Tag: Competitors

Foolish patents or the inventive step of idiocy

It is very frustrating that the rationale of a legal mechanism such as patents, intended to enable inventors to recover from their creative efforts, the investment of time and of financial resources that they have put into the development  of new and non-obvious inventions, and therefore promote innovation, has been subverted for the monetary compensations it entails when infringement occurs.

Patents confer an exclusive right upon their owner, enabling him to exclude others from making, using, importing, and selling the patented innovation for a limited period of time and making the practice of those acts by third parties dependent of an authorization of the patent owner, i.e., a license.

In this context, patents are intrinsically linked to competition. A particular concern is to not attribute such an exclusive right to creations that do not amount to an invention, i.e., based upon a basic or common function which does not contain any inventive step considering the prior art. Indeed, patenting something that is elementarily required to produce a given functionality would amount to conferring to the right owner a monopoly that would prevent any further competition and, consequently, future innovation.

In the computer software context, considering that most patents are conferred for very restricted elements of a given product, a particular danger is the development of patent thickets, which can be described as a web of interdependent and overlapping IP rights which require new inventions to depend upon licensing from different patent owners. This is so because it is possible to own a patent on an element crucial for the proper functioning of other parts of a software product.

Understandably, patent trolls can find here the greatest of motivations.

It is important to distinguish, in this context, design patents and utility patens, with which most of us are more familiar with.

Utility patents are meant for new, non-obvious and, as their name might have you guessing, useful inventions, having into consideration the specific functionality of the product.

By contrast, design patents address new, non-obvious, non-functional, aesthetic or ornamental aspects of products, provided that the design is not exclusively mandated by the function of the product. In practice, this amounts to demonstrate that alternative designs enabling the same function exist. Therefore, these patents are often associated with the ‘look and feel’ of the product.

As with any other patent, the exclusive right conferred by design-patents aim to prevent competitors from copying another company’s products designs. Hence, these patents assume particular importance when a product presents key features which enable consumers to immediately associate a design with a particular brand.

Design patents have been particularly popular in the field of computer software, namely in regards of the user experience and user-interfaces. From what I have had the chance to learn last trimester in the respective module of the post-grad program I am currently undertaking, I would risk saying that computer software patents do not really need any more complexities added to them. In fact, I am still recovering from the European Patent Office’s case law regarding what constitutes the proper technical character of an invention.

Thus said, a design patent was at stake, among other claims, in the Apple v. Samsung case regarding the ‘slide-to-unlock’ patent, describing a way to unlock a touch screen device. I still fail to comprehend how taking the general existing logic of opening gates, doors or fences and applying it to a computerized device passes the assessment of the inventive step test.

Similarly, just recently, among other allegations, Microsoft claimed that its patent over the design of a slider, which it named “User Interface for a Portion of a Display Screen” and which allows users to zoom in or out of documents, has been infringed by Corel.

Just so you get a complete idea of the claim, you can find below the design at stake:

Microsoft slider.

In its defence, it must be noted that the patent claim does not refer to a generic slide, but to the specific design of the slider and its placement in the bottom right corner of the User Interface.

Disregarding the consideration if the design at stake qualifies as new and non-obvious version of existing designs (i.e., prior art), such claim – if successful – might have serious economic repercussions for Corel as it will entitle Microsoft to all of the profits attributed to that design even if respecting a part of the product and not the entire product.

Nevertheless, the Electronic Frontier Foundation (EFF) has qualified this claim as the most stupid patent of December 2015. And despite any good will one might want to manifest in favour of Microsoft, it is indeed difficult to escape the obviousness of all this nonsense.

Google Break: The new reality show on the EU channel

Let's all break Google, the new EU h(l)obby!

Let’s all break Google, the new EU h(l)obby!

I like the Google search service. I like it because it is the best at what it does. It is a fact that Google’s dominant position in the EU market is not due to the lack of competitors or due to a weaker competition. There are other big companies which provide the same sort of services. Microsoft Bing, Yahoo, Duck Duck Go… But they just don’t do it as well. Google’s dominance comes from a vast majority of EU citizens preferring its services over those provided by its competitors. It hasn’t grown into a verb by mere chance. This is what competition on the merits is all about. Theoretically, there is nothing wrong with dominance legitimately acquired. What about in practice?

