Motorola Dodges EU Patent Fine, But There Are Some Strings Attached

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Motorola (NYSE:MSI) has escaped a fine from the European Union over abusing its power in patent litigation with Apple (NASDAQ:AAPL) in Germany. Motorola was going after Apple in a German court over a standards essential patent (SEP) related to 3G technology on which¬†Motorola believes Apple’s iPhone is infringing. Though Apple agreed to pay Motorola a fee to license the patent, Motorola wanted more stringent conditions attached to the agreement.

Standards essential patents in the technology industry are those patents related to technologies that are deemed standard and necessary to the industry and so must be licensed to other parties on fair, reasonable, and non-discriminatory terms (FRAND). Apple agreed to license the 3G patent from Motorola, but Motorola proceeded to file an injunction and demand that certain iPhone devices be banned on the grounds of patent infringement. The general disagreement between companies as to what constitutes FRAND terms has led to lots of litigation in the technology industry, both in the U.S. and abroad.

European Commission head Joaquin Almunia released a statement, saying that, “Motorola had committed to license the SEP to third parties on FRAND terms. And Apple had agreed with Motorola that in case of dispute, the German courts would set the applicable FRAND rate and Apple would pay royalties accordingly. However, Motorola persisted in using the threat of an injunction to force Apple into a settlement agreement with very restrictive conditions.”

“In such a case, the recourse to an injunction cannot be objectively justified and may become an anti-competitive tool in licensing negotiations. Such a practice could lead SEP holders to extract high royalty rates or other restrictive conditions. This could have a negative impact on consumer choice, prices and innovation,” Almunia went on to say.

The European Commission felt that Motorola overstepped its bounds in refusing to license Apple the patents on the FRAND terms decided by a German court. Motorola instead pursued injunctions against Apple that forced the company to give up the right to sue Motorola over its patents in the future.

Almunia said that the Commission won’t fine Motorola because this is the first time the organization has ruled on the matter and national courts in Europe have not all agreed on how SEP litigation should be handled.

“These principles strike the right balance between the interests of patent holders, who should be fairly remunerated for the use of their intellectual property, and those of the implementers of standards, who should get access to the standardised technology without being ‘held up’ through abuses of market power. The prohibition decision against Motorola should set a precedent and provide guidance to the industry,” Almunia said.

Motorola and Apple are also involved in litigation over FRAND patents in the U.S. Last month, Apple filed a complaint in court alleging that it paid too much to license FRAND patents from Motorola related to 3G technology. The two companies’ litigation over the patents dates back to 2010.

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