There has been a lot of deliberate obfuscation around standard-essential patents (SEPs) lately, mostly from people trying to defend or minimize bad behavior from Samsung and Google/Motorola. However, there is much less gray area than people realize. Samsung and Google/Motorola simply tried to abuse their SEPs, and broke antitrust laws and their commitments to standard-setting bodies in the process. It is actually quite black and white once you take the time to understand the issues.
Standards are usually established for interoperability. Recently, Blu-Ray and HD DVD slugged it out in the market, with Blu-Ray finally coming out on top. To avoid those kinds of bruising battles, especially when they might slow down the adoption of a technology, sometimes an industry will decide to set a standard and pick a winner itself ahead of time. This occurred in the video industry with the MPEG-4 standard and in the telecommunications industry with the 3G standard. When a standard is set, companies voluntarily contribute their technologies and patents to the standard.
Picking a winner this way is actually illegal since it involves the major players in an industry sitting down together and colluding. While any one player may only hold a slice of the market, collectively they hold a monopoly. Governments around the world have made an exception for standard-setting in their antitrust laws as long as the companies participating in the process agree to license any SEPs (patents required to implement the standard) on FRAND (fair, reasonable, and non-discriminatory) terms. This is to protect any small or new players who wish to implement the standard from getting locked out. (Some standard-setting bodies, such as W3C, go even further and require companies to turn over their patents so that implementing a standard doesn't require any licensing at all.) Again, participating in the standard-setting process and contributing your technology to a standard are all voluntary.
By agreeing to license your SEPs on FRAND terms, you are agreeing to license those patents to all comers and with no exceptions. Because of this, it is completely acceptable for Microsoft to release a product that implements a standard before beginning negotiations with Samsung for use of Samsung's SEPs. Microsoft will be paying Samsung; it's just a matter of when. And this payment will cover the period of time when Microsoft was using Samsung's technology without a license. It also means that Samsung should not be able to seek an injunction against Microsoft, blocking Microsoft from selling its product, before a license has been obtained. Injunctions are only allowed if Samsung cannot be made whole with money from Microsoft. But with SEPs, you can always be made whole with money. Samsung should only be able to obtain an injunction if FRAND terms are established (by courts if necessary), and then Microsoft still refuses to pay. In the current disputes, Apple and Microsoft have both signaled their willingness to pay by posting bonds with the courts.
Now that governments in the U.S., Europe, Japan, and Australia have all come down and decided that injunctions are inappropriate in SEP disputes, and a U.S. court has found that Google/Motorola acted in bad faith by never even attempting to offer FRAND terms to Microsoft before seeking an injunction (to recap: Google/Motorola asked for $4,000 million, Microsoft offered $1.2 million, and the court settled on $1.8 million per year), Android fans are now pivoting and trying to say that Samsung's and Google/Motorola's bad behavior is somehow justified by Apple's and Microsoft's bad behavior.
To demonstrate how wrong-headed this is, I'm going to use a simple analogy. Imagine that a school decides to standardize on a certain type of notebook. To attend this school, a student is required to purchase and use these notebooks, which happen to be manufactured and sold by one of the parents (Mr. Google) at the school. No other notebooks are acceptable. In establishing the standard and awarding the notebook contract, the school stipulates that Mr. Google must sell the notebook to students on FRAND terms.
Another parent at the school, Mrs. Apple, makes and sells hand-crafted pencil cases. These pencil cases are highly coveted, but Mrs. Apple refuses to sell one to Mr. Google. In turn, Mr. Google says that Mrs. Apple can either buy notebooks from him for $4,000 or in exchange for one of her pencil cases. The notebooks are worth approximately $2. Tying the licensing of SEPs to the cross-licensing of non-SEPs is not acceptable, even if Mrs. Apple is being a jerk.
Another parent at the school, Mrs. Microsoft, is suing Mr. Google because she slipped and fell on his unshoveled sidewalk following a snowstorm. Mr. Google says that Mrs. Microsoft will have to pay $4,000 for a notebook unless she agrees to drop the lawsuit first. Using SEPs to defend against lawsuits involving non-SEPs is not acceptable, even if Mrs. Microsoft is being a jerk.
When the court found that Google/Motorola was only entitled to $1.8 million per year instead of the $4,000 million it was asking for, many people said that companies would stop participating on standard-setting committees. This, again, shows a complete lack of understanding of the issues involved. One thing that U.S. courts are still grappling with is the basis for establishing licensing fees for SEPs. The opinion favored by Apple and Microsoft (both own considerable numbers of SEPs themselves and have pledged not to seek injunctions) is that SEPs should be valued based on their pre-standard value. Samsung and Google/Motorola both argue that SEPs should be valued based on their hold up value, meaning that SEPs should be worth more because companies have to use them to implement a standard. Some of the SEPs that Google/Motorola was using against Microsoft involved interlaced video. Interlaced videos on the internet are now very rare and I'm sure that Microsoft would have happily left support for interlaced video out of their products rather than pay Google/Microsoft $4 billion per year, but Microsoft had no choice because handling interlaced video is in the MPEG-4 standard.
Returning to our school notebook analogy, imagine that Mr. Google's notebooks sold for $2 before the school standardized on them. Shouldn't $2 be the starting point for establishing FRAND terms? Of course, conditions change over time and Mr. Google may have to adjust the price if paper prices started going up, but $2 should clearly be the starting point. Do you really think that Mr. Google would have problem selling his notebooks for $2 each to 500 students when he used to sell his notebooks for $2 each to 80 students? Should he really have the option to raise the price of his notebook to $5 once students are required to buy them? Those are the arguments that Samsung and Google/Motorola, and their fans, are making.
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