EU Competition Official Addresses Standard-Essential Patent Abuse in Bar Association Speech

This posting was written by Cheryl Beise, contributor to IP Law Daily.

Speaking today at the International Bar Association Antitrust Conference in Madrid, Joaquín Almunia, European Commission Vice President responsible for Competition Policy, emphasized the need for reform of the standard-setting process. In his address titled “Higher Duty for Competition Enforcers,”  Alumnia added his voice to the growing international concern over the abuse of standard-essential patents to block competition.

Alumnia acknowledged the importance of standard-setting organizations in integrating markets, making products and services available, and ensuring the technical interoperability of devices, but said more needs to be done to ensure that the standard-setting process is “competitive, open, and transparent.”

Standards should be set and adopted in an open and transparent manner to prevent established market leaders from sidelining innovative technologies, Alumnia said. “I think that we need to have a constructive conversation with stakeholders and with regulators on the best way to achieve this goal.”

Standard-essential patent owners also must provide access to their technologies on fair, reasonable, and nondiscriminatory (FRAND) terms. The problem of standard-essential “patent ambush” requires clarification in the implications of FRAND and how FRAND negotiations should be conducted, according to Alumnia.

In particular, Alumnia expressed concern about the use of court injunctions to circumvent the effective access inherent to FRAND patents. “We need to find good answers soon, because consumers cannot be held hostage to litigation. Both competition authorities and the courts should intervene to ensure that standard-essential patents are not used to block competition,” Alumnia said.

Industry also has a role to play in guaranteeing the proper functioning of the standardization system, Alumnia added. “I would therefore strongly encourage industry players to come together in the relevant standard-setting organisations and elaborate clear rules on the basis of these guiding principles to prevent the misuse of standard-essential patents.”

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Trade Regulation Tidbits

This posting was written by Jeffrey May and John W. Arden.

News, updates, and observations:

 On November 27, the European Commission (EC) announced the appointment of Joaquin Alumnia as the new Commissioner-designate for Competition, for a term running through October 31, 2014. Almunia, 61, previously served as the EC Commissioner for Economic and Monetary Affairs. A career politician, he was the Socialist Party candidate for prime minister of Spain in 2000. He would replace Neelie Kroes, who served as Commissioner for Competition since November 2004 and has been appointed as Commissioner-designate of the EC Digital Agenda. The appointments must be approved by the European Parliament, which is expected to hold individual hearings on the Commissioners-designate January 11-19 and to vote on the new Commission as a whole on January 26, 2010. Further details appear here on the European Union's Europa website.

 A group of 59 senators from both sides of the aisle have sent a letter to the Acting Head of the Delegation of the European Commission (EC) to the United States, requesting that the EC complete expeditiously its investigation of Oracle Corporation's proposed acquisition of Sun Microsystems Inc. Oracle announced on November 9 that the EC had issued a statement of objections (SO) concerning the proposed merger, despite U.S. approval of the transaction. The U.S. Department of Justice approved the plan in August, concluding the merger would not be anticompetitive. In a November 24 statement, Senator John Kerry (D, Massachusetts), who signed the letter, said: “The EC is within its sovereign rights to set the rules for operation in its market, but with our Department of Justice having made a compelling case that the merger does not pose a threat to competition, it is fair to ask the EC for the basis on which a delay on decision making is warranted and to make a decision one way or the other.” Orrin Hatch (R, Utah), another signatory, said “I have become increasingly concerned about the growing body of evidence that foreign regulatory agencies are unfairly using their review processes to impede the business of American corporations,” said Senator Orrin Hatch (Utah), another signatory.

 An increase in false advertising litigation and other dispute resolution might be the product of the “dismal economy,” according to a November 22 New York Times article. The number of complaints filed with the National Advertising Division of the Council of Better Business Bureaus is on track to set a record this year. The 82 formal complaints so far in 2009 follows 84 challenges in 2008, 62 challenges in 2007, and 52 challenges in 2006. Although there are no numbers available regarding the Lanham Act false advertising lawsuits filed this year, lawyers are reporting a corresponding increase. “In this economy, where margins are a bit tighter, a lot of marketing departments have decided to become more aggressive in going after their competitors in hopes that they can either protect their market position or capture an additional market share,” said John E. Villafranco, partner at Kelley, Drye & Warren and contributor to CCH Advertising Law Guide. (“Best Soup Ever? Suits Over Ads Demand Proof.)”

 A number of appointments of FTC senior staff were announced by the agency on November 30. Among them, Cecelia Prewett was named as Director of the Office of Public Affairs; Jessica Rich and Charles Harwood were named as Deputy Directors in the Bureau of Consumer Protection; and Norm Armstrong, Jr. was named Deputy Director in the Bureau of Competition. FTC Chairman Jon Leibowitz also announced a number of personnel changes within the Bureau of Consumer Protection. Joel Winston was named Associate Director of the Division of Financial Practices; Maneesha Mithal was named Associate Director of the Division of Privacy and Identity Protection; and Mark Eichorn was named Assistant Director of the Division of Privacy and Identity Protection. An announcement appears here on the FTC website. A list of senior FTC enforcement personnel appears at CCH Trade Regulation Reporter ¶9557.