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A FRAND In Need – The European Commission’s Samsung Investigation

07 March 2012

On 31 January 2012, the European Commission (“Commission”) announced that it had opened a formal investigation into Samsung Electronics (“Samsung”) to investigate whether Samsung had:

  • abused its dominant market position in contravention of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”); and/or
  • acted in breach of the 1998 commitment it gave to the European Telecommunications Standards Institute (“ETSI”).

The announcement of this investigation follows an earlier announcement by the Commission on 4 November 2011 that it had sent requests for information to both Apple and Samsung concerning the enforcement of standards-essential patents in the mobile telephony sector.

Standard setting and context of the investigation

Standard setting can foster innovation and enhance competition by ensuring that products from multiple manufacturers are compatible and interoperable. However, standard setting can also raise competition concerns. The Commission’s investigation arises in the context of the on-going global patent dispute between Samsung and Apple. In 2011, Samsung sought injunctions in several EU Member States to block the sale of certain mobile devices on the grounds that the devices infringed certain patents it owned.  Most notably, Samsung sought to block the sale of Apple’s iPhone 4S in France and Italy. However, both the French and Italian courts have since found against Samsung and refused to grant the injunctions.

It appears that Apple has also recently complained to the Commission about Motorola Mobility’s (“Motorola”) use of essential patents.  This is also part of a wider battle. Last December, Motorola won a preliminary injunction in Germany, accusing Apple of infringing its patents.  This new Apple complaint also follows hot on the heels of the Commission’s approval of Google’s acquisition of Motorola’s patent portfolio.

The particular patents at issue in the present case are known as standards-essential patents. Such patents are necessary for devices to conform to industry standards (e.g., the 3G mobile standard). Under its Horizontal Co-Operation Guidelines, adopted in 2010, the Commission, amongst other things, requires owners of standards-essential patents to licence them to competitors on “fair, reasonable and non-discriminatory terms” (“FRAND”). In 1998, Samsung gave an irrevocable commitment to ETSI that it would licence its standards-essential patents on FRAND terms.

Conclusion

The actions by Samsung in the present case, not merely to refuse to licence but to actively seek pre-emptive injunctions raise interesting questions vis-à-vis the application of the competition rules. The announcement by the Commission means that it will now examine this case as a matter of priority, but does not prejudge the outcome of the investigation. If found in breach of Article 102 TFEU, the Commission can fine Samsung up to 10 per cent of its total worldwide turnover.  In a similar case in 2008, the Commission fined Microsoft €899 million for non-compliance with a Direction to licence its interoperability information to downstream competitors.

This particular topic at the IP/antitrust interface, highlighted by past cases such as Rambus and Qualcomm, has sparked much debate on both sides of the Atlantic. Standard-setting activities are inherently global in scope. Accordingly, it is of some importance that licensors and licensees of IP essential to standards are cognisant of the legal regime and process of enforcement which apply in the different jurisdictions in which they operate.

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The content of this article is provided for information purposes only and does not constitute legal or other advice. Mason Hayes & Curran (www.mhc.ie) is a leading business law firm with offices in Dublin, London and New York. © Copyright Mason Hayes & Curran 2012. All rights reserved.

 

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