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Multi-association letter to EVP Stéphane Séjourné on the IPRED modernisation

Dear Executive Vice-President Séjourné,

We, the undersigned representatives of industry associations representing over 100 companies from various sectors (including automotive, information technology, semiconductors, software & services, AI, quantum technology, telecoms, communications and consumer goods), collectively holding more than 580.000 patents, and employing  around 2,5 million  people in the EU, urge the European Commission to take steps to modernise the 20-year-old Intellectual Property Rights Enforcement Directive (IPRED) in relation to proportionality of remedies for patent infringement, to ensure that the system is fit for purpose in the digital age and supports Europe’s competitiveness. 

The results of a recently published independent study  commissioned by your services clearly show that the proportionality requirement set out in the IPRED is not being effectively applied to patents, despite the European Commission having issued guidelines to this end in 2017. As a result, the patent enforcement framework lacks the balance needed to support investment in new innovative technologies in Europe, negatively impacting Europe’s competitiveness and consumers. 

As the independent study clearly demonstrates, despite the existing IPRED’s requirement that remedies for patent infringement be proportionate, European courts consistently issue automatic permanent injunctions upon a finding of patent infringement without undertaking a proportionality assessment: proportionality has been applied in less than 1% of cases in EU countries, according to data provided by Darts-ip, the most comprehensive database of European court decisions. 

The consequence of injunctions being issued automatically is that even an accidental infringement by a manufacturer of a patent that relates to a minor feature of a complex product can result in the entire existing product range being immediately removed from the market.

Companies often settle claims to avoid that, which gives patent owners excessive leverage to demand settlements far surpassing the patented technology's value . The situation is even more egregious when the defendant is a small and medium-sized enterprise (SME) and the recalled product provides their only source of revenue.

This imbalance has made Europe attractive to Patent Assertion Entities (PAEs), whose attacks harm innovative operating companies – and ultimately the public – by creating a huge disincentive for investment in the R&D necessary to bring to market the next generation of innovative products. Critical digital technologies such as 5G, the Internet of Things, edge computing, Artificial Intelligence and the underlying hi-tech semiconductors - because of their complexity - are at the highest risk of abusive patent litigation , which significantly discourages R&D investments. The immediate and full removal of products from the market can harm third parties and the public and disrupt supply chains.

While the US has succeeded in clamping down on the harm caused by PAEs by effectively scrapping automatic injunctions, this has not yet happened in Europe at large.  A patent system in which injunctions are granted in effect automatically creates a locational disadvantage for companies having their main manufacturing base in the EU, compared with regions where proportionality is applied, such as the US.

We therefore believe that now is the time to modernise the 20-year-old IPRED through targeted amendments to ensure that courts in the EU Member States and the newly established Unified Patent Court effectively consider the proportionality of remedies in their handling of patent litigation cases. Amending the IPRED is identified in the independent study as a potential solution to ensure proportionality is effectively applied – and we believe it to be the only solution that will work. Further non-binding guidelines would not be effective in addressing this issue, as evidenced by the November 2017 IPRED guidance from the Commission, which failed to improve the situation.

Modernising IPRED to ensure true proportionality in patent enforcement directly advances the EU's goals of cutting red tape and simplifying business regulations. The current black-and-white approach to automatic injunctions forces businesses to expend significant resources navigating unpredictable legal risks which can result in entire product lines being taken off the market for infringement by a single feature among thousands. This system is particularly harmful to SMEs. Clear proportionality standards would ease this regulatory burden for businesses and create predictable outcomes, supporting investment in productive activities rather than litigation. A more balanced patent enforcement framework would also reduce the risk of opportunistic patent attacks that hurt SMEs and undermine knowledge transfer, thereby protecting the startup ecosystem the Commission wants to scale up.

We hope that in light of this new evidence, the European Commission will take decisive action on this issue that is critical for Europe’s competitiveness, productivity, and innovation. 

We stand ready to support you and your team in this endeavor.