In practice, Google has been having full-size antitrust problems regarding how it manages the search results presented. It has been alleged that those are manipulated in order to promote the company’s own services at its competitors’ expense and to be favourable to certain business in which it has interest while being detrimental to others. The decline of once very influential publishing industries under the impact of the internet has most certainly contributed to the problem.

It is a fact that Google crosses the results from its search algorithms with links to its own related web services, such as Youtube, Maps, News, which expands the format of search results beyond a meagre index of links. From the user’s viewpoint, this is a good thing. From its competitors’ perspective, not so much. While Google is obviously dominant, it is yet to be confirmed if it actually abuses its position in the EU market. Nevertheless, legitimate fears that this self-promotion may be harmful to users is increasingly prevailing among the EU regulators, to which the weight of certain points of interests might not have been completely irrelevant.

In this context, the European Parliament just voted a resolution on “consumer rights in the digital single market”, proposed by the European People’s Party (EPP) and the Social and Democrats (S&D), the two biggest political blocs of the European Parliament.

If I would be remotely naïve, I would consider that it is certainly a coincidence that Andreas Schwab, one of the MEP who proposed the resolution, is tied to the law firm which represents some of the German publishers against Google… Or that the fact that the two MEPs who proposed the resolution are national citizens from Germany and Spain, precisely the countries where legislative initiatives have recently been taken in order to make Google pay for links, is not more than a happenstance.

Anyway, in the paragraph 15 of the resolution, despite being outlined the relevance of search engines for the functioning of a competitive digital single market, the European Commission is called upon to apply existing legislation and to consider if ‘unbundling’ the search engines operations of Internet technologies companies with activities in the EU from the rest of their commercial business services may boost competition in the EU market.

In a less politically correct way to put it, companies which promote their own non-search services through their search engine should have those services disaggregated. To what end? Well, what would be achieved through this action is not clear.

It is, however, evocative of previous statements of German politicians who considered that Google’s dominant position should be broken. In the same line, several of the complainants against Google – once again, inadvertently, mostly German publishers – called for this separation.

As far as I am aware, the European Commission has never requested the break-up of any company for anti-competitive practices. In fact, structural remedies as such should only be imposed if there is no equally effective solution, if this latter is more burdensome, or there is a risk for repeated infringement. Nonetheless, in this case, it seems very unlikely that it can be considered that Google’s competitors actually need Google’s infrastructure in order to be able to provide their own services. Anyway, for Google to actually be ‘broken up’, it would have to be demonstrated that it has abused its dominance in the search or advertising markets.

Needless to say, the separation of its search engine operations from its other lines of business would be seriously harmful for Google. As it is well known, Google supplements the results from its search algorithms with advertising which is its primary source of income. In case of separation, its value would certainly drop, its databases would be less complete and its search engine service would end up being less effective. Ironically, the measure would be quite disadvantageous to users of the search service.

Moreover, and more gravely, the resolution considers that “search process and results should be unbiased” and calls on promoting “non-discriminatory online search” in its paragraph 17, where it calls on the Commission to prevent any abuse in the marketing of interlinked services by search engine operators:

when operating search engines for users, the search process and results should be unbiased in order to keep internet searches non-discriminatory, to ensure more competition and choice for users and consumers and to maintain the diversity of sources of information; notes, therefore, that indexation, evaluation, presentation and ranking by search engines must be unbiased and transparent.

It appears that the underlying principle is that, considering that consumers do prefer its search services over those provided by its competitors, consumers shouldn’t have to use a search provider’s bundle service just because that company actually promotes its other own services. One should ask, though, if it is reasonable to demand from a search engine service provider to not reflect on the search results presented any prominence of its own services and to self-marketing?

