Almunia brokers truce in patent wars
The antitrust rulings issued today by the Commission provide landmark guidance on how technology companies can license patents included in an industry standard.
Two rulings by the European Commission today may signal an end in sight to a series of long-running disputes – labelled “patent wars” – between technology giants.
Google’s Motorola broke European Union competition rules by trying to remove from the German market Apple iPhones and iPads, which used certain Motorola patents without a licence, the Commission ruled today (29 April). It also announced a settlement with Samsung, which had sought similar injunctions against Apple products.
The two cases provide landmark guidance on how technology companies can license patents included in an industry standard. Motorola escaped a fine because of the novelty of the case. The cases relate to the 3G and GSM standards for mobile phones, to which both Samsung and Motorola contributed patents.
Since these standards are fundamental for mobile phones to work, the main patents included are called standard essential patents (SEPs) and must be licensed out in a fair and non-discriminatory manner.
In 2011, Apple complained to the Commission that rivals Samsung and Motorola were taking advantage of their patents’ inclusion in the standards to demand extortionate royalties from Apple. The companies retorted that Apple, which made nearly €5 billion profit in the final quarter of 2011 alone, was refusing to negotiate a reasonable fee.
Abuse of power
A number of other technology companies have filed complaints with the Commission accusing SEP owners of abusing their market power, in a series of global disputes known as the patent wars. The Commission is still investigating a similar complaint against Motorola by Microsoft.
The settlement with Samsung sets out a framework so that licensors can be sure that they are not negotiating so inflexibly that breaches of EU competition rules are incurred. Under the settlement, if after 12 months of negotiations no compromise has been reached on the royalty rate, the parties must allow a court or an arbitrator to fix the price for them.
The decision against Motorola also held that licensors cannot, as is sometimes the case now, prevent their licensees from challenging the validity of their patents in court – an important principle since 50% of challenges succeed. “Intellectual property rights should not be abused to the detriment of competition and consumers,” Joaquin Almunia, the European commissioner for competition, said yesterday.