Tuesday, January 31, 2012

EU launches full-blown investigation of Samsung's suspected abuse of FRAND-pledged patents -- Motorola must watch out

The European Commission just announced that it has "opened a formal investigation to assess whether Samsung Electronics has abusively, and in contravention of a commitment it gave to the European Telecommunications Standards Institute (ETSI), used certain of its standard essential patent rights to distort competition in European mobile device markets, in breach of EU antitrust rules".

It goes without saying that Samsung is innocent until proven guilty of abuse. But the launch of a full-blown investigation after a few months of preliminary investigations is an important step. This means European competition enforcers have received information, in response to questionnaires (sent to Apple, which may have informally complained, and Samsung) that warrant a more formal effort. As the Commission's press release states, "[t]he opening of proceedings means that the Commission will examine the case as a matter of priority".

Please bear with me for a big-time "See I Told Ya So". Back in November I clarified on this blog, and in correspondence and interviews with major news agencies (several of whom quoted me), that the EU's concerns appeared to relate to Samsung's, not Apple's, conduct. Both companies received questionnaires, but the Commission said that its concerns related to patents essential to wireless telecommunications standards, and Apple has never sued anyone over a patent of that kind. In fact, Apple never participated in such a standard-setting process as far as I know. [Update] By the previous sentence I meant to say that Apple never participated in the definition of a standard like GSM or 3G/UMTS. Apple has contributed to codec standards, but since it's part of the MPEG LA pool, anyone can receive a license to those patents without having to negotiate with Apple itself. [/Update]

In principle, antitrust agencies could also try to go after Apple, but in that case, the theory would have to be a different one than FRAND-pledged standards-essential patents.

So far, Samsung's attempts to enforce a minimum of 13 different allegedly 3G-essential patents against Apple haven't been successful. In Germany, Samsung has already lost its first two lawsuits over such patents. Previously, a Dutch court dismissed a Samsung motion for an injunction because it held Samsung to have failed to honor a FRAND licensing commitment. Bids for preliminary injunctions against the iPhone 4S failed in France and Italy.

But the European Commission can't wait until Samsung finally wins a ruling based on such a patent and enforces it, potentially causing irreparable harm.

Even though Samsung is at this stage the only company to be investigated over this issue, other suspected abusers could face similar inquiries anytime. And everyone else who may intend to seek or enforce injunctions based on FRAND-pledged standards-essential patents in Europe will now have to proceed with extra caution. In particular, Motorola Mobility has already won (but, to the best of my knowledge, not yet sought to enforce) an injunction against Apple in Germany. Motorola's conduct is also relevant to the ongoing competition review of its proposed acquisition by Google. As I wrote last week, there's a risk of Google putting its muscle behind widespread FRAND abuse post-acquisition. Google has not spoken out on the issue of whether it's acceptable to seek (or enforce) injunctions based on standards-essential patents, though other large players including (but not limited to) Cisco, IBM, HP and RIM are clearly concerned about any such abuse of FRAND-pledged patents.

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