Standards and competition law

Michael AdamDG Competition, European Commission

(speaking in a personal capacity - the views expressed are not necessarily those of the European Commission)

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

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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

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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

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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

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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

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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)

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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

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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."

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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."

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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

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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."