The Federal Trade Commission, Department of Justice and U.S. Patent and Trademark Office all took action in the past few months with respect to standards-essential patents (SEPs), including two FTC consent decrees, a joint policy statement issued by DOJ and the USPTO, and a speech by the DOJ’s Deputy Assistant General for Economic Analysis.
The FTC’s Google Consent Decree: On Jan. 3, 2013, the FTC entered into a Consent Decree with Google Inc. and its wholly owned subsidiary Motorola Mobility LLC to settle allegations that Google and Motorola violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, by engaging in unfair methods of competition and unfair practices relating to the licensing of SEPs. Please click here for our Client Alert summarizing the decree and analyzing its broader impact on companies.
The FTC’s Bosch/SPX Consent Decree: On Dec. 3, 2012, the FTC announced a proposed consent decree regarding Robert Bosch GmBH’s acquisition of a division of SPX Corporation. The FTC alleged that prior to its acquisition by Bosch, SPX had violated Section 5 of the FTC Act by seeking injunctions against competitors to block them from using SEPs that SPX had committed to license on Fair, Reasonable, and Non-Discriminatory (FRAND) terms, even though the patent litigation defendants were willing to take licenses on FRAND terms. The FTC stated: “Patent holders that seek injunctive relief against willing licensees of their FRAND-encumbered standards-essential patents should understand that, in appropriate cases, the Commission can and will challenge this conduct as an unfair method of competition under Section 5 of the FTC Act.”
As a remedy, the FTC is requiring, among other things, that Bosch offer a royalty-free license to all potential implementers and provide a letter of assurance to the relevant standards development organization, promising to license on FRAND terms any SEPs it acquires in the future for the standards at issue. The vote was 3-2, with the dissenters objecting that, “[s]imply seeking injunctive relief on a patent subject to a [FRAND] license, without more, even if seeking such relief could be construed as a breach of a licensing commitment, should not be deemed either an unfair method of competition or an unfair act or practice under Section 5.” Materials relating to the consent agreement are available here.
The DOJ/USPTO’s Policy Statement: On Jan. 8, 2013, the DOJ and USPTO issued a Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments, to address whether injunctive relief or exclusion orders in International Trade Commission investigations are properly issued when the patent holder asserts standards-essential patents that are encumbered by a F/RAND licensing commitment. While recognizing that a patent gives the patent holder the right to exclude, the Policy Statement explains that in some circumstances, the remedy of an injunction or an exclusion order may be inconsistent with the public interest, especially where “an exclusion order based on a F/RAND-encumbered patent appears to be incompatible with the terms of a patent holder’s existing F/RAND licensing commitment to a [standards-development organization].” The Policy Statement is quick to point out that an exclusion order “may still be an appropriate remedy in some circumstances, such as where the putative licensee is unable or refuses to take a F/RAND license and is acting outside the scope of the patent holder’s commitment to license on F/RAND terms. For example, if a putative licensee refuses to pay what has been determined to be a F/RAND royalty, or refuses to engage in a negotiation to determine F/RAND terms, an exclusion order could be appropriate.” However, generally, the DOJ and USPTO urged the ITC to consider whether a patent holder has acknowledged voluntarily through a commitment to license its patents on F/RAND terms that monetary damages, rather than injunctive or exclusionary relief, is the appropriate remedy for infringement. A copy of the Policy Statement is available here.
The DOJ’s Speech: On Dec. 5, 2012, Fiona M. Scott Morton, DOJ’s former Deputy Assistant Attorney General for Economic Analysis, gave a speech titled, “The Role of Standards in the Current Patent Wars.” Scott Morton succinctly summarized some DOJ guidance to standards-development organizations with respect to FRAND encumbered patents:
- Determine whether proposed technology for which no FRAND commitment has been made should be included in the standard;
- Make clear that the patent holder’s licensing commitments run with the patent;
- Give licensees the option to license on a cash-only basis but allow voluntary cross-licensing;
- Place some limitations on the patent holder’s right to seek an injunction against a willing and able licensee;
- Lower the transaction cost of determining FRAND licensing terms;
- Consider ways to increase certainty that patent holders believe the disclosed patent are essential to the standard after it is set.
At the same time, Scott Morton explained the hesitation for DOJ to wade into concerns regarding “commercially essential” patents that are not FRAND encumbered patents. A copy of the speech is available here.