DOJ and USPTO join FTC in urging Caution before Granting SEP Injunctions

Courtesy of Wikimedia CommonsYesterday the Antitrust Division of the U.S. Department of Justice (DoJ) and the U.S. Patent Trademark Office (USPTO) united in issuing a rare joint policy statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments. As the title suggests, the policy focuses on those patent claims that would be necessarily infringed by the implementation of a standard (so-called standards essential patents, or “SEPs”), where the owner of the claims has pledged to make the claims available on “fair, reasonable and non-discriminatory” (or “F/RAND”) terms. More specifically, the policy statement addresses the question of whether, and if so when, the owner of SEPs should be entitled to ask the International Trade Commission (ITC) for an injunction to bar the importation of products implementing the standard in question.

Until recently, the ITC rarely found itself in the limelight, as its purpose is to protect U.S. markets from unfair inroads by foreign commercial interests. One way it can do so is to protect the owners of U.S. patents from unauthorized foreign vendors when they seek to sell products into the U.S. that would infringe the U.S. patents. In such a case, the ITC has the poser to bar the importation of the goods until such time, if ever, as the vendor has acquired a patent license from the owner of the infringed patent claims on terms satisfactory to the owner.

Normally, the owner of the claims would have no obligation to provide such a license on fair and reasonable terms, or on any terms at all. But where the owner of a patent claim has, in connection with being a member of a standards setting organization (SSO), agreed to provide a F/RAND license to anyone seeking to implement a given standard, what rights should the owner of the SEP have if, on the one hand, the foreign vendor refuses to ask for a license, or, on the other, the vendor contends that the terms offered by the owner of the SEP are not in fact fair and reasonable? Have YOU Discovered the Alexandria Project?

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Cutting to the chase, the policy statement postulates a non-exclusive list of situations in which the agencies believe it could be inappropriate, and others in which it would be appropriate, to grant an injunction, and urges the ITC to exercise “caution” before reaching a decision in any given circumstance. While the statement is directed specifically at the ITC, the first footnote in the statement observes that “similar principles apply to the granting of injunctive relief in U.S. federal courts” (the same footnote observes, however, that the statement is not intended to be “a complete legal analysis of injunctive relief” under the applicable Supreme Court precedent).

Not surprisingly, given that the USPTO is a co-author, the policy statement initially takes pains to acknowledge not only the benefits that standards provide to society, but also the value of patents, and the rights of patent owners to enforce the privileges that the USPTO has granted and which the courts have historically protected. This balancing approach carries through the remainder of the report, and therefore avoids advocating (as some commentators have urged) that injunctions should never be permitted in situations where SEPs are bound by FRAND commitments. The policy statement is therefore evolutionary and clarifying rather than ground-breaking or radical in its reasoning and recommendations.

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The question of SEPs and injunctive relief is both timely and urgent, because such injunctions have recently been sought by – and sometimes been granted to – major IT companies in the course of the high-stakes battles being fought for dominance in the multi-billion dollar mobile device marketplace. If the ITC awards an injunction to the owner of a SEP essential to the use of a mobile device, then the defendant can effectively be barred from selling its standard-compliant products in the enormous U.S. marketplace. In such a situation, the defendant may opt to take a license – even if the SEP owner insists on extracting terms that the vendor does not believer are fair or reasonable at all. On the other hand, if the injunction request is refused, then the owner of the SEP would be deprived of a right that the owner of a patent would otherwise have if it was not subject to a FRAND obligation, and may have to enter into lengthy and expensive litigation while a competitor eats into its market share.
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If this sounds familiar, it should, because it was only last week that the U.S. Federal Trade Commission (FTC) announced that Google had agreed to enter into a Consent Decree pursuant to which Google would agree to forego recourse to SEP-enforcement injunctive relief and enter into binding arbitration at the request of any implementer of a SEP owned by Google, where Google was under a F/RAND obligation and the would-be licensee contended that the terms offered by Google were not, in fact, fair and reasonable. You can read my summary of that announcement here.

In fact, the antecedents of the current policy go back farther, most recently to concerns relating to the vagueness of FRAND obligations expressed by US and EU regulators and patent authorities last fall, and prior to that, to a request for comments and a workshop convened by the FTC (at which I spoke) the year before, during which the FTC solicited public input in relation to FRAND undertakings in order to determine whether action or guidance was needed to ensure the maintenance of healthy competition in the marketplace. And to be sure, the topic of F/RAND is a difficult and complex one (you can read a primer about it here).

Now that the relevant U.S. agencies have acted and spoken, it is likely that the next pronouncements on this topic will arise in the EU, where the European Commission has not yet announced what action, if any, it will take in connection with Google, and where (as noted above) the regulators and European Patent Office (EPO) had joined with their U.S. counterparts to request SSOs to take action to unburden the courts from law suits that might be avoidable if F/RAND obligations were more precise, and/or to channel such disputes into alternative dispute resolution channels, such as arbitration (as Google has agreed to do).

As I have pointed out recently, while Consent Decrees (and now policy statements) can have great influence, they are not in themselves binding upon courts. Consequently, it is possible that the next case before the ITC – or decided in a U.S. federal court – may not follow the approach advocated in the policy statement, or agreed to by Google. That said, the DoJ, FTC and EC have the power to act in their own right against those that they believe are in violation of applicable law, and to forcefully advocate their positions before the courts.

It will be interesting to see whether the evolving and increasingly detailed consensus that has emerged among U.S. and EU regulators and patent agencies will prevail in the breach, or whether the position they are espousing will be rebuffed by the courts. Should that occur, in order for the nuclear threat of SEP injunctions to be restrained, the baton of change would need to pass to the legislative branch here and abroad – should they be inclined to become involved. If that sounds far-fetched, given the bickering and gridlock endemic in Washington (at least) today, it’s worth recalling that just last July, the House Judiciary Committee held a hearing on the very same issues.