Samsung Proposes a Patent Pledge to Settle EC FRAND Investigation

Guest post by Jorge L. Contreras.  Prof. Contreras is an Associate Professor of Law at American University Washington College of Law.

As part of the global smartphone litigation between Apple and Samsung, the European Commission has been investigating Samsung’s use of injunctive relief to address infringement of standards-essential patents (SEPs).  Last December, the Commission informed Samsung that its attempts to obtain injunctions against Apple based on SEPs covering the European Telecommunications Standardisation Institute's (ETSI) 3G UMTS mobile wireless standard constituted an abuse of dominant position under EU competition law.  One of the key elements in the claim against Samsung was that it sought injunctions after having committed to license its SEPs to implementers of the UMTS standards on fair, reasonable and non-discriminatory (FRAND) terms, a common requirement within the standards-development world. 

Last week the Commission announced  that it has received a preliminary settlement proposal from Samsung.  Under this proposal, Samsung would commit not to seek injunctions in Europe on the basis of SEPs covering a broad range of wireless telecommunications and networking standards (i.e., well beyond the UMTS standard at issue in the Apple case), so long as the alleged infringers agreed to comply with a specified process for determining appropriate FRAND royalty rates.  This process would include good faith negotiations for at least 12 months, followed by arbitration at the International Chamber of Commerce (ICC) or litigation in the English High Court.  Samsung’s commitment with respect to its SEPs would become the most recent in a growing number of public commitments being made voluntarily by patent holders to limit the enforcement of their patents covering standardized technologies.

For those following the smartphone wars, Samsung’s proposal should sound familiar, as it bears a striking resemblance to the terms on which Google settled an investigation by the U.S. Federal Trade Commission this summer.  The FTC’s investigation of Google’s subsidiary Motorola Mobility also focused on the use of SEPs to seek injunctive relief against implementers of industry standards, and was based on the potential anticompetitive impact of this behavior.  There are, however, several notable differences between the FTC’s Google settlement and what Samsung has proposed.  Some of these are summarized in Table 1 below:

Table 1

Comparison of Google and Samsung (Proposed) Injunction Settlement Terms

* Mobile devices include smartphones and tablet devices but exclude desktop, notebook, subnotebook and laptop computers.

As Table 1 indicates, Samsung’s proposal is (not surprisingly) a bit less burdensome than the terms that Google agreed with the FTC.  To wit, the proposed geographic coverage is narrower (the EEA rather than the whole world) and the duration is half as long (5 rather than 10 years).  Interestingly, however, Samsung has proposed a mandatory negotiation period, during with it would be required to negotiate FRAND terms with a potential licensee, that is twice as long as the period agreed by Google (12 versus 6 months).  As patent holders typically want to get to court as quickly as possible, it is not clear why Samsung has proposed a longer period, and this may simply be a function of private signaling made by the Commission.  Samsung’s choice of arbitral tribunals is also interesting, inasmuch as it designates the private International Chamber of Commerce (ICC) over the UN-chartered World Intellectual Property Organization (WIPO), which has actively been seeking to get into the SEP arbitration business.

Just as the FTC did prior to finalization of the Google settlement, the EC has solicited public comments on the proposed Samsung settlement.  The FTC received 25 submissions in response to its solicitation, and made several adjustments to the final Google order as a result.  The EC has allowed 30 days for the submission of comments (through Nov. 16, 2013) and it is likely that many of the same issues that were raised in the comments to the FTC will surface again.

For those who are generally interested in voluntary patent pledges like the one proposed by Samsung, the Program on Information Justice and Intellectual Property (PIJIP) at American University’s Washington College of Law has established a new public web resource listing and describing non-SDO patent commitments.  The site, which was launched last week, already includes 63 different non-SDO patent commitments covering thousands of patents.  These pledges have been made by industry leaders such as Google, Microsoft, Apple and Intel, as well as small entities and, should its proposal to the EC be accepted, Samsung.  We hope to continue to add information to this site, and invite the submission of additional non-SDO patent commitments by the public.