From the category archives:

Compulsory Licensing

Samsung and the EU

by Charlie Rothbart on 2 February 2012

In my last post I discussed the ongoing litigations between Apple and Samsung, specifically in relation to  standards-essential patents.

It has now been announced that the EU Commission has launched a formal investigation into the 3G licensing practices of Samsung and the alleged contravention of the “irrevocable commitment it made to the European Telecommunications Standards Institute (ETSI).”

The Agreement on Trade Related Aspects of Intellectual Property (TRIPS) requires signatory states to ensure that their national patent legislation obliges patent rights holders to license, on fair, reasonable and non-discriminatory terms (FRAND) their standard-essential patents.

Yet Samsung has asserted a standard-essential 3G patent against Apple, and as a result the Commission is investigating to ascertain whether this is an anti-competitive practice in contravention of Article 102 EU, which prevents the distortion of the common market by an abuse of an entity in a dominant position.

A notable feature of this investigation is that it was not (apparently, or at least publicly) requested by Apple, which is the usual sequence of events in circumstances such as these: the Commission is acting entirely on its own initiative.

The instigation of this investigation demonstrates to the commercial world that the mechanisms in place to protect the consumer and to further the aims of the EU Treaties in maintaining the single Community market really do have teeth. Whether Samsung will be bitten remains to be seen, although it is hard to see how it can be avoided.

As yet, Samsung has not commented on the news, and it remains to be seen if the parties even attempted to negotiate a licence in line with the FRAND obligations.

For the telecommunication industry, lawyers, patent attorneys and policy makers alike, this will be an interesting process to watch, and one which could have significant implications for FRAND, competition law and the plethora of patent litigation that is currently battering the telecommunications market.

 

 

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We reported some months ago on the German case concerning the relationship between patents and standards for recordable CDs.CD-R Logo.jpg In that case, the German Federal High Court decided that the so-called “FRAND defence” could apply to patents relevant to standards. In other words, it is possible for a company implementing a standard to obtain a licence as long as it sets aside a reasonable licence fee.

Court - Hague.jpgThe Dutch Court in the Hague explicitly rejected this defence and noted that its decision was different to that drawn by the German Federal High Court. The Dutch Court noted that there was no concept of “compulsory licence under cartel law”. Dutch law (like German law) has a specific provision in its patent code for the granting of compulsory licences. Such licences only come into effect when they have been granted by a court. The Dutch Court states that this is reasonable as nobody would otherwise understand the conditions under which the licence had not been granted.

There’s an implicit criticism of the defendant in the case that it had apparently never attempted earlier to take a licence to the technology from Philips. Philips Logo.jpgThe Court clearly stated the defendant should have attempted earlier (on starting sale of the goods or becoming aware of the need) to obtain a licence under FRAND conditions and, if this attempt had not been successfuly, the defendant could have asked for a compulsory licence to be granted. The Court points out that at least a preliminary licence could have been granted in summary proceedings.

The decision highlights two issues of European Patent Law.

Firstly the need for a uniform patent litigation system to harmonise the decisions of the different national courts. The different decisions in the German and Dutch courts are based on different legal traditions and codes of civil procedure (and contractual law). The Dutch have traditionally granted complusory licences more readily than the German courts and so it’s not surprising that the Court in the Hague suggested this route, whereas the German Federal High Court suggested an alternative option.

Secondly the need for clarity under which licenses to patents required to implement standards can be granted. Most Standards Setting Orgnisations have a clear policy on intellectual property – licences will be granted on Fair Reasonable and Non-Discriminatory (FRAND) conditions. There are, however, difference on how to interpret these conditions – there’s little or no case law to enable a market entrant to assess its risks and It’s clearly impractical in a single European market to have to go to multiple courts to obtain compulsory licences (as the Dutch want) or post multiple bonds (as suggested in Germany).

The case has also been discussed on the EPLawblog here

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