Microsoft states commitment to FRAND licensing of standard essential patents

Out-Law News | 10 Feb 2012 | 12:02 pm | 3 min. read

Microsoft has promised to always licence standard essential patents to rivals on fair, reasonable and non-discriminatory (FRAND) terms.

Microsoft said it would keep its promises to standards bodies by not seeking injunctions or exclusion orders against firms trying to use standard essential patents and would also "make those essential patents available for license to other firms without requiring that those firms license their patents back to Microsoft, except for any patents they have that are essential to the same industry standard". The software giant also said it would not transfer standard essential patents to other firms unless they agreed to follow Microsoft's approach.

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 FRAND terms.

Microsoft said it was reiterating its "long-standing approach to patents that are essential to industry standards" following recent regulatory concern over the way patent holders are making such technology available.

"Microsoft is one of several firms that have been discussing these concerns with antitrust enforcers over the past few months," Dave Heiner, Microsoft vice president, said in a blog

"In these discussions, we have offered our view that any patent holder that promises to make its standard essential patents available on reasonable and nondiscriminatory terms should do just that. That means that such patent holders should not seek to block shipments of competing products just because they implement an industry standard— a license on reasonable terms is always available. That also means that such patent holders should not require other firms to license back their patents, except for patents that are essential to the same standard. And if a patent holder sells its patents, it should contractually require the buyer to live up to these points. A promise to license patents on reasonable and nondiscriminatory terms, absent these three points, is an empty promise," Heiner said.

Earlier this year the European 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 fair, reasonable and non-discriminatory (FRAND) terms but may have breached this requirement when trying to enforce its patent rights against those rivals in court.

The Commission is responsible for investigating possible abuses of dominant market position under the Treaty on the Functioning of the European Union (TFEU). Last year it asked both Samsung and Apple to provide information relating to the "the enforcement of standards-essential patents in the mobile telephony sector," Reuters news agency reported at the time.

It emerged earlier this week that Apple wrote to the European Telecommunications Standards Institute (ETSI) in November setting out a licensing framework it believes all companies using "cellular standards essential patents" should adopt. It said such patents should 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.

“Telecoms companies often make patent portfolio cross-licensing deals that are confidential, making it difficult to evaluate whether standards-essential patent licensing is being done on fair, reasonable and non-discriminatory terms,” Deborah Bould, patent law expert at Pinsent Masons, the law firm behind Out-Law.com said.

“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.

The European Commission has previously said that companies that take part in standardisation schemes must licence the use of the technology on FRAND terms "in order to guarantee undistorted competition" and so the "positive economic effects" can be gleaned from the process. The EU's Competition Commissioner has also raised concerns that technology companies could use standardisation and IP rights as tools of abuse to stifle competition.

South Korean technology company Samsung 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.