updated 10:33 pm EST, Wed February 26, 2014
Ruling claims Apple's non-SEP lawsuits amount to 'first shot fired'
In a judgement that has bewildered international patent and legal analysts, the South Korean Fair Trade Commission (FTC) has rejected Apple's complaint against Samsung that the latter was using FRAND-pledged standards-essential patents (SEPs) for bargaining leverage and as threat of litigation in order to strike unjust licensing deals. The Korean FTC has essentially said that suing or seeking product injunctions over SEPs is perfectly okay -- if your company is based in South Korea.
The ruling, which contradicts growing world court and government rulings that litigation over SEPs should be a tool of absolute last resort after mediated fair-rate negotiations have failed, is completely out of step with other jurisdictions, notes patent case analyst Florian Mueller. He attributes the outcome of the Korean antitrust case to "the fact that regulators in the West failed to make much sharper decisions."
"The KFTC ruling appears to be far more SEP holder-friendly than anything the DOJ, FTC or European Commission ever indicated in this context," Mueller said, "but unlike in August, when I wondered whether South Korea was on the verge of becoming a 'FRAND rogue state,' all I can say now is that basically the Korean competition regulators have taken the worst parts of certain Western rulings, positions and almost-accepted settlement proposals on SEP injunction issues ... and added at least one absurdity of their own to the mix."
He explains that the "unprecedented absurdity" is that, in ruling in favor of Samsung, the Korean FTC determined that the smartphone maker did not have an "essential facility" monopoly on SEPs, since more than 50 companies hold other such standards-essential patents. However, the agency appears to have not understood (or willingly ignored) that without the cooperation of all SEP holders involved with a product, it may never come to market -- precisely the reason why the Fair, Reasonable And Non-Discriminatory (FRAND) standards came about. Samsung has frequently pledged to license its SEPs using FRAND guidelines, but in practice does not adhere to the concept.
Much of the legal dispute between Apple and Samsung would evaporate overnight if Samsung would stop attempting to sue Apple over alleged infringements of SEPs, which is most cases is all the company has to throw back at Apple, which does not litigate over SEPs but only over non-SEP design and utility patents (a significant factor in its nearly-unbroken string of wins against Samsung). In the two telecom giants' latest case, Samsung has already been found guilty of copying a non-SEP Apple patent, and had one of its own claims on an SEP against Apple thrown out of court as invalid.
The Korean agency had been "investigating" Apple's claims against Samsung for almost two years, and has now found that not only is Samsung's SEP legal strategy okay, but that the company has been "above board" in its dealings and is "not liable" for any violation of Korean antitrust law. Apple has repeatedly said it would be a "willing licensee" to any of Samsung's standards-essential patents if the Korean company would license them on FRAND terms, but like Google-owned Motorola, Samsung insists on a far higher, non-FRAND license rate and tries to tie SEP licensing to giving Samsung free reign over non-SEP patents in exchange, a violation of FRAND and SEP guidelines.
Mueller was even more perplexed by the Korean FTC's finding that Apple, "by first filing a patent infringement lawsuit," (over a non-SEP copying charge, which it later won) was responsible for "the overall 'negotiation atmosphere' being determined by the characteristics of patent infringement litigation," the agency said. Regulatory agencies often conflate non-SEP and SEP license disputes, with Mueller noting that the ITC is prone to this fallacy as well, with only one commissioner (Dean Pinkert) taking a consistent stand to keep such cases separate. "Non-SE patents can be worked around [in a product design]," Mueller said. "SEPs cannot."
The action of the agency may be some kind of "revenge" for the loss Samsung suffered at the hands of the Obama administration, when the latter overturned an ITC ban on iPhones based on the very conflation of SEP and non-SEP issues Mueller noted. While Samsung is entitled to royalties for its SEPs, it refuses to negotiate with rivals in good faith -- and Mueller quotes a Korean law professor as saying that the company's habit of seeking sales injunctions (bans) over SEP-license disputed products is "problematic."