Motorola has likened its enforcement of standards essential patents as a lethal "bullet" it can use to "kill" smartphone competitors, but it's becoming clear that such a strategy won't be tolerated in the European Union. A German high court preliminarily ruled in Apple's favor on an appeal to an earlier ban on iPhone and iPad sales in Germany due to alleged infringement of a Motorola patent related to 3G wireless networking standards. According to the court's ruling, Motorola's attempts to ban competing products using 3G standards would constitute a violation of antitrust law.

Motorola is among dozens of companies involved in setting the standards for 3G wireless networking used in today's mobile devices. Working with the European Telecommunications Standards Institute (ETSI), Motorola and others agreed to include certain patented technologies as part of the 3G standards in exchange for an agreement to license those patents to anyone using the standard on fair, reasonable, and non-discriminatory (FRAND) terms. In other words, Motorola and others are compelled to offer a license to any patents deemed essential to the 3G standard for FRAND terms.

Unfortunately, what exactly constitutes FRAND terms was never spelled out by ETSI. Motorola demanded a 2.25 percent royalty on the full retail price of all iPhones and 3G-equipped iPads. Apple rejected the offer as unfair; Motorola then used the 3G standards essential patents as part of its lawsuits against Apple. Naturally Apple told the court that Motorola was seeking an unfair licensing fee, and called its attempts to assert injunctions against Apple a violation of anti-competition statutes.

Apple's win in Germany

Apple lost one of several German lawsuits brought by Motorola concerning 3G-related patents due to unique constraints on FRAND defenses under German legal precedent. Apple's original proposed licensing agreement didn't cover what would happen if Apple tried to have Motorola's patent ruled invalid. So Apple ended up on the wrong side of those constraints. The decision resulted in a temporary halt on Apple's online sales in Germany, though Apple was able to secure a temporary reprieve one day later based on its appeal of the original ruling.

Monday's ruling by the Karlsruhe Higher Regional Court suspends the injunction until the full appeal process is completed. That may take as long as a year. However, it suggests that a ruling based on summary analysis of the briefs filed by both Apple and Motorola would likely come down in Apple's favor.

Apple submitted an amended licensing proposal that "now does contain a clause according to which Motorola can rescind the agreement in the event of a challenge to the validity of the relevant patents." Since Apple's proposal now accounts for this scenario, "the assumption would have to be that Motorola would breach its obligations under antitrust law if it continued to demand that Apple cease and desist from the sale of the iPhone and the iPad," the court said in a statement.

Un-FRAND-ly strategy is a losing one

Rival Samsung also attempted to leverage its own FRAND-encumbered 3G-related patents against Apple in an effort to take a "strong stance against Apple during the lingering legal fights." That strategy backfired in the courts. Judges in the Netherlands, France, Italy, and Germany rejected requests for injunctions based on such patents.

The strategy also put Samsung on the business end of a formal antitrust investigation by the European Commission launched in January. According to the Commission, the investigation will attempt to "to "assess whether Samsung Electronics has abusively, and in contravention of a commitment it gave to the ETSI, used certain of its standard essential patent rights to distort competition in European mobile device markets, in breach of EU antitrust rules."

Motorola could likewise find itself in hot water with the European Commission if it continues to try and assert 3G-related patents against its competitors in violation of its FRAND agreements. Both Microsoft and Apple have complained to the Commission about the company's tactics, suggesting Motorola is using its standards related patents to stifle competitors.

Furthermore, Apple has filed a lawsuit against Motorola in the US over its use of 3G related patents. In that lawsuit, it claims Motorola's actions in Germany violated Motorola's patent licensing agreements with Qualcomm (which makes the 3G chips used in current iPhones and iPads). As a customer of Qualcomm, Apple is protected by the licensing agreement and therefore should not be subject to lawsuits by Motorola.

Apple appealed directly to the ETSI to create a common standard for determining FRAND royalties. "It is apparent that our industry suffers from a lack of consistence adherence to FRAND principles in the cellular standards arena," Apple chief IP counsel Bruce Watrous wrote in a letter to he ETSI last November. In addition to setting a standard royalty base and formula for calculating a fair royalty percentage, Apple argued companies should be barred from seeking injunctions based on FRAND-encumbered patents.

Microsoft and Cisco both sent letters to the ETSI agreeing with Apple's principles. Microsoft even made a public statement it would not seek injunctions related to any patents made part of any industry standard. Google, for its part, merely committed to maintaining the same legal strategy Motorola has employed with respect to its standards-related patents after it completes its proposed acquisition of Motorola Mobility. With increased scrutiny promised by the Department of Justice and the European Commission on the condition of granting approval of the merger, however, Google may want to rethink that strategy. So far it appears to be a losing one.