Will the UPC’s PMAC help fill the void left by the intended withdrawal of the SEP Regulation?

Last week I attended the Warsaw SEP Conference. One of the topics that caught my attention, amongst the raft of interesting discussions about SEP policy and FRAND dispute resolution, were the frequent references to the forthcoming UPC Patent Mediation and Arbitration Centre (PMAC). 

A number of commentators at the Conference suggested that PMAC might fill the void left by the impending withdrawal of the draft SEP Regulation (more on that here) and its proposal for mandatory non-binding FRAND determinations.  

Dr Klaus Grabinski, President of the UPC Court of Appeal, explained that PMAC is expected to open its doors early next year, once its procedural rules have been finalised. He also noted that the CJEU in Huawei v ZTE encouraged the use of arbitration in FRAND cases, and suggested that PMAC would be the perfect place to do it.  

Other voices raised anticipated benefits of PMAC in helping to resolve licensing disputes. One of the themes canvassed repeatedly at the Conference was the issue of transparency – how do implementer companies (particularly SMEs) know what a fair price for a licence is if they don’t have access to the SEP holder’s other licences? PMAC was suggested as a means for implementers to obtain access to information about what other licensees are paying, with the additional benefit of having an independent third party setting out their view on a fair price for the licence. These factors, it was said, would give the implementer comfort that they are paying a fair price, enabling those involved in the negotiations to seek the requisite approvals from their business.  

However, parties also need confidence in the decision-makers, in particular for arbitrations which do not offer any right of appeal. There are already a wide range of mediation and arbitration options available to parties involved in FRAND licensing disputes. Parties can, and frequently do, make use of such methods to resolve their disputes (for example, InterDigital and Lenovo agreed to a binding arbitration in October last year).  

There are also of course plenty of stumbling blocks that can prevent parties from agreeing on an alternative dispute resolution (ADR) process. It can be challenging to agree on the scope and parameters of an arbitration, including on matters such as the extent of evidence to be provided, to whether parties should pause other litigation while the arbitration proceeds. A fully-fledged arbitration can also be very expensive.  

It may be the case that the utility of PMAC will revolve around facts such as its cost and the speed of its processes, and how these compare to other ADR options. The extent to which the UPC expects, or even mandates, the use of PMAC by parties in FRAND cases is also likely to play a role in the number of PMAC determinations we see. (As an aside, the English Court is now able to mandate mediations in court proceedings in appropriate cases.)  

Hopefully as the year progresses more information about precisely how PMAC will operate will come to light, including the publication of its procedural rules. Companies will then be able to consider how PMAC compares to other ADR options, and how it might fit into their wider licensing dispute resolution strategies.  

Of course, the Courts will always remain an option for parties when ADR is not viable, or fails. The UPC itself can help resolve FRAND disputes. It ordered access to Panasonic’s licences to Xiaomi (at Panasonic’s request) in Panasonic v Xiaomi and in its first substantive FRAND judgment, the Mannheim Local Division concluded that Panasonic’s conduct complied with FRAND, whereas OPPO’s counter-offer was held not to be FRAND (see more in the FRAND section of the Bristows UPC Review here). 

It remains to be seen if the UPC will go further in future cases and set specific FRAND rates in a manner more akin to the approach of the English Courts. In either case, it seems likely that there will continue to be plenty of developments in FRAND / SEP dispute resolution for some time to come.