I. Introduction
Imagine spending decades carefully planning and building a prosperous community in close collaboration with future residents. Together, you establish a stable and predictable environment where people feel secure and supported. Over time, residents fully embrace the community, trusting its well-organized infrastructure and clear rules.
Then, without warning, city hall announces a rapidly conceived project that disregards the existing structure. The new plan introduces confusing and conflicting rules, higher costs, and uncertainty, leaving residents unsure about how things will work.
A similar situation is taking shape in Europe, threatening the success of the Unified Patent Court (UPC).
But let’s first take a closer look at the journey that led us to this point.
Cellular standards such as 4G and 5G are becoming increasingly crucial across a growing number of industries, driving connectivity, efficiency, and innovation. From healthcare and automotive to smart manufacturing and agriculture, these technologies enable ultra-fast and reliable communication, automation, and data-driven decision-making.
Standards are the result of collaborative efforts within standard development organizations. In these organizations, companies contribute technologies derived from massive R&D efforts, many of which are protected by patents. The most valuable innovations are selected to be incorporated into the standard, and if patented, those patents may become essential to practice the standard. These are known as standard essential patents or SEPs. To ensure widespread accessibility, SEP owners typically commit to make their technologies available on Fair, Reasonable, and Non-Discriminatory (FRAND) terms commonly through licensing. Such FRAND commitment ensures that SEP implementers can access groundbreaking technologies while SEP owners receive fair and adequate compensation for their contributions to the standard.5 The latter incentivizes SEP owners to continue their R&D investments to build the next generation of cellular standards, sustaining a cycle of innovation.
In recent years, concerns have been raised about the alleged lack of transparency in SEP licensing and inefficiencies in negotiations.6 Intervention, they argued, was necessary to support new entrants and small and medium-sized enterprises (SMEs) in the Internet of Things (IoT). In their view, these stakeholders might hesitate to enter the IoT, where cellular standardized patented technologies are critical and access to SEPs is required. This, they claimed, could hinder innovation and harm European competitiveness.
To address these perceived problems, the European Commission (EC) published in April 2023 a Draft SEP Regulation7 (the Draft Regulation) to regulate SEPs in the European Union (EU). On 11 February 2025, the Draft Regulation was withdrawn by the EC citing “[n]o foreseeable agreement.”8 It remains to be seen what action the European Parliament will take regarding the withdrawal.
The EC has also stated that it may introduce a new proposal or take a different approach to “allow for a new start” within discussions on “Europe’s economic and financial sovereignty.”9 As the EC is leaving the door open to making a similar proposal to the one it previously introduced, it is worthwhile to review the Draft Regulation as published. Further, the withdrawal presents an opportunity to examine whether regulatory intervention was ever needed and how the Draft Regulation’s measures could affect European innovation and competitiveness.
Considering the above, this article aims to assess (i) whether the concerns driving regulatory intervention are justified, and (ii) the potential impact of the Draft Regulation’s proposed measures on European innovation and competitiveness.
Both aspects are crucial. While the EC’s goals are certainly laudable, introducing unnecessary regulation to an already well-functioning ecosystem could have unintended negative consequences. Given the significant contribution of European patents to the EU’s economy,10 an efficient and balanced patent system is crucial to preserving the region’s competitive edge in the global market. Regulations based on unsubstantiated concerns may impose a costly and unnecessary regulatory burden on innovators. They may also disrupt the delicate balance that has long fostered innovation across industries. Further, the Draft Regulation could adversely impact established institutions such as the European Patent Office (EPO) and the UPC.