Furthermore, while one could believe that there are some good intentions behind this ‘search neutrality’ goal, it seems that the intention is for providers to reveal their algorithm and how the results are determined, in order to ensure that the process is fairly conduct and is not unfavourable to its competitors. Nevertheless, the ‘search neutrality’ concept is just ludicrous. Search is inherently biased according to the criteria set. That is how search is supposed to be. It should return the most completed version of the results we ask to find and not results manipulated by the strongest website owner.

Coincidently, it reminds of the comical German ‘ancillary copyright’ which was intended to license revenue from Google for indexing publishers content and of Günther Oettinger own stance on the issue. So one should really worry if this is just not the first step for a European ancillary copyright for press publishers.

To be true, the document does not mention Google or any specific search engine. However, it is very likely to be particularly directed to Google as the company has a European market share of over 90%.

Despite its non-binding nature, the fact that the European Parliament has no initiate legislative powers and certainly has no competence regarding the unbundling of companies, the resolution shows that the European Parliament is getting involved in a matter that falls within the jurisdiction of the Commission, considering the ongoing proceedings aiming to address the competition concerns on the market of internet search engines.

Anyway, it is certainly intended to put pressure on Margrethe Vestager, the new EU Competition Commissioner, considering that Joaquin Almunia, its predecessor, was unable to reach a satisfactory settlement regarding the complaints and the allegations concerning its market power. In this regard, Joaquin Almunia considered that Google could not be broken up under existing competition legislation. Until now, Margrethe Vestager is being cautious regarding the next steps to be taken.

Thus said, I guess this is just the beginning of this saga… But, considering all this, I cannot help being pessimist. I am quite worried regarding what may follow.

Net Neutrality in the EU – A work still in progress

Which neutrality do you prefer?

Which neutrality do you prefer? 1)Copyright by EFF-Graphics under the Creative Commons Attribution 3.0 Unported

Aiming to allow everyone to communicate with anybody globally, the net neutrality principle establishes that all content providers should have equal access on networks. In this context, it enables people to access and impart information and it provides entrepreneurs with the proper platform to invest and develop new businesses models. Therefore, non-discrimination commitments are required from Internet Services Providers regarding users, contents, devices or communications.

But it is easier said than done… In fact, it appears that net neutrality is not a straight forward principle, thus allowing different interpretations. Perhaps the very own nature of the concept can – at least partially – explain the difficulty of the institutional and political debates surrounding the legislative reforms in the telecommunications sector both in the EU and in the USA.

On the EU side, the negotiations regarding the draft regulation laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent (the TSM proposal) have been quite tumultuous.

As you might well remember, it all began with the text proposed by the European Commission, in 2013, which was claimed to fully implement the principle of net neutrality, while it actually stripped it of all real meaning. In fact, it foresaw an almost unlimited right of Internet Services Providers (hereafter ISPs) to manage Internet traffic.

Afterwards, there were the debates within the European Parliament, which first reading ended successfully last April, resulting in a clear and strict interpretation of the net neutrality principle and a proper framework for ‘specialised services’. Indeed, according to the text, telecommunications operators would be allowed to develop access offers with an optimised quality of service for specific applications, which wouldn’t be able to not run properly on the so-called ‘best-effort Internet’.2)A Best Effort Internet refers to the model of the Internet that does not differentiate between ‘levels’ of content providers. All web authors, large and small, enjoy the same ability to produce content or services that can, via the Internet reach an audience / customer base.

Currently, the debates are being held within the Council of the European Union which, along the European Parliament, is the EU co-legislator. However, the meeting of the EU Member States’ telecommunications ministers, held in Luxembourg, past June, clearly demonstrated the existing major divisions among Member States.

Considering the most recent proposal of the Italian Presidency (see here and here), it was quite evident that Member States were heading to a looser and weaker approach to net neutrality rules. The proposal consisted in a ‘principles-based approach’ in order not to inhibit innovation and to avoid having an obsolete regulation in the future.

However, the proposal did not address the principle of net neutrality but rather its opposite, as it set principles to traffic management:

Clear principles for traffic management in general, as well as the obligation to maintain sufficient network capacity for the internet access service regardless of other services also delivered over the same access.

