European Commission competition commissioner Joaquín Almunia yesterday said that Motorola Mobility "abused its dominant position" over standards essential patents by threatening Apple with an injunction in Germany.
Tech companies can't make kit that complies with a certain standard — in this case GPRS — without using standards essential patents (SEPs). For a company's patent to be included in a standard, it has to agree to license it to other manufacturers on FRAND (fair, reasonable, and non-discriminatory) terms — in Motorola Mobility's case, that didn't happen, said the EC.
Motorola Mobility had initially agreed to license the patents under FRAND terms, and Apple signed up to use them under the agreement that, in the event of any dispute over licensing costs, the German courts would set the royalty rates instead. After Apple decided the rates Motorola Mobility wanted were too high and not in keeping with FRAND terms, rather than allow a third party to decide a fair rate, Motorola responded by threatening a patent infringement injunction that could have seen Apple unable to sell its phones in some European countries.
"Motorola persisted in using the threat of an injunction to force Apple into a settlement agreement with very restrictive conditions," Almunia said. As a result of the threats, Apple also agreed not to pursue the matter through the courts.
"In such a case, the recourse to an injunction cannot be objectively justified and may become an anti-competitive tool in licensing negotiations," the commissioner added.
No EC fine was forthcoming for Motorola Mobility, however, as there is no previous European case law on the matter, while rulings from courts in member states have reached different conclusions. Instead, the EC has warned that patent holders must let courts set royalty rates when talks break down with licensees.
"The Motorola Decision establishes clearly that a potential licensee is to be considered willing if, in case of dispute, it agrees to a determination of FRAND terms by a court. This constitutes a "safe-harbour" against SEP-based injunctions. A licensee should also remain entitled to challenge the validity and infringement of the SEPs it has to license," Alumina said.
Samsung has also been in the EC's firing line over SEPs, after it too sought an injunction against Apple in Europe over the use of SEPs relating to UMTS, a 3G standard. Having agreed to license the patents under FRAND terms, it later sought an injunction against Apple when negotiations went sour.
Samsung has since seen the error of its ways, offering commitments to the EC that it will let courts or an arbitrator settle any arguments over what constitutes FRAND rates for its SEPs in future, rather than turning to injunctions.
On Tuesday, the EC made the commitments legally binding on the company for five years.
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