Photographer: Krisztian Bocsi/Bloomberg

EU Plays Peacemaker in Tech’s Patent-Licensing Wars

Updated on
  • EU weighs in on how patent fees and validity are determined
  • Regulators publish guidelines for how firms should behave

The European Union is seeking to play peacemaker in the patent-licensing wars that have embroiled technology giants from Qualcomm Inc. to Apple Inc., weighing in with guidelines for how companies should behave.

As more gadgets become connected to the internet, Europe “is being held back by a lack of transparency and predictability” on how patents are licensed between makers and users of key technology, the EU said in a statement on Wednesday. The guidelines will suggest how fees should be determined and will try to stamp out lengthy disputes over the value of patents.

While fees should be decided between companies, prices charged should take account of the economic value of the patented technology, regulators said. The EU also wants to see greater scrutiny of thousands of patents declared to be key industry standards. That might see some patents lose their status as a standard essential patent that must be licensed by manufacturers who want to use the technology.

The EU is aiming to stem a wave of patent litigation that has triggered lengthy court disputes and legal injunctions that can take smartphones off store shelves. Some patent owners have been dubbed trolls for threatening court action if manufacturers don’t pay up for technology that may not be valuable. Manufacturers, too, have been sued for refusing to pay for key technology that others developed.

Escalating Dispute

Qualcomm and Apple are currently engaged in an escalating dispute over technology licensing fees that Qualcomm charges for patents that cover the basics of how mobile phone systems work. Apple says Qualcomm is unfairly charging too much and leveraging its strong market position in chips illegally. Qualcomm has countered that Apple, one of its largest customers, has lied to regulators in an unfair attempt to bully it into charging less.

Soon after its first legal salvo, Apple cut off licensing payments to Qualcomm. That’s about $2 billion a year in highly profitable revenue, according to analyst estimates, and the chipmaker was forced to lower earnings forecasts.

The EU’s guidelines aren’t binding but it hopes to push companies in different industries to negotiate on how they’ll license technology. Regulators will monitor the industry and aim to create arrangements that curb abuse and reduce litigation. Alternative dispute resolution could be used to avoid court battles, the EU said.

Standard-setting organizations such as the European Telecommunications Standards Institute, should upgrade their database of patents to check that information filed by companies is accurate, the EU said. A scrutiny process should be introduced in the future that would make public when a patent is determined non-essential.

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