Europe tells tech firms to stop abusing standards-essential patents

Motorola and Samsung have both been slapped down by European antitrust regulators for trying to use standards-essential patents (SEPs) as weapons in their endless wars with Apple(s aapl), threatening sales of iPads and iPhones on highly spurious terms.
Neither company was fined for its attempted abuses of the patent system, though both have been told in no uncertain terms to cut it out. Samsung has agreed in a settlement to stop abusing SEPs for the next 5 years (as I said before, there should be no such limit on this commitment) and Google’s Motorola Mobility has got away pretty much scot-free — the European Commission was willing to fine the firm for its naughtiness, but refrained because there was no case law to help set the level, and because different national courts in Europe have differing opinions on the issue.
However, there is at least now a great deal more legal certainty in the European Union as to what the owner of a SEP can or cannot do with it.

When essential means essential

The Apple vs Everyone legal wars, which by now feel like they’ve been dragging on since Victorian times, are all about patents, which all parties have been using to try to stymie one another in the burgeoning mobile market. However, SEPs are quite unlike other patents governing interface gestures and the like – the technologies involved in these particular Motorola and Samsung cases are needed for phones to connect to the internet, and you simply can’t make a modern handset while avoiding their use.
Because they’re so fundamental to core standards, the companies that own such patents typically agree to license them to anyone willing to pay a fair, reasonable and non-discriminatory (FRAND) licensing fee. What happened in these cases is that both Motorola and Samsung, having made such commitments in the past, then tried to have Apple’s products taken off European shelves because Apple hadn’t paid the relevant fees.
For its part, Apple argued it hadn’t paid the fees because Samsung and Motorola were asking for unreasonable amounts – Motorola, for example, was asking for 2.25 percent of the entire mobile device’s sale price just for letting Apple use an essential part of the basic GPRS standard, which is just silly.
Over to Competition Commissioner Joaquin Almunia, who like all the other members of the European Commission is desperately trying to tie up loose ends before his term ends later this year (see also, the Google(s goog) antitrust saga):

“Our decision on Motorola, together with today’s decision to accept Samsung’s commitments, provides legal clarity on the circumstances in which injunctions to enforce standard essential patents can be anti-competitive. This will also contribute to ensuring the proper functioning of standard-setting in Europe.
“While patent holders should be fairly remunerated for the use of their intellectual property, implementers of such standards should also get access to standardised technology on fair, reasonable and non-discriminatory terms. It is by preserving this balance that consumers will continue to have access to a wide choice of interoperable products.”

Now what?

Tuesday’s decisions are largely positive – SEP abuse can stop new entrants in various tech markets, so anything that lessens that likelihood is a good thing. In a Q&A, the Commission said it had established a “safe harbor” for anyone who wants to use a SEP and is willing to pay a fair rate.
Less clear is what’s fair and what isn’t. For everyone to play according to the new rules and avoid injunctions and/or being ripped off, they will need to agree to adjudication of the FRAND terms by a court or by a mutually agreed arbitrator. It’s now down to those courts and arbitrators to decide what constitutes a reasonable royalty rate; they may ask the Commission for guidance on certain points, as a Mannheim, Germany court has done regarding the Motorola-Apple case.
In other words, this issue will probably hang around like a bad smell for the foreseeable future, which is terrific news for lawyers. That said, we shouldn’t be seeing any more injunctions over standards-essential patents now – and that means consumers are also winners today.