In fact, the very important definitions of net neutrality and specialised services were not included in the text.

According to the document of the Italian Presidency, “instead of a definition of net neutrality there could be a reference to the objective of net neutrality, e.g. in an explanatory recital, which would resolve the concerns that the definition might be at variance with the specific provisions.” However, clear provisions are required in order to ensure its full enforcement.

Specialised services, which refer to the types of content that operators could prioritise over others, despite not being regulated, were not prohibited. Thus said, if they were not foreseen in the text, the principle of non-discrimination should at least have been clearly stated instead. It was not the case.

In its place, it was foreseen that ISPs will be able to apply traffic management measures as long as they were transparent, proportionate and not anti-competitive. Measures “that block, slow down, alter, degrade or discriminate against specific content, applications or services, or specific classes thereof” could be applied under certain circumstances, such as to “prevent the transmission of unsolicited communications”; to prevent “temporary congestion control”; or to meet their “obligations under a contract with an end-user to deliver a service requiring a specific level of quality to that end-user”.

Moreover, the proposal did not contain any reference to the obligation of Member States regarding the guarantee of the right to freedom of expression, which must be ensured at both the end-user and the content provider.

Thus said, this text raised some confusions and concerns. To start with, regarding unsolicited communications, it must be noted that an e-mail service is not an internet access service. Moreover, it should have been clarified that the prevention of temporary congestion should be an exception and not be established ‘by default’. Furthermore, the concept of a “contract with an end-user to deliver a service requiring a specific level of quality to that end-use” is not fully compatible with the ‘best effort’ Internet concept.

Last but not the least; the text lacked a clear non-discrimination principle for Internet access providers. For instance, the text did not refer the discrimination based on pricing which would lead to a result where big telecommunications companies would be able to pay for preferential treatment for their services or to have their services accessible for free, while others, with less financial capacity, would end up being excluded due to throttling of their services.

As a result, ISPs would turn themselves into the gatekeepers of a market of customers which would only be accessible for those companies willing to pay accordingly. In fact, this is a crucial point because consumers will invariably prefer the websites or services made available for free.

The direct result of such a text was that telecoms operators would be able to discriminate between different users, their communications or the content accessed. Internet access providers, and not users, would therefore decide what applications and content could be freely used.

In an unfortunate coincidence, Günther Oettinger, the already well-know Digital Commissioner for its ‘inside the box’ way of thinking, published his first post on his blog, arguing that the full coverage of internet access in rural zones would be finally possible if the telecommunications operators would be allowed “to reap the benefit of their investments”.

Moreover, a letter sent from Jean-Claude Juncker and Frans Timmermans to the other commissioners is being interpreted as suggesting that the European Commission might change direction regarding its initial proposal.

In this context, the main challenge is to conciliate the open internet as a instrument for the democratic expression, which promotes informed citizenship and plurality of opinions, with the network operators own interests in managing their networks, namely through specialized services. ISPs should be entitled to manage traffic – namely offering customers internet access packages with different speeds and volumes – but the traffic should neither be prioritized nor discriminated based on the content, services, applications, or devices used.

More recently, the Italian Presidency appears to have distanced itself from its own proposals, alleging that

none of the compromise drafts, which had been developed at a technical level, has gathered enough consensus. Such drafts (…) are significantly different from the positions of the single Member States, including Italy, that has always chosen to act as a neutral mediator under the Presidency rather than imposing its own point of view.

This is just the consequence of the strong divergences which oppose EU Member States, which is expected to be resolved at a political level.

In this context, the recent resolution adopted by the European Parliament does not come as a surprise as it stresses that

all internet traffic should be treated equally, without discrimination, restriction or interference, irrespective of its sender, receiver, type, content, device, service or application.

In these dark times for net neutrality, one can only hope for the right balance between net neutrality and reasonable traffic management to be found.

And as Christmas is getting closer, one can also wish for the EU and the USA to ultimately adopt compatible rules on guaranteeing an open internet. As announced recently, Barack Obama is taking strong positions in favour of Net Neutrality and is calling on the Federal Communications Commission (FCC) to adopt rules to prevent ISPs from blocking and slowing down content.

