Injunctions for FRAND pledged SEPs:
The Quest for an Appropriate Test of
Abuse under Article 102 TFEU
Universität Wurtzburg, 21 January 2014
Arbeitsgruppe Wettberwerb und Regulierung
Prof. Nicolas Petit, University of Liege (ULG)
Nicolas.petit@ulg.ac.be
Outline
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2.
3.
4.
5.
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Setting the scene
Options for tests of abuse
Selection rule
“Testing” the tests
Conclusion
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I.
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Setting the scene
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Apple filing of design patents (January 2007)
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Apple filing of design patents (June 2007)
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Apple v Samsung litigation (2011)
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The global smartphone war (1)
Patent owners enforce their
IPRs and seek injunctions in
courts across the world (ie to
obtain removal of infringing
products)
Patent (unlicensed)
implementers raise allegations
of unlawful abuse as a
counterclaim
Difficulty 1: some patents are
core to standardized
technologies (though not all)
=> “SEPs”
Difficulty 2: some SEPs are
encumbered by a FRAND
commitment
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The global smartphone war (2)
Samsung patents over
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“method and apparatus for reporting inter-frequency measurement
using RACH message in a communication system”, which is
allegedly UMTS-essential
“apparatus and method for encoding/decoding transport format
combination indicator in CDMA mobile communication system”,
which is allegedly UMTS-essential
Motorola patents over
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H.264 video codec standard (for X-Box)
IEEE 802.11 WiFi standard (for X-Box)
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The global smartphone war (3)
Two types of cases
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De facto standards
Formal standards adopted by SSOs
Different types of proceedings
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National litigation (patent infringement): Samsung v Apple
EU Commission investigations: Samsung (Apple is
complainant); Motorola (Microsoft is complainant)
Different types of allegations
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“Competition law” defense
Violation of a FRAND commitment as abuse (patent hold-up)
The global smartphone war (4)
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The legal issue
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What test of abuse?
A priori, ITT Promedia v Commission, T-111/96 as confirmed by
Protégé International Ltd v Commission, T-119/09
But rise of a new test => arguably abusive to seek injunctions
against a “willing licensee”
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Germany v Commission?
German test
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EU test
FSC in Orange Book Standard
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Can be abusive to seek
injunctions against a “willing
licensee”
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Press releases in ongoing
investigations (21 12 12)
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If offer that “cannot be refused”
Has acted “as if” he was already a
licensee in good standing (acts of
fulfillment)
Very “patentee friendly”
No formal standard, no FRAND
pledge
No final determination of abuse
Unclear if ruling under German
and/or EU law
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May be abusive where SEPs are
concerned and the potential
licensee is “willing” to negotiate
a license on FRAND terms
More restrictive in scope
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FRAND and SEPs only
But more “licensee friendly”
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Patent invalidity proceedings do
not disqualify willingness
Accepting third party
determination qualifies willingness
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Dusseldorf v Manheim?
ECJ Reference by District
Court of Dusseldorf
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Question by Manheim Regional
Court to EU Commission
Huaweï v ZTE: 5Q on “willing licensee”:
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Is injunction v a self-proclaimed
“willing” licensee an abuse in itself (#1)?
Or must an OBS offer be on the table
(#1)?
If OBS offer is no prerequisite, but
expressions of willingness suffice, how
much evidence => mere statements
(oral) or submission of “specific
conditions” (#2)
If an OBS offer is prerequisite, how
comprehensive? => a draft contract, or
less? (#3)
If an OBS offer is prerequisite, how
much fulfillment is needed, how far
must the willing licensee go? =>
payment of royalties in account (#4)?
Is there abuse under the same
conditions if patentee seeks other types
of remedies (damages, etc.) (#5)
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Judge Andreas Voß stays proceedings in
Motorola v Apple, November 2013
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Questions asked to EU Commission
relate to what kinds of terms constitute
a FRAND agreement.
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Motorola sought to impose on Apple a
non-challenge clause, and later sought
injunction
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Apple refusal “willing” or “unwilling”?
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Commission v CJEU?
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Statements of Commissioner Almunia
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The Commission will “fully take account” of any guidance, but
will not discontinue its investigations
Use of Article 9 R1/2003 to trump judicial debate?
Role of both institutions should be to set substantive
standard for SEP injunctions
N. Petit, “Injunctions for FRAND-Pledged SEPS: The Quest
for an Appropriate Test of Abuse under Article 102 TFEU”,
European Competition Journal, Volume 9, Number 3,
December 2013
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II.
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Options for tests of abuse
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Available (Legal) Technology
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Source
Tests
Existing case-law proof test
• Abusive Litigation (ITT Promedia/Protégé
International) => “wholly exceptional
circumstances”
• Abusive refusal to supply (Magill/IMS
Health/Microsoft III) “exceptional
circumstances”
• Generic abusive anticompetitive foreclosure (Post
Danmark)
New test
• Modified abusive refusal to supply (Emanuelson;
Körber)
• Abusive bargaining (Mariniello)
• “Willing licensee” (Orange Book Standard or
reconfigured test)
Other
• “Serious doubts” (article 9, R1/2003)
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III. Selection rule
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How to select the right test?
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No criterion in the case-law
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Lawyers v economists
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Lawyers v lawyers
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Forms-based (Ortiz Blanco & Lamadrid) v effects-based (Marsden)
Economists v economists
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Legal certainty v economic welfare
Minimize type I or type II errors?
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“Consistency” as a selection rule?
