Apple v Samsung: This Time It’s Global
Posted: February 6th, 2012 | Author: alexkitz | Filed under: Business, Competition, Copyright, Fair Dealing, Intellectual Property, International, Patent, Smart Phones, Technology, Uncategorized | No Comments »“The United States district court is a public institution, and the workings of litigation must be open to public view,” Justice Alsup wrote in an October order in Oracle America, Inc v. Google Inc. Yet this is not the approach of U.S. District Judge Lucy Koh and U.S. Magistrate Judge Paul Grewal, who have not only granted many of Apple and Samsung’s sealing motions, but in some cases have gone even further. During an October hearing on the proposed injunction, Koh was unprompted when she asked Apple and Samsung if they wanted to seal the courtroom.
This level of secrecy prevents academics, lawyers, and other curious bystanders from the cottage industry of prognosticating the results of the trial. Perhaps the best alternative is to look at the recent decision by the German courts applying EU law in an effort to draw some conclusions that could apply to the American ruling.
Writing on the Microsoft Antitrust prosecutions in the US and EU, John Jennings at Spencer Fane Britt & Browne LLP explains the difference between the two jurisdictions:
Although US antitrust law contains substantial parallels to its EU counterpart, the enforcement of these laws often differs in the two jurisdictions. EU antitrust law largely derives from Articles 81 and 82 of the EC Treaty. Article 81 prohibits cartels and “concerted practices” that distort competition, such as price fixing, production limits, and dividing market share. Article 82 prohibits dominant businesses from using their market share to leverage other markets, engaging in predatory pricing, excessive pricing, price discrimination and some forms of resale price maintenance, or generally abusing their market position. These Articles roughly comport with Sections 1 and 2 of the Sherman Act, respectively. While these provisions appear similar, most commentators acknowledge that US antitrust law aims to promote competition, while EU law attempts to protect competitors.
Indeed this dichotomy between protecting competitors in the EU and protecting competition in the US looks likely to apply to the current litigation involving Apple and Samsung over 3G/UMTS patents.
The EU Litigation
It is under Article 102 TFEU (ex Article 82 TEC, noted above) that the EU has begun investigations regarding Samsung’s licensing fees to Apple. The article reads,
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.
Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
On February 3rd, 2012, the Mannheim Regional Court found Apple infringed a patent used to synchronize e-mail accounts. Presiding Judge Andreas Voss said in delivering the ruling. “The court has come to the conclusion that the wording of the patent does cover functioning that were at issue here,” said Voss. Apple “wasn’t able to convince the court that it isn’t infringing.” Yet just a few hours later, Apple was granted an injunction against the ruling based on the fact that the technology used by Samsung and Motorola were not being licensed to Apple at a reasonable rate.
Now the EU has launched a probe into Samsung’s licensing fees based on allegations that the company has violated FRAND (“Fair, Reasonable, and Non-Discriminatory”) terms of 1998 which dictate that participants undertake that their IPR, if incorporated into the standard, will be accessible on fair, reasonable and non- discriminatory terms and conditions. In essence, the FRAND commitment constitutes a restriction on the IPR holder’s ability to freely set royalties for the use of its IPR by third parties.
Apple alleged that Motorola repeatedly refused to license this patent to Apple on reasonable terms, despite having declared it an industry standard patent seven years ago. This injunction by the German court brings Samsung the unwanted attention of the European Commission on Antitrust as the legal battles between the two companies have heretofore dealt mostly with patent issues. This shift towards FRAND standards places Samsung and Motorola under the Commission microscope. Apple on the other hand, comes out relatively unscathed, as their patent issues do not fall under any FRAND-pledged standards.
The US Attitude
Samsung’s allegations of infringement have forced the Seoul-based tech giant to outline the technology they feel Apple has unfairly taken from them. However, in doing so they have also exposed the manner in which they license said technology.
Any antitrust holdings against Samsung and Motorola in the EU will likely have more serious consequences than private patent conflicts. When the Commission issued a decision on the Microsoft antitrust case in 2004 regarding their violation of Article 82, amongst other orders it fined the software company €497.2 million (~$650M CDN). While Samsung’s potential antitrust infringements will likely not garner such substantial fines – if indeed they are held to be in violation of FRAND agreements – it should be noted that the German courts have already ordered over €100 million bonds for injunction enforcement. The patent and antitrust issues are worth a great deal to both sides of the table, but the costs surrounding the antitrust issues in Europe should not be underestimated. In the US, on the other hand, a decidedly more pro-business attitude indicates a greater emphasis on the patent battle rather than antitrust issues.
The EU attitude, a result of zealous enforcement of antitrust laws by the former Competition Commissioner Mario Monti who served from 1999 until 2004, has not been mimicked on the other side of the Atlantic. Rather than a series of fines (and additional fines for noncompliance amounting to €2M per day as in the EU) the US approach focused more on negotiations between Microsoft and the Justice Department. Judge Kollar-Kotelly accepted nearly all elements of the November 2001 agreement and within 3 years, all other States had followed suit (with Massachusetts the final holdout until June of 2004). The agreement placed an emphasis on the user experience and most of the issues with Microsoft bundling its software were dealt with by giving purchasers to manually delete Microsoft software from their computers.
Conclusion
Ultimately this comparison between the EU and US approach to antitrust litigation may not give us any greater insight into the current litigation in California. However, using a broad-strokes application of the two jurisdiction’s attitudes it is likely that Apple and Samsung will reach a settlement in the US, and any antitrust issues will be dealt with by the parties making specific technological concessions. Of note in the US litigation will be whether Apple leverages Samsung’s potential Article 102 woes in the EU to gain greater traction as the two move towards that settlement. In doing so we may see the different attitudes create a sort of balance for multinational companies. But of course, with the shroud of secrecy that hangs over the US proceedings, that analysis will have to wait until the facts of the dispute are made public.
UPDATE: So what are reasonable licensing terms? Today the Wall Street Journal reports that Motorola is requesting approximately 2.25% in royalties from Apple, or about $1 billion for the iPhone manufacturer, likely as a way to force a settlement.
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