1 FRAND COMMITMENTS AND EU COMPETITION LAW Thomas Kramler European Commission, DG Competition (The views expressed are not necessarily those of the European Commission)

2 General legal/economic analysis of standardisation agreements Agreements between competitors but clear benefits of standardisation - Interoperability, follow-on innovation Subject to conditions - Transparency of process - Unrestricted participation - Access to all who wish to work the standard

3 Legislative Framework Ongoing revision of the general framework for European Standardisation Policy (Directive 98/34/EC) - Referencing in public procurement of selected ICT standards 2011 Guidelines on Horizontal Agreements - Guidance on competition law and standard setting

4 Horizontal Guidelines "287. FRAND commitments are designed to ensure that essential IPR protected technology incorporated in a standard is accessible to the users of that standard on fair, reasonable and non- discriminatory terms and conditions. In particular, FRAND commitments can prevent IPR holders from making the implementation of a standard difficult by refusing to license or by requesting unfair or unreasonable fees (in other words excessive fees) after the industry has been locked-in to the standard or by charging discriminatory royalty fees."

5 Hot Topics - Transfer of FRAND commitments - Reciprocity - Injunctions

6 Transfer of FRAND commitments Horizontal Guidelines "285. […] To ensure the effectiveness of the FRAND commitment, there would also need to be a requirement on all participating IPR holders who provide such a commitment to ensure that any company to which the IPR owner transfers its IPR (including the right to license that IPR) is bound by that commitment, for example through a contractual clause between buyer and seller." - IPcom case - Injunctions

7 Reciprocity Google/Motorola merger decision (para 107) -Concern that SEP holder may force a holder of non-SEPs to cross-license those non-SEPs to it in return for a licence of the SEPs.

8 Injunctions -Directive 2004/48 on the enforcement of intellectual property rights ("the Enforcement Directive") - Article 3(2) remedies shall: "[…] be effective, proportionate and dissuasive and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse". -European Court of Justice, C ‑ 70/10, Scarlet Extended: - When granting injunctions a fair balance between the protection of the intellectual property right and the freedom to conduct a business must be struck. (para 46)

9 - Many cases in Member States' courts For example, German Federal Supreme Court, (KZR 39/06), Orange Book Standard: "A defendant sued based on a patent is able to defend himself against the claim for injunctive relief asserted by the patent proprietor filing the action, by pleading that the latter abuses a dominant position on the market if he refuses to conclude a patent license agreement with the defendant on non-discriminatory and non-restrictive terms and conditions." -Risk of diverging views Injunctions

10 -Pending Commission antitrust investigations (formal proceedings opened in 2012) - Apple/Samsung; Apple/ Motorola; Microsoft/Motorola - Google/Motorola merger decision By threatening to use injunctions, holders of standard- essential patents could make demands that their commercial partners would not accept under normal circumstances. -Higher royalties -Onerous cross-licensing terms -Exclusion Injunctions

11 Injunctions Google/ Motorola merger decision (para 141): "[…] the problem of a SEP holder not making a 'true' FRAND offer can be prevented if a potential licensee has the opportunity to have the terms of the cash-only option licence assessed by an independent third party (whether a court or arbitrator) without the threat of immediately being excluded from the market. […] Without such a possibility, FRAND negotiations may be distorted to the detriment of potential licensees and ultimately consumers who might be faced with less choice and innovation."

12 Conclusion VP Almunia: "Legal battles like these may put the standardisation process at risk and hold up innovation in the entire industry. […] I am willing to provide clarity to the market through our enforcement. […] I am also convinced that the industry needs to do its homework too." (Fordham conference, September 2012)