United States: In A Rarely-Seen Joint-Effort In The Competition Arena, The DOJ And The USPTO Unite In Issuing A Policy Statement On Remedies Involving Standard Essential Patents

On January 8, 2013 - less than a week after the Federal Trade Commission ("FTC") entered into a consent order with Google,1 under which Google is generally banned from seeking injunctions on its F/RAND2 -encumbered standard essential patents ("SEPs")3 - the United States Department of Justice ("DOJ") banded together with the United States Patent and Trademark Office ("USPTO") (jointly referred here as "the Agencies") in issuing the Policy Statement on Remedies for Standard Essential Patents Subject to F/RAND Commitment ("Policy Statement on Remedies for SEPs").

This was a rare pairing in that, in the past, the DOJ has generally joined forces with the FTC in jointly issuing guidelines in the area of competition and antitrust enforcement policy. Examples include the DOJ-FTC joint "Antitrust Policy Enforcement Regarding Accountable Care Organizations," "Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition," "Antitrust Guidelines for the Licensing of Intellectual Property," "Antitrust Guidelines for Collaborations Among Competitors," and "Horizontal Merger Guidelines." The Policy Statement on Remedies for SEPs is, therefore, a departure from that established practice.

The DOJ issued the policy statement in its capacity as "the executive-branch agency charged with protecting U.S. consumers by promoting and protecting competition," and the USPTO in its capacity as "the executive-branch agency charged with responsibility for examining patent applications, issuing patents, and' through the Secretary of Commerce' advising the President on domestic and certain international issues of intellectual property policy." Policy Statement on Remedies for SEPs at 8.

Noting the procompetitive virtues of consensus-driven standards along with their risks, the Agencies sought to balance the rights of SEP holders against the risk of hold-up to implementers. On the one hand, the Agencies recognized that "[i]n some circumstances, the remedy of an injunction or exclusion order may be inconsistent with the public interest" and "may harm competition and consumers." Id. at 6. On the other hand, they rejected a general ban on injunctive relief actions for SEPS, see id. at 7-8, or rigid imposition of "one-size-fits-all mandates for royalty-free or below-market licensing, which would undermine the effectiveness of the standardization process and incentives for innovation," id. at 5-6.

In determining whether an injunction or exclusion order may be appropriate, or otherwise should be denied, the Agencies offered a flexible approach that could be used to adapt the remedy to the specific facts of each case by identifying non-exhaustive "relevant factors when determining whether public interest should prevent the issuance of an exclusion order... or when shaping such a remedy." Id. at 7-9. One such factor is "whether a patent holder has acknowledged voluntarily through a commitment to license its patents on F/RAND terms that money damages, rather than injunctive or exclusionary relief, is the appropriate remedy for infringement." Id. at 9.

However, according to the Agencies, "This is not to say that consideration of the public interest factors ... would always counsel against the issuance of an exclusion order to address infringement of a F/RAND-encumbered, standards-essential patent"; such an order may still be "an appropriate remedy" in some circumstances. Id. at 7.

For example, an exclusion order by the International Trade Commission ("ITC") or a district court injunction may be appropriate when "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." Id. The Agencies also made clear that "a constructive refusal to negotiate" could be the basis for injunctive relief or an exclusion order, such as when the putative licensee "insist[s] on terms clearly outside the bounds of what could reasonably be considered to be F/RAND terms in an attempt to evade the putative licensee's obligation to fairly compensate the patent holder." Id. Other factors relevant to a particular case may also justify such a relief, making the inquiry a case-specific one. See id. (noting that "[t]his list is not an exhaustive one," thus leaving room for other considerations).

In contrast, the FTC has taken a much more restrictive view of SEP inunctions. For example, in its Google order, the FTC generally banned efforts by Google to seek injunctive relief on its SEPs, except in the following narrowly enumerated circumstances against a potential licensee who (a) is outside the jurisdiction of the United States, (b) has stated in writing or sworn testimony that it will not license on any terms, (c) refuses to enter a license on terms determined to be F/RAND in the "Final Ruling" of a court (after exhaustion of all appeals) or through binding arbitration or other mutually-agreed process, or (d) fails to provide a written confirmation to a SEP owner in response to a F/RAND Terms Letter as outlined in the FTC Order. FTC Decision & Order at 7-8. The order also allows Google to seek injunctive relief in certain circumstances when the putative licensee first sues Google for injunctions on the potential licensee's own SEPs. Id. at 11-12. The order also requires rigid adherence to an offer of a detailed licensing agreement and specific steps for negotiating and resolving disputes before pursuing any injunctive relief consistent with the above conditions. See, e.g., id. at 9-12.

Notably, the FTC order is not based on the antitrust laws, but instead relies on Section 5 of the FTC Act, which is primarily a consumer protection statute that prohibits "unfair method of competition" and "unfair acts or practices." See FTC Complaint, ¶¶ 31-32. Commissioner Ohlhausen dissented generally questioning the applicability of Section 5 to Google's conduct and the "doctrinal confusion" the order would cause, among other reasons. See generally Dissenting Statement of Commissioner Ohlhausen. Commissioner Rosch issued a separate statement that called into question the FTC's use of Section 5's "unfair method of competition" prong without any "limiting principles" - such as "the requirement that a respondent have monopoly or near-monopoly power" - which risked "unsettl[ing] 'settled principles of [Sherman Act] Section 2 law' as defined by the Supreme Court case law under Section 2, ... as well as the language of Section 2 itself." Sep. Stmt. of Commissioner Rosch at 3-4.


1. All of the relevant documents, including the FTC Complaint, the Decision and Order, and Separate and Dissenting Statements respectively of Commissioners Rosch and Ohlhausen can be found on the FTC's website at http://www.ftc.gov/os/caselist/1210120/index.shtm.

2. "F/RAND" refers to a commitment made by a patentee to an industry standard setting organization ("SSO") that the patentee will license its patents that are, or will become, essential to a standard adopted by the SSO on fair, reasonable, and non-discriminatory terms.

3. Throughout, "SEPs" is used to refer only to F/RAND-encumbered standard essential patents. These are patents that have been designated as essential to the functionality of an approved standard, such as the telecommunications standards applicable to mobile devices operating on a 3G network, pursuant to the specifications of an SSO.

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