FRAND COMMITMENTS AND EU COMPETITION LAW

• 1 Thomas Kramler European Commission, DG Competition (The views expressed are not necessarily those of the European Commission)

General legal/economic analysis of standardisation agreements

Agreements between competitors but clear benefits of standardisation - Interoperability, follow-on innovation 2 Subject to conditions - Transparency of process - Unrestricted participation - Access to all who wish to work the standard

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 3 - Guidance on competition law and standard setting

Horizontal Guidelines

4 "287. FRAND commitments are designed to ensure that fees." 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

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Hot Topics

• - Transfer of FRAND commitments • - Reciprocity • - Injunctions

Transfer of FRAND commitments

Horizontal 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." 6 • - IPcom case

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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)

Injunctions

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 9

Injunctions

- Pending Commission antitrust proceedings opened in 2012) investigations (formal - 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 10

Injunctions

Google/ 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." 11

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) 12