Samsung could be fined billions over Apple ban

PATENTS OBJECTION::The European Commission could impose massive fines over Samsung Electronics’ efforts to use ‘standard-essential’ patents in its battle with Apple

The Guardian, LONDON

Fri, Dec 28, 2012 - Page 15

Samsung Electronics Co could face fines running to billions of US dollars from the European Commission (EC) over its attempts to use its “standard-essential” patents (SEPs) on 3G to ban sales of Apple Inc’s iPhone and iPad in Europe.

The Google-owned smartphone company Motorola Mobility may face similar penalties over its attempts to ban sales of Microsoft Corp’s Xbox 360 through its use of patents relating to Wi-Fi and the H.264 video standard.

Both companies could receive fines in the US as well, where the Federal Trade Commission weighed in earlier this month in a court case between Motorola and Apple, arguing that Motorola’s use of SEPs amounted to a “hold-up.” Samsung is also being investigated by the US Department of Justice over its use of SEPs in cases against Apple.

The European Commission’s competition arm, run by Joaquin Almunia, issued a formal statement of objections on Friday.

The potential fines can run to 10 percent of a company’s worldwide turnover, which in Samsung’s case would amount to nearly US$15 billion, based on last year’s revenues of US$148.9 billion. The commission opened its investigation into Samsung in January.

Samsung and Apple have been battling each other through the courts — and seeking sales bans on each others’ products — in dozens of countries.

Apple has been seeking bans based on what it claims are infringements of specific patents that are not part of any standard, such as the “pinch and zoom” feature on touch screen phones, as well as design patents on the appearance of its products.

Samsung, by contrast, has frequently tried to use its SEPs, which differ from the patents asserted by Apple in that they are only included in a standard such as 3G if the owner makes a formal commitment to license them to all comers on a “fair, reasonable and non-discriminatory” basis. If the licenser and licensee cannot agree on pricing, it is set by a court. The commission said Apple had offered to make a payment, but that the two sides differed on the sums involved.

Just days before Almunia’s office moved against Samsung, the company announced that it was withdrawing its demands for sales bans on the iPhone and iPad in Europe — though the lawsuits, in which it is demanding payment for Apple’s use of the technologies, continue.

“Samsung remains committed to licensing our technologies on fair, reasonable and non-discriminatory terms, and we strongly believe it is better when companies compete fairly in the marketplace, rather than in court. In this spirit, Samsung has decided to withdraw our injunction requests against Apple on the basis of our standard essential patents pending in European courts, in the interest of protecting consumer choice,” the company said.

However, it is continuing to seek sales bans via SEPs in other parts of the world, including the US, Asia and Australia.

Almunia argued in the statement that allowing companies that hold SEPs to ban sales where companies have not agreed pricing amounted to a “hold-up,” because “access to those patents which are standard-essential is a precondition for any company to sell interoperable products in the market.”

The European Commission decided that because Apple had offered to pay a licensing fee on the patents for 3G owned by Samsung, the Korean company’s demands for a sales ban were unjustified. “Recourse to injunctions harms competition,” it said.