IP developments in Europe - the next challenges for the robotics industry

IP developments in Europe – the next challenges for the robotics industry

Artificial intelligence and robotics are two of the most innovative fields of technology, with many companies investing tremendous sums in researching and developing new products. Therefore, three of Germany’s largest industry associations have launched the “Industry 4.0 Platform”, a joint project with the German Ministry for Economic Affairs and Education and Research Ministry cementing Germany’s position as a hub for sustainable production technologies. To protect their investments, the businesses have to remain alert not only to data protection and (product) liability issues but particularly also to intellectual property developments. Innovative companies depend on using technical IP rights to survive in the market. Germany and Europe are currently experiencing a number of different developments in patent legislation that innovative companies should urgently consider at this early stage. In particular, the recent developments in handling standard essential patents and the planned introduction of a Unitary European Patent Court System will become very important. In the following, these issues will be discussed due to provide an overview on the commercial and legal developments arising for companies which are active in the robotics industry on the European, in particular German, markets.

Industry 4.0

Germany remains a pioneering force in automation technology and networked industries. Several of the major manufacturers of industrial robots are from Germany or the European Union. According to a press release of the International Federation of Robotics (IRF Statistical Department, 23 March 2015), of the 225,000 industrial robots sold worldwide in 2014 (+ 27% over 2013), 56,000 went to China, resulting in a 50% growth rate over 2013. South Korea, Japan, USA and Germany again were the biggest sales markets besides China in 2014. China in particular is more than keen to outrun the established manufacturing powers in the robotics segment, not only as one of the largest buyers of robots but also as one of the biggest manufacturers. That last aspect will of course increase Chinese exports and give another boost to the already very strong worldwide competition.

The German industry and politicians have recognised this trend and chose the Hannover trade fair in April 2015 as venue to present their “Industry 4.0 Platform”, a project dealing with the development and implementation of future information, communication, automation and production technologies. The project involves the German Ministry for Economic Affairs and Ministry of Education and Research as well as the three industry associations as initiators, plus several research institutes, universities and virtually all major German industrial enterprises.

The project’s list of high-profile participants shows how important this topic has become and that even now, the development of robotics, smart factories and advanced manufacturing is exposed to significant market pressure and lively competition.

As the pressure of competition is likely to increase further, IP rights and most notably patents are a means to distinguish oneself from competitors in technical areas such as robotics. The industry has spotted this potential: Studies conducted by Fraunhofer IAO and IAT Stuttgart University have shown that over the recent years, companies especially from China, the USA and Germany filed considerably more patent applications in technologies relating to robotics and Industry 4.0, such as artificial intelligence, network wireless communication or power supply.

Standard essential patents

What are the implications for the participants in the robotics industry? Although only a fraction of the above mentioned patent applications have been issued to date, this will change in the foreseeable future and some technologies will be monopolised by single players.

Wireless communication technology will play a prominent role in robotics, regardless of the specific functions of each product, as robots depend on wireless communication to operate, be it in industrial production, medical technology or logistics contexts. The essential wireless technologies must be standardised to link robots to different devices, for example to control or service them remotely. Communication among robots, for example at complex assembly lines, requires standardisation of network components across different manufacturers and users. This field will be particularly prone to patent litigation, in the way mobile communication technology in smartphones is already today.

To implement these goals on the technical level, standards must be introduced for the technologies: Specific industry standards will become established that have to be used by everyone seeking to operate in a particular market in order to make a marketable product. By way of example, technical standards in wireless communication usually comprise several thousand patents, which are essential because it is not possible for technical reasons to make standard compliant products without infringing these rights.

Disputes about standard essential patents (SEPs) involve not only the “ordinary” questions of patent litigation (is the protected technology actually being used?) but also an entirely different, vital question: Is the proprietor required by antitrust law to issue a license on FRAND (fair, reasonable and non-discriminatory) terms? For patentees, this means they can participate in their competitors’ sales to some extent (of a fair, reasonable and non-discriminatory royalty) but have no right anymore to forbid others to use their patent, at least as long as the users comply with the legal requirements imposed on them.