List of signatories

  • IP2Innovate
  • European Automobile Manufacturers' Association (ACEA)
  • ACT / The App Association
  • Computer & Communications Industry Association (CCIA Europe)
  • European Association of Automotive Suppliers (CLEPA)
  • Fair Standards Alliance (FSA)*

 

For further information, please contact IP2Innovate: Patrick Oliver, Executive Director

Email: contact@ip2innovate.eu

 

* The positions and statements in this letter do not necessarily reflect the specific corporate positions of each individual member company of the signatory trade association.

 

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Patrick Oliver

Wide cross-section of industry urges the European Commission to take action to stop PAEs from gaming the patent system in Europe

Thirty-five companies and four industry groups representing over 150 companies from different industry sectors, have written to European Internal Market Commissioner Thierry Breton, urging him to take action to clamp down on Patent Assertion Entities (PAEs) – otherwise known as “patent trolls”. “The experience of our member companies indicates that Europe’s patent system is not working properly and is undermining Europe’s ability to compete globally in the next frontier of technologies,” said Patrick Oliver, Executive Director of IP2Innovate, one of the industry groups that signed the letter. “The European Commission needs to take steps to stop PAEs from gaming the patent system. We are urging Commissioner Breton to draft a set of guidelines that address imbalances in the patent system – in particular guidelines that support the application of a proportionality requirement in patent enforcement by judges around Europe, as required by EU law,” Mr Oliver added. Many European courts issue automatic injunctions upon a finding of a patent infringement, without considering a remedy that could be more proportionate. So for example, an unintentional infringement of just one patent among many others could result in a popular product being withdrawn from the market. PAEs don’t invent, build or sell anything. They just buy up patents to assert them against innovative companies, including SMEs, and extract high settlement fees not based on the value of the underlying invention but rather based on the damage that would result from the removal of the entire product from the market. “As litigation by PAEs has slowed in the US we have witnessed its rise in Europe,” Mr Oliver said, adding: “It’s not just big firms that are targeted – SMEs are also picked on by PAEs. Unjustified product withdrawals can sink a company. They also deprive the public of consumer choice and the benefits of innovation.” Clear enforcement guidelines would help ensure Member States apply EU law properly. They would also bring more balance to the patent system and help avoid disproportionate outcomes and abusive litigation practices, Mr Oliver said. “We stand ready to work with the Commissioner and his team on specific solutions to prevent PAEs from further exploiting the legal system to the detriment of Europe’s digital economy,” he said. Notes to editors: 1. The letter to Commissioner Breton and full list of signatories can be found here. 2. IP2Innovate (IP2I) is a coalition of small and large companies that create innovative products and services in Europe and collectively hold thousands of European patents, as well as European industry groups that collectively represent 65 companies. Our members include: Adidas, Amadeus, Atos / Bull, Daimler, Dell, Freebox, Google, Intel, Microsoft, Nvidia, Proximus, SAP, Spotify & Wiko. IP2I is concerned about a number of imbalances in Europe’s patent legal system that are being exploited to the detriment of innovation and growth in Europe. The exploitation of these imbalances is in particular shown by the rise of litigation related activity by Patent Assertion Entities (PAEs) in Europe. 3. European Commission’s IP Package of 29 November 2017: In its IP Package of 29 November 2017, the Commission acknowledged that there are differences in the way Member States apply certain provisions of the EU Directive on IPR enforcement (IPRED) (such as those on injunctions) across the Single Market, thereby limiting the effectiveness of the Directive. The Commission therefore undertook to “work with Member States' national experts and judges on further, more targeted guidelines, to give more detailed and practical guidance on specific IPRED issues, based on best practices experience” (here, p. 29) with a view to improving the system of judicial enforcement in the EU. Two years after the publication of the IP Package, the thirty-four companies and four associations signatories to the letter to Commissioner Breton call on the European Commission to expand its work with Member States, judges and stakeholders to publish targeted guidelines to support the homogenous and effective application of the proportionality principle to patents. 4. For further information, please contact: Patrick Oliver Executive Director, IP2Innovate Email: contact@ip2innovate.eu Mobile: +32-477-597065
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