EC accepts legally binding commitments by Samsung Electronics on standard essential patent injunctions
30 Apr 2014 03:39 PM
The
European Commission has rendered commitments offered by Samsung Electronics
(Samsung) legally binding under EU antitrust rules. According to these
commitments, Samsung will not seek injunctions in Europe on the basis of its
standard essential patents (SEPs) for smartphones and tablets against licensees
who sign up to a specified licensing framework. Under this framework, any
dispute over what are fair, reasonable and non-discriminatory (so-called
"FRAND") terms for the SEPs in question will be determined by a
court, or if both parties agree, by an arbitrator. The commitments therefore
provide a "safe harbour" for all potential licensees of the relevant
Samsung SEPs. Indeed, potential licensees that sign up to the licensing
framework will be protected against SEP-based injunctions by Samsung (see
alsoMEMO/14/322). The Commission has also taken a
prohibition decision in a separate investigation concerning Motorola
(see IP/14/489).
Commission Vice President in charge of competition
policy Joaquín Almunia said: "The protection of
intellectual property and competition are both key drivers of innovation and
growth. This is why it is essential that intellectual property is not misused
to the detriment of healthy competition and, ultimately, of consumers. In this
context, I welcome Samsung's commitment to resolve disputes on standard
essential patents without having recourse to injunctions in a way that could
harm competition. Together with today's decision in the Motorola case, the
Commission's decision to accept Samsung's commitments provides clarity
to the industry on what constitutes an appropriate framework to settle disputes
over "FRAND" terms in line with EU antitrust rules. I would also
encourage other industry players to consider establishing similar dispute
resolution mechanisms."
The Commission’s competition
concerns
SEPs are patents essential to implement a specific
industry standard. It is not possible to manufacture products that comply with
a certain standard without accessing these patents by obtaining a licence. This
may give companies owning SEPs significant market power. As a result, standards
bodies generally require their members to commit to license SEPs on FRAND
terms. This commitment is designed to ensure effective access to a standard for
all market players and to prevent "hold-up" by a single SEP holder.
Such access on FRAND terms allows consumers to have a wider choice of
interoperable products while ensuring that SEP holders are adequately
remunerated for their intellectual property.
Seeking injunctions before courts is generally a
legitimate remedy for patent holders in case of patent infringements. However,
the seeking of an injunction based on SEPs may constitute an abuse of a
dominant position if a SEP holder has given a voluntary commitment to license
its SEPs on FRAND terms and where the company against which an injunction is
sought is willing to enter into a licence agreement on such FRAND terms. Since
injunctions generally involve a prohibition of the product infringing the
patent being sold, seeking SEP-based injunctions against a willing licensee
could risk excluding products from the market. Such a threat can therefore
distort licensing negotiations and lead to anticompetitive licensing terms that
the licensee of the SEP would not have accepted absent the seeking of the
injunction. Such an anticompetitive outcome would be detrimental to innovation
and could harm consumers.
Samsung owns SEPs related to various mobile
telecommunications standards and has committed to license these SEPs on FRAND
terms. In April 2011, Samsung started to seek injunctions against Apple on the
basis of its SEPs. The Samsung SEPs in question related to the European
Telecommunications Standardisation Institute's (ETSI) 3G UMTS standard, a
key industry standard for mobile and wireless communications. In December
2012, the Commission informed Samsung of its preliminary view that it
considered Apple a willing licensee on FRAND terms for Samsung's SEPs and
that against this background, the seeking of injunctions against Apple based on
Samsung's SEPs in several EU Member States may constitute an abuse of a
dominant position in breach of Article 102 of the Treaty on the Functioning of
the EU (TFEU) (see IP/12/1448and MEMO/12/1021).
Samsung’s commitments
To
address the Commission's concerns, Samsung has for a period of five years
committed not to seek any injunctions in the European Economic Area (EEA) on
the basis of any of its SEPs, present and future, that relate to technologies
implemented in smartphones and tablets against any company that agrees to a
particular framework for licensing the relevant SEPs.
The
licensing framework provides for:
-
a
negotiation period of up to 12 months; and
-
if
no agreement is reached, a third party determination of FRAND terms by a court
if either party chooses, or by an arbitrator if both parties agree on
this.
An
independent monitoring trustee will advise the Commission in overseeing the
proper implementation of the commitments.
Background
Article 9 of the EU's Antitrust Regulation
(Regulation 1/2003) allows the Commission to conclude antitrust proceedings by
making commitments offered by a company legally binding. Such a decision does
not reach a conclusion on whether EU antitrust rules have been infringed but
legally binds the company to respect the commitments. If the company breaches
these commitments, the Commission can impose a fine of up to 10% of its annual
worldwide turnover, without having to find an infringement of Articles 101 or
102 TFEU. A policy brief on commitment decisions under Article 9 is
available here.
The
Commission opened its investigation in January 2012 (see IP/12/89). In December 2012, the Commission issued a Statement of
Objections setting out its preliminary competition concerns (seeIP/12/1448). In September 2013, Samsung offered commitments in
order to address the Commission's concerns. In October 2013, the Commission
consulted interested parties on Samsung's commitments (seeIP/13/971). On 3 February 2014, Samsung submitted the final
version of the commitments which addressed the Commission's
competition concerns.
The
Commission recognises that other dispute resolution mechanisms than the
specific ones to which Samsung commits may also be relied upon to settle FRAND
disputes.
More information on this investigation is available on
the Commission's competition website in the publiccase register under the case number 39939.