuss further actions regarding the preparations and to invite ministers to inform the Council of recent or upcoming developments in [...]

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Unified at Last? Germany’s Constitutional Court Removes UPC Hurdle

On July 9, 2021, Germany’s Federal Constitutional Court rejected a pair of applications for a preliminary injunction directed against the German Approval Act on the Agreement on a Unified Patent Court (UPC) (decision of June 23, 2021, 2 BvR 2216/20). Thus, German ratification of the Agreement now only requires a presidential signature of the Approval Act and the subsequent deposition of the ratification.

The Constitutional Court’s press release can be found here (in English and German). The text of the decision itself is available here (in German only).

BACKGROUND

So far, 15 EU Member States have ratified the 2013 Agreement on a UPC. In recent years, the ratification process has faced several unexpected hurdles and proved to be cumbersome. Last year, post-Brexit, the United Kingdom formally revoked its ratification (as of July 20, 2020). Since then, of the ratifications required for entry into force, only Germany’s remained pending.

Germany’s Federal Constitutional Court annulled a first national ratification Approval Act on February 13, 2020, after a successful constitutional complaint. Now, following an apparently unsuccessful second round of constitutional complaints, nothing remains to prevent the second Approval Act, which was redrafted and approved by the German legislator in fall 2020, from being formally signed by the German president.

GROUNDS FOR THE CONSTITUTIONAL COURT’S DECISION

The Constitutional Court stated that the constitutional complaints were inadmissible on the merits because the complainants had not sufficiently substantiated the possibility of a violation of their fundamental rights.

Under German constitutional law, national legal acts may only transfer sovereign rights to the European Union or EU-related institutions under certain conditions. In particular, in order for a national act to be deemed unconstitutional, it must be established that the transfer of rights would undermine the German constitution or, in the words of German constitutional law, would affect the integral core or identity of the German constitution. In its 2020 decision, the Federal Constitutional Court recognized that the first Approval Act lacked the two-thirds majority in parliament required for such a significant transfer of sovereign rights. The first Approval Act was adopted unanimously, but only 35 of the approximately 600 German members of parliament were present for the vote, which was found to be too few for such a far-reaching piece of legislation.

In principle, the hurdles for a successful constitutional complaint are high. The Approval Act represents a democratically legitimized majority decision by a constitutional body. Now 570 members of parliament have voted in favor of the second Approval Act. Therefore, in the present decision, the Federal Constitutional Court (for the first time) considered the merits of the law rather than the formalities of passage.

In the present case, the complainants argued that Articles 6 et seq. of the UPC Agreement violated the independence of judges established in the German constitution and the constitutionally guaranteed principle of the rule of law due to the appointment of the judges of the UPC for six years, their possible reappointment and the [...]

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Paris Court of Appeals Rejects Pharmaceutical Supplementary Protection Certificate Applications

One of the conditions for obtaining an SPC is that “the product is protected by a basic patent in force”. The Court of Justice of the European Union (CJEU) clarified to what extent a product must be identified by the claims to meet this condition in Teva, Eli Lilly, and Royalty Pharma.

In Eli Lilly, the CJEU notes that an active ingredient which is not identified in the claims of a basic patent by means of a structural or functional definition cannot be considered to be “protected by a basic patent.”

The active ingredient does not, however, have to be identified in the claims by a structural formula. A functional definition of the active ingredient may suffice if it is possible to reach the conclusion on the basis of the claims (interpreted in light of the description of the invention) that they relate “implicitly but necessarily and specifically, to the active ingredient in question.

Click here to read the full article in our latest International News.




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