FTC Rules Noerr-Pennington Doctrine Does Not Block Antitrust Action for False Representations Regarding Patents During Standards Setting Process

July 7, 2004. The Federal Trade Commission (FTC) issued an order [2 pages in PDF] titled "Order Reversing and Vacating the Initial Decision and Order and Remanding for Further Proceeding" in the FTC's proceeding titled "In the Matter of Union Oil Company of California". The full Commission reversed an administrative law judge's decision that the Noerr-Pennington doctrine prevents the FTC from pursing an antitrust enforcement action against Union Oil Company of California (Unocal) in connection with its making false representations to a government standards setting body regarding its patent rights.

The FTC also issued an opinion [56 pages in PDF] explaining its order. See also, FTC release.

This is an oil industry action. However, this will also affect the application of antitrust laws to technology companies that engage in misrepresentation regarding their patents and patent applications in standards setting processes.

The FTC filed its Administrative Complaint on March 4, 2003 alleging that Unocal subverted the California regulatory standard setting proceedings relating to low emissions gasoline standards, in violation of Section 5 of the FTC Act.

The complaint alleged that Unocal engaged in unfair methods of competition through knowing and willful misrepresentations, to the California Air Resources Board (CARB) and to competing gasoline refiners, that Unocal lacked, or would not assert, patent rights concerning automobile emissions research results. The complaint also alleged that Unocal induced the CARB to adopt standards that overlapped its patents, and that Unocal induced other refiners to reconfigure their refineries in ways that exposed them to Unocal patent claims.

On November 25, 2003, an FTC Administrative Law Judge issued his Initial Decision [74 pages in PDF] in the proceeding captioned "In the Matter of Union Oil Company of California". The ALJ dismissed the FTC's administrative complaint against Union Oil Company of California (Unocal) pursuant to the Noerr-Pennington doctrine, and because the FTC "lacks jurisdiction to decide the fundamental and substantial patent issues raised by the allegations of the Complaint."

The FTC wrote in its July 7 opinion that "A private business allegedly has used false and misleading statements to induce a government body to issue regulatory standards that conferred market power upon the firm. Respondent argues that, even taking the Complaint’s factual allegations as established as is required at this preliminary stage, its deliberate use of misrepresentations to secure monopoly power is protected from antitrust challenge under the Noerr-Pennington doctrine, which shelters certain petitioning for government action. We disagree."

See, Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers v. Pennington, 381 U.S. 657 (1965).

See also, story titled "ALJ Dismisses FTC's Patent Ambush Complaint Against Unocal" in TLJ Daily E-Mail Alert No. 789, December 1, 2003.

The July 7 order states that "the Commission has determined to reverse and vacate the Initial Decision and to vacate the Order accompanying it, and to remand this matter for further proceedings."

The July 7 opinion was written by FTC Chairman Timothy Muris, and joined by the four other Commissioners. The November 25, 2003 Initial Decision was written by Administrative Law Judge Michael Chappell. This is Docket No. 9305. See also, FTC's collection of pleadings in this proceeding.