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[Check Against Delivery]
Vice President of the European Commission responsible for Competition policy
Introductory remarks on Motorola and Samsung decisions on standard essential patents
Brussels, 29 April 2014
Today the Commission has adopted two antitrust decisions addressed to Motorola Mobility and Samsung. These decisions relate to the enforcement by these two companies of patents which are essential to two telecom standards - the second and third generation standards, commonly known as "GSM" and "3G".
Before I explain the Commission’s approach in these two cases, let me recall the background to our competition policy approach in the area of standardisation.
As you know, standards are used in many industries and in particular in the telecommunications industry. In 2011, the Commission had already adopted guidelines providing guidance to standard-setting organisations on how to best ensure compliance with EU competition rules.
Today’s decisions will provide further guidance to the industry on the interpretation of EU competition rules regarding the enforcement of a particular class of patents – the so-called "standard essential patents" or "SEPs".
SEPs are patents that are technically essential to implement a specific standard. In practical terms, it is not possible to manufacture products that comply with a standard, such as mobile phones or tablets, without using such patents.
More than 1300 patents have been declared essential to the second generation "2G" or GSM standard, and nearly 3000 patents have been declared essential to the third generation "3G" or UMTS standard developed by the European Telecommunications Standards Institute (the ETSI). These standards need to be implemented in all smartphones and tablets sold in Europe.
Once a standard is widely implemented and manufacturers of standard-compliant products become locked-in to the standard, SEPs give significant market power to their owner that can be used abusively.
Within standard setting organizations, holders of SEPs willing to be included in the standard must commit to give access to their technology and to do so on so-called "FRAND" terms – for "Fair, Reasonable and Non-Discriminatory".
Disagreements on what constitute FRAND terms have led some SEP holders to seek and enforce injunctions before Courts. These injunctions can lead to the prohibition to sell the products which allegedly infringe the patent.
Today's two decisions clarify how EU competition rules apply in such a situation.
First, our decisions affirm that recourse to injunctions is generally a legitimate remedy for patent infringements.
Second, our decisions clarify that the seeking of injunctions may be abusive when two conditions are met:
- first, a SEP holder has given a commitment to license on FRAND terms during standard-setting;
- and second, the potential licensee is willing to enter into a licence on FRAND terms.
In the first case, the Commission has concluded that Motorola abused its dominant position as a SEP holder by seeking and enforcing an injunction against Apple in Germany. Motorola sought this injunction on the basis of one of its second generation (GSM) SEPs.
Motorola had committed to license the SEP to third parties on FRAND terms. And Apple had agreed with Motorola that in case of dispute, the German courts would set the applicable FRAND rate and Apple would pay royalties accordingly.
However, Motorola persisted in using the threat of an injunction to force Apple into a settlement agreement with very restrictive conditions.
In such a case, the recourse to an injunction cannot be objectively justified and may become an anti-competitive tool in licensing negotiations. Such a practice could lead SEP holders to extract high royalty rates or other restrictive conditions. This could have a negative impact on consumer choice, prices and innovation.
Moreover, following the threat of an injunction by Motorola, Apple was forced to give up its ability to contest Motorola's patents before German courts.
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 licence.
These principles strike the right balance between the interests of patent holders, who should be fairly remunerated for the use of their intellectual property, and those of the implementers of standards, who should get access to the standardised technology without being "held up" through abuses of market power.
The prohibition decision against Motorola should set a precedent and provide guidance to the industry.
However, as this is the first case in which the Commission assesses this type of injunctions under Article 102 of the Treaty, and given that national courts have expressed diverging views, we have exercised our discretion by not imposing a fine.
In the second case, Samsung had sought injunctions against Apple in various EU Member States on the basis of SEPs for the 3G standard.
During the Commission's investigation, Samsung offered commitments that were market tested and then amended. The Commission has today decided to make these commitments legally binding.
Samsung commits not to seek injunctions for five years in Europe on the basis of SEPs for smartphones and tablets against any potential licensee who agrees to accept a specified licensing framework.
This licensing framework consists of:
- a mandatory negotiation period of up to 12 months;
- and, if the negotiation fails, a determination of FRAND terms by a third party – either by a court or arbitration.
An independent monitoring trustee will advise the Commission in overseeing the proper implementation of the commitments by Samsung, following the "safe harbour" concept established in the Motorola Decision.
Today's decisions reflect the Commission's balanced approach with respect to intellectual property rights and competition rules. Both competition and the protection of intellectual property are essential to innovation and growth. This means that IP rights should not be misused to the detriment of competition and ultimately consumers. I would encourage other industry players to consider establishing similar dispute resolution mechanisms.