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Europe Weary of Apple, Samsung Patent War

Europe Weary of Apple, Samsung Patent War

The question European antitrust officials are now pondering is whether Apple and Samsung are genuinely concerned about protecting their intellectual property rights or are using the patent system as a means of gaining competitive advantages in the marketplace. "Patent laws do get abused both in the U.S. and Europe," said CEI analyst Ryan Radia, "and consumers wind up the losers."

By Erika Morphy
11/28/11 5:00 AM PT

EU antitrust chief Joaquin Almunia has done what few in the global patent community are willing to do: He has acknowledged the elephant in the room by questioning the motives of two multinationals -- Samsung and Apple -- as they bloody each other with patent lawsuits.

"Standardization and IP rights are two instruments that, in this new IT sector, can be used as a tool to abuse," Almunia told reporters.

For this reason, the European Commission has requested information from Samsung and Apple concerning the enforcement of "standards-essential patents," according to the Commission. The point is to determine whether these patent infringement claims have breached EU antitrust laws.

Samsung and Apple have been battling each other in courts across the continent for close to a year, trading patent infringement claims on their respective mobile and tablet devices. Such legal moves are commonplace in the United States. However, the EC's line of inquiry suggests this strategy may be getting old in Europe, a shift other firms may be well advised to note.

A Competitive Leg Up

The EC's inquiry is understandable, Ryan Radia, an analyst with the Competitive Enterprise Institute, told the E-Commerce Times.

"Yes, patent laws do get abused both in the U.S. and Europe, and consumers wind up the losers. The battle between Apple and Samsung is benefiting first and foremost patent attorneys," he said.

"In many respects, their arguments look like companies trying to gain a leg up in the market via the patent system rather than companies trying to stop their innovations from being ripped off by competitors," Radia observed.

It's Personal

Does it make sense to paint an entire industry based on Samsung's and Apple's blood feud?

"This is a somewhat atypical battle, because Apple feels Android was stolen from them and because Samsung was a massive supplier to Apple," Rob Enderle, principal of the Enderle Group, told the E-Commerce Times.

"Apple feels they personally used proprietary information they got as part of their relationship to create these devices. This makes the litigation somewhat personal and likely to go outside the typical bounds of a simple dispute over who owns the given intellectual property," he explained.

'Perfectly Within Their Rights'

Even if the battle between Apple and Samsung defies common corporate sense, both companies have a right to sue each other for perceived infringement, insisted Alexander Poltorak, chairman and CEO of the General Patent Corporation.

"As an exclusionary right, a patent is nothing but a license to sue," he told the E-Commerce Times.

"There is nothing anticompetitive per se in patent litigation," continued Poltorak. "The English Parliament, in its Statute of Monopolies of 1624, made a clear distinction between patents and monopolies, legislating that 'any declaration [against monopolies] shall not extend to any Letter Patents ... .' Moreover, as U.S. Supreme Court Justice Clifford wrote, 'patents are not to be regarded as monopolies ... but as public franchises ... .'

In short, a patent is not regarded as a monopoly because one cannot patent a problem -- say, a disease, Poltorak pointed out. Rather, one can only patent a specific solution to the problem, such as a particular drug that is used to treat the disease. Other solutions may be offered by competitors, such as different drugs to treat the disease.

There is one exception from this general rule: standard-essential patents that can prevent competitors from implementing any standard-compliant solution. However, neither company has asserted standard-essential patents in this case, Poltorak said.

Antitrust authorities can require the owner of standard-essential patents to offer them for licensing on FRAND (Fair, Reasonable and Non-Discriminatory) terms, he noted, but that is not applicable in this case.

Broad Authority

Nevertheless, the EC does have broad authority to use fines to make any behavior it feels inappropriate very expensive, Enderle pointed out.

"Since Apple is refusing to license, they could fine Apple, much like they did Microsoft, to force the company to license at an European Commission-set fair price, thus effectively ending the litigation," he suggested.

"With Steve Jobs gone, it is more likely Apple will avoid the fines and allow the licensing, thus ending the reason for the litigation," Enderle said. "However, then Samsung will be paying both Apple and Microsoft license fees, making Android anything but the free product the licensees expected it to be -- and others would be expected to pay the same fees."


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