Stephen J. Elliott
Voluntary industry standards on technical specifications play an important role in the economy by ensuring interoperability among complementary products and interchangeability between competing products. Once such a standard is established it may be prohibitively difficult to switch to an alternative technology. As a result, the owner of patented technology incorporated into a standard may engage in "patent hold-up" by asserting the patent to exclude a competitor or obtain a higher price for using the technology than would have been possible before the standard was set. Standard-setting organizations (SSOs) rely on voluntary licensing commitments, which often take the form of an agreement to license on fair, reasonable, and non-discriminatory (F/RAND) or reasonable and non-discriminatory (RAND) terms, to mitigate the possibility of patent hold-up.
By statute, an injunction is available in the United States as a remedy for patent infringement. In eBay v. MercExchange,1 the Supreme Court held that a court evaluating a request for an injunction in a patent case must consider, among other factors, whether monetary damages are adequate and whether an injunction would be in the public interest. European courts also grant injunctions to prohibit patent infringement. Recently, two courts in the United States have held that an injunction was not available to an owner of a standard-essential patent (SEP) where the patent owner had previously committed to license the patent on F/RAND terms. The Antitrust Division of the Department of Justice recently issued a policy statement to the same effect, and the Federal Trade Commission (FTC) has issued two decisions stating that merely seeking an injunction in these circumstances can constitute a violation of Section 5 of the FTC Act. Similarly, the European Commission competition authority (EC) last year initiated investigations of Samsung and Motorola for such conduct.
These developments raise concerns that the statutory right to an injunction may now, in many circumstances, be unavailable to the owner of an SEP, and that a patent owner may be subject to antitrust scrutiny, or even liability, for invoking that right.
The United States
The Courts. In Microsoft v. Motorola,2 the U.S. Court of Appeals for the Ninth Circuit affirmed a decision holding that Motorola's RAND commitments created a contract enforceable by Microsoft as a third-party beneficiary. "Implicit" in Motorola's promise to the SSOs, the court found, was a guarantee that Motorola would "not take steps to keep would-be users from using the patented material, such as seeking an injunction" anywhere in the world. The Ninth Circuit upheld a preliminary injunction prohibiting Motorola from enforcing an injunction it had previously obtained against Microsoft in Germany.
Subsequently, the district court held that Motorola was not entitled to a permanent injunction against infringement of any of its SEPs worldwide. Because of its F/RAND commitment, the district court determined, a license for Motorola's SEPs "will become a reality," so Motorola could not establish the necessary irreparable harm or lack of an adequate remedy at law.
Judge Richard Posner also concluded that injunctive relief was not available for infringement of a RAND-encumbered SEP in Apple v. Motorola.3 He reasoned that by committing to license its SEPs on F/RAND terms "Motorola implicitly acknowledged that a royalty is adequate compensation for a license to use" those patents.
In Apple v. Motorola Mobility,4 however, the Western District of Wisconsin held that Motorola did not breach its F/RAND commitments by seeking injunctive relief, because no language in the SSO agreements prohibited Motorola from doing so. The court found that a contract purportedly depriving a patent owner of that right must do so clearly, given that patent owners have a statutory right to seek an injunction.
The FTC and Justice Department. In two recent decisions, the FTC held that seeking to enjoin infringement of an SEP subject to a F/RAND commitment may constitute an unfair method of competition and/or an unfair act or practice in violation of Section 5 of the FTC Act. These decisions follow a June 2012 FTC statement asserting that, in light of the potential for "patent hold-up," an International Court of Justice (ITC) exclusion order should not be available for infringement of a F/RAND encumbered SEP.
In its December 2012 decision in In the Matter of Robert Bosch GmbH,5 the commission considered the merger of Bosch and its competitor SPX Service Solutions (SPX). The FTC alleged that SPX's injunction demands in infringement actions based on SEPs subject to a F/RAND commitment constituted an unfair method of competition. The parties entered into a consent order in which Bosch agreed to deliver, to each of the defendants in the SPX patent litigation or any other potential licensee that requested one, a "written, unconditional, unilateral, irrevocable offer" for a "royalty-free, fully paid-up, irrevocable, perpetual, non-exclusive license" to the SPX SEPs.
Two weeks later, the FTC issued a decision in In the Matter of Google.6 It alleged that Google and Motorola Mobility breached Motorola's F/RAND commitments by "seeking to enjoin and exclude willing licensees" of F/RAND-encumbered SEPs to enhance their bargaining leverage, and in doing so violated the "unfair method of competition" and "unfair acts or practices" provisions of Section 5. In a consent order, Google agreed not to seek injunctive relief (including an ITC exclusion order) unless it previously had offered a license on what Google considered to be F/RAND terms. If the initial offer were rejected, Google would be required to participate in a proceeding to determine an appropriate royalty and then to offer a license on the terms determined by the arbitrator or court. Google also agreed to refrain from assigning any SEP to a third party unless the third party agreed to take on Google's F/RAND commitments and obligations under the consent order.
On Jan. 10, 2013, the Justice Department and the U.S. Patent and Trademark Office jointly issued a policy statement in which they agreed with the FTC that an injunction based on a F/RAND-encumbered patent could harm competition and consumers. However, these agencies did not portray such conduct as an antitrust violation, but instead suggested that consideration of the eBay factors should generally preclude an injunction or exclusion order, because (1) by voluntarily making a F/RAND commitment, the patent holder implicitly acknowledges that money damages is the appropriate remedy for infringement, and (2) a court should conclude that such an order or injunction is not in the public interest.
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