The European Commission on April 29, 2014 issued two press releases in the competition law cases in investigations against Motorola Mobility and Samsung. A very-very interesting list of FAQs have also been issued constituting in some sort – guidelines for licensing SEPs under FRAND terms. I’ll spend some time on the guidelines as they have extremely important ramifications back here in India, but I would summarize the Motorola and Samsung decisions first. After these decisions, the position of the EU is more-or-less, in line with the US position on SEP – FRAND licensing.
Disclaimer: My firm, Saikrishna & Associates represents Indian handset vendors (Micromax and Intex) in proceedings initiated by Ericsson related to SEPs, FRAND and other related issues.
The Commission’s decisions were given by the chief competition authority, Joaquin Almunia, who noted that the ultimate harm of the smartphone patent wars was to the consumers.
Samsung case: Samsung agreed that it would not seek injunctive relief in Europe on the basis of its SEPs against licensees who sign up to a patent license. The FRAND terms under such a program would be either determined by Courts, or if both parties agree then through a arbitrator. Under the program, Samsung would negotiate with prospective licensees for a period of 12 months before approaching courts, or if Samsung and the prospective licensee agree, take the negotiations to arbitration for final rate determination.
Motorola case: The Commission found that seeking an injunction for a FRAND encumbered patent/s was abuse of dominant position under EU rules particularly when Motorola itself had agreed to license its patents (i.e. a FRAND commitment precludes injunctions) on FRAND terms, and where a prospective was willing to enter into a license on FRAND terms (the only issue being the FRAND terms themselves).
The Commission found it Motorola’s behavior anti competitive, when under the garb of an injunction, Motorola sought to restrain Apple (or give up entirely) from challenging the validity, essentiality, or infringement of Motorola’s SEPs.
The Commission noted that: “Implementers of standards and ultimately consumers should not have to pay for invalid or non-infringed patents. Implementers should therefore be able to ascertain the validity of patents and contest alleged infringements.”
The FAQs: More like guidelines for other SEPs owner seeking to license on FRAND terms.
If one reads the FAQs, one gets the distinct impression that they were framed after the Motorola and Samsung decisions issued by the Commission. There are several inputs in these FAQs that could have a significant impact here:
i. Injunctions and SEPs do not go hand-in-hand: It is anti-competitive (abuse of a dominant position) to use injunctions, when the SEP owner / licensor had already committed to license its SEPs on FRAND terms, and there is a willing licensee to enter into the license – but questions the FRAND terms.
ii. Are injunctions for SEP licensing banned as being anti-competitive: NO – Injunctions can be used against an unwilling licensee.
iii. So who is a willing licensee: Someone who is willing to take a license – could even submit to a Courts jurisdiction, or if licensor willing – approach an arbitrator. Just because, a prospective licensee challenges the validity, essentiality and even infringement positions for SEPs (yes – there can be such a position), it does not mean that the licensee is unwilling. The test is that that consumers should not have to pay for invalid, non-infringed and non-essential patents.
For example, in the US in Realtek v. LSI – it was held that an unwilling licensee is one who refuses to enter into a licensing arrangement with the SEP owner on rates that are determined by a Court.
iv. “Is a potential licensee who challenges validity, essentiality or infringement of SEPs unwilling? NO. Potential licensees of SEPs should remain free to challenge the validity, essentiality or infringement of SEPs. It is in the public interest that potentially invalid patents can be challenged in court and that companies, and ultimately consumers, are not obliged to pay for patents that are not infringed.
v. The Commission does not do a rate determination for FRAND licensing: Commission states that Courts and arbitrators are best placed to decide on the same.