Standards and competition law Michael Adam DG Competition, European Commission (speaking in a personal capacity - the views expressed are not necessarily those of the European Commission)

1
Standards and competition lawMichael
AdamDG Competition, European Commission(speaking
in a personal capacity - the views expressed are
not necessarily those of the European Commission)
2
IP and competition law have the same goals

• No inherent conflict between IP and competition
  law
• Both share the same objective
• Consumer welfare and efficient resource
  allocation
• Both necessary to promote innovation
• Antitrust intervention is rare
• Standardisation creates a specific context at the
  intersection of IP and competition law

3
Standards bring benefits

• Globalising, knowledge-based economy
• More and more products have to work together
• Of particular importance in IT/communications
• Interoperability avoids lock-in
• Follow-on innovation
• Enable competing implementations by multiple
  vendors

4
But there is an antitrust risk

• Group of companies decide on commonly agreed
  specifications (generally in a standards body)
• Can be a choice of one technology over another
• Technologies often covered by patents
• Different to how competition occurs
  traditionally
• One-off choice between different technologies
• The technology that is chosen is the standard

5
May mean market power

• Depends on importance of standard in market
• i.e. is it commercially indispensable to comply?
• Depends on lock-in
• sunk costs
• network effects

6
May mean market power which would not have existed

• Depends on ex ante alternatives
• Relevance of but for scenario
• What would have happened ex ante is a good
  benchmark
• Strips out the ability to charge resulting from
  the standard
• Good indication of what a FRAND price is

7
How do you keep the benefits but protect against
the risks?

• Ex ante disclosure of essential patents
• Allows informed decision by participants
• Protects against "patent ambush"
• Commitment to license on FRAND terms
• Access to standard for all
• Quid pro quo for being included in the standard
• Designed to constrain ex post exercise of market
  power resulting from standard (pricing, other
  terms)

8
Injunctions

• SEP-based injunctions potentially
  anti-competitive
• Standardisation context commitment to license
  (FRAND)
• The patent has been included in the standard on
  that basis
• The company has chosen to provide access to all
  in exchange for monetisation - not to exclude
• Effects
• May exclude products from the market
• May lead to other harmful terms through a
  distortion of negotiations (e.g. royalty level,
  other clauses)
• There should be a willing licensee

9
Google/MMI merger decision (para 107)

• "Depending on the circumstances, it may be that
  the threat of injunction, the seeking of an
  injunction or indeed the actual enforcement of an
  injunction granted against a good faith potential
  licensee, may significantly impede effective
  competition by, for example, forcing the
  potential licensee into agreeing to potentially
  onerous licensing terms which it would otherwise
  not have agreed to."

10
Google/MMI merger decision (para 126)

• "The seeking or enforcement of injunctions on the
  basis of SEPs is also not, of itself,
  anti-competitive. In particular, and depending on
  the circumstances, it may be legitimate for the
  holder of SEPs to seek an injunction against a
  potential licensee which is not willing to
  negotiate in good faith on FRAND terms."

11
Injunctions

• Proceedings opened in 3 cases in 2012
• Samsung
• Motorola/Apple
• Motorola/Microsoft
• Statements of Objections relating to the seeking
  and enforcement of SEP-based injunctions issued
  in the first two cases
• December 2012 and May 2013 respectively

12
Vice-President Almunia (Sep 2012)

• "The fact that we have received many complaints
  related to standards-essential patents also shows
  that there is a great need for guidance. I want
  to tell you that I am willing to provide clarity
  to the market through our enforcement. Having
  said that, I am also convinced that the industry
  needs to do its homework too. I expect the
  leading companies in the sector not to misuse
  their intellectual property rights. It is high
  time they look for negotiated solutions - I am
  tempted to call them peace talks that would
  put an end to the patent wars."