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SEPInsightFacing a potential fine of 10 percent of itsworldwide turnover, Samsung promised notto sue smartphone rivals over infringement ofits related SEPs for the next five years. Thatpromise hinders on whether the companyis willing to license the essential rights onFRAND terms, and is subject to a proposedframework, which stipulates a negotiation periodof up to 12 months, during which, if noagreement is reached, a court or an arbitratorcan determine the FRAND terms.The European Commission put Samsung’sproposals to the market in October, seekingfeedback on their viability.Joaquín Almunia, vice president in chargeof competition policy at the European Commission,said: “I am looking forwardto receiving the feedback of other marketplayers on Samsung’s proposals. Enforcingpatents through injunctions can be perfectlylegitimate. However, when patents are standard-essential,abuses must be preventedso that standard-setting works properly andconsumers do not have to suffer negativeconsequences from the so-called patentwars. If we reach a good solution in thiscase, it will bring clarity to the industry.”Speaking shortly after the European Commissionput Samsung’s proposals to the test,Dr Tobias Wuttke, who is the chief litigator atMeissner Bolte, said that the situation has tobe seen in the context of the LTE-Standarddecision of the Düsseldorf court in March2013 to refer a case that relates to SEPs tothe Court of Justice of the EU.“The referral was made because the courtwas not sure whether, under European competitionlaw, it is possible to seek injunctiverelief from an SEP for which a FRAND-declarationhas been made as long as the infringer,in principle, is willing to negotiate a licence onFRAND terms.”“I think this could have a huge impact on thetelecommunication litigation activity in Europebecause if there is no injunction relief, theamount of litigation could reduce. Without thatrelief, litigation will not be as attractive. Most ofthe settlements are made against the backdropof the possibility of an injunction. It’s like thependulum hanging over the infringing party.”Of Samsung’s proposals, Wuttke added:“The offer made by Samsung is far friendlierthan any offer that Motorola Mobility/Googlewould have made. But they will have to submitsomething similar, in my view.”Indeed, the European Commission toldMotorola Mobility in May to that it had abusedits dominant position and was in violation ofthe same rules as Samsung, because it assertedan SEP, and applied for and won an injunctionagainst Apple in Germany. The caseis still ongoing, and the Google subsidiary isalso facing a similar complaint from Microsoft,filed with the European Commission inDecember 2012, which it will have to contend soon.Google’s commitmentsIn the US, the story is much the same. Followingan FTC investigation, Google was foundto have refused to license Motorola MobilityownedSEPs on FRAND terms, brought infringementsuits against companies using thepatented technologies, and sought injunctionsto ban the sale of infringing products.After period of public consultation on howGoogle should change its practices to complywith FTC rules, the commission issued a finalorder against the internet company in July 2012.Although it dropped an allegation of anti-competitiveconduct, the FTC outlined multiplescenarios in which Google cannot seek injunctiverelief when asserting SEPs, includingif the potential licensee categorically refusesto license on FRAND terms. Like Samsung’sproposals to the European Commission, a periodof negotiation was included—six monthsin this instance—after which a dispute wouldhave to head to district court or arbitration.The order, in force until 2023, was not unanimouslyagreed. Commissioner Ohlhausendissented because the FTC alleged thatGoogle and Motorola Mobility violated Section5 of the FTC Act—“but not the anti-trust laws”,she told attendees of the Standards & Patentsconference on 4 December.Chiefly, she took issue with the lack of transparencyand guidance that the FTC’s decisionsprovided to patent holders and otherssubject to the FTC’s jurisdiction, includingother US agencies and courts, which wouldconsider, interpret and incorporate the commission’sview into their own practices.She said: “In particular, I raised concernsabout the FTC enforcing Section 5 withoutproviding sufficient information about the relationshipbetween that statutory provisionand the antitrust laws, including the Shermanand Clayton Acts. Without such information,it is unclear what the term ‘unfair method ofcompetition’ means or how the commissionwill use its enforcement discretion under Section5. The inherent ambiguity in the FTCAct makes it all the more important that theagency provide meaningful limiting principlesto application of Section 5.”Ohlhausen also feared that the Google ordercould create conflict with other US agencies.“Our decisions effectively tell holders of standard-essentialpatents that they cannot goto the ITC [International Trade Commission],where the only available relief is an exclusion,”she explained.“I am not saying that competition policy shouldtake a secondary position to other industrialpolicy concerns. Quite the contrary, the FTChas correctly advocated for a greater role forcompetition in US industrial policy decisions.However, as I have noted, I believe we needto exhibit a certain amount of regulatory humilityand recognise that we may not be thebest-positioned governmental entity to act ina particular area.”Finally, the FTC’s Google order could be perceivedas having “insufficient recognition” ofIP rights, said Ohlhausen.“The FTC placed significant restrictions on theability of holders of standard-essential patentsto seek injunctions, which is a critical intellectualproperty right. In my view, the FTC did this ineach case with very little, if any, evidence thatthe patent holder agreed to waive this right whenit participated in the standard-setting process.”The commissioner saw this perception in practiceat an event in China, where it was claimedthat the US has an essential facilities doctrine,and when the Google order is read in light of thisdoctrine, an unreasonable refusal to licence anSEP could constitute monopolisation, an actionthat could be remedied by compulsory licencesto the SEP in question.“This is not an accurate reading of relevantUS law or, in my opinion, of the FTC’s decisionin Google,” said Ohlhausen.“This sort of misinterpretation is troublingon two levels. First, it undercuts the valueof intellectual property rights and gives ourcounterparts abroad the misperception thatwe support wide application of compulsory licensing,which is completely incorrect.”“Second, if these misperceptions about our SEPenforcement actions here in the US are implementedelsewhere in the world, the resultingharm to patent rights would create serious disincentivesfor investment in research and developmentand ultimately harm innovation.”Despite Ohlhausen’s misgivings, the act of obtainingan injunction off the back of an SEP doesseem to be frowned upon. As US Judge RichardPosner put it when dismissing a patent infringementcase between Apple and Motorola Mobilityin June 2012: “How could it be permitted to enjoinApple from using an invention that [MotorolaMobility] contends Apple must use if it wants tomake a cellphone with UMTS telecommunicationscapability—without which it would not bea cellphone[?]”The intersection of IP and anti-trust laws doesrequire pragmatism, because innovation mustbe sought with the end consumer in mind.After all, innovative products are created withhim or her in mind, and it is the consumer thatultimately funds their development. It is up togovernment agencies such as the FTC andthe European Commission to tread carefullyduring their investigations into IP practices,and make sure that they seek feedback fromall parties concerned. IPPro11 www.ipprotheinternet.com