[A2k] Mondaq: United States: US Federal Trade Commission Moves Aggressively On Standard-Essential Patents
thiru at keionline.org
Mon Dec 10 03:51:29 PST 2012
United States: US Federal Trade Commission Moves Aggressively On Standard-Essential Patents
10 December 2012
A new Federal Trade Commission merger consent order raises significant questions about the ability of standard-essential patent (SEP) holders to enforce their intellectual property rights. By a vote of 3-2, the FTC approved the order, which conditioned the acquisition of SPX Services (SPX), an automotive air conditioning equipment maker, by Robert Bosch GmbH (Bosch), in part, on Bosch's commitment to terminate lawsuits in which SPX had sought injunctive relief against infringement of its SEPs.
The FTC's complaint challenged the acquisition itself, but also alleged that prior to the acquisition, SPX had engaged in unfair competition in violation of FTC Act § 5 by filing actions for injunctions against willing would-be licensees of its SEPs. (The complaint cites only one patent-in-suit as an actual SEP; the others "may be essential" to a standard.") According to the complaint, SPX's actions amounted to unfair competition because of its prior commitment during the standard-setting process to license the SEPs on fair, reasonable and non-discriminatory (FRAND) terms. The FTC's majority statement warned that "[p]atent holders that seek injunctive relief against willing licensees of their FRAND-encumbered SEPs should understand that in appropriate cases the Commission can and will challenge this conduct as an unfair method of competition[.]"
The Bosch order reflects the continuing aggressiveness of the FTC and, to a lesser extent, the DOJ's Antitrust Division in enforcing FRAND commitments against the patent owners that make them. In February of 2012, the Antitrust Division cleared Google's acquisition of Motorola Mobility and suggestedthat it, too, might use the merger review process to extract commitments to license SEPs on FRAND terms. The Bosch order suggests an even more aggressive use of unfair competition laws to enforce private FRAND agreements. SPX's FRAND agreement did not expressly bar it from seeking injunctive relief, but the FTC's complaint nonetheless alleged that there was an implied agreement not to do so. Further, it was unclear that the patents at issue were truly standard-essential.
In a spirited dissenting statement, Commissioner Maureen Ohlhausen argued that, absent additional conduct like the deception the FTC alleged in its ill-fated Rambus litigation, "[s]imply seeking injunctive relief" based on a "FRAND-encumbered SEP" should not be a Section 5 violation. She expressed concern that the agency was overstepping its bounds, intruding into an area that the courts and the International Trade Commission can resolve satisfactorily.
Commissioner Ohlhausen also sharply criticized the Bosch order's legal underpinnings, questioning the majority's discernment of an "increasing judicial recognition" of a problem arising from SEP-based injunctions. Finally, Commissioner Ohlhausen warned that the consent order "raises more questions about what limits the majority of the Commission would place on its expansive use of Section 5 authority," and would lead the FTC to intervene in "garden variety breach of contract" disputes, including ones far removed from SEPs and FRAND agreements.
As Commissioner Ohlhausen suggests, the FTC's action here gives IP owners little comfort that the agency has yet defined limits to its application of Section 5, either generally or specifically, as a means to enforce FRAND licensing commitments. After the Bosch order, it is unclear whether any action for injunctive relief for infringement of a patent even arguably covered by a FRAND agreement—conduct that one ordinarily would expect to be immune from antitrust challenge under the Noerr-Pennington doctrine—would ever be beyond scrutiny. A company that wishes to participate in the development of new technological standards must therefore balance the benefits of developing and acquiring valuable intellectual property, and winning its incorporation into those standards, with its willingness to agree to what amounts to a compulsory license to all comers.
Originally published on December 6, 2012.
Knowledge Ecology International (KEI)
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