European Commission makes commitments offered by Samsung Electronics legally binding
By Gabriele Accardo
On 29 April 2014, the European Commission European issued a decision (see also the related press release) which made legally binding the commitments offered by Samsung Electronics (“Samsung”) in relation to certain standard essential patents (“SEP”) relating to the European Telecommunications Standardisation Institute’s 3G UMTS standard, which Samsung committed to license on reasonable and non-discriminatory (so-called “FRAND”) terms (see Newsletter 5-6/2013, p. 6, for additional background).
Back in April 2011, Samsung started to seek injunctions against Apple on the basis of its SEP. In December 2012, the Commission informed Samsung of its preliminary view that it considered Apple a “willing” licensee (i.e. a potential licensee is to be considered willing if, in case of dispute, it agrees to a determination of FRAND terms by a court) for Samsung’s SEP and that, in the circumstances, the seeking of injunctions against Apple based on Samsung’s SEP in several EU Member States could constitute an abuse of a dominant position in breach of Article 102 of the Treaty on the Functioning of the EU (“TFEU”). In September 2013, Samsung offered commitments that were market tested and then amended (see Newsletter 5-6/2013, p. 6 for additional background).
Based on the commitments, Samsung shall not seek injunctions for five years in Europe on the basis of its SEP for smartphones and tablets against any potential licensee who agrees to accept a specified licensing framework, which consists of i) a mandatory negotiation period of up to 12 months; and ii) if the negotiation fails, a determination of FRAND terms by a third party – either by a court or arbitration.
An independent monitoring trustee will advise the Commission in overseeing the proper implementation of the commitments by Samsung, based on the “safe harbour” established in the Motorola Decision, whereby a potential licensee is to be considered willing if, in case of dispute, it agrees to a determination of FRAND terms by a court and to be bound by such a determination.
Such a decision does not reach a conclusion on whether EU antitrust rules have been infringed by Samsung, but legally binds the company to respect the commitments. If Samsung breaches these commitments, the Commission can impose a fine of up to 10% of its annual worldwide turnover, without having to find an infringement of Article 102 TFEU.
In a separate memo, the Commission clarified that the 2009 Orange-Book-Standard ruling of the German Federal Court of Justice (see Newsletter 3/2009, p. 4, for additional background), which did not specifically relate to SEP, is not directly applicable to the Motorola case on which the Commission decided. In the Orange-Book-Standard case, the German Court held that a defendant in a patent infringement case may successfully raise an antitrust defense against the issue of an injunction provided that i) it has made an unconditional offer to license under terms that cannot be rejected by the patent holder without abusing its dominant position, and ii) it actually acted as if it had entered into a valid patent license (thus in very broad terms, when a user pays or deposits a reasonable license fee).
Arguably, based on the “safe-harbor” principle established by the Commission, for such a defense to be successful in cases concerning SEP, it would suffice that the defendant be “willing to negotiate” a license on FRAND terms. These issues, however, will soon be addressed by the European Court of Justice, which has been asked to clarify whether a SEP holder abuses its dominant position by requesting an injunctive relief, even if the infringer is willing to negotiate a license on FRAND terms, or whether the infringer is further required to comply with the contractual obligations that would exist under a FRAND license (see, the reference for a preliminary ruling by the Regional Court of Düsseldorf to the European Court of Justice in the SEP-based litigation between Huawei and ZTE, in Newsletter 2/2013, p. 9, for additional background).