Essential Patents, FRAND Licensing and Abuse of Market Power

There has been a spate of antitrust complaints to the European Commission and other antitrust authorities of late, regarding the licensing of "essential patents". In the first months of 2012 alone, the European Commission received at least five new antitrust complaints over the potentially abusive use of technology patents. These complaints are being used increasingly by alleged patent infringers as another line of defence against actions brought by patent holders in the United States and in Europe. The use of complaints in this way has vital, strategic implications for the owners of technology patent portfolios and it is a tactic that should be taken into account by plaintiffs and defendants in the on-going “patent wars”.

The allegation at the heart of these antitrust complaints is that holders of relevant essential patents are not licensing these patents on fair, reasonable and non-discriminatory (FRAND) terms and, as a result, the patent holder—considered to hold a dominant position by virtue of its patent—is abusing its position in contravention of EU antitrust law.

How Antitrust Law Impacts on Patent Litigation

The influence of antitrust law on the patent wars and on patent litigation cannot be underestimated. Antitrust law impacts the way patent holders can use and enforce their patents and has consequences for any litigation involving these patents.

When patent holders commit their patents to a technical standard, those patents are treated as essential to that standard. Patentees are required under antitrust law to license those patents on FRAND terms.

Patent holders attempting to obtain injunctions to block access to their standard-essential patents may fall foul of the antitrust laws and could fail to block access. Patent holders are therefore seeking increasingly to assert that FRAND-based licenses are not applicable. Conversely, their competitors are alleging that non-declared patents should be treated as essential, a corollary of which is that they should be licensable on a FRAND basis.

An important issue in the patent wars relates to the extent to which a patentee of a FRAND-encumbered patent can use these patents to force its competitors to cross-license unencumbered patents.

Competitors may use licensing requirements under antitrust rules to defend themselves against patent infringement claims, and different European courts have demonstrated varying degrees of acceptance of such arguments.

Current EU Antitrust Skirmishes in The Patent Wars

The European Commission has shown great willingness to take up high-profile cases involving patents, standards and licensing terms:

• In January 2012, the Commission opened an investigation following a complaint by Apple that a competitor had abused its dominant position by using certain of its standard-essential patent rights to impede competing companies’ market access to crucial technologies, and by seeking injunctions against Apple and others.
• In April 2012, the Commission launched two investigations—following complaints by Apple and Microsoft—into whether or not Motorola had acted appropriately in seeking injunctions for patent infringements against Apple’s iPhone and iPad products and Microsoft’s Windows and Xbox products. Motorola’s patents form part of an industry standard and Motorola has committed to license these patents on FRAND terms.
• In May 2012, Huawei filed an antitrust complaint with the European Commission against US-based InterDigital. Huawei urged the Commission to intervene in order to end abuses by InterDigital of the Huawei patents that are allegedly essential to the 3G (Universal Mobile Telecommunications System) standard. Huawei has alleged that an injunction sought in the United States by Interdigital is designed to force Huawei to conclude a global license in breach of FRAND terms.
• Google made a complaint to the Commission in June 2012, in which it accused Nokia and Microsoft of using proxy companies—“patent trolls”—to undermine Google’s Android mobile operating system.
  According to the European Commission, in the pipeline there are at least five additional complaints concerning the potentially abusive use of technology patents in industry standards.

Outlook

Antitrust law is increasingly being used as a strategic tool in the ongoing patent wars raging on both sides of the Atlantic. Complaints to the European Commission are on the increase. Technology companies with portfolios of patents are urged to stay abreast of the Commission’s and the courts’ decisions and any developments in the patent wars. Antitrust laws can be used by all IP rights holders, as a either a shield or as a sword.

*Also contributed by Philipp Werner