References   [ + ]

1. Copyright by EFF-Graphics under the Creative Commons Attribution 3.0 Unported
2. A Best Effort Internet refers to the model of the Internet that does not differentiate between ‘levels’ of content providers. All web authors, large and small, enjoy the same ability to produce content or services that can, via the Internet reach an audience / customer base.

Open Competition or the Dominant Undertaking Crusade

Google vs EU?

Google vs EU?

Google is undergoing a rough time in the European Union, being pressured on diverse fronts. There’s the famous ECJ ruling, and the polemics surrounding the collecting of data by Street View cars. Some think that the company should be broken up. Others see it as a threat to their sovereignty. But maybe it is all about fear, as admitted by Mathias Döpfner, chief executive of Axel Springer, a German publishing giant, in an open letter to Eric Schmidt, Google’s executive chairman. Some worry that big companies will be disincentive to invest in Europe.

Thus said, what is the fuss now?

Well, actually it is an already an old question…Over the years, Google has been facing increasing criticism regarding its search business’ dominant position in Europe.

Google’s market share in Europe is up to 90%, so there is no doubt that it has a dominant position in the European market. According to settled case law of the CJEU, dominance is a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, its customers and ultimately of the consumers.1)See Case 27/76 United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paragraph 65, and Case 85/76 Hoffmann-La Roche & Co. AG v Commission (1979) ECR 461, paragraph 38

It is a well accepted principle that, having reached a dominant position, the concerned undertaking has a special responsibility not to allow its conduct to impair genuine undistorted competition on the market.2)See Case 322/81Michelin, ECR 3461 (1983) paragraph 57

Therefore, a dominant position is not in itself illegal. However, according to article 102 of the Treaty on the Functioning of the European Union (TFEU), if an undertaking exploits this position to eliminate competition, it is considered be an abuse, which is deemed to be an anti-competitive conduct.

One must be well aware that a competitive market is desirable for the competitive quality and price it offers, the choice it allows and the innovation it brings. The ultimate beneficiary of competition is the consumer of a good or a service, i.e., all of us. It might not come as a surprise that less successful competitors might try to reduce the market share of a dominant undertaking in their favour.  That is what competing is all about: to try to be better than your competitors, try to be the best at something. But one should expect that they will try to do so through competition! One should not be wary of a dominant position simply due to to its huge market share or to the amount of power it entails, although it shall not be left unrestrained either. A successful company shall not be ‘punished’ or persecuted for its success. The legitimacy of the dominant undertaking’ activities shall always be accessed according to the consumer’s interests.

Back in 2010, the European Commission opened an antitrust investigation into allegations that Google Inc. has abused a dominant market position, in violation of European Union rules (Article 102 TFEU), following 18 (eighteen) complaints presented by its competitors regarding Google’s online search and search advertising.

In short, despite the four areas of concern raised by European Commission, the focus of the case was Google’s vertical search results and the extent to which it favoured its own specialized search services, reducing the visibility of results from competing sites.

Late February, the European Commission announced (here) a settlement proposal from Google in the context of the ongoing antitrust investigation – the third from Google after the previous two were criticized as not going far enough – which it deemed satisfactory.

In this proposal, Google has committed to visibly display links of the services of three competitors, selected through an objective method, whenever it promotes its own specialized search services on its web page following a search query. Some of these links would require the competitors to pay Google.3)You can better understand the proposal from the screenshots as shown here

This proposal received a strong public backlash, namely, of course, from Google’s competitors, apparently very concerned with the users’ interest which is, as previously mentioned in the text, a valid point, however not as convincing as intended, coming as it comes from less successful competitors.

For instance, the FairSearch group, which Microsoft backs, argued that

[it]requires rivals to pay Google for placement similar to that of Google’s own material, undercutting the ability of other to compete and provide consumer choice. This will be done through an auction mechanism that requires participating companies to hand the vast majority of their profits to Google.

