Wednesday, May 9, 2012

ITC asks 'members of the public' for input on how an Xbox import ban would affect the public interest

Companies and organizations fighting the abuse of standard-essential patents as well as makers of Xbox games now have an opportunity to warn a U.S. trade agency against the implications of a ban of Microsoft's wildly popular gaming console resulting from Motorola's aggressive enforcement of patents on the H.264 (video codec) and IEEE 802.11 (WLAN, or WiFi) industry standards. Motorola's suspected abuse of standard-essential patents is problematic enough that the European Commission has launched two formal investigations, but an Administrative Law Judge (ALJ) at the United States International Trade Commission (ITC) merely stated that Microsoft did not prevail on its related defenses.

On April 23, ALJ Shaw made an initial determination holding Microsoft's Xbox gaming console to infringe four Motorola patents, three of which are FRAND-pledged standard-essential patents. Today the Commission, the six-member decision-making body at the top of the U.S. trade agency, gave formal notice of its request for statements on the public interest. The ALJ's recommendation won't necessarily be adopted. Microsoft and Motorola have both filed petitions for review. But in parallel to the review that is almost certainly going to happen, the ITC will evaluate the public interest issues an import ban could raise.

According to the document, "members of the public are invited to file submissions of no more than five (5) pages" on a variety of potential implications of a limited exclusion order (i.e., import ban), which could come with a cease-and-desist order, for (among other things) competitive conditions in the United States economy or United States consumers. The deadline for such submissions is "close of business [5 P.M. Eastern Time] on Friday, June 8, 2012".

Companies, industry associations and other entities frequently write to the ITC to state their public interest concerns over potential import bans. For example, Google and T-Mobile supported HTC against Apple, and while an import ban was ultimately ordered, the ITC gave HTC plenty of time to modify its products (four months), which may in part be attributable to this support from other stakeholders.

In the Xbox case, the public interest issues of a hypothetical import ban are hugely greater than they were in the HTC case. HTC makes Android-based smartphones and tablets, and its products can easily be replaced by other Android as well as non-Android device makers. Apple only asserted non-standard-essential patents, which can be worked around (in fact, HTC announced a workaround immediately after the ITC ruling).

There is widespread and profound concern in the industry over the rampant abuse of standard-essential patents by certain holders of such patents. Motorola is seeking injunctive relief against both Apple's and Microsoft's core products in the United States and Germany based on such patents. In the summer of 2011, the Federal Trade Commission received position papers from many industry players in response to a call for input relating to standardization. It's possible that companies who are neither Microsoft allies nor enemies of Motorola will submit statements.

Apart from the FRAND issue, an import ban against the Xbox would result in substantial losses of revenue for an entire ecosystem of video game publishers, many of which are U.S. companies.

There could be a rather interesting public interest debate. I will report on any interesting statements that show up on the ITC document server.

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