|In the Unwired Planet rush,|
have IP lawyers
sidelined competition law
"First, some background for anyone that missed this development. This is the latest decision in the Unwired Planet cases (see previous Kat reports here) and the first UK judgment to really get to grips with the issue of FRAND. FRAND refers to the obligation on those that own standard essential patents (SEPs) to license those patents on fair, reasonable, and non-discriminatory (FRAND) terms. The judgment makes a number of important findings on FRAND (see here and here for a summaries), some of which may appear to suggest that competition law will not play a central role in the future:
- That Unwired Planet did not breach EU competition law by seeking an injunction prematurely, insisting on a worldwide licence, attempting to impose unfair pricing, and/or bundling SEPs with non-SEPs.
However, although these findings may, at first sight, appear to distance competition law from the assessment of FRAND these legal issues do, in fact, remain entangled for a number of reasons:
- That a FRAND undertaking to ETSI creates a legally enforceable contract upon which any implementer can rely without recourse to competition law and, for example, that a royalty rate may be above FRAND but not breach competition law.
1. The conduct of SEP holders in FRAND negotiations can still amount to an abuse of dominance even if, on the facts of this case, Unwired Planet was found not to breach competition law. In particular, the European Court of Justice set out a clear framework in Huawei v ZTE for the approach to be taken by the parties to FRAND negotiations (see the detail here and here) and as to when injunctions will be available under EU competition law. Birss J has found that this framework should be applied fluidly, but it seems very likely that a substantial departure would be argued to be an abuse of dominance. In addition, Birss J himself recognised that a licence offer far above FRAND which disrupts or prejudices negotiations would engage the EU competition law on excessive pricing. (I also wonder whether competition law might bite on other (less extreme) licence offers above FRAND…).
2. Competition law will remain an attractive (and worthwhile) line of defence/attack for many implementers facing infringement proceedings, even if it is possible to enforce FRAND separately on contractual grounds. Where an SEP holder refuses to grant a licence on FRAND terms, it can lead to patent ‘hold-up’ meaning that an implementer might be blocked from accessing the market. This gives rise to some robust competition law arguments, not all of which were put to the judge in this case, and which other defendants may seek to rely on in the future. The competition law rational of these issues is dealt with to some extent in the Commission’s competition law guidelines on standardisation.
3. The European Commission, along with other competition authorities across the world, continues to be alert to FRAND, particularly in relation to ICT and telecommunication standards. For example, just last week the Commission launched a consultation on its proposed Communication which aims to create a smooth, practicable and fair market system for SEP licences, including guidance on the enforcement of FRAND. SEP holders and implementers would be wise to take heed of any guidance as the Commission has been known to bring enforcement action on FRAND issues itself (resulting in Samsung offering commitments and an infringement decision against Motorola in 2014)."