Seeking, and enforcing, an injunction by
a patent-holder as an antitrust abuse ?
The emerging picture in the EU
Alison Jones
University of Toronto Patent
Colloquium: FRAND Panel
21 Nov 2014
Background
Standard setting, standard-essential patents (‘SEP’) and Fair,
Reasonable and Non-Discriminatory (‘FRAND’) licensing commitments
Multiple national injunction suits in the EU
Samsung, Motorola, Huawei and the concept of an abuse
The Commission’s approach in Motorola
The problem that has occurred in the EU
Many national courts exercised discretion on facts to
deny injunction to a FRAND-encumbered SEP-holder
• Growing consensus that injunctions should be remedy of last resort?
But the approach of German courts has been different:
the Orange Book Standard
• Attractive forum for patent holders – patent litigation can be resolved
quickly and cheaply in patent-holder friendly way
• German law ordinarily requires the grant of an injunction even before
validity of the patent established: to avoid potential licensee must
e.g., renounce defences and unconditionally offer terms, refusal of
which would be abusive
• Largest smartphone market in the EU. Implications for licensing
throughout the EU – leverage for negotiating EU wide licences
Should ‘antitrust’ intervene?
If SEPholder
entitled
to
injunction
(virtually)
as of
right:
Implementers (locked into a standard) have choice:
exclusion or pay royalty demanded (but is it FRAND?) –
Exploitation (beyond value of patent) and
discrimination? It only takes one bullet to kill
Allows exploitation of market power acquired as a
result of the standard setting process (standard setting
confers additional power beyond patent)? Royalty
stacking?
Undermines confidence in, and working of, SS process
Adversely impact on innovation, quality, variety and
cost of products downstream?
These are the problems that, to ensure the success of the standard, the FRAND commitment
was designed to prevent (and without FRAND the standard setting process itself may be
anticompetitive)? If the FRAND commitment is powerless what about competition law?
Goals of EU competition
To ensure that competition in the internal market is not distorted:
anticompetitive agreements/mergers and abuse of market power
Like IP law it seeks to promote innovation and consumer welfare – but
emphasis in Article 102 cases on protecting process of competition
Sought to accommodate / understand nature of IPRs and to ensure that
in order not to reduce dynamic competition and to maintain the
incentive to innovate, innovators are not unduly restricted in the
exploitation of IPR
• Approach to technology transfer agreements
• No assumption that holder of IPR is dominant
Article 102 – can require dominant undertakings
to deal with others or to deal on specified terms
Article 102 prohibits abuse of a dominant position: includes exploitation and unlawful
exclusionary behaviour (practices that cause consumers harm through their impact
on competition - as distinct from competition on the merits), e.g.,
• Unfair pricing; Price discrimination;
Refusal to deal; Margin Squeeze
• Vexatious litigation; Or a new abuse – categories not fixed (eg AstraZeneca, misuse of patent system).
Where dominant firm has no valid objective justification for its conduct
In ‘exceptional circumstances’ exercise of IPR has been held to constitute an ‘abuse’;
eg competition law encroaches on IPR by requiring holder to grant licences to third
parties seeking to enter/remain on the market (Magill/ IMS/Microsoft) – but care:
freedom of contract, impact on innovation
European Commission
Yes there is room for competition law
Motorola Mobility Inc – infringement decision
• Seeking an injunction can constitute an abuse in exceptional
circumstances and absent any objective justification for the
conduct
• Disadvantageous licensing terms in the settlement agreements
(especially no challenge clause to the validity of the SEPs etc)
and a negative impact on, and undermining confidence in, the
standard setting process (depriving consumers of its benefits)
Samsung – commitments decision
• Commitments to end Article 102 investigation
Objections to antitrust intervention
Runs against the very nature of the patent; injunction-legal remedy which part
and parcel of patent
Fundamental right of access to court (Art 6 ECHR) and general principle of rule
of law – Courts can decide
Breach of duty of sincere cooperation and mutual respect
FRAND-encumbered SEP-holder not waived right to seek injunction
Necessary to bring recalcitrant implementers who refusing to bargain in good
faith (reverse hold-up) - denying access to injunctions gives prospective
licensees enhanced ability/incentives to free-ride on SEPs
If the non-innovators have to pay only little and late … it will mean that the profits of the
grasshopper companies will be greater at the expense of the ant innovators, who made the
grasshoppers’ business possible. And consumers will lose by reason of less future innovation.
Professor Sir Robin Jacob
Huawei v ZTE – litigation between two Chinese
companies before the German courts
Might lower German courts be in breach of obligations
under EU law by making an injunction available?
Essentially, the Landgericht Düsseldorf has asked the CJ
whether, and if so when, the seeking of an injunction by a
patent-holder against a patent infringer may constitute
an abuse of a dominant position contrary to Article 102
The fact that an injunction is permitted under national
law would not provide a defence to a finding of an abuse
– conduct attributable to SEP-holder and not required
Court of Justice to rule on the question of ‘abuse’
in Huawei (AG Opinion on 20 November)
Unlawful exploitative conduct? Or Exclusionary?
• Eliminating competition by “utilising methods other than those which come within the
scope of competition on the merits”, AstraZenca?
• If injunction permitted– significant risk of hold-up; no adverse impact on freedom of
contract/ innovation – SEP-holder planned to monetise right through licensing
• Anticompetitive effects?
• Success of standard setting processes; Exclude competing technology upstream;
Eliminate competition and development of competition in fast-moving market
downstream?
But what about right of access to court?
SEP-holder can raise objective justification so implementers not free
to infringe with impunity
• potential licensee not willing to pay FRAND rate or cannot pay?
If injunction not generally available to SEPholder
Axiomatic that mechanism for swift resolution of
licensing disputes put in place
Role for competition agencies?
Should SSOs be doing more
Guidance necessary from courts in the EU – no direct
precedent (but judgments in the US are emerging)