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Standard setting and
abuse of dominant position
(Article 82 EC Treaty)
Douglas Lahnborg
Orrick,
Herrington &
Sutcliffe
Standard setting
• No specific legislation
• Articles 81 and 82 EC Treaty apply generally
– Article 81 prohibits anti-competitive agreements
– Article 82 prohibits abuse of a dominant position
EU attitude to standard setting
• Competition Commissioner Neelie Kroes:
– “only standardise where there are demonstrable benefits”
– only include “proprietary technology when there are no clear
and demonstrable benefits over non-proprietary alternatives”
– “standardisation agreements should be based on the merits
of the technologies involved”
• Competition authorities “may need to intervene” when an
owner of proprietary technology, which has been included
in a standard, exploits its power
(OpenForum Europe, 10 June 2008)
Conduct currently under investigation in Brussels
• Several companies are currently being investigated in
relation to standard setting:
– FRAND licensing
– Disclosure of patents
– Conduct in standard setting organisations
• Licensing of interoperability information
Dominance (Article 82)
• Examples in the technology field:
– MS:
• Work group server operating systems (file, print, share)
• “Streaming” Media Players
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Qualcomm: Licensing of CDMA and WCDMA patents
Rambus: Licensing of DRAM patents
Google: Search advertising
IBM:
• Software modelling tools
• Mainframe
→ Narrow market definitions
Rambus - “Patent ambush”
• DRAM chips standardised by the U.S. SSO JEDEC
• Rambus was a member of JEDEC, did not disclose patent;
– but note: Rambus never voted on standard
• EC Commission (Aug 2007):
– Rambus intentionally deceptive by not disclosing the existence of
patents which it later claimed were included in the standard
– Rambus subsequently claimed “unreasonable royalties”
– Without patent abuse Rambus’ licence fee would have been lower
– Remedy: Reasonable and non-discriminatory royalty
• Case on-going
Qualcomm - FRAND
• Qualcomm owns patents included in the CDMA (2G) and
WCDMA (3G) standards
• Art 82 complaints lodged by Ericsson, Nokia, TI,
Broadcom and others alleging abuse of dominance by
Qualcomm for charging excessive license fees:
– “essential patent holders should not be able to exploit the
extra power they have gained as a result of having
technology based on their patent incorporated in the
standard”
– Qualcomm should license on Fair Reasonable and NonDiscriminatory terms
Qualcomm - FRAND
• Commission opens formal investigation (Oct 2007)
• Nokia/Qualcomm settlement (July 2008)
• Others to follow?
Microsoft - OOXML
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ISO: Open Document Format (ODF)
MS new document format for Office: Open Office XML
OOXML first rejected but later approved
Creating choice or abuse of dominance?
Case on-going
Forced Licensing of IP-rights
• Dominant companies required to license IP-right (e.g.
interoperability information) if:
– Refusal to license relates to a product indispensable to the
exercise of an activity on a neighbouring market
– Refusal excludes effective competition
– Refusal prevents appearance of new product or technical
development
– No objective justification
Case T-201/04 Microsoft (2007)
Conclusion
• Extensive obligations on dominant technical companies in
standards setting context
• Companies use Article 82 as a “sword” to achieve
strategic advantages
• European Commission forum of choice for US and
European companies
• National company authorities keen but limited resources