Wednesday, February 22, 2012

After Apple, Microsoft also files an EU antitrust complaint against Motorola Mobility over FRAND abuse

Less than a week after Apple's EU antitrust complaint against Motorola Mobility became publicly known, Microsoft has also filed formal competition charges against MMI with the European Commission.

With two industry leaders complaining about MMI's alleged abuse of FRAND-pledged, standard-essential patents, the prospects of formal investigations have certainly increased. Under its best practice guidelines, the European Commission will presumably make a determination on the launch of full-blown investigations within a few months. European regulators are already investigating Samsung's related conduct, which is largely consistent with what MMI is doing in Europe. When the Commission cleared Google's proposed acquisition of MMI last week, it stressed that it did not "bless[] all actions by Motorola in the past [...] with regard to the use of [its] standard essential patents". (I published the full text of European Commission Vice President JoaquĆ­n Almunia here.)

Since I follow MMI's aggressive litigation and enforcement activities in Germany closely (I watch all of the related court hearings), I can see what Apple and Microsoft are complaining about. If every owner of standard-essential patents behaved like Motorola, this industry would be in chaos, and grind to a halt. Just in the field of wireless telecommunications standards, there are hundreds of essential portfolios, and Motorola's assertions also include related technologies such as the H.264 video codec.

Standard-essential patents aren't powerful because of their technical merits. Most of the time they aren't particularly innovative. They're just critical because they cover mandatory parts of standards. That's the only reason they can't be worked around once they are part of an industry standard. It's key that the owners of such patents act responsibly, and if some of them don't, antitrust intervention is needed.

I'm profoundly concerned about the new and growing phenomenon of "FRAND abuse tourism": companies like Samsung and Motorola start litigation in places like Germany only because they see better chances of winning injunctions based on standard-essential patents than, for example, in the United States. As a European consumer, I don't want to be held hostage by companies that use industry standards as a nuclear weapon and restrict choice. As a European citizen, I'm reasonably confident that the Commission will make those companies (and countless others who are watching these high-profile smartphone cases and harboring similar plans) realize that Europe is not a good destination for FRAND abuse tourism.

Motorola has already won and enforced against Apple an injunction based on a standard-essential patent. The Mannheim Regional Court will rule on another Motorola lawsuit over the same patent (but against a different Apple legal entity) and on a Motorola video codec patent lawsuit against Microsoft in April. I don't dispute any company's right to defend its intellectual property vigorously, but when standard-essential patents are involved, there must be clear limits.

Apple and Microsoft have definitely enhanced their credibility on the issue of standard-essential patents by making concise and clear statements on how such patents should be used. Two weeks ago, I published a letter that Apple had sent to ETSI, a major European standards body, in November 2011, and a subsequent letter from Cisco in support of Apple's position. That same day, Microsoft made clear that it won't seek injunctions based on standard-essential patents. The United States Department of Justice took note of the fact that Apple and Microsoft spoke out clearly on this issue while Google was beating around the bush:

"During the course of the division’s investigation, several of the principal competitors, including Google, Apple and Microsoft, made commitments concerning their SEP licensing policies. The division’s concerns about the potential anticompetitive use of SEPs was lessened by the clear commitments by Apple and Microsoft to license SEPs on fair, reasonable and non-discriminatory terms, as well as their commitments not to seek injunctions in disputes involving SEPs. Google’s commitments were more ambiguous and do not provide the same direct confirmation of its SEP licensing policies."

I had voiced very similar criticism of Google's letter to standard-setting organizations (I also did a follow-up post on additional ambiguities that I identified after my initial analysis).

Google will probably be in control of MMI soon. Google itself is, according to media reports such as this FT story, going to receive a Statement of Objections from the European Commission spanning more than 400 pages, just relating to Google's conduct in the search and online advertising markets. Google should think hard about whether it wants to get another 100- or 150-page Statement of Objections at some point relating to standard-essential patents. Abidance by competition rules may be a much better choice.

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