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FRAND COMMITMENTSAND

EU COMPETITION LAW

Thomas KramlerEuropean Commission, DG Competition

• (The views expressed are not necessarily those of the European Commission)

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General legal/economic analysis of standardisation agreements

Agreements between competitors but clear benefits of standardisation

- Interoperability, follow-on innovation

Subject to conditions- Transparency of process- Unrestricted participation - Access to all who wish to work the standard

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Legislative Framework

• Ongoing revision of the general framework for European Standardisation Policy (Directive 98/34/EC)

- Referencing in public procurement of selected ICT standards

• 2011 Guidelines on Horizontal Agreements

- Guidance on competition law and standard setting

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Horizontal Guidelines"287. FRAND commitments are designed to ensure that essential IPR protected technology incorporated in a standard is accessible to the users of that standard on fair, reasonable and non-discriminatory terms and conditions. In particular, FRAND commitments can prevent IPR holders from making the implementation of a standard difficult by refusing to license or by requesting unfair or unreasonable fees (in other words excessive fees) after the industry has been locked-in to the standard or by charging discriminatory royalty fees."

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Hot Topics

• - Transfer of FRAND commitments

• - Reciprocity

• - Injunctions

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Transfer of FRAND commitmentsHorizontal Guidelines•"285. […] To ensure the effectiveness of the FRAND commitment, there would also need to be a requirement on all participating IPR holders who provide such a commitment to ensure that any company to which the IPR owner transfers its IPR (including the right to license that IPR) is bound by that commitment, for example through a contractual clause between buyer and seller."•- IPcom case

•- Injunctions

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Reciprocity

Google/Motorola merger decision (para 107)

- Concern that SEP holder may force a holder of non-SEPs to cross-license those non-SEPs to it in return for a licence of the SEPs.

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Injunctions- Directive 2004/48 on the enforcement of intellectual

property rights ("the Enforcement Directive") - Article 3(2) remedies shall: "[…] be effective,

proportionate and dissuasive and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse".

- European Court of Justice, C‑70/10, Scarlet Extended:- When granting injunctions a fair balance between the protection of the intellectual property right and the

freedom to conduct a business must be struck.(para 46)

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- Many cases in Member States' courts

For example, German Federal Supreme Court, (KZR 39/06), Orange Book Standard:

"A defendant sued based on a patent is able to defend himself against the claim for injunctive relief asserted by the patent proprietor filing the action, by pleading that the latter abuses a dominant position on the market if he refuses to conclude a patent license agreement with the defendant on non-discriminatory and non-restrictive terms and conditions."

- Risk of diverging views

Injunctions

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- Pending Commission antitrust investigations (formal proceedings opened in 2012)

- Apple/Samsung; Apple/ Motorola; Microsoft/Motorola

- Google/Motorola merger decision

By threatening to use injunctions, holders of standard-essential patents could make demands that their commercial partners would not accept under normal circumstances.

- Higher royalties- Onerous cross-licensing terms- Exclusion

Injunctions

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InjunctionsGoogle/ Motorola merger decision (para 141):

"[…] the problem of a SEP holder not making a 'true' FRAND offer can be prevented if a potential licensee has the opportunity to have the terms of the cash-only option licence assessed by an independent third party (whether a court or arbitrator) without the threat of immediately being excluded from the market. […] Without such a possibility, FRAND negotiations may be distorted to the detriment of potential licensees and ultimately consumers who might be faced with less choice and innovation."

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Conclusion

VP Almunia: "Legal battles like these may put the standardisation process at risk and hold up innovation in the entire industry.

[…] I am willing to provide clarity to the market through our enforcement.

[…] I am also convinced that the industry needs to do its homework too." (Fordham conference, September 2012)