Microsoft Complains to EC Regarding Google's Abuse of Standard Essential Patents
February 22, 2012. Microsoft announced that it filed a complaint with the European Commission (EC) asking it to investigate Motorola Mobility and Google for anticompetitive conduct in connection with its abuse of standard essential patents (SEPs) for video on smartphones and tablets. Apple previously complained.
Google announced its plans to acquire Motorola Mobility in August of 2011. See, story titled "Google to Acquire Motorola Mobility" in TLJ Daily E-Mail Alert No. 2,290, August 15, 2011.
The U.S. Department of Justice (DOJ) and EC cleared the transaction on February 13, 2012. See, stories titled "DOJ Closes Investigations of Transactions Involving Communications Patents" and "EC Approves Google Acquisition of Motorola Mobility" in TLJ Daily E-Mail Alert No. 2,335, February 13, 2012.
Microsoft's Dave Heiner stated in a short piece that "We have taken this step because Motorola is attempting to block sales of Windows PCs, our Xbox game console and other products."
He explained that "the industry came together years ago to define common technical standards that every firm can use to build compatible products for video and Wi-Fi. Motorola and all the other firms that contributed to these standards also made a promise to one another: that if they had any patents essential to the standards, they would make their patents available on fair and reasonable terms, and would not use them to block competitors from shipping their products. Motorola has broken its promise. Motorola is on a path to use standard essential patents to kill video on the Web, and Google as its new owner doesn’t seem to be willing to change course."
The DOJ's Antitrust Division stated in a release on February 13 that it "continues to monitor the use of SEPs in the wireless device industry, particularly in the smartphone and computer tablet markets. The division will not hesitate to take appropriate enforcement action to stop any anticompetitive use of SEP rights".
The EC stated in a release on February 13 regarding the Google acquisition of Motorola Mobility that "All smartphones also need to adhere to certain telecommunications standards such as 3G or 4G/LTE. Motorola, as some other market participants, holds patents that are essential for these standards to operate. Access to such "standard essential" patents is therefore crucial for players on the smartphone market. However, the Commission concluded that the proposed transaction would not significantly change the existing market situation in this respect."
It also stated that this "decision is without prejudice to potential antitrust problems related to the use of standard essential patents in the market in general". And, it added that "Access to standard essential patents is crucial for all market players. It is for this reason that standard setting organisations require the holders of standard essential patents to license these patents to any interested third parties on fair reasonable and non-discriminatory ("FRAND") terms. The absence of such licences would hinder competitors or indeed the entire industry to the detriment of consumers and innovation."
In addition, three days earlier, Joaquín Almunia, the EC VP for Competition Policy gave a speech in which he cautioned companies about misuse of SEPs. See, story titled "EC's Alumnia Addresses Patents and Communications Standards" in TLJ Daily E-Mail Alert No. 2,335, February 13, 2012.
"I am notably thinking of the surge in the strategic use of patents that confer market power to their holders. The potential abuses around standard-essential patents are a specific illustration of this concern." Almunia continued that "Standards are the best tool to promote interoperability of devices or to define safety or quality benchmarks. In the communications technologies, standards are key for a universal interconnection and seamless communication. Once a standard is adopted, it becomes the norm and the underlying patents are indispensable. Owners of such standard essential patents are conferred a power on the market that they cannot be allowed to misuse."
He stated that "Standardisation processes must be fair and transparent, so that they are not in the hands of established firms willing to impose their technologies. But it is not enough. We must also ensure that, once they hold standard essential patents, companies give effective access on fair, reasonable and non discriminatory terms."
He concluded that "I am determined to use antitrust enforcement to prevent the misuse of patent rights to the detriment of a vigorous and accessible market.
Microsoft's Heiner elaborated that "Motorola is demanding that Microsoft take its products off the market, or else remove their standards-based ability to play video and connect wirelessly. The only basis for these actions is that these products implement industry standards, on which Motorola claims patents. Yet when the industry adopted these standards, we all were counting on Motorola and every contributor to live up to their promises.
Heiner also disclosed that Motorola is not refusing to license its SEPs. It is just asking too much. He wrote that "For a $1,000 laptop, Motorola is demanding that Microsoft pay a royalty of $22.50 for its 50 patents on the video standard", while Microsoft is only demanding two cents to license its SEPs for the same product.
Google has complained publicly about assertion of patents against its Android. See, story titled "Google Says Patents Attack Android" in TLJ Daily E-Mail Alert No. 2,280, August 5, 2011.
Microsoft added that "there are big differences between Google's approach and
Microsoft’s. Microsoft is not seeking to block Android manufacturers from
shipping products on the basis of standard essential patents. Rather, Microsoft
is focused on infringement of patents that it has not contributed to any
industry standard. And Microsoft is making its patents -- standard essential and
otherwise -- available to all Android manufacturers on fair and reasonable
terms. In fact, more than 70 percent of Android devices are now licensed to use
Microsoft’s patent portfolio."