F/RAND commitments at risk? How Samsung tries to fight Apple with breaking licensing commitments for standardized technologies!

The patent fight of Apple and Samsung reaches a next level and what started with design patents has now turned into standard essential 3G technology patents. Right now Samsung asserts 13 patents in 9 countries against Apple. These patents are essential to UMTS standards. Essential patents are limited in its leverage potential against infringers. Firms have to commit to license these patents under F/RAND terms. However, Samsung obtains an injunction to prohibit Apple from using the patent implemented in the standard. A Dutch and Italian curt will soon have to decide whether Samsung has respected its FRAND commitments properly. Depending on the outcome, these decisions are not limited to this case. When FRAND breaks we might most likely experience multiple litigation cases which may then also harm the public.

If Samsungs claims are supported by the judges, all companies owning essential patents are able to block a competitor that is using the standardized technology in question. Essential patents are these that someone would necessarily infringe when implementing the standard. These patents may block whole technologies. Especially in the ICT sector technologies such as UMTS, Wi-Fi, Bluetooth or MPEG are at risk. This time claims may thus also affect consumers, since injunctions on e.g. telecommunication standards may cripple our whole mobile communication system. Due to these impacts it was long time the notion that F/RAND commitments protect the public interest and any abuse of standard essential patents. The upcoming rulings might thus decide about a substantial license commitment in our system of standards and patents.

What is F/RAND all about? There have always been concerns that essential patent holding companies are able to abuse the indispensable character of their patents to control the market. However, most Standard Setting Organizations (SSOs) oblige essential patent holders previous to a standard adoption to sign agreements to license their patents under fair, reasonable and non-discriminatory (F/RAND) or even royalty free (RF) terms. F/RAND terms are established to protect consumers and prohibit anti-competitive behavior. Antitrust rulings have regarded the licensing marked of a standard to be a market of its own. Companies owning essential patents therfore hold a dominant position in these markets. F/RAND claims can thus be raised as a defense in patent infringement proceedings where the plaintiff has to agree to license the technology. While F/RAND may still be vague in declaring a reasonable license fee, it has always ensured to prohibit the potential of injunctions and thus to block whole technologies.
It is now the question if these FRAND commitments hold and what happens if not?

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About timpohlmann

Tim Pohlmann is a post-doctoral researcher in economics at Mines ParisTech and Berlin Institute of Technology. He specializes in the economic analysis of markets for technology. He earned his doctoral degree with the highest distinctions in August 2012 from the Berlin Institute of Technology with a dissertation on patenting and coordination in ICT standardization. Tim’s research covers the empirical analysis of the trade of patents, patent trolls, standardization consortia and patent pools. He has presented his work at a large number of international conferences. Tim has been actively involved in preparing studies for the European Commission and the German Federal Government on the role of patents in technological standardization and business models in Open Source Software. Doctoral Thesis SSRN author page
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