I got asked on Twitter where to find the full text of European Commission Vice President Joaquín Almunia's statement, from I quoted in my previous post. While the Commission's press release is on its website, that statement was distributed to journalists but not published. So I thought I'd just post it here as a service.
Before I do, I would also like to strongly recommend reading the statement that the U.S. Department of Justice issued yesterday. Just like I did, the DoJ notes that Google's position on the use of standard-essential patents, particularly but not only in connection with injunctions, is not as unambiguous as Apple's and Microsoft's statements were. There's clearly a lot of concern over Google's stance in Washington DC as well as in Brussels.
Here's the full text of Vice President Almunia's statement:
The Commission adopted today a clearance decision in the case Google/Motorola. We concluded that the acquisition would not as such raise competition concerns. Our assessment is largely based on an analysis of whether the transaction would modify market conditions with respect to operating systems on the one hand, and patents on the other hand. Our conclusion is that there is no substantial modification as a result of the acquisition itself.
One of the issues examined by the Commission is the likely impact of the transaction on the licensing of patents. Through the acquisition of Motorola's mobile handset business, Google would acquire a large number of Motorola's patents necessary for the manufacturing of smartphones and tablets. Many of Motorola's patents which will be transferred to Google are so called "standard essential patents" relating to mobile telephony standards.
Standard essential patents and competition
Before a standard is set different technologies can compete. But once a standard has been agreed and widely adopted, the market is often de facto locked into that standard.
Certain underlying patents are necessary to produce products that comply with the standard. These "standard essential patents" are essential for the proper functioning of a particular device and are therefore essential for a product to be marketable.
"Standard essential patents" give their holders market power. This may create competition concerns because it enables them to "hold up" competitors or even an entire industry to the detriment of consumers and innovation.
To alleviate these competition concerns, standard setting organisations require that the holder of SEPs licence their SEPs to any interested third parties on fair reasonable and non discriminatory ("FRAND") terms. The Commission's Horizontal Guidelines adopted last year make clear that such FRAND commitments are crucial to ensure access to the standardised technology for all interested parties.
With this in mind our assessment of the Google/Motorola transaction focused in particular on the standard essential patents which will be acquired by Google.
It is important to emphasise that in assessing the merger we can only take into account the changes in market conditions which result directly from the merger. In other words: the changes which are merger specific. Motorola has already enforced standard essential patents prior to the transaction. Its maximum per-unit royalty rates are consistent and well known throughout the industry and this transaction will not change them. Our assessment is therefore that the market situation is not significantly changed by the transaction.
Today's decision does not mean that the merger clearance blesses all actions by Motorola in the past or all future action by Google with regard to the use of these standard essential patents. Our decision today is without prejudice to the legality under EU antitrust law of Motorola's past and Google's future actions. However, the question whether Motorola's or Google's conduct is compliant with EU antitrust law cannot be dealt with in the context of the merger procedure.
I have already identified issues relating to the enforcement of standard essential patents against competitors as a potential competition concern. We are aware of the increasingly strategic use of patents in the sector and are vigilant. The Commission has recently opened an antitrust investigation against Samsung with regard to its use of standard essential patents and in particular its recourse to injunctions against competitors in national courts. That review is on-going and is being dealt with as a priority.
In summary, the Commission has cleared the Google/Motorola transaction largely on the basis that the transfer of Motorola's patents to Google does not result in competition problems specifically related to the merger.
But I can assure you that the Commission will take further action if warranted to ensure that the use of standard essential patents by all players in the sector is fully compliant with EU competition law and with the FRAND commitments given to standard setting organisations. This is important so that the standard-setting process works to promote innovation for the benefit of industry and consumers.
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