Orrick, Herrington & Sutcliffe

1. Standard setting and abuse of dominant position (Article 82 EC Treaty) Douglas Lahnborg Orrick, Herrington & Sutcliffe

2. Standard setting • No specific legislation • Articles 81 and 82 EC Treaty apply generally • Article 81 prohibits anti-competitive agreements • Article 82 prohibits abuse of a dominant position

3. EU attitude to standard setting • Competition Commissioner Neelie Kroes: • “only standardise where there are demonstrable benefits” • only include “proprietary technology when there are no clear and demonstrable benefits over non-proprietary alternatives” • “standardisation agreements should be based on the merits of the technologies involved” • Competition authorities “may need to intervene” when an owner of proprietary technology, which has been included in a standard, exploits its power (OpenForum Europe, 10 June 2008)

4. Conduct currently under investigation in Brussels • Several companies are currently being investigated in relation to standard setting: • FRAND licensing • Disclosure of patents • Conduct in standard setting organisations • Licensing of interoperability information

5. Dominance (Article 82) • Examples in the technology field: • MS: • Work group server operating systems (file, print, share) • “Streaming” Media Players • Qualcomm: Licensing of CDMA and WCDMA patents • Rambus: Licensing of DRAM patents • Google: Search advertising • IBM: • Software modelling tools • Mainframe → Narrow market definitions

6. Rambus - “Patent ambush” • DRAM chips standardised by the U.S. SSO JEDEC • Rambus was a member of JEDEC, did not disclose patent; • but note: Rambus never voted on standard • EC Commission (Aug 2007): • Rambus intentionally deceptive by not disclosing the existence of patents which it later claimed were included in the standard • Rambus subsequently claimed “unreasonable royalties” • Without patent abuse Rambus’ licence fee would have been lower • Remedy: Reasonable and non-discriminatory royalty • Case on-going

7. Qualcomm - FRAND • Qualcomm owns patents included in the CDMA (2G) and WCDMA (3G) standards • Art 82 complaints lodged by Ericsson, Nokia, TI, Broadcom and others alleging abuse of dominance by Qualcomm for charging excessive license fees: • “essential patent holders should not be able to exploit the extra power they have gained as a result of having technology based on their patent incorporated in the standard” • Qualcomm should license on Fair Reasonable and Non-Discriminatory terms

8. Qualcomm - FRAND • Commission opens formal investigation (Oct 2007) • Nokia/Qualcomm settlement (July 2008) • Others to follow?

9. Microsoft - OOXML • ISO: Open Document Format (ODF) • MS new document format for Office: Open Office XML • OOXML first rejected but later approved • Creating choice or abuse of dominance? • Case on-going

10. Forced Licensing of IP-rights • Dominant companies required to license IP-right (e.g. interoperability information) if: • Refusal to license relates to a product indispensable to the exercise of an activity on a neighbouring market • Refusal excludes effective competition • Refusal prevents appearance of new product or technical development • No objective justification Case T-201/04 Microsoft (2007)

11. Conclusion • Extensive obligations on dominant technical companies in standards setting context • Companies use Article 82 as a “sword” to achieve strategic advantages • European Commission forum of choice for US and European companies • National company authorities keen but limited resources