On December 7, the chief of the Antitrust Division at the
U.S. Department of Justice (DOJ), Makan Delrahim, announced that the DOJ will
be withdrawing from the 2013 USPTO and DOJ joint statement, “Policy Statement
on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND
Commitments.” The announcement was part
of his speech, titled “Telegraph Road: Incentivizing Innovation at the Intersection of Antitrust and Patent law.”
His speech provides, in part:
. . . In the more recent past, we have seen somewhat of a
shift toward the view that patents might confer too much power, particularly if
those patents are essential to a technical interoperability standard. The
fundamental right of the patent holder to exclude competitors has been
questioned in this context.
In particular, I have criticized the argument that it ought
to be a violation of antitrust law for a holder of a standard-essential patent,
or SEP, to exclude competitors from using the technology, including by seeking
an injunction against the sale of infringing goods—I think that argument is
wrong as a matter of antitrust law and bad as a matter of innovation
policy.
. . . When it comes to the test for obtaining injunctive
relief against infringement, patent law already strikes a careful balance that
optimizes the incentive to innovate, for the benefit of the public. The
test was articulated by the Supreme Court in eBay v. MercExchange.
. . . A court applying the eBay test is thus allowed
to consider effects in the market, including (as Justice Kennedy noted in
concurrence) how significant the patented invention is to the use of the
product, and whether the patent holder can be properly rewarded for that
contribution without the ability to exclude competitors.
When this test is used to maintain appropriate incentives to
innovate, it thus facilitates the goals of antitrust law and patent law
alike.
I fear that we at the Antitrust Division gave some observers
the opposite impression, however, with the confusion created by the joint
statement issued by the Department of Justice and the U.S. Patent &
Trademark Office in early 2013, entitled “Policy Statement on Remedies for
Standards-Essential Patents Subject to Voluntary F/RAND Commitments.”
That Policy Statement purported to offer the agencies’
perspectives on the propriety of a federal court issuing an injunction, or the
International Trade Commission’s issuing an exclusion order, “when a patent
holder seeking such a remedy asserts standards-essential patents that are
encumbered by a RAND or FRAND licensing commitment.” In particular, the
statement discusses what is in the “public interest” because the eBay test
and the Tariff Act governing the ITC name the public interest as a relevant
factor.
As I have said before, this joint statement should not be
read as a limitation on the careful balance that patent law strikes to optimize
the incentive to innovate. There is no special set of rules for exclusion
when patents are part of standards. A FRAND commitment does not and
should not create a compulsory licensing scheme.
In those cases, as in all cases, the question is what result
will optimize the incentives to innovate for the benefit of the public.
Since injunctions against infringement frequently do serve the
public interest in maintaining a patent system that incentivizes and rewards
successful inventors through the process of dynamic competition, enforcement
agencies without clear direction otherwise from Congress should not place a
thumb on the scale against an injunction in the case of FRAND-encumbered
patents.
Despite my clarification of the Antitrust Division’s position
on the propriety of these types of injunctions, the potential for confusion
remains high because the joint statement from 2013 indicates that an injunction
or exclusion order “may harm competition and consumers,” seeming somehow to
suggest an antitrust inquiry that is distinct from the goal of optimizing the
incentives for innovation—namely, dynamic competition.
This potential for confusion has lead me to a conclusion that
I would like to announce here today, in the interest of clarity and
predictability of the laws, and among the patent law community with whom we
share the goal of incentivizing innovation: The Antitrust Division is hereby
withdrawing its assent to the 2013 joint “Policy Statement on Remedies for
Standards-Essential Patents Subject to Voluntary F/RAND Commitments.”
The 2013 statement has not accurately conveyed our position about
when and how patent holders should be able to exclude competitors from
practicing their technologies. We will be engaging with the U.S.P.T.O. to
draft a new joint statement that better provides clarity and predictability
with respect to the balance of interests at stake when an SEP-holder seeks an
injunctive order.
Any discussion regarding injunctive relief should include the
recognition that in addition to patent holders being able to engage in patent
“hold up,” patent implementers are also able to engage in “hold out” once the
innovators have already sunk their investment into developing a valuable
technology. Additionally, a balanced discussion should recognize that
some standard-setting organizations may make it too easy for patent implementers
to bargain collectively and achieve sub-optimal concessions from patent holders
that undermine the incentive to innovate. That is the topic I want to
turn to next.
Although standard-setting organizations can undoubtedly offer
enormous benefits to consumers, there are antitrust risks associated with any
activity that involves competitors making joint decisions. When there is
evidence that participants in a standard-setting organization have engaged in
collusion, which is the “supreme evil” of antitrust law, according to the
Supreme Court in Trinko, the Division will be inclined to investigate.
For instance, there is a potential antitrust problem where a
group of product manufacturers within a standard-setting organization come
together to dictate licensing terms to a patent holder as a condition for
inclusion in a standard because it may be a collective exertion of monopsony
power over the patent holder. . . .
The Antitrust Division will therefore investigate and bring
enforcement actions to end practices that eliminate the independent centers of
decision-making and thereby harm competitive processes, including price
competition and innovation competition. Often a single maverick firm may
be willing to take a chance on a new and innovative technology or business
model that the rest of its competitors would rather see killed off in its
incipiency. Antitrust law recognizes the consumer benefit of those
entrepreneurial and innovative tendencies and their vulnerability to collusion.
Although there are certain best practices for guarding the
process of standard setting against such abuses, we are concerned that some
standard-setting organizations may not even attempt to adopt these
safeguards.
. . . Calling your meetings a standard-setting organization,
or even in fact publishing some standards necessary for interoperability, is
not a free pass for coordination designed to reduce common competitive threats
or forestalling innovative developments in the industry that put a legacy
business model at risk.
… Patent policies affect the incentives for innovation.
If an SSO’s policy is too restrictive for one side or the other, it also risks
deterring participation in procompetitive standard setting.
Just as competition in the marketplace results in better
outcomes for the consumers of goods and services, competition among
standard-setting organizations to adopt better patent policies can result in
better outcomes for the consumers of standard-setting activities (that is, for
the participants themselves).
It is for this reason that we will take a dim view of any
coordinated effort by competitors to stifle competition among standard-setting
organizations, including competition to offer the patent policy that brings the
most participants to the table. For instance, competitors would come
under scrutiny if they orchestrated a group boycott of an SSO with a patent
policy that is unfavorable to their commercial interests.
