Apple reacts to Motorola’s injunction on essential patents! A new chapter of Antitrust and Standard Setting?

As to a statement of a Munich based patent attorney Florian Müller, Apple has reacted to Motorola’s injunction of GSM standard essential patents. Even though Motorola today won an injunction that is related to the iCloud’s data push function, some signs point to the ruling of a different case (from early December) on standard essential patents. Just  Tuesday (Jan 31st) the European Commission announced (in a press release) to investigate if Samsung has failed to honor its irrevocable commitment to license any standard essential patent under fair, reasonable and non-discriminatory (FRAND) terms. Motorola has committed to license under exactly these same rules when it declared the patent to be essential to ETSI’s GSM standard seven years ago. Just last night Apples has removed all GSM compliant products which include the UMTS capable iPad and all iPhones (not the iPhone 4Gs). It is now to question if Apple failed to raise FRAND commitment as a defense against Motorola? And if Motorola will soon be the next company on the Commission’s radar?

On the Foss Patent Blog Florian Müller argues that even though the injunction was granted in December last year, under German law an injunction only has commercial impact if the winning party formally seeks enforcement. Furthermore the iPhone 4Gs is the only GSM compliant product that is already cross licensed by Apple’s chip supplier Qualcomm. In comparison the push data function is especially relevant for Apples new iCloud service in the in the iPhone 4Gs. Among other observations, these incidences indicate Apples removal of products in the German online store to be a reaction to the former ruling on essential patents in December.

However, it is yet very unclear why Apple did not raise (as they did in the Samsung case) Motorola’s earlier FRAND commitments as a defense against the injunction. Antitrust law interprets the licensing of essential patents to be a market of its own. A company that owns an essential patent would thus hold a dominant position in this market. Standardization participants are expected to allow others the use of their technology, but they can require adequate royalties. Standard Setting Organizations often mandatorily require firms participating at standard setting to disclose any patent that might turn out to be essential for the standard in question. Furthermore holders of such patents have to submit a declaration whether they accept to commit on fair, reasonable and non-discriminatory terms of licensing for these patents (FRAND commitments). If a firm discloses a patent and refuses to commit on such licensing terms, the SSO will usually set the standard excluding the protected technology. Motorola has committed to these rules seven years ago when they declared its patents to be essential to ETSI’s GSM standard. The defendant (in this case Apple) has the right to get a license under FRAND terms, which can be raised as a defense in infringement cases.

Authorities of competition policy are concerned with standardization practices in terms of the direct coordination among competing companies that work together on a commonly agreed technology. Essential patents have a special position on a technology because they may leverage market power and lead to exclusive effects. Any patent owner, no matter how small his contribution to the standard may be, can thus block the implementation of the standard by any user. In the absence of binding rules and coordination mechanisms, a non-cooperative patent holder can thus sack exorbitant royalties out of any proportion with the value of his own technological contribution to the standard. Even more worrisome for competition policy, a patent holder who is also active on the downstream production market can effectively exclude his competitors from the use of the standard by refusing to grant viable licensing conditions. The European Commission just announces to investigate if Samsung abused its dominant market position by not honoring its FRAND commitments to ESTI. It is now to see if the EC will soon turns the antitrust lens on Motorola.


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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One Response to Apple reacts to Motorola’s injunction on essential patents! A new chapter of Antitrust and Standard Setting?

  1. Pingback: ITU Patent Roundtable | Innovation Economics

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