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Industry should develop new rules on standards to prevent patent abuses, EU Competition Commissioner says

Companies should work together to establish "clear rules" that prevent standard-essential patents being misused, the EU's Competition Commissioner has said.18 Jun 2012

Standards are agreed technical specifications to ensure that a single technology is used across an industry, often with the goal of achieving interoperability of products regardless of the manufacturer.

Companies can opt to send their experts to forums created by standards setting bodies in order to help develop standards but, in return, most standards setting organisations insist that companies agree to licence any intellectual property they own that is essential to implementation of that standard on fair, reasonable and non-discriminatory (FRAND) terms.

However, in a speech Competition Commissioner Joaquín Almunia said that companies should develop new rules that elaborate on the FRAND principles in order to guarantee "the proper functioning of the standardisation system." He urged companies to forge the rules on the basis of three "fundamental principles" that have guided recent European Commission enforcement "action" on the abuse of standard-essential patents in a competition law context.

"Our first principle is that standards should be set and adopted in an open and transparent manner at all times," Almunia said. "This prevents established players from manipulating the process to keep innovative companies and their technologies on the sidelines. A process that arbitrarily keeps some parties outside may unfairly benefit those that are on the inside. This is especially important in those industries where standards are urgently needed – such as for digital and internet services."

"We can label the second principle the 'patent ambush' issue. If a company has – or is developing – patents on the standards that are being set, it must disclose this fact and give access to them on FRAND terms; that is, access on fair, reasonable and non-discriminatory terms," he said.

"As to the third principle, we need to clarify what are the implications of FRAND and how FRAND negotiations should be conducted. These questions are the core of a few cases we have opened recently involving companies such as Apple, Samsung, Motorola and Microsoft," the Commissioner said.

"One issue in these cases is the use of court injunctions that can infringe the principle of effective access inherent to FRAND, he added. "We need to find good answers soon, because consumers cannot be held hostage to litigation. Both competition authorities and the courts should intervene to ensure that standard-essential patents are not used to block competition."

"However, industry too has a role to play in guaranteeing the proper functioning of the standardisation system. I would therefore strongly encourage industry players to come together in the relevant standard-setting organisations and elaborate clear rules on the basis of these guiding principles to prevent the misuse of standard-essential patents," Almunia said.

The European Commission is responsible for investigating possible abuses of dominant market position under the Treaty on the Functioning of the European Union (TFEU).

Such abuse can include by "directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; limiting production, markets or technical development to the prejudice of consumers; applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage" amongst other possible abuses, the TFEU states.

In April the European Commission launched two investigations into whether Motorola has abused a dominant market position in breach of EU competition laws. It said it had received complaints from Apple and Microsoft about the way Motorola had asserted patent rights over the use of standards-essential mobile device technology.

The European Commission is also investigating whether Samsung has also abused a dominant market position in the mobile phone industry. The Commission said that Samsung was obliged to licence the use of patents relating to 3G mobile and wireless technology to rivals on FRAND terms but may have breached this requirement when trying to enforce its patent rights against those rivals in court.