European Commission objects to potential misuse of standard-essential patents
On 6 May 2013 the European Commission (EC) gave its preliminary view[i] that Motorola Mobility’s seeking and enforcing of an injunction on the basis of its standard-essential patents (SEPs) was an abuse of a dominant position and thus prohibited by EU competition law.
The EC does not question the use of injunctions by patent-holders, but using injunctions may be considered abusive where SEPs are concerned and the potential licensee is willing to enter into a licence on Fair, Reasonable and Non-Discriminatory (FRAND) terms. In this case, it’s the EC’s view that the alleged infringer, Apple, was willing to enter into a FRAND licence. Apple demonstrated this willingness by its acceptance to be bound by a third party’s (in this case, the German court’s) determination of a FRAND royalty rate in the event that bilateral negotiations did not come to a fruitful conclusion. By contrast, a potential licensee is considered to be unwilling if they are passive and unresponsive to a request to enter into licensing negotiations or if they are found to employ clear delaying tactics.
The EC also gave its view[ii] that the fact that a potential licensee challenges the validity, essentiality or infringement of the SEP does not make it unwilling. In this case, Motorola required clauses that prohibited such challenges by Apple, even after Apple had agreed to be bound by a third party determination of the FRAND terms. The EC believes that it is in the public interest that licensees should be able to challenge the validity, essentiality or infringement of SEPs.
Under the circumstances of this case, the EC’s view is that recourse to injunctions harms competition. The threat of injunctions can distort licensing negotiations and could lead to licensing terms that the licensee of the SEP would not have accepted if it wasn’t for that threat.
The next step in the EC investigation is to allow Motorola to present its counter-case. If the Commission concludes that there is sufficient evidence of a violation of competition law, it can prohibit the injunction and impose a hefty fine of up to 10% of Motorola’s annual worldwide turnover.
In the US, the Federal Trade Commission (FTC) has previously expressed similar concerns in its own investigation[iii] into Motorola’s SEP licensing and assertion practices. Google (who owns Motorola Mobility) is not permitted to obtain or enforce injunctions for its Motorola SEPs unless the licensees were “unwilling” under a consent order agreed between Google and the FTC.
[i] http://europa.eu/rapid/press-release_IP-13-406_en.htm
[ii] http://europa.eu/rapid/press-release_MEMO-13-403_en.htm
[iii] http://www.ftc.gov/os/caselist/1210120/130103googlemotorolado.pdf
