Statement of Objections in Samsung standard-essential patent case

By Peter Willis


On 21 December 2012, the European Commission sent a Statement of Objections to Samsung, marking the next step in its investigations into standard-essential patents. The Statement of Objections (SO) alleges that Samsung has abused a dominant position by seeking injunctions against Apple for the alleged infringement of patents for mobile phone standards. The case is of interest for its potential impact not only in the mobile phone sector, but also in other standards-rich sectors.

The patents relate to the 3G UMTS standard, a key industry standard for mobile and wireless communications. When the standard was adopted in Europe, Samsung gave a commitment that it would license the patents that it had declared essential to the standard (the standard-essential patents - SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND) terms. In 2011, Samsung started to seek injunctions against Apple in the courts in a number of Member States, claiming infringement of the patents. Apple complained to the Commission, which opened an investigation in January 2012. 


 "The Commission alleges that in this specific case, Samsung's recourse to injunctions against a willing licensee damaged competition" 

Samsung announced on 18 December that it was withdrawing its injunctions, but the Commission issued its SO nevertheless, commenting that this did not affect its preliminary conclusions about Samsung's conduct.

The Commission alleges that in this specific case, where Samsung had originally committed to license SEPs on FRAND terms, its recourse to injunctions against a willing licensee damaged competition, because the conduct excluded competing products from the market and distorted licensing conditions in favour of the patent holder. The Commission stresses that it does not seek to challenge recourse to injunctions in patent disputes generally, but only in exceptional circumstances such as these.

On other occasions, Commission officials have confirmed that they have no intention of intervening in disputes involving non-essential patents. However, the Samsung investigation is only one of a number of investigations into alleged abuses involving SEPs, and Competition Commissioner Almunia has indicated on several occasions that he is looking to provide strong guidance to businesses in this area, through the mechanism of the Commission's enforcement powers.

The Commission's preferred tool in this sort of case is to accept commitments from alleged infringers. It has issued a number of decisions accepting commitments in order to close high-profile competition investigations in recent years, for example commitments by Microsoft to offer users a choice of browser software. If, having analysed the SO, Samsung decides to offer commitments, a useful pointer as to their possible content may be found in Google's commitments to the US Federal Trade Commission, published in the form of a draft consent order on 3 January this year, in another SEP case.

In that case, the FTC alleges that Motorola had committed to license its own mobile, video and wireless LAN SEPs on FRAND terms, but had then sought injunctions against willing licensees. Following its acquisition of Motorola in June 2012, Google allegedly continued the practice. The US authorities and the Commission have been liaising very closely on their respective SEP investigations, with respect to both the analytical framework and their enforcement responses, and any commitments accepted in the EU in the Samsung case would be likely to bear some resemblance to Google's commitments to the FTC.

The terms of the proposed consent order in the FTC proceedings are complex, but Google essentially undertakes not to seek an injunction against a willing licensee in respect of FRAND-encumbered SEPs, while a licence is being negotiated or its terms determined.

The draft order sets out in some detail the steps that Google must take before seeking an injunction, or in order to establish that a potential defendant is not a "willing licensee". The concept of the willing licensee is significant, and also features in the European Commission's analysis. If the parties agree to negotiate the terms of a licence, Google must make a written offer of all material licence terms, and must allow at least 6 months for negotiation. At the end of that period, it will provide a draft licence, and the potential licensee may accept it or seek binding arbitration. While that process is under way, Google may not seek an injunction. Alternatively, at least 6 months before seeking an injunction, Google must offer a licence, and at least 60 days before seeking an injunction, must offer binding arbitration. It may require, as a condition of a licence of its SEPs, that the licensee grants a reciprocal licence of its own SEPs (but may not require a licence of any other IPRs).
Outside these procedures, Google may seek an injunction only in limited cases, and in particular where the potential licensee has either stated in writing or in sworn testimony that it will not accept a licence on any terms, or has failed to indicate that it is prepared in principle to accept a licence on FRAND terms. The intention appears to be to limit the circumstances in which the SEP-holder can claim that it is not dealing with a willing licensee. The parties' conduct around the formal notices in this area is likely to be crucial.
In general, the proposed commitments preserve the parties' rights to challenge the validity, infringement, essentiality and value of the patents, and to seek remedies other than injunctions.
Interestingly, the proposed FTC consent order expressly avoids any definition of FRAND. In contrast, Commissioner Almunia has expressed a wish that EU competition law should develop better tools for assessing whether a licence offer is made on FRAND terms. It is not clear at this stage whether the Commission merely envisages a definition, similar to that set out in the FTC order, of a process of negotiation and/or determination intended to deliver FRAND terms, or whether it envisages going further, defining some of the substantive content of a FRAND licence.
The offer of commitments is at the initiative of the company under investigation, and it is therefore open to Samsung not to offer commitments, but to contest the findings set out in the SO. If satisfactory commitments are not forthcoming and accepted in the form of a binding decision, and the Commission maintains its objections following Samsung's response, it may issue a formal infringement decision, in which it may order appropriate remedies and/or impose a fine. In either case, its decision will be keenly studied for its precedent value in this area.

For more information please contact:

Peter Willis