It has been widely reported in the past few days that Samsung has made a proposal to the European Commission (EC) in the hope of avoiding a fine of up to $18.3 billion, following an EC investigation into the Korean company’s use of its standard-essential patents (SEPs) in ongoing litigation, particularly against Apple.The EC opened the proceedings in January of 2012, based on Samsung’s applications for injunctive relief in various European countries against ‘competing mobile device makers’ (i.e. Apple). While Apple has principally asserted non-standards-related patents, Samsung’s defensive strategy has been based substantially on alleged infringements of patents which it has declared as being essential to implement global mobile telephony standards. The EC was concerned, in particular, that Samsung may have failed to honour its commitment to license any SEPs on fair, reasonable and non-discriminatory (FRAND) terms, and that such behaviour might amount to abuse of a dominant position.
Samsung is right to be concerned about the consequences of an adverse finding by the EC, which can levy fines of up to 10% of a company’s global turnover during the year preceding an investigation. In 2004, for example, Microsoft was fined €497 million (US$794 million) over licensing, interoperability and software bundling practices. In 2008, Microsoft was ordered to pay an additional €899 million (US$1.44 billion) for failure to comply with the 2004 decision. And in 2009, the EC fined Intel €1.06 billion ($1.45 billion) for anti-competitive behaviour. Samsung’s global turnover during 2011 was over $180 billion!
Samsung’s proposal has been published by the EC, which is seeking comments from ‘interested parties’. The proposed commitment is simple enough. As summarised in the EC press release:
Samsung has proposed to commit for a period of five years not to seek any injunctions on the basis of any of its SEPs, present and future, that relate to technologies implemented in smartphones and tablets ("Mobile SEPs") against any company that agrees to a particular licensing framework.
The licensing framework consists of: (i) a negotiation period of up to 12 months and (ii) if no agreement is reached, a third party determination of FRAND terms by either a court or an arbitrator, as agreed by the parties. If the parties cannot agree on either submitting to court or arbitration, the parties will have to submit to arbitration.
Personally, I think that this is a pretty fair compromise. Certainly it lies somewhere between the two more extreme views expressed by IAM Magazine (that denying Samsung the ability to obtain injunctions will actually harm, rather than benefit, consumers) and by FOSS Patents’ Florian Müller (that ‘Samsung's proposals would make things worse, not better, and they would increase, not decrease, legal uncertainty’). I do not agree with either of these positions.
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