Motorola Mobility abuses its dominant position in the E.U. by seeking and enforcing an injunction against Apple in Germany on the basis of its mobile phone standard-essential patents (SEPs), the European Commission said in a preliminary antitrust review of the case on Monday.
The Commission opened the investigation into Motorola Mobility in April 2012, about a month before Google's acquisition of the company closed, to scrutinise whether it abuses its patents that are deemed essential to an industry standard to get a sales ban on products of the infringing party. Such conduct may be abusive if the potential licensee is willing to enter into a licence on fair, reasonable and non-discriminatory (FRAND) terms, the Commission said in a news release.
Motorola Mobility has asserted a standard-essential patent against Apple in Germany that relates to the European Telecommunications Standardisation Institute's (ETSI) GPRS standard, a key industry standard for mobile and wireless communications, the Commission said.
The Google-owned company committed to license relevant patents on FRAND terms when the standard was adopted in Europe, but still it sought an injunction against Apple in Germany over a GPRS patent, the Commission said. Moreover, after the injunction was granted, Motorola went on to enforce it, even when Apple had declared that it would be willing to be bound by a determination of the FRAND royalties by the German court, the Commission said.
This practice harms competition, the Commission concluded in its Statement of Objections, which is a formal step in an antitrust investigation in which parties are informed about the Commission's preliminary findings.
"The Commission is concerned that the threat of injunctions can distort licensing negotiations and lead to licensing terms that the licensee of the SEP would not have accepted absent this threat. This would lead to less consumer choice," it said.
Today's statement does not question the availability of injunctive relief for the owners of standard-essential patents in other circumstances, for instance in the case of unwilling licensees, the Commission said.
"We agree with the European Commission that injunctions should only be sought against unwilling licensees and, in this case, Motorola followed the procedure established in the German Supreme Court's Orange Book ruling. Apple had to make six offers before the court recognized them as a willing licensee," Motorola spokeswoman Katie Dove said in an email.
Apple spokesman Alan Hely declined to comment.
The parties involved in the investigation can now respond in writing and request an oral hearing. The Commission can then make a final decision, and if there is sufficient evidence of an infringement, it can impose a fine of up to 10 percent of a company's annual worldwide turnover and prohibit the conduct.
The European Commission's spokesman on Monday said that "most of the behavior" in question took place before the company was acquired by Google. Speaking at the announcement of the next stage in the ongoing antitrust investigation, Jonathan Todd said that although it was a bit early to be talking about who would pay a fine, if wrongdoing is found it would be Motorola Mobility that would be liable.
In the first quarter of the year, Motorola Mobile revenue was $1.02 billion, or 7 percent of Google total, consolidated revenue, according to Google's latest earnings report. Motorola is being run as a separate company.
(Additional reporting by Jennifer Baker in Brussels.)