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Consistency
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Set a test coherent with solutions applied in similar factual,
economic and legal setting; Set a distinct test in unrelated
factual, economic and legal settings
Example: single branding agreements are lawful < 30% under
Article 101 TFEU. Exclusive dealing under 102 TFEU should
thus be per se lawful if tied market share < 30%
Various facets of consistency
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Internal consistency (test consistent with case law under
applicable provision)
Transversal consistency (test consistent with case law under
other competition provisions)
Constitutional consistency (test consistent with GPL and other
core values)
Economic consistency (test makes economic sense)
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IV. “Testing” the tests
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Internal Consistency (1)
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All existing case-law tests are internally consistent
How about the new ones?
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Abusive bargaining
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Under Article 102 a) TFEU, what’s abusive is to set unfair price, not to
adopt measures that may give rise to unfair price level (eg CJEU,
United Brands)
The problem stems from the decision to include the impugned
technology in standard. But this is not a decision of the dominant firm
Contrary to Commission policy under the Guidance Paper
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Internal Consistency (2)
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“Willing licensee” => FRAND declaration means SEP owner
must license all “willing licensees”
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“Contractual duty” variant
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“Moral duty” variant
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But FRAND does not clearly give rise to contractual duty + not unlawful
to breach a contract in EU competition law
Trick 1 => FRAND to give rise to an “antitrust” duty to license? => Yet,
need to prove Magill-IMS Health “exceptional circumstances”
Trick 2 => FRAND setting is “exceptional circumstance” in itself => but not
the case-law trend + Vesterdorf counterargument
Weberian theory of abuse => false commitment, not intended to be
honoured
AstraZeneca => But AZ was an already dominant firm => here, patentee is
not dominant at FRANDing stage
Rambus? => article 9 decision, not CJEU-proof
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Transversal Consistency
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No obvious transversal inconsistency of the various tests,
absent case-law on collective injunction seeking
But “willing licensee” test seems transversally inconsistent
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SEP owner’s FRAND commitment => No reliance value of unilateral
pledges in competition law
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Prospective licensee => willingness of buyer to be ascertained on
basis of exteriorized conduct (Bayer and VW case-law) => acts of
fulfillment are needed, mere willingness declarations are not
sufficient
“Act of State” doctrine
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Article 101 TFEU
Merger control (GC, Gencor v. Lonhro)
Article 9 of R 1/2003
Opinions of AG Jacobs in Albany and AG Léger in Arduino
Is the culprit the court granting injunction?
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Constitutional Consistency
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All tests impinge yet protect the “freedom to do business”
All tests restrict the “right of access to courts”
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But one test pays heed to Article 47 EU Charter => ITT
Promedia/Protégé International
“King” of all rights, cannot be balanced as easily as other
fundamental rights
General principles of law (incl. EU law)
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Willing licensee >< No implied waiver rule
Willing licensee >< Principle of legitimate expectations (key
notion of “sufficiently precise assurances”)
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Economic Consistency
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Screening
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Tests of abusive exploitation should be disregarded => black
sheep of IO
Abusive bargaining, or “holdup” theories => not mainstream
economics
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Hold-up as “exoticonomics”
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Formal rebuttal: G. Langus,V. Lipatov and D. Neven,
“Standard essential patents: who is really holding up (and
when)?”, mimeo
Empirical invalidation
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Litigation costs are trivial (0,1% of Apple’s revenues in 2012)
No empirical evidence: “In the recent case with Microsoft pursuing
claims of hold-up against Motorola in the Western District of
Washington, even Microsoft's experts …conceded under crossexamination that holdup was not necessarily a problem. Instead,
they stated there was no evidence of hold-up and could not identify
a single license that had been held up”.
Empirical data (telcos, Darts IP)
Empirical data (digital communications,
Darts IP)
Empirical Data (Samsung, telcos)
Empirical data (Samsung, Digital
Communications)
Alternative
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Theories of exclusion are more robust (ie refusal to
supply, abusive litigation, anticompetitive foreclosure)
Yet, tests articulating a non price predation theory are
not plain vanilla economics
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Complex to prove potential for anticompetitive exclusion =>
no good proxy to predict outcome of judicial proceedings
(unlike in price predation)
But “raise rival costs” at any rate
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Yes, but also raises the costs of Domco
Does it harm rivals more (cos’ Domco has scale?)
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Not sure in emerging markets
Smartphone war is a conflict of giants
Litigations costs are trivial (0,1% of Apple’s revenues in 2012)
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V.
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Conclusion
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Brief Overview of Implications
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Internal
Transversal
Constitutional
Economic
consistency
consistency
consistency
consistency
Refusal to supply
+
+
–
+
Abusive litigation
+
+
+
+
+
+
–
+
Willing licensee
–
–
–
–
Abusive bargaining
–
–
–
–
Anticompetitive
foreclosure
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Worst-case scenario?
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CJEU dismisses reference
CJEU adresses reference, but ruling à la Pfleiderer or Sot
Lélos kai Sia v GlaxoSmithKline
Legal uncertainty and high compliance costs
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Words of wisdom
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Josh WRIGHT, FTC Commissioner, recently made the
point that antitrust in high-tech markets should be
“disciplined by empiricism”
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Need for facts (ex post intervention is more adequate)
IP enforcement strategies only abusive in “exceptional
circumstances”
GC, T-198/98, Micro Leader Business v Commission
If law is to be made, this should be done with binding
legal instruments, and reviewable decisions
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Neither soft law, nor Article 9 decisions (Marsden)
Wait for CJEU guidance?
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Thank you
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