This post highlights material recent developments in Europe concerning standard essential patents (SEPs) and FRAND licensing, including Samsung’s commitments proposed in the context of the ongoing antitrust probe of the European Commission (see our previous post).
Samsung’s Commitments Proposal
In its commitments proposal, Samsung offered not to seek injunctions based on its patents essential to smartphone and tablet technology standards (“Smart Mobile SEPs” as defined in its commitments proposal) against a potential licensee who agrees to Samsung’s particular licensing framework. The proposed commitments are limited to the European Economic Area and would only apply for a period of five years.
According to the Commission’s press statement, the FRAND licensing framework proposed by Samsung consists of several steps: (i) a potential licensee of Smart Mobile SEPs must agree to follow the framework as the exclusive means for determining FRAND terms for a license to Smart Mobile SEPs; (ii) negotiations must take place between Samsung and the potential licensee for 6 to 12 months before they can be considered to have failed; (iii) if the negotiation fails, the parties will resort to a third party determination of FRAND terms by either a court or an arbitration tribunal, as agreed by the parties; (iv) if the parties cannot agree on (iii), the issues will be submitted to arbitration.
The Commission now invites comments from interested parties on Samsung’s commitments. If the feedback from the market consultation is positive, the Commission will take a decision making the commitments legally binding. This means that the Commission will not take a position on whether Samsung infringed Article 102 TFEU.
Towards Increased Clarity on the Issue?
Vice President Joaquín Almunia observed that “if we can reach a good solution in this case, it will bring clarity to the industry.” But in addition to the Samsung case, there are also other cases on foot at the European Union level. For example, the Commission’s investigation of whether the circumstances in which Google (MMI) sought an injunction on the basis of SEPs was anti-competitive is still on foot. The closed-door hearing in that case took place at the end of September.
The EU Courts are also considering the issue, as a result of questions referred by the Düsseldorf District Court in Germany (Case C-170/13 Huawei v. ZTE). Samsung’s commitments proposal expressly notes that the Commission will take “full account” of the Huawei case or any other relevant judgment. In this context it is worth bearing in mind that, even if a settlement is reached, the Commission may reopen proceedings in any case in light of the judgment, either on its own initiative or at the request of Samsung.
The European Parliament is also very interested in FRAND licensing of SEPs. It recently released a study that it commissioned, “The Contribution of Competition Policy to Growth and the EU 2020 Strategy”, which calls for the Commission to provide explicit guidance on FRAND licensing of SEPs, and observes that clarity regarding the determination of FRAND licensing rates would be of value.