Monday, May 6, 2013

The EC's FRANDLY Statement

On May 6, 2013, the European Commission ("EC") sent a Statement of Objections (MEMO/13/403) to Motorola Mobility L.L.C., complaining that the Google unit had impermissibly sought injunctive relief against alleged infringement of some of its mobile communications patents.  Google purchased Motorola Mobility in 2012, in large part to acquire the latter's massive portfolio of roughly 25,000 patents and patent applications, some of which are considered essential to mobile communication technical standards.  Increasingly, antitrust authorities around the world are policing the use of such standards-essential patents, especially when they claim devices, methods, or systems adopted by technical standards-setting organizations or negotiations in which the owners of such patents participated.  In general, the law prefers that standards-essential patents be made available by their owners for licensing to others on terms that are (fair) reasonable and non-discriminatory (i.e., "(F)RAND").

In its Statement, the EC explained its rationale for taking action as follows:
In industries such as the IT sector, industry standards are key to ensuring interoperability and fostering innovation. They bring benefits to consumers and businesses. However, once a technology has been chosen and the standard has been set, it is important that the standard is accessible to all interested parties. In order to ensure such access and to prevent patent hold-up, standard-setting organisations generally require that members commit ex ante to license their standard essential patents (SEPs) on Fair Reasonable and Non-Discriminatory (FRAND) terms. 
Against this backdrop, the Commission is concerned that the use of injunctions can be anti-competitive. In this case, the Commission considers at this stage that recourse by Motorola Mobility to injunctions on the basis of FRAND-encumbered SEPs distorted the negotiation process for a FRAND licence with Apple – a willing licensee. Hold-ups of this kind can ultimately lead to less consumer choice with regard to interoperable products and less innovation.
The EC answered its own question, "Is the Commission not intervening in a simple patent dispute between private parties?," in the negative:
No.  The Commission takes no position on the validity or infringement of the patents in question which is to be determined by national courts. The Commission's intervention aims to protect the public interest that commitments given during a standard-setting process are respected so that consumers and businesses can enjoy the benefits of standardisation.
Furthermore, the EC reaffirmed its support for patent rights outside the context of standards-essential patents:
Intellectual property rights are one of the cornerstones of the single market and therefore have a key role in promoting innovation. This case is about the potential misuse of certain SEPs in the specific standardisation context. The Commission will continue to attach high importance to effective patent protection and an efficient patent system.
Motorola Mobility and its competitor Apple Inc. may now respond to the EC's concerns in writing.  They may even request an oral hearing to explain their positions.  Both options present pitfalls to both parties, as owners of numerous important patents that are, or may in the future become, part of technical standards relied upon by competitors in their industry.  What is certain is that (F)RAND principles are in the clear ascendancy in the world of patents, particularly in the European Union.

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