FRAND COMMITMENTS

AND
EU COMPETITION LAW

Thomas Kramler
European Commission, DG Competition

• (The views expressed are not necessarily those of the European Commission)
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General legal/economic analysis of
standardisation agreements
Agreements between competitors but clear benefits
of standardisation
- Interoperability, follow-on innovation

Subject to conditions
- Transparency of process
- Unrestricted participation
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- Access to all who wish to work the standard
 Legislative Framework

• Ongoing revision of the general framework for

European Standardisation Policy (Directive
98/34/EC)

- Referencing in public procurement of selected ICT

standards

• 2011 Guidelines on Horizontal Agreements

- Guidance on competition law and standard setting

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Horizontal Guidelines
"287. FRAND commitments are designed to ensure
that essential IPR protected technology
incorporated in a standard is accessible to the
users of that standard on fair, reasonable and non-
discriminatory terms and conditions. In particular,
FRAND commitments can prevent IPR holders from
making the implementation of a standard difficult
by refusing to license or by requesting unfair or
unreasonable fees (in other words excessive fees)
after the industry has been locked-in to the
standard or by charging discriminatory royalty
fees."
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Hot Topics

• - Transfer of FRAND commitments

• - Reciprocity

• - Injunctions

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Transfer of FRAND commitments
Horizontal Guidelines
•"285. […] To ensure the effectiveness of the FRAND
commitment, there would also need to be a requirement on
all participating IPR holders who provide such a commitment
to ensure that any company to which the IPR owner
transfers its IPR (including the right to license that IPR) is
bound by that commitment, for example through a
contractual clause between buyer and seller."
•- IPcom case

•- Injunctions
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Reciprocity

Google/Motorola merger decision (para 107)

- Concern that SEP holder may force a holder of

non-SEPs to cross-license those non-SEPs to it in
return for a licence of the SEPs.

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Injunctions
- Directive 2004/48 on the enforcement of intellectual
property rights ("the Enforcement Directive")
- Article 3(2) remedies shall: "[…] be effective,
proportionate and dissuasive and shall be applied in such
a manner as to avoid the creation of barriers to
legitimate trade and to provide for safeguards against
their abuse".
- European Court of Justice, C‑70/10, Scarlet Extended:
- When granting injunctions a fair balance between the
protection of the intellectual property right and the
freedom to conduct a business must be struck.
(para 46)
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Injunctions
- Many cases in Member States' courts

For example, German Federal Supreme Court, (KZR 39/06), Orange

Book Standard:
"A defendant sued based on a patent is able to defend himself against
the claim for injunctive relief asserted by the patent proprietor filing
the action, by pleading that the latter abuses a dominant position
on the market if he refuses to conclude a patent license agreement
with the defendant on non-discriminatory and non-restrictive terms
and conditions."

- Risk of diverging views

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Injunctions
- Pending Commission antitrust investigations (formal
proceedings opened in 2012)

- Apple/Samsung; Apple/ Motorola; Microsoft/Motorola

- Google/Motorola merger decision

By threatening to use injunctions, holders of standard-essential

patents could make demands that their commercial partners
would not accept under normal circumstances.

- Higher royalties
- Onerous cross-licensing terms
- Exclusion
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Injunctions
Google/ Motorola merger decision (para 141):

"[…] the problem of a SEP holder not making a 'true' FRAND

offer can be prevented if a potential licensee has the
opportunity to have the terms of the cash-only option licence
assessed by an independent third party (whether a court or
arbitrator) without the threat of immediately being excluded
from the market. […] Without such a possibility, FRAND
negotiations may be distorted to the detriment of potential
licensees and ultimately consumers who might be faced with
less choice and innovation."

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Conclusion
VP Almunia: "Legal battles like these may put the
standardisation process at risk and hold up
innovation in the entire industry.
[…] I am willing to provide clarity to the market
through our enforcement.
[…] I am also convinced that the industry needs to
do its homework too." (Fordham conference,
September 2012)

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