Out-Law News 3 min. read

Competition regulator 'determined' to prevent standards rights abuses

The European Commission will use competition law to stop companies abusing the fact that their patented technology forms part of agreed technical standards, the EU's Competition Commissioner has said.

Joaquin Almunia said that the "strategic use of patents" by some businesses was helping them to "occupy" markets, restricting new firms from emerging and stifling innovation. He said that the "potential abuses around standard-essential patents are a specific illustration of this concern".

Standards are agreed technical specifications to ensure that a single technology is used across an industry, often with the goal of achieving interoperability of products regardless of the manufacturer. Companies can opt to send experts to help develop standards but, in return, most standards setting organisations insist that companies agree to licence any intellectual property they own that is essential to implementation of that standard on fair, reasonable and non-discriminatory (FRAND) terms.

Almunia said that whilst standards were the "best tool to promote interoperability of devices or to define safety or quality benchmarks" companies should not abuse their patent rights to the technology.

"Once a standard is adopted, it becomes the norm and the underlying patents are indispensable," Almunia said in a speech on Friday.

"Owners of such standard essential patents are conferred a power on the market that they cannot be allowed to misuse. Standardisation processes must be fair and transparent, so that they are not in the hands of established firms willing to impose their technologies. But it is not enough. We must also ensure that, once they hold standard essential patents, companies give effective access on fair, reasonable and non discriminatory terms. This is crucial if we want industries and businesses relying on such patents to develop freely to their utmost potential," he said.

"I am determined to use antitrust enforcement to prevent the misuse of patent rights to the detriment of a vigorous and accessible market. I have initiated investigations on this issue in several sectors and we will see the results in due time," the EU's Competition Commissioner said.

The European Commission is responsible for investigating possible abuses of dominant market position under the Treaty on the Functioning of the European Union (TFEU).

Earlier this year the Commission opened a "formal investigation" into whether Samsung distorted competition in the mobile phone industry. The Commission said that Samsung was obliged to licence the use of patents relating to 3G mobile and wireless technology to rivals on FRAND terms but may have breached this requirement when trying to enforce its patent rights against those rivals in court.

The South Korean technology company has been embroiled in legal battles around the world with US software giant Apple with both companies claiming the other has infringed its intellectual property rights. Apple has accused its rival of infringing design rights it owns for its iPad tablet. It has said Samsung had engaged in "blatant copying" in its design of its Galaxy Tab 10.1 device.

Samsung has also sued Apple over the use of its patents. Apple previously claimed that this is an attempt by its rival to "coerce" it into "tolerating" Samsung's "imitation" of its iPad.

Google recently wrote to standards body the Institute of Electrical and Electronics Engineers (IEEE) claiming that it would "honour" the same licensing commitments Motorola had agreed to abide by in relation to its standard-essential patents. Google is expected to receive regulatory approval to takeover Motorola this week, according to a report by Reuters news agency.

Last week software giant Microsoft said it was committed to licensing standard-essential patents on FRAND terms after hearing regulators express concern over the way patent holders are making such technology available.

It also emerged that Apple wrote to standards body the European Telecommunications Standards Institute (ETSI) in November setting out a licensing framework it believes all companies using "cellular standards essential patents" should adopt. Apple called for those patents to be licensed at an "appropriate rate" and that such a rate "must apply... to a common base". It also said companies that committed to developing standard essential patents in the mobile phone industry under FRAND terms would be breaking those terms by trying to enforce their rights to those patents by obtaining a court injunction against rivals' usage of the technology.

Patent law expert Deborah Bould of Pinsent Masons, the law firm behind Out-Law.com, said last week that confidential cross-licensing agreements make it difficult to assess whether telecoms companies do make standard-essential patents available on FRAND terms.

“In order to be truly compliant with FRAND obligations companies must licence these standards-essential patents on the same terms to everyone. The details of these licence arrangements should be transparent.  Once the agreements are signed, everyone should pay the licensor the same royalty rate going forwards, albeit that those royalties could be offset by payments for any cross licence,” Bould said.

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