It looks like we're finally getting some sensible rules appearing in the ever ongoing fight over smartphone patents.
The European Commission has informed
Motorola Mobility of its preliminary view that the company's seeking and enforcing of an injunction against Apple in Germany on the basis of its mobile phone standard-essential patents ("SEPs") amounts to an abuse of a dominant position prohibited by EU antitrust rules. While recourse to injunctions is a possible remedy for patent infringements, such conduct may be abusive where SEPs are concerned and the potential licensee is willing to enter into a licence on Fair, Reasonable and Non-Discriminatory (so-called "FRAND") terms. In such a situation, the Commission considers at this stage that dominant SEP holders should not have recourse to injunctions, which generally involve a prohibition to sell the product infringing the patent, in order to distort licensing negotiations and impose unjustified licensing terms on patent licensees. Such misuse of SEPs could ultimately harm consumers.
The basic point here is that you simply cannot build a phone these days without using someone else's patents. This is why we have these SEPs themselves. In order to be included in the patent pool that will be these standards the holder has to agree to license them on fair, reasonable and non-discriminatory terms (FRAND). Which is great, anyone who wants to build a phone using the standard can just rock up, demand a license and go build a phone.
Except, of course, it doesn't really work that way. For those patent holders can always play around with what is the definition of FRAND terms. Further, while they're playing hard to get on what the price should be (remarkably, as you'll no doubt be surprised to find out, the prices they want to charge for the patents they own are rather higher than those they're willing to pay on those they don't) they are therefore limiting the ability of the would be licensees to come to market.
Or, if they do come to market without having agreed on price then some companies might try to get an injunction against sales of the offending items. Because, as everyone agrees, the phones are using the standards but are not paying the license for them.
All of this rather undoes the point of having the patent pools in the first place. If patents get into the standards then they really should be, in fact must be if the standard is to work, available to all. Delay and games such as the above mean that they're not, not really.
Which is why the most important part of this ruling is the following:
Today's Statement of Objections sets out the Commission's preliminary view that under the specific circumstances of this case - a previous commitment to license SEPs on FRAND terms and the agreement of Apple to accept a binding determination of the terms of a FRAND licence for SEPs by a third party - recourse to injunctions harms competition.
If a company is using the standard, and also is willing to pay whatever license is independently determined to be FRAND, then you cannot injunct their sales in order to force them to negotiate. In this manner the EU system is moving closer to the US: a very similar result came from part of the Samsung v. Apple case in California. You can't use SEPs to get an injunction against continued sales: not in normal circumstances you can't.
The real point here is that the law does grind small: but it can sure grind slow too. In the back and forth of injunctions and court hearings an entire generation or two of smartphones can enter and leave the market: making it entirely moot if the injuncted party eventually wins the case. They're still out that generation of two of phone sales.
Of course, patents that haven't been entered into standards essential patent pools can still use injunctions to wipe abusers out of the market. But this is a definite advance: SEPs cannot, in normal circumstances, be used to ban sales. For everyone knows, by their being SEPs, that a license will, indeed must, be granted and banning competing products from the market just because the patent holder is dragging their feet over the price just doesn't seem right. Or, if you prefer, is a barrier to free competition.
