Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Samsung offers five-year restriction on injunctions over standard-essential patents to resolve EC concerns, (Oct 17, 2013)

By Tobias J. Gillett, J.D., LL.M.

In commitments released today by the European Commission (EC) for public comment, Samsung Electronics has proposed that it will refrain for five years from seeking injunctions on the basis of its standard essential patents (SEPs) against licensees that agree to a particular licensing framework. The commitments are intended to resolve EC concerns that its enforcement of SEPs in the mobile communications field, particularly against Apple, Inc., may have amounted to an abuse of its dominant position.

The EC views an SEP holder’s pursuit of an injunction based on its SEPs as a possible abuse of a dominant position if the SEP holder has given a commitment to license its SEPs on Fair Reasonable and Non-Discriminatory (FRAND) terms and the company against which the injunction is sought is willing to enter into a license agreement on FRAND terms. The EC believes recourse to injunctions under those circumstances can unduly distort licensing negotiations and allow SEP holders to charge royalties or impose licensing terms to which licensees would not agree in the absence of the threat of injunction.

Under its proposed commitments, Samsung would agree for a period of five years not to seek any injunctions in the European Economic Area on the basis of any of its SEPs related to technologies implemented in smartphones and tablets against any licensees that agree to a particular licensing framework. The framework would consist of (1) a negotiation period of up to 12 months and (2) if no agreement is reached during those 12 months, a third party determination of FRAND terms by either a court or an arbitrator, as agreed by the parties, with arbitration serving as the default choice if no agreement could be reached. An independent trustee would advise the EC in overseeing the implementation of the commitments.

“I am looking forward to receiving the feedback of other market players on Samsung’s proposals,” said Joaquin Almunia, Commission Vice President in charge of competition policy. “Enforcing patents through injunctions can be perfectly legitimate. However, when patents are standard-essential, abuses must be prevented so that standard-setting works properly and consumers do not have to suffer negative consequences from the so-called patent wars. If we reach a good solution in this case, it will bring clarity to the industry.”

The EC opened its investigation of Samsung in January 2012, and in December 2012 it notified Samsung of its preliminary view that its pursuit of injunctive relief against Apple based on its 3G UMTS SEPs in several EU Member States could violate EC antitrust rules. Samsung had committed to license its mobile telecommunications SEPs on FRAND terms, and the EC preliminarily considered that Apple was willing to enter into a licensing agreement on those terms. Almunia had disclosed that Samsung’s settlement offer in a speech on the topic of abuse of dominance, delivered at Fordham Law School’s 40th annual international antitrust law and policy conference on September 27 in New York City.

If the market test indicates that Samsung’s commitments would provide a satisfactory resolution of the EC’s concerns, the EC may make them legally binding on Samsung.

The EC has also released a memorandum providing questions and answers regarding Samsung’s proposed commitments, the EC’s concerns, and the market test process.

Companies: Samsung Electronics

News: Antitrust