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Summary:

Europe’s antitrust authorities have invited Motorola to defend itself over its use of essential patents as legal weapons against Apple, despite Apple’s willingness to pay what it considered a reasonable royalty rate.

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Europe’s antitrust authorities have warned Motorola, which is owned by Google, over its use of standards-essential patents as legal weapons. In doing so, the European Commission has partially backed the view of Apple, Microsoft and Cisco, all of which have argued that no-one should try to win injunctions based on these patents.

Standards-essential patents (SEPs) cover, as the name suggests, technology that is essential to certain standards. SEPs are supposed to be licensed by the patent-holder on so-called fair, reasonable and non-discriminatory (FRAND) terms — essentially, because this technology is so important, the patent holder is not supposed to try blocking rivals from using it as long as they are willing to pay a FRAND rate.

In the case of Motorola, the SEPs in question cover part of the GPRS standard, which is in turn part of the rather important GSM cellular standard. Motorola and Google tried to get Apple to pay a rate of 2.25 percent of the entire device’s sale price in order to use the technology. Apple said this wasn’t a reasonable rate and Motorola sued in Germany, eventually winning its case and threatening the sales of iOS devices in that country. The Commission opened an investigation into this in April 2012.

Crucial to the Commission’s “statement of objections” today, Apple had agreed to let the German court set a reasonable licensing rate, but Motorola had pushed on with enforcing the injunction anyway. This showed Apple had been willing to pay something to Motorola – without that willingness, the Commission suggested, it might not have stepped in.

As the Commission summarized its preliminary conclusion:

“The seeking and enforcing of an injunction for SEPs can constitute an abuse of a dominant position in the exceptional circumstances of this case – where the holder of a SEP has given a commitment to license these patents on FRAND terms and where the company against which an injunction is sought has shown to be willing to enter into a FRAND licence.”

That said, Motorola maintained in its own statement today that “Apple had to make six offers before the court recognized them as a willing licensee.”

A statement of objections is effectively a warning and an invitation to the target to defend itself – after that defence has been heard, the Commission will come up with a final judgement.

In a statement on Monday, EU Competition Commissioner Joaquín Almunia said SEPs should not act as blockers to competition:

“The protection of intellectual property is a cornerstone of innovation and growth. But so is competition. I think that companies should spend their time innovating and competing on the merits of the products they offer — not misusing their intellectual property rights to hold up competitors to the detriment of innovation and consumer choice.”

In its statement, the Commission highlighted the difference between its preliminary ruling and the U.S. Federal Trade Commission’s (FTC) proposed Consent Order that would force Motorola to play by the FRAND rules — that order would only apply to Motorola’s future dealings, while the European Commission is preparing to rule on what Motorola has already done.

  1. Fred Gehelmiholtzenstein Tuesday, May 7, 2013

    “That said, Motorola maintained in its own statement today that “Apple had to make six offers before the court recognized them as a willing licensee.”” So the court was stupid. Apple made offers. Isn’t that the threshold?

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