Intellectual property right owners cannot be overzealous in protecting their rights by refusing their competitors access to such rights. Such a refusal can even in certain specific circumstances be considered as being illegal and in breach of competition law.

The European Commission is currently in the process of seeking comments from interested parties on commitments recently offered by Samsung in order to allay further penalties and enforcement procedures by the European Commission in relation to a potential finding of an abuse of a dominant position. In 2012, the Commission opened an investigation in relation to the filing of an injunction by Samsung against its competitor Apple seeking to prohibit the latter from making use of certain standard essential patents owned by Samsung.

Standard-essential patents (SEPs) are patents which protect a technology which is essential for the implementation of an industry standard developed by a standard-setting organisation. This means that it would not be technically possible for competitors to make a standard-compliant product without using the technology protected by the said patent.

In industries such as the IT sector, industry standards are vital and bring benefits to both consumers and entrepreneurs in terms of interoperability and innovation. In order to ensure access to such technology, standard-setting organisations generally require that market players commit ex ante to license their SEPs on fair, reasonable and non-discriminatory (FRAND) terms.

Samsung owns SEPs related to mobile telecommunications standards and committed itself to license them on FRAND terms.

Apple was willing to enter into a licensing agreement on such terms for these SEPs.

However, Samsung filed judicial proceedings against Apple seeking injunctions in order to prevent the latter from using such patents.

The European Commission considered such recourse to injunctions as unduly distorting FRAND licensing negotiations and possibly facilitating the way for Samsung to charge royalties or impose licensing terms which a licensee would not agree to, were it not for the threat of having its products excluded from the market.

This would in turn impact consumers due to an increase in prices, a reduction in product choice and stifling innovation in the markets for smartphones and tablets.

The Commission therefore considered Samsung’s behaviour as potentially amounting to an abuse of a dominant market position in breach of EU competition rules.

In order to allay the Commission’s concerns, Samsung has now proposed to commit for a period of five years not to file any injunctions in the European Economic Area with regard to all its SEPs, present and future, that relate to technologies implemented in smartphones and tablets against any company that agrees to a particular licensing framework.

The licensing framework consists of a negotiation period of up to 12 months and, if no agreement is reached, a third party determination of FRAND terms by either a court or an arbitrator, as agreed by the parties.

After receiving feedback from stakeholders, the Commission will proceed to conclude whether the commitments offered by Samsung truly address competition concerns. If that is the case, it may adopt a decision to make them legally binding on Samsung.

Such a decision would not conclude that there is an infringement of EU antitrust rules, but would legally bind Samsung to respect the commitments offered. In the eventuality that such commitments are not honoured, the Commission would then be able to impose a fine of up to 10 per cent of the company’s annual worldwide turnover without having to find an infringement of the EU antitrust rules.

Apt to note that the Court of Justice of the European Union currently also has before it a request for a preliminary ruling on a case revolving around similar circumstances involving the Chinese telecoms companies Huawei and the company ZTE. The Court’s ruling would possibly also guide the Commission to come to a decision in the Samsung case.

Protecting patents through injunctions is perfectly legitimate. However, when it comes to standard-essential patents, caution must be exercised in order to ensure that the patent holder is not found guilty of acting abusively, to the detriment of entrepreneurs and consumers alike. Further guidance on the matter from both the CJEU and the European Commission is indispensable for industry at large.

mariosa@vellacardona.com

Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.

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