New SEP Regulatory Framework and AI Copyright Legislation Advance in the European Union

On April 27, a pair of legal measures were advanced within the European Union that promise to greatly impact the state of technological commercialization within Europe for both standardized and artificial intelligence (AI) technologies. While political leaders in the EU maintain that either proposal addresses consumer safety and competition concerns, multiple commentators have pointed out issues that could slow the rate of technological commercialization to the detriment of Europeans across the continent.

EU Commission Finally Publishes SEP Regulatory Framework Following Criticisms

After weeks of anticipation since draft regulations were first leaked to the media, the European Commission has finally introduced a proposal for a new regulatory framework surrounding standard-essential patents (SEPs). The framework would hand over a great deal of regulatory power to the European Union Intellectual Property Office (EUIPO) to intervene in commercial licensing disputes over telecommunications and other standardized technologies that are covered by SEPs. Those responsibilities would be housed in newly-established “competence center” at the EUIPO charged with maintaining a register of SEPs, conducting so-called “essentiality checks” of patents registered with the EUIPO as SEPs, and administering fair, reasonable and non-discriminatory (FRAND) royalty rates as determined by the agency in lieu of litigation.

“The current system has suffered from a lack of transparency, predictability, and length disputes and litigation,” according to the EU Commission’s press release announcing the new SEP regulatory framework. Some IP industry members have responded positively to the proposed rules, noting that the EUIPO’s FRAND determination proceedings under the rules would follow a mediation-style process allowing limited discovery and some expert testimony. Further, the rules would also allow any owner of an SEP subject to the EUIPO’s determination of a FRAND rate for an entire standardized technology to submit aggregate royalty proposals and other information to the EUIPO.

However, several renowned IP pundits have voiced grave concerns that the proposed SEP framework would do more harm than good to technological competition at a time when both the U.S. and EU are locked in a battle for tech supremacy with foreign rival China. An IPWatchdog editorial penned by Adam Mossoff, Professor of Law at GMU’s Antonin Scalia Law School, noted that the EUIPO, the EU’s main agency for registering trademarks, lacks the patent law expertise required to determine whether a claimed technology is essential to a standard. IPWatchdog CEO & President Gene Quinn was even more pointed in his criticism of the EU’s double-handed approach on SEPs:

“As the EC is set to debate the wisdom of a multi-industry takeover that will render meaningless FRAND (i.e., fair, reasonable and non-discriminatory) licensing promises in favor of authoritarian decrees, the European Union continues to march forward with an unfair trade practices case against China at the World Trade Organization… because European Technology companies are deprived of ‘the possibility to exercise and enforce the rights that give them a technological edge…’ What is the European Commission thinking, if anything? No, China, you must stop doing what you are doing because we want to take over complete and total control of SEPs specifically, and as a result, all standard setting and related technological innovation more generally? This level of hypocrisy is special even for government bureaucrats.”

Along with the new regulatory framework on SEP licensing, the EU Commission’s draft rules also lay the groundwork for the establishment of a compulsory licensing instrument for patents in response to formal EU declarations of crises in areas such as semiconductor supply shortages or COVID-19 response. The rules would also create a unitary supplementary protection certificate (SPC) to harmonize national rules on patent term extensions for human or veterinary pharmaceutical products.

AI Act’s Provisions on Copyright Transparency Could Trigger Infringement Suits

On the same day that the SEP framework was officially published, the members of the European Parliament also voted to advance the AI Act, a landmark legislative proposal that would establish strict regulations proscribing various practices by tech companies implementing artificial intelligence platforms. Among the AI Act’s main provisions are rigorous testing and documentation rules surrounding AI systems used in high-risk applications such as autonomous driving and medical devices, as well as new regulations surrounding general AI systems such as natural language processing platforms.

According to news reports, AI Act provisions related to generative AI models underwent changes in the days leading up to the MEP vote to advance the legislation. This includes language related to copyright-protected content used to train generative systems like ChatGPT or other platforms that may be generating media after being trained by digital files of copyrighted literature, art or music. While efforts to ban the use of copyrighted materials to train such AI systems were not successful, the AI Act does require that operators of such platforms disclose copyrighted materials that have been used for AI system training.

While the issue of AI inventorship and authorship has been a key debate in intellectual property circles, there has been a growing question over whether the use of copyrighted material to train AI systems constitutes infringement, or whether such activities may be covered under traditional fair use doctrines. While tech companies like ChatGPT operator OpenAI keep their training data secret, the new provisions in the AI Act would potentially open up such companies to a growing sector of infringement litigation being brought by copyrighted content owners such as Getty Images.

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Author: jorisvo