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Tuesday, April 29, 2014
EC: Motorola Mobility Broke Competition Rules, Samsung's Commitments Accepted

The European Commission will accept a pledge by Samsung Electronics not to seek injunctions against licensees of its smartphone patents. However, it ruled on Tuesday that Motorola Mobility broke EU competition rules.

The European Commission has rendered commitments offered by Samsung Electronics legally binding under EU antitrust rules. According to these commitments, Samsung will not seek injunctions in Europe on the basis of its standard essential patents (SEPs) for smartphones and tablets against licensees who sign up to a specified licensing framework. Under this framework, any dispute over what are fair, reasonable and non-discriminatory (so-called "FRAND") terms for the SEPs in question will be determined by a court, or if both parties agree, by an arbitrator.

To address the Commission's concerns, Samsung has for a period of five years committed not to seek any injunctions in the European Economic Area (EEA) on the basis of any of its SEPs, present and future, that relate to technologies implemented in smartphones and tablets against any company that agrees to a particular framework for licensing the relevant SEPs.

The licensing framework provides for:

- a negotiation period of up to 12 months; and

- if no agreement is reached, a third party determination of FRAND terms by a court if either party chooses, or by an arbitrator if both parties agree on this.

An independent monitoring trustee will advise the Commission in overseeing the proper implementation of the commitments.

The European antitrust regulator has also taken a prohibition decision in a separate investigation concerning Motorola. It found that Motorola Mobility's (Motorola) seeking and enforcement of an injunction against Apple before a German court on the basis of a smartphone standard essential patent (SEP) "constitutes an abuse of a dominant position prohibited by EU antitrust rules in view of the particular circumstances in which the injunction was used".

The Commission has ordered Motorola to eliminate the negative effects resulting from it.

The Motorola Mobility SEPs in question relate to the European Telecommunications Standardisation Institute's (ETSI) GPRS standard, part of the GSM standard, which is a key industry standard for mobile and wireless communications. When this standard was adopted in Europe, Motorola Mobility declared some of its patents as being essential and gave a commitment that it would license the patents which it had declared essential to the standard on FRAND terms.

In today's decision, the Commission found that it was abusive for Motorola to both seek and enforce an injunction against Apple in Germany on the basis of an SEP which it had committed to license on FRAND terms and where Apple had agreed to take a licence and be bound by a determination of the FRAND royalties by the relevant German court.

The Commission also found it anticompetitive that Motorola insisted, under the threat of the enforcement of an injunction, that Apple give up its rights to challenge the validity or infringement by Apple's mobile devices of Motorola SEPs. Implementers of standards and ultimately consumers should not have to pay for invalid or non-infringed patents. Implementers should therefore be able to ascertain the validity of patents and contest alleged infringements.

The Commission did not to impose a fine on Motorola because there is no case-law by the European Union Courts dealing with the legality of such injunctions and because national courts have so far reached different conclusions on this.

"Today's decisions reflect the Commission's balanced approach with respect to intellectual property rights and competition rules," said oaquin ALMUNIA, Vice President of the European Commission responsible for Competition policy. "Both competition and the protection of intellectual property are essential to innovation and growth. This means that IP rights should not be misused to the detriment of competition and ultimately consumers. I would encourage other industry players to consider establishing similar dispute resolution mechanisms."

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