Jack Ellis

Samsung has offered to refrain from seeking injunctions against alleged infringers of its standards-essential patents (SEPs) in a settlement proposal made to the European Commission’s Directorate-General for Competition (DG COMP). The publication of Samsung’s offer added to a day of bad news for the Android ecosystem, as across the pond the USPTO confirmed the validity of Steve Jobs’ touchscreen heuristics patent which has been at the centre of several key disputes between Apple and its Android-shipping rivals.

Back in January 2012, the Commission announced it would formally investigate Samsung due to concerns over the way in which the Korean company was litigating its patents essential to 3G wireless networking standards, particularly in its disputes with Apple. Samsung would likely face an extremely hefty fine and the imposition of conditions that could severely impact the value of its patents and its leverage in licensing negotiations if it were found to be using its SEPs anti-competitively. In response the company withdrew injunction requests in its lawsuits against Apple in a number of EU jurisdictions, including France, Germany, Italy, the Netherlands and Britain.

In a statement released yesterday, the Commission revealed that Samsung has offered not to seek injunctions against suspected infringers of its SEPs relating to mobile telecommunications technologies for a five-year period, provided that those suspected infringers agree to a ‘licensing framework’. This framework would include a 12-month period for negotiating a licence deal. If no agreement is reached after that period, FRAND terms would be determined by either a court or an arbitrator, as agreed by the parties; if they cannot agree on a resolution method, the parties would be required to submit to arbitration. The Commission has now opened a one-month period for the submission of public comments on Samsung’s proposals.

Over at the FOSS Patents blog, Florian Müller argues that the terms of Samsung’s settlement offer are “totally insufficient” as the commitment to refrain from seeking injunctions is limited to five years, after which time the company will presumably be free to resume its pursuit of injunctions against SEP infringers. He also points out that the behind-closed-doors nature of arbitration – should FRAND negotiations go that way – would keep stakeholders none the wiser as to finalised royalty rates and how they were decided upon.

But there is another way of seeing things here – that ultimately, consumers will lose out if Samsung is denied the ability to get injunctions.

It is worth remembering that the Korean company’s assertions against Apple in Europe came after the initial patent suit launched against it by Apple in the United States. Unlike its US rival it had never shown itself to be a great patent litigator before that time. Since Samsung has contributed a significant number of patents to 3G/LTE standards – while Apple’s showing is far less significant – it may have to rely on many of those SEPs to counter-sue those that have made assertions against it. Apple, on the other hand, can use its portfolio dominated by non-SEPs to sue competitors, negotiate big royalties and to obtain injunctions. In other words, it has the tools to keep the price of its own products as high as possible, while pushing up the price of Samsung’s or even excluding Samsung products from multiple markets.

Thus, if Samsung is prevented from obtaining injunctions against infringers of its SEPs, the way is cleared for Apple to dominate markets and to keep a competitor’s products off the shelves. The upshot of this for consumers could well be high prices and reduced choice. Aren’t they the very things that the DG COMP is supposed to guard against? And that’s before you factor in the disincentives currently being created for companies to take part wholeheartedly in standards-setting in the first place. After all, it is hard to believe that had Samsung known back when it embraced the standards system what it knows now it would have placed itself in such a strategically disadvantageous position.