Friday, December 21, 2012

(Ab)use of patents

There's a charmingly predictable fracas brewing over at Slashdot regarding today's announcement that the EU plans to act regarding Samsung's abuse of standards-essential patents in their dispute with Apple.

As of right now the highest-promoted comment is "And yet...they do nothing to Apple and their rounded corners?"

That's exactly right.  Setting aside the gross oversimplification of that comment, the galaxy of difference between design and utility patents, and the merits of any such patents, the actionable item here isn't present in any of Apple's asserted patents.By contributing your patent to a standard and thus earning the status of a standards-essential patent (SEP), you give up certain powers that you would otherwise have.  For fans of the Laffer curve, you're engaging in an act that vastly broadens the base of your royalty audience (by putting it into a standard) but also greatly constraining your freedom to set royalty rates.  This is also the reason why Apple can set royalty rates at whatever it wants for its proprietary patents while Samsung can't do the same for its SEPs.

Likewise, you can't be as aggressive in discussions, whatever the rates. You don't have the power to walk away unilaterally.  If someone says they're already licensed through a component supplier, you don't get to deny that without supporting authority.  You don't get to say that an offer is unfairly low and end negotiations to try to get a competing product banned.  The general intent is that you don't get to use SEPs as a weapon.  Standards bodies and governments take an unkind view to patent ambush.  That's the price you pay, and that's why Samsung is in trouble here.  

If you have set a complicated pricing structure for those patents involving monetary and non-monetary consideration being exchanged, then you also must tread lightly when negotiating offers.

On the other hand, Apple is legally free to be as unreasonable as it wants with non-SEP utility patents and design patents.  Neither Apple nor Samsung are strangers to adverse actions in the EU, so the nerd rage should just be put in check.  Apple's involvement here isn't even a factor in the EU's preliminary findings--the only important facts are around Samsung's conduct.

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