The European Commission has made a preliminary determination that Google’s Motorola Mobility unit “abused its dominant position” under EU antitrust rules in seeking to obtain and enforce an injunction against Apple in Germany. At the center of the dispute is Motorola’s claimed misuse of ”standards essential patents” in mobile patent litigation against Apple.
Google’s antitrust settlement with the FTC in the US requires the company not to use standards-essential patents to block rival mobile products. The European Commission says that’s what Motorola was trying to do in this case. However, this prohibition substantially diminishes the value of Motorola’s patent portfolio to Google.
According to the European Commission statement released earlier today:
The Motorola Mobility SEPs in question relate to the European Telecommunications Standardisation Institute’s (ETSI) GPRS standard, part of the GSM standard, which is a key industry standard for mobile and wireless communications. When this standard was adopted in Europe, Motorola Mobility gave a commitment that it would license the patents which it had declared essential to the standard on FRAND terms. Nevertheless, Motorola Mobility sought an injunction against Apple in Germany on the basis of a GPRS SEP and, after the injunction was granted, went on to enforce it, even when Apple had declared that it would be willing to be bound by a determination of the FRAND royalties by the German court.
Motorola sought better licensing terms than what Apple wanted to pay, using the potential (and actual) threat of injunction as leverage according to the European Commission. The Commission expressed concern “that the threat of injunctions can distort licensing negotiations and lead to licensing terms that the licensee of the SEP would not have accepted absent this threat. This would lead to less consumer choice.”
Because Apple was, in this case, a “willing licensee,” threatening and seeking an injunction was determined to be an abuse of power under Article 102 of the Treaty on the Functioning of the European Union:
In such a situation, the Commission considers at this stage that dominant SEP holders should not have recourse to injunctions, which generally involve a prohibition to sell the product infringing the patent, in order to distort licensing negotiations and impose unjustified licensing terms on patent licensees. Such misuse of SEPs could ultimately harm consumers. The sending of a Statement of Objections does not prejudge the final outcome of the investigation.
The finding by the European Commission is preliminary. Motorola now has a chance to defend itself (that defense will probably revolve around Apple’s status as a willing licensee). If it fails to successfully make its case a final decision will be entered, which could include a formal prohibition of the disputed conduct and a fine of “up to 10 percent of a company’s annual worldwide turnover.”
In other words, this could hypothetically result in a significant financial penalty against Google if the antitrust finding stands. In all likelihood the final decision will prohibit future misuse of standards-essential patents, like the US antitrust settlement. Financial penalties for Google are more uncertain.
Interestingly, this “abuse of standards-essential patents” issue was not raised in the main European antitrust investigation against Google. Now, that “omission” has been addressed by this case.