Over the past years, there have been many lawsuits, especially between the major smartphone companies, on how the duties should be distributed among the patentee and the user of the patent. Many of these cases revolved around SEPs, arguing who has to meet which requirements to ensure that the patentee can still enforce his patent rights by way of an injunction or that the patent user can plead royalty payments on FRAND terms.

Recently, the Court of Justice of the European Union (CJEU) defined EU-wide rules on how this has to be done (ruling of 16 July 2015, case C-170/13). In particular, the patentee is subject to significant duties in relation to the user of his SEP, which the patentee has to fulfil before he can enforce any claim for injunctive relief in court. The ruling impacts licensing practices throughout the EU. According to the CJEU, as a first step, the patentee must approach the patent user with details of the alleged infringement and offer him a license specifying the amount of the royalty and its calculation corresponding to FRAND terms. The CJEU does not describe, however, the exact way in which this is to be done. On receiving the information the patent user must inform the patentee without delay whether he accepts the offer. If the patent user refuses the offer he has to promptly submit a counteroffer that corresponds to FRAND terms likewise. In addition, the patent user has to provide a security (such as a bank guarantee) to secure the patentee’s claims.

The specific elaborations of this procedure are highly complicated but will directly concern a major part of companies engaged in robotics, not least because many of the relevant technologies covering the communication of the interacting devices involve standard essential patents in some form or other.

Unified Patent Court System

Also the already enacted introduction of the new pan-European patent system will be of extraordinary strategic importance inter alia for robotics companies: Until now, one could only file a collective application (EP application) to obtain a bundle of different national patents. Once the new system comes into force (currently envisaged for the end of 2016 / early 2017) applicants only need one single application to get one Europe-wide patent with unitary effect (one-stop shopping). According to the European Patent Office, the fees for the complete term of the unitary patent (20 years) will be reduced by more than 70% over the comparable fees for a European patent (EP) for the contracting Member States.

Thus, on one hand, patentees will have a cost-efficient alternative of obtaining comprehensive patent protection within the EU and enforcing the patent Europe-wide in a single procedure before the new Unified Patent Court, to be established over the next one to two years.

On the other hand, the new system of course also involves the risk of the patent being revoked with Europe-wide effect, in one single pan-European action for revocation, whereas the current system requires a separate action for revocation for each Member State once the deadline for filing notice of opposition to the European Patent Office has expired.

This applies also for all existing EPs and EP applications, which will be transferred automatically into the new system, in other words converted to unitary patents, unless their proprietors have opted out from the unitary system (there will be a “sunrise-period”). The opt-out has to be exercised for every single EP and EP application and incurs an opt-out fee of EUR 80 in each case. A patentee who has opted out and later wishes to re-join the new system, for example for Europe-wide enforcement purposes, can do so by “opting in” for a fee of EUR 80 as well.

What does all this mean for innovative companies? Well, these companies have to develop a strategy deciding what they will do with their existing patents once the new system has come into force, either dealing with the new system or even return to national patent applications to avoid the risk of Europe-wide revocation. Since there are not yet any experiences how the new Unitary Patent System will work in practice and because the written law, consisting of the EU Regulations (EU) No 1257/2012, (EU) No 1260/2012, the Agreement on a Unified Patent Court and the Rules of Procedures, contains numerous ambiguities and contradictions, companies already owning European patents or patent applications or are planning to enter into the European market should be aware of the chances and risks of the new European patent system and start to define their patenting strategies for Europe right now.

Conclusion

For companies active in the robotics sector, IP rights are extremely important and will become more so for reason of their increased use to meet networking requirements. IP rights can be an enormous competitive advantage for innovators with wide IP portfolios. When enforcing patents that qualify as standard essential, however, they have to be sure to satisfy the criteria that the CJEU has defined for the EU. Companies have to become aware of the implications of the ongoing reform of the European patent system and the introduction of the UPC and devise appropriate filing strategies now. Once the new system has been introduced, it may be too late.

Dr Jan Phillip Rektorschek is a German qualified lawyer in TaylorWessing’s Munich office and specialises in patent litigation. His work for Taylor Wessing is concentrated on advising and representing international and German clients in court and out-of-court disputes. He is member of UNION-IP and gives lectures for Intellectual Property Law at the Munich Business School.