Monday, February 10, 2014

Are U.S. and EU antitrust enforcers taking a rather soft line on standard-essential patent issues?

Violators of competition laws often get away with a slap on the wrist. This has been repeatedly the case with respect to the abuse of FRAND-pledged standard-essential patents (SEPs). Years ago the European Commission missed out on major opportunities to set the FRAND record straight by letting alleged offenders off the hook all too easily. This leniency proved to have been a strategic mistake when SEP holders like Samsung and Motorola Mobility tried to get Apple's gadgets banned in key European markets and Motorola additionally attempted the same against Windows and the Xbox gaming console. Those were symptoms of a lack of clear guidance from Brussels.

The EU has still made more of an effort in this area than its U.S. counterparts (the DoJ and the FTC). The FTC's consent decree in the Motorola case has not stopped Google from pursuing SEP-basd injunctive relief at least against Apple. Two FRAND-related Motorola-Apple cases are pending before the United States Court of Appeals for the Federal Circuit, and U.S. bans of the iPhone and the iPad are still a possibility.

Last week there were three statements on FRAND antitrust cases by EU and U.S. regulators that I'd now like to comment on:

In my observation, the strategies of aggressive SEP holders increasingly shift to the pursuit of damages and supra-FRAND royalties. Billion-dollar claims can be a similar threat to companies as injunction bids. I believe EU and U.S. antitrust regulators should make clear that an overbroad royalty base, for example, is also anticompetitive. It's obviously difficult for competition regulators to get into the patent valuation business, but some demands are so outrageous that they could, if they politically wanted to do this, find some demands to have been far outside the FRAND ballpark and provide guidance on such issues as the proper royalty base. Unreasonable demands that alleged SEP infringers sign far-reaching non-disclosure agreements prohibiting them from coordination with their chipset makers are another issue that has nothing to do with injunctions but should nevertheless have regulators concerned. If U.S. and EU authorities continue to turn a blind eye to those issues, it could very well happen that future landmark decisions will increasingly come from Asia, particularly India.

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