Wednesday, October 5, 2011

Samsung's attempt to ban the iPhone 4S over FRAND patents is deeply troubling

As the Wall Street Journal reports, Samsung announced this morning that it seeks to ban the new iPhone -- the iPhone 4S -- in various markets. Today, Samsung will make simultaneous filings of petitions for preliminary injunctions in Paris, France as well as Milan, Italy, to be followed by similar actions in other countries yet to be determined.

The Korea Times' Kim Yoo-chul already wrote on September 18 - two-and-a-half weeks ago -- that a Samsung executive, speaking on condition of anonymity, announced such an initiative against the new iPhone right after its launch. Today's events validate the Korea Times' high-quality research into these patent issues. Last week, the Korea Times also found out from unnamed Samsung executives that the consumer electronics giant didn't expect much help from Google with respect to Android's intellectual property issues. The Korea Times clearly has an inside track.

Today's announcement by Samsung states that the petitions to be filed today in France and Italy "will each cite two patent infringements related to wireless telecommunications technology, specifically Wideband Code Division Multiple Access (WCDMA) standards for 3G mobile handsets". Very importantly, Samsung's announcement declares those patents to be "essential", which is an incredibly important term in connection with industry standards. If those patents are indeed essential to the standard, then Samsung as a participant in the relevant standard-setting process has an obligation to grant licenses to everyone, including Apple, on FRAND (fair, reasonable and non-discriminatory) terms. Apple already accuses Samsung in other jurisdictions, including but not limited to the U.S., of failing to honor those obligations.

This is what the FRAND issue comes down to: if those patents are essential, then there are two questions to be analyzed by a court: Does Apple have to pay? And if so, how much can Samsung ask for under a FRAND framework? But an injunction can only be justified if and when Apple refuses to pay a FRAND royalty that it owes in the binding opinion of a court of competent jurisdiction.

Starting with a petition for an injunction means to put the cart before the horse

Samsung's press release simply claims that Apple's "violation" is "too severe", and therefore seeks to shut down the new iPhone. That way, Samsung puts the cart before the horse. Standards-essential patents are not supposed to be used that way. In the alternative, there would be chaos in this industry, and widespread hold-up. Imagine what would happen if every participant in a standard-setting process could later shut down entire telecommunications networks even if the alleged infringers are willing to pay a royalty to be determined, in the event of a commercial disagreement between the parties, by a court of law.

Many may think that Samsung is right to seek an injunction since that's what Apple does with its own patents. But we're talking about two completely different types of patents -- not under patent law, which views them all as patents in the sense of government-granted monopolies, but under competition law, which comes into play when companies join forces to create industry standards. Apple simply doesn't have an obligation to grant a license to its asserted patents on any terms because those patents aren't standards-related. Samsung, however, made FRAND commitments with respect to those patents and must honor them. The industry at large depends on everyone honoring those commitments. This here is not just about two companies, Apple and Samsung. This is about the very basis on which this industry operates. Without those industry standards, phones couldn't connect to the networks of carriers, and carriers couldn't communicate with each other.

Regardless of whether one supports Apple's enforcement of intellectual property rights philosophically, the key thing is that Apple asserts patents that it may use without restrictions, while Samsung uses patents that an entire industry relies upon because Samsung and everyone else made FRAND licensing commitments in the first place.

In the Netherlands, a decision on the fundamental question of what legal remedies Samsung may or may not ask for based on its FRAND-pledged declared-essential patents will be announced on Friday, October 14. The judge there asked very good questions at a recent hearing. Therefore, I'm confident that he will establish clear limits for Samsung's and everyone else's assertion of such patents.

This use of standards-related patents is unacceptable

Samsung's determination to fight hard is admirable. They're clearly giving Apple a run for the money. I don't support some of Apple's overreaching claims. I repeatedly criticized the overly right holder-friendly stance of the Düsseldorf Regional Court in connection with the German Galaxy Tab 10.1 injunction. I interpreted Samsung's license agreement with Microsoft as a clear indication that Samsung respects intellectual property and is willing to pay a fair price for a license. The Korea Times quoted me today with critical remarks on the iPhone 4S and Apple's current lack of breakthrough innovation. I use a Samsung phone and my next one might be the upcoming Galaxy Note. But the use of standards patents as a weapon is something I cannot support or defend.

Samsung is playing with fire. Most likely, those assertions of FRAND patents will fail, but you never know how different jurisdictions will decide, especially if there's little experience with these issues in some countries and/or if some systems have general shortcomings. Some may not like this analogy, but it was shocking to see that an exchange student with no criminal record or plausible motive for a murder was imprisoned in Perugia, Italy for four years without any such thing as the evidence required for a single day of detention in better jurisdictions. Milan is certainly a modern city and a major center of commerce in the wealthiest region of Italy, not a provincial place with too many people stuck in medieval times like Perugia. If the Milan court handed an injunction against the iPhone 4S based on standards-essential patents instead of analyzing what (if anything) Apple owes Samsung, it would create an equally outrageous commercial equivalent of the scandalous first-instance conviction of Amanda Knox and her ex-boyfriend. I think the Italian judiciary can't afford another embarrassment of that kind in front of the whole world too soon, but Samsung appears to be hoping that Italy will give the iPhone 4S an Amanda Knox treatment, which in turn would give Samsung some temporary leverage in settlement negotiations with Apple.

With a view to next week, even though each country in Europe can decide on legal issues independently from courts in other EU member states, a good decision by the Dutch judge next week would greatly reduce the risk for Apple of the iPhone 4S being banned in other European countries. The Netherlands is a small country, but many patent lawsuits take place there, especially since Rotterdam seaport is a major point of entry for many tech products into Europe. The Dutch court should serve as a beacon for the rest of Europe.

Will Verizon and T-Mobile express concern or are they hypocrites?

I really believe the industry at large must be concerned about where the (ab)use of standards patents as a strategic weapon may ultimately lead. Verizon and T-Mobile filed amicus curiae ("friend-of-the-court") briefs in support of Samsung in California, claiming that an injunction against certain Samsung products would run counter to the public interest, and the court accepted them (though it's another question whether it will agree with their content). Why aren't those carriers, whose business fundamentally depends on the undisrupted functioning of industry standards, up in arms when Samsung uses communications standards patents against Apple?

From a public interest point of view, that's a much more critical issue than the availability of a few LTE 4G devices during this year's Christmas selling season. There may not be an equivalent in France and Italy to the American concept of an amicus curiae brief, but in order to avoid the impression of being hypocrites, Verizon and T-Mobile should at least voice their concern in public and look for other ways to support Apple's defense against this rampant abuse of standards-related patents.

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