By Urska Petrovcic, Ph.D candidate at the European University Institute, Visiting Scholar at UC Berkeley
On April 3rd, the European Commission opened a formal investigation against Motorola Mobility Inc., a developer of smart-phones and tablets, and the owner of several patents declared essential for industry standards, such as the second and third generation ("2G" and "3G") mobile and wireless telecommunications standards. The Commission will investigate whether Motorola used its standard essential patents (SEPs) in a way which distorts competition in the EU market, thus violating the prohibitions of Article 102 of the Treaty on the Functioning of the European Union (TFEU). More precisely, the investigation will evaluate whether by seeking and enforcing injunctions against Apple and Microsoft, Motorola failed to honor the commitments made to the standard setting organizations to license its essential patents on a fair, reasonable and non-discriminatory (FRAND) basis, and whether such behavior amounts to an abuse of a dominant position. The Commission will also evaluate whether the licensing conditions offered by Motorola are, as alleged by Apple and Microsoft, unfair, and hence violate Article 102 TFEU.
The decision to start an investigation comes only few weeks after the Commission approved the acquisition of Motorola Mobility Inc. by Google. At the time, the Commission made clear that the approval of the acquisition was without prejudice to potential antitrust problems related to the strategic use of SEPs. In discussing the acquisition, the Commission maintained that the SEP owners might have legitimate reasons to seek (or enforce) an injunction for the violation of SEPs. It however emphasized that, in specific circumstances, injunctions based on SEPs might impose severe anticompetitive effects. This would be for instance the case when the threat of an injunction forces potential licensees to agree on licensing terms they would not accept otherwise (they might be forced to accept the payment of higher royalties, agree to cross-license non essential patents etc). In addition, the enforcement of an injunction might negatively affect consumers, if products are excluded - although only for a limited time - from the market.
Given the lack of precedents, the outcome of the investigation is uncertain. The Commission raised similar questions in the investigation opened in January against Samsung Electronics, which is still ongoing. Nonetheless, it seems that now Motorola Mobility’s ability to obtain an injunction for its SEPs is seriously limited in the EU. Article 16 of the Council Regulation No 1/2003 in fact provides that national courts must avoid giving decisions that would conflict with a decision contemplated by the Commission in proceedings it has initiated. This suggests that, if asked to grant an injunction based on the violation of Motorola’s SEPs, national courts might decide to suspend its proceedings, and wait for the Commission’s decision.
The European Comissions press release can be found over here.