Alongside the Article 102 TFEU standard essential patents (“SEP”) complaints that the European Commission is investigating against Samsung and Motorola Mobility, the European Commission, the U.S. Department of Justice and Federal Trade Commission are actively encouraging standards setting organisations to provide greater clarity regarding the scope and implications of FRAND commitments offered by SEP right holders.
On 10 October, at the ITU Patent Roundtable in Geneva, Renata B. Hesse (U.S. DOJ), Mark D. Seidman (U.S. FTC), and Thomas Kramler (EU DG Comp) all addressed policy choices that standard bodies could implement to prevent anticompetitive conduct in connection with SEPs, making clear that there is a broad trans-Atlantic consensus on several hot topics, including the use of injunctions, cross-licensing, and the transfer of FRAND commitments. Ms Hesse’s speech is available here, and the PowerPoint presentations delivered by Messrs Seidman and Kramler can be found here and here, respectively.
On the use of injunctions, Ms Hesse stressed that it was necessary to “place some limitations on the right of the patent holder who has made a F/RAND licensing commitment who seeks to exclude a willing and able licensee from the market through an injunction”, going on to note that “it would seem appropriate to limit a patent holders right to seek an injunction to situations where the standards implementer is unwilling to have a neutral third-party determine the appropriate F/RAND terms or is unwilling to accept the F/RAND terms approved by such third party”.
Not surprisingly, Mr. Kramler noted that this approach reflects that taken by the European Commission in Google/Motorola Mobility : “[…] 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…”(at ¶140).
In Google/Motorola Mobility, the European Commission also expressed concern that “the 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” (at ¶107). Ms Hesse suggested that standards bodies should prohibit the mandatory cross-licensing of patents that are not essential to the standard or a related family of standards, while permitting voluntary cross-licensing of all patents.
Finally, on the issue of the transfer of FRAND commitments, Ms Hesse noted the importance of ensuring that such commitments to standards bodies bind both the current patent holder and subsequent purchasers of the patents, and that these commitments extend to all implementers of the standard, whether or not they are members of the standards body. As Mr Kramler noted, this approach reflects the Commission’s position, expressed in the EU Horizontal Guidelines: “[t]o 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 the buyer and the seller” (at ¶285).
It appears that ETSI is following the ITU in taking up the challenge to address at least some of these issues. At its meeting in the week of 15 October it appears that ETSI’s members agreed in principle that FRAND commitments should transfer with the encumbered patents, such that the purchaser is bound by prior FRAND commitments. While ETSI can only bind its members, and this issue is the easiest of the three to address, this is another sign of progress.