Wednesday 4 June 2014

Plunging into a Safe Harbour from SEP Injunctions

The European Commission’s antitrust agency is striking a cunning compromise between divergent views on whether or not and under what circumstances injunctions may be sought for patent infringements where patentees have agreed to license patents, they have declared as potentially essential to the UMTS (WCDMA) standard, on fair, reasonable and non-discriminatory terms. EC press releases announce competition rule infringement by Motorola and commitments given by Samsung on this matter. The Motorola decision creates a competition rule infringement ‘remedy’ which “provides a ‘safe harbour’ for standard implementers who are willing to take a licence on FRAND terms. If they want to be safe from injunctions based on SEPs by the patent holder, they can demonstrate that they are a willing licensee by agreeing that a court or a mutually agreed arbitrator adjudicates the FRAND terms.”  Commitment decision details for Samsung are a practical illustration of the safe harbour principles in the Motorola decision.
The Commission’s Vice President in charge of competition policy Joaquín Almunia said: "The so-called smartphone patent wars should not occur at the expense of consumers.”  However, the Commission has not presented publicly, through the publication of the Samsung decision (the full Motorola decision is yet to be made available) or its public statements, any evidence or diagnosis of actual abuse or harm versus the countervailing positions of others in the smartphone and tablet markets A Q&A memo accompanying the decision announcements simply states that “the Commission’s aim is to prevent SEP holders from using SEP-based injunctions in an anticompetitive way, in order to extract licensing conditions that may restrict competition and ultimately harm consumers.

To the contrary, there is abundant published evidence and analysis showing consumers and smartphone markets are doing rather well with vigorous competition despite various theories of abuse and harm. The Commission is well aware of this, but has intervened nevertheless. Mr Almunia's spokesperson Antoine Colombani remarked last year that "[t]he markets for smartphones and tablets are very dynamic, innovative and fast-growing. Samsung's growing market position and the success of Google's Android platform are good reasons to believe that competition is strong on these markets."

FRAND licensing terms negotiated or determined by arbitration or the court in the safe harbour must be on the basis of a packaged approach, according to the Licensing Framework set out in the Samsung decision. Notably, recognising that it would be impossible to assess infringement, validity, essentiality for every patent, even in modest-sized portfolios, and that this is not the way license negotiations work in the real world, the EC's approach is not on these basis of individual assessments of these issues on a patent-by-patent basis or in multiple jurisdictions. In other words, if a licensee wants to enter the safe harbour and protect itself from the threat of injunctions for all Mobile SEPs, it must accept that all such SEPs are within the safe harbour and this requires a timely and efficient approach to determining FRAND terms for all those Mobile SEPs. The quid pro quo with the removal of the threat of injunctions in the safe harbour framework is that licensees cannot pull things apart and challenge many or every patent to delay and fragment the licensing process.

It is quite perverse that the availability of injunctions or even seeking them should be an antitrust issue. My detailed analysis of the Commission's decisions including the safe harbour, Licensing Framework, testing for willingness, dominance and abuse, and inter-jurisdictional conflicts can be found here.

1 comment:

Techsmart2014 said...

Interesting study on smartphone royalties: