NEW YORK (TheStreet) -- Behind the Obama Administration's decision to give Apple (AAPL) relief in its patent battle with Samsung, reported by our Chris Ciaccia, lies the use and abuse of what are called "Standards-Essential Patents."
And behind that is Google (GOOG).
A "Standards-Essential Patent" or SEP is just what it sounds like. It's a patent that is basic to a technology. How cell phones make calls, how they move data around -- all these things are standardized. Some of those standards include technologies on which patents are granted.
When patents are made part of a standard, the patent-holder is supposed to be willing to license that patent to whoever wants it, under what are called "Fair, Reasonable and Non Discrimatory" terms, FRAND for short.Trouble is, a lot of companies with SEPs have lately been filing suit over those patents in violation of FRAND principles. Which brings us to Google. When Google bought Motorola two years ago, it had a relatively small arsenal of patents. Motorola brought with it a host of SEP patents, licensed under FRAND, which Google has since been using in court in an effort to defend itself against suits over other patents. Last year, Judge Richard Posner, who is a name to reckon with, heard a case streaming from all this, with Apple and Motorola suing one another. He dismissed both cases "with prejudice," which means they couldn't be re-filed. While much of the chatter after that decision involved Posner's refusal to hold Motorola, and therefore Google, liable for using four patents that described key features of the iPhone, more important was what he said about FRAND:
How could it [Motorola] be permitted to enjoin Apple from using an invention that it contends Apple must use if it wants to make a cell phone with UMTS telecommunications capability -- without which it would not be a cell phone.Not everyone agrees with Posner, of course. The International Trade Commission, which is a U.S. agency, had agreed with Samsung to stop Apple's imports of various, older iPhones and iPads over patents which are subject to FRAND. That's what U.S. Trade Representative Michael Froman has now stopped, essentially agreeing with Posner. You can fight in court over money when it comes to SEP patents, but in the end, they must be subject to FRAND, and you can't stop trade over standards.
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