On January 8, the U.S. Department of Justice, Antitrust Division (“DOJ”) and the U.S. Patent & Trademark Office (“PTO”) (collectively, “the Agencies”) issued a joint policy statement regarding remedies for Standards-Essential Patents (“SEPs”) subject to voluntary fair, reasonable and non-discriminatory (“FRAND”) commitments. This joint statement came just days after the FTC’s statement in Google, which similarly addressed SEPs subject to FRAND terms. While both statements address SEPs, they vary in their recommendations as to just what extent exclusionary orders should be limited.
DOJ and PTO Joint Statement
In their joint statement, the Agencies address whether “injunctive relief in judicial proceedings or exclusion orders in investigations under section 337 of the Tariff Act of 1930 are properly issued when a patent holder seeking such a remedy asserts [SEPs] that are encumbered by a [FRAND] licensing commitment.”
The Agencies note that the United States encourages systems that support FRAND licensing—both domestically and internationally—rather than imposing “one-size-fits-all” mandates on royalties. Yet a patent owner’s FRAND commitments could, they say, affect “the appropriate choice of remedy for infringement of a valid and enforceable [SEP].”
In the context of proceedings before the United States International Trade Commission (“USITC”), the Agencies state that exclusion is typically an appropriate remedy when an imported good is found to infringe a patent and may be appropriate in certain circumstances. Such circumstances might include when a putative licensee is unable or refuses to take a FRAND license or when a putative licensee is not subject to the jurisdiction of a court that could award damages. However, the Agencies also state that the remedy of an “exclusion order may be inconsistent with the public interest,” especially if an exclusion order based on voluntary FRAND terms seems to be incompatible with the terms of a patent holder’s existing FRAND licensing commitments.
The Agencies also suggest the USITC consider whether a patent holder has “acknowledged voluntarily through a commitment to license its patents on F/RAND terms that money damages, rather than injunctive relief, are appropriate.” In such circumstances, the Agencies speculate whether USITC may determine that the weight of public interest factors make exclusionary orders inappropriate or subject to delay.
The FTC’s Google Statement
The Antitrust Advocate recently examined the issue of SEPs subject to FRAND terms in light of the Google settlement and the Bosch proposed consent decree. These actions by the FTC clarify several points about its views on SEPs, including:
A majority of the Commissioners are willing to bring stand-alone Section 5 FTCA claims where an entity reneges on its voluntary agreement to license SEPs on FRAND terms;
The threat of a ‘patent ambush’ is harmful to the public interest; and
Industry participants should be encouraged to license SEPs on FRAND terms.
Differences Between the Joint Statement and the Google Statement
Important similarities and differences between the Agencies’ joint statement and the FTC’s statement in Google are worth noting.
At least two important similarities between the statements exist. Both statements emphasize:
(1) The threat of an injunction can lead to a ‘patent ambush’ which might cause consumer harm in the form of higher prices or the ban of sales of important products; and
(2) Licensing SEPs on voluntary FRAND terms is important to the public interest.
The FTC and the Agencies seem to differ, however, on when injunctive relief or exclusion is warranted.
The FTC seeks to limit injunctions or exclusion orders based on infringement of patents subject to a voluntary FRAND commitment—evidenced in part by the FTC’s willingness to bring a stand-alone FTCA Section 5 claim. The Google Order also narrowly restricts cases in which Google can seek injunctive relief. The Order limits such relief to circumstances in which a licensee:
(1) Exists outside the jurisdiction of the US;
(2) Has stated in writing or sworn testimony that it will not license the FRAND patent on any terms;
(3) Refuses to enter a licensing agreement covering the FRAND patent on terms set in a Final Ruling; or
(4) Fails to provide the written confirmation as requested in a FRAND terms letter delivered within 30 days.
While the Google order is specific to that company, the FTC also noted that “the Proposed [Google] Order may set a template for the resolution of SEP licensing disputes across many industries . . .”
The Agencies take a slightly less restrictive approach, and note that “exclusion orders could be appropriate if a licensee is unable or refuses to take a FRAND license and is acting outside the scope of the patent holder’s commitment to license on FRAND terms, such as by refusing to pay the FRAND royalty or refusing to negotiate to determine FRAND terms.” The joint statement also notes that its list of appropriate exclusion orders “is not an exhaustive one.”
One important take away from both the FTC’s statement in Google and the Agencies’ joint statement is that the government has indicated its willingness to limit exclusion orders and injunctive relief for SEPs licensed on voluntary FRAND terms under certain circumstances.
For additional insight into the FTC’s views on exclusion orders and SEPs, see its July 11, 2012 statement “Concerning Oversight of the Impact on Competition of Exclusion Orders to Enforce Standard-Essential Patents.”