Apple v. Samsung — no injunctions for Samsung either (at least in Europe)

Samsung announced today that it will no longer be seeking injunctions against Apple’s iphones in European courts based on claims that those phones infringed Samsung’s “standards essential patents” covering certain 3G cellular networking technologies. Samsung says that it’s doing so for the good of consumers. Um, maybe. A more likely explanation is that it fears possible action by EU antitrust officials, who are increasingly wary of injunctions in patent cases involving patents that are “essential” to industry standards.

This is an important development in the Apple/Samsung fracas, because it deprives Samsung of a bit of leverage that it thought it had. Stay tuned.

The Federal Trade Commission investigates Google’s use of patents

Federal Trade Commission headquarters, DC

News in today’s NY Times that the Federal Trade Commission has opened an antitrust investigation into Google’s use of “standards essential patents” — i.e., patents that are necessary to the basic operation of smartphones and tablet computers. Google has represented to standards setting organizations (private industry groups that define and adopt rules meant to allow devices from different manufacturers to work together on a common standard) that if standards were adopted that would require smartphone and tablet makers to use its patents, that it would license them on “fair, reasonable, and non-discriminatory” terms. Many standard setting organizations require this sort of “FRAND” licensing commitment as a condition of participation in the standard setting process. In any event, the article suggests that the FTC is investigating to see whether Google is living up to these commitments, or whether they are using their standards essential patents to disadvantage rivals.

This is an important issue. Abuse of standards essential patents can harm competition. And the FTC is well aware of that fact. In Senate testimony in July, Edith Ramirez, an F.T.C. commissioner, speaking of the potential abuse of standard-essential patents, said, “Holdup and the threat of holdup can deter innovation by increasing costs and uncertainty for other industry participants, including other patent holders.”

Stay tuned.

Freakonomics: Why do drug patent owners sometimes pay those who knock off their pills?

Photo by e-magic.

We have a new post up on the Freakonomics blog, this time asking why the owners of patents on blockbuster drugs sometimes pay millions of dollars to those who knock off their pills.  The answer? To prevent you from getting cheaper medicine. Which, as we explain, is something that the antitrust law should step in to prevent.

DirecTV and Viacom win; consumers lose

It appears that DirecTV and Viacom have settled their protracted dispute over what DirecTV will pay to carry Viacom programming, including channels like Comedy Central, MTV, Nickelodeon, Spike, and BET.  The battle had culminated in a nine-day blackout of Viacom channels for DirecTV subscribers.  With the settlement, service has now been restored. But the deal comes at a price, and much of it will be paid by people who don’t even subscribe to DirecTV.

For Viacom, the problem was money: specifically, their insatiable desire for more of it.  Video programmers like Viacom have been demanding — and getting — sharply increased fees for their programming. Over the past few years, the cable companies have paid nearly 8% more per year for programming, and they’ve passed much of that along to their subscribers in the form of higher cable bills. As a result, over the past decade, the average cable bill has risen by about 6% a year — more than twice the rate of inflation. And consumers are starting to rebel: a recent report by an industry consulting firm found that 2.65 million Americans canceled TV subscriptions between 2008-2011 in favor of lower-cost internet subscription services or video platforms.

This burgeoning trend of “cord-cutting” is what the cable and satellite companies fear most.  And so they are doing everything in their power to try to stop it.  The DirecTV/Viacom settlement is an example.  Under the agreement, popular Viacom shows will become more widely available to DirecTV subscribers via a subscription-only online site.  So DirecTV customers will be able to access their favorite programs online. But the rest of us may be out of luck. At least if we can believe Derek Chang, the executive vice president for DirecTV who led DirecTV’s negotiations with Viacom.  Immediately after concluding the deal with Viacom, Mr. Chang gave a quote that made clear what he thought DirecTV had gained: “My expectation,” Mr. Chang said, “is that [Viacom] will not increase the amount of free programming they have online.”

So don’t look for Viacom to be expanding its offerings on Hulu and Netflix.  Or on its Comedy Central website. And given the logic of their deal with DirecTV, I wouldn’t be surprised if the amount of Viacom programming available online actually shrinks. Pay close attention, Stewart and Colbert fans.

So, is there a problem here?  Definitely.  As cable companies collude with programmers to drive up consumers’ monthly cable bills, while restricting the availability of programming via lower-cost online services like Hulu and Netflix, we all know what the response is likely to be — more piracy. We don’t condone that.  But in a world where piracy is the inevitable response to greedy, restrictive strategies like we see at play in the DirecTV/Viacom deal, perhaps we should be a bit more skeptical when the cable companies and programmers turn up in Congress complaining.

Google about to settle with EU antitrust officials?

The EU is investigating whether Google’s practice of promoting its own services via its search results is an abuse of dominance in violation of EU antitrust laws. There are now reports that Google is making a bid to avoid antitrust charges by changing the way it displays search results.  If true, this could be a major shift in Google’s business model. Stay tuned.