DOJ and USPTO Issue Statement on Injunctive Relief for Infringement of SEPs Subject to FRAND Commitments

January 8, 2013. The Department of Justice's (DOJ) Antitrust Division and the U.S. Patent and Trademark Office (USPTO) released a document [10 pages in PDF] titled "Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments".

This policy statement addresses "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 standards-essential patents that are encumbered by a RAND or FRAND licensing commitment." (Footnotes omitted.)

This policy statement argues that an exclusion order or injunction for a FRAND encumbered SEP may be inconsistent with the public interest. However, there are exceptions. For example, an exclusion order or injunction may be appropriate where the putative licensee has refused to take a FRAND license.

Neither the DOJ nor the USPTO have authority to write rules that are binding either upon the U.S. International Trade Commission (USITC) in Section 337 proceedings, or the U.S. District Courts in patent infringement actions. This policy statement is written for whatever persuasive or argumentative value it might have.

The Federal Trade Commission (FTC), which shares antitrust enforcement authority with the DOJ, did not join in this statement. However, the FTC expressed views regarding the availability of injunctive relief to enforce SEPs subject to FRAND commitments in an amicus curiae brief [25 pages in PDF] filed with the U.S. Court of Appeals (FedCir) on December 5, 2012, in Apple v. Motorola, App. Ct. Nos. 2012-1548 and 2012-1549. See also, story titled "FTC Files Amicus Brief Re Availability of Injunctive Relief in SEP FRAND Case" in TLJ Daily E-Mail Alert No. 2,484, December 6, 2012.

19 U.S.C. § 1337 provides, in part, that "The importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that ... infringe a valid and enforceable United States patent or a valid and enforceable United States copyright registered under title 17". Moreover, this section empowers the USITC to issue exclusion orders. See also, the USITC's web page on Section 337 proceedings.

The DOJ/USPTO policy statement states that "exclusion typically is the appropriate remedy when an imported good infringes a valid and enforceable U.S. patent".

It also explains the benefits of standards setting and FRAND commitments. "Standards, and particularly voluntary consensus standards set by standards-developing organizations (SDOs), have come to play an increasingly important role in our economy" and "serve the public interest in a variety of ways".

However, the policy statement continues, "collaborative standards setting does not come without some risks. For example, when a standard incorporates patented technology owned by a participant in the standards-setting process, and the standard becomes established, it may be prohibitively difficult and expensive to switch to a different technology within the established standard or to a different standard entirely. As a result, the owner of that patented technology may gain market power and potentially take advantage of it by engaging in patent hold-up, which entails asserting the patent to exclude a competitor from a market or obtain a higher price for its use than would have been possible before the standard was set, when alternative technologies could have been chosen."

"In an effort to reduce the occurrences of opportunistic conduct in the adoption of voluntary consensus standards, while encouraging participants to include the best available technology in standards, some SDOs have relied on voluntary licensing commitments by their participants, including commitments to license the patents they own that are essential to the standard on F/RAND terms."

The DOJ and USPTO state that the US "continues to encourage systems that support voluntary F/RAND licensing -- both domestically and abroad -- rather than the imposition of one-size-fits-all mandates for royalty-free or below-market licensing, which would undermine the effectiveness of the standardization process and incentives for innovation."

This statement argues that "In some circumstances, the remedy of an injunction or exclusion order may be inconsistent with the public interest. This concern is particularly acute in cases where an exclusion order based on a F/RAND-encumbered patent appears to be incompatible with the terms of a patent holder’s existing F/RAND licensing commitment to an SDO."

It reasons that "A decision maker could conclude that the holder of a F/RAND-encumbered, standards-essential patent had attempted to use an exclusion order to pressure an implementer of a standard to accept more onerous licensing terms than the patent holder would be entitled to receive consistent with the F/RAND commitment -- in essence concluding that the patent holder had sought to reclaim some of its enhanced market power over firms that relied on the assurance that F/RAND-encumbered patents included in the standard would be available on reasonable licensing terms under the SDO’s policy. Such an order may harm competition and consumers by degrading one of the tools SDOs employ to mitigate the threat of such opportunistic actions by the holders of F/RAND-encumbered patents that are essential to their standards."

On the other hand, "An exclusion order may still be an appropriate remedy in some circumstances, such as where the putative licensee is unable or refuses to take a F/RAND license and is acting outside the scope of the patent holder’s commitment to license on F/RAND terms."

Also, "An exclusion order also could be appropriate if a putative licensee is not subject to the jurisdiction of a court that could award damages."

See also, stories titled "DOJ's Morton Addresses SEPs, FRAND, Non-SEPS and Hold Ups" in TLJ Daily E-Mail Alert No. 2,484, December 6, 2012, and "DOJ's Hesse Addresses Patents and Standard Setting Organizations" in TLJ Daily E-Mail Alert No. 2,466, October 23, 2012.

(Published in TLJ Daily E-Mail Alert No. 2,506, January 9, 2012.)