Several French and German publishers and companies, among which Axel Springer, created an initiative called the ‘Open Internet Project’, insisting that the commitments proposed by Google to bring this investigation to an end are not sufficient to safeguard a competitive online market. The claims can be accessed on the group’s website.

In June, the European Commission invited complainants to react to Google’s proposal and received a significant negative feedback from press publishers, pressing the European Commission to reject Google’s proposals and proceed to a formal charge with infringement, stating as follows:

(…) the most prominent areas of any search results pages would be reserved for Google’s own services, independent of their quality, while all rival services have to accept inferior visibility even if they are far more relevant to a search query.

And they added:

The only relevant “commitment” is the addition of three Rival Links’ whenever Google puts links to its own monetized services first. However, in the most relevant commercial areas rivals will have to bid for a Rival Link in an auction and pay Google the highest price for a click. As a result, websites would not be ranked by relevance anymore but primarily according to the price they are willing to pay Google. As a new type of ad, Rival Links are not a concession but a new revenue stream for Google. As rivals could always bid for AdWords-ads, their situation is not improved.

No one can blame the settlement’s critics for any lack of coherence as these reactions are in line with those of lead complainant Foundem, who sustained that the proposed rival links will consume the majority of rivals’ profits and will not be selected according to relevance, merit, or quality.

Eric Schmidt, Executive Chairman of Google, recently addressed this issue, under the title ‘We built Google for users, not websites’, stating:

To date, no regulator has objected to Google giving people direct answers to their questions for the simple reason that it is better for users.

Facing the described context, the European Commission might have to seek to obtain more concessions from Google.

As the current Commission’s will be replaced in November, it is very unlikely that Joaquín Almunia, Vice-President of the European Commission and Commissioner responsible for competition, will be able to attain a final consensus within the Commission by then and the decision will most certainly be postponed in order to be taken under the next Commission.

Thus being said, Google is obviously trying to avoid formal charges. Of course it has no interest in having to pay a high fine nor damaging its reputation. But one might wonder if any compromise will ever be sufficient for its competitors.

From the several points raised by complainants, it seems sometimes that the intention is to artificially propel traffic to websites that compete with Google. That should not Google’s obligation. That wouldn’t even be fair for Google, nor in the best interests of consumers. And it would imply a senseless and unjustified advantage for competitors at the expenses of Google and, ultimately, consumers.

What must be ensured is the effectiveness of competition on the merits in the areas of specialized search and search advertising and, more importantly, the desirable effectiveness of the principle of Open Internet. The principle of Open Internet is defined as the enabling of Internet users to access the content, applications and services of their choice. It is therefore closely linked to the principle of Net Neutrality, meaning the ability for consumers to access and distribute information or run applications and services of their choice.

But an Open Internet also closely linked to competition among network, services and content providers, as it implies that each provider have the opportunity to test the value of its projects in the online marketplace. The door shall remain wide open for the next big company that will shake the online world. One must not forget that back in the 90’s, in the heydays of the internet, search engines as AltaVista and Yahoo were as popular as Google is now. Google outran them due to users’ preferences. And it must be guaranteed that consumers will be able to know about and use other services in the future if they prefer so.

Therefore, as competition and the principles of an Open Internet and Net Neutrality serve and benefit ultimately the consumers, competitors are not the main aim in themselves. Although they undeniably benefit from that protection, any confusion between the interests of consumers and of competitors shall be avoided.

Google shall not be prevented from improving its own services because its competitors are not as successful or are unable to keep up. So the suggestion of German justice minister Heiko Maas for Google to reveal its ranking algorithm in order to be more transparent appears as senseless.

What must be guaranteed is that users are informed of the existence of the competing websites, their relevance to the search, and are given the possibility to access them, thus providing users with a genuine choice between competing services. This must be the core of the European Commission’s assessment regarding the further concessions it might demand from Google in the future.

References   [ + ]

1. See Case 27/76 United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paragraph 65, and Case 85/76 Hoffmann-La Roche & Co. AG v Commission (1979) ECR 461, paragraph 38
2. See Case 322/81Michelin, ECR 3461 (1983) paragraph 57
3. You can better understand the proposal from the screenshots as shown here

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