Monday, June 11, 2012

Intel and AT&T join the FTC, Apple, Microsoft, HP, Cisco, Nokia and others in opposing import bans over standard-essential patents

Google's (Motorola's) pursuit of import bans against the iPhone, the iPad and the Xbox gaming console has drawn even more statements on public interest considerations from major industry players than met the eye last week. Two more statements filed on Friday showed up on the ITC document server today: a statement filed by AT&T in the Motorola v. Apple investigation, and one filed by Intel in the Motorola v. Microsoft investigation. Both letters oppose import bans over FRAND-pledged standard-essential patents (SEPs).

Other submissions to this effect were made by the Federal Trade Commission, Cisco, HP, Nokia, and various industry organizations including the Business Software Alliance, the Entertainment Software Association, and the Retail Industry Leaders Association.

The ITC, a trade agency with quasi-judicial authority, routinely calls for comments on public interest considerations prior to potential import bans. But in connection with import bans over SEPs there is unusually widespread concern in the industry. The ITC can't and won't ignore these submissions.

While Verizon generally opposes import bans, AT&T's statement is focused on the specific issues raised by SEPs. AT&T "respectfully submits that the public interest precludes issuance of an exclusion order for a FRAND-committed standards-essential patent" and says that "[t]he appropriate remedy for infringement of a standards-essential patent subject to a FRAND commitment is FRAND royalties collected in district court". The three-page letter explains that those who contribute patents to FRAND standards "suffer no harm that FRAND royalties are insufficient to compensate", while import bans over SEPs would have major negative implications:

"Issuing exclusion orders for FRAND-committed standards-essential patents harms the public interest with respect to each of these factors: competition would suffer from fewer, higher-priced, less innovative, and lower quality products; production would go down. In the end private consumers as well as state and federal government customers who have come to critically depend on wireless devices and services would be harmed through diminished options and impaired competition."

Intel's nine-page statement is very elaborate and extremely compelling. It explains the general issues of exclusion orders over SEPs, such as "the crucial role of RAND commitments in preserving competition", and goes into detail on the specific policies of the International Telecommunications Union (ITU), the standard-setting organization that created the H.264 video codec standard.

Intel's letter warns against the effects of allowing companies to abuse the market power that they owe to the incorporation of their patented inventions into a standard:

"An Exclusion Order is unnecessary to protect intellectual-property rights in this case, because Motorola has agreed to license those rights to all comers. Moreover, an Exclusion Order here would harm the public interest and U.S. consumers by facilitating the unfair exploitation of market power that was created by an industry standard. This market power, which Motorola agreed to forego in favor of a RAND royalty, would not have existed absent Motorola’s RAND commitment because the standard-setting organizations ('SSOs') that promulgated the standards at issue condition the incorporation of a patent into a standard on the receipt of a RAND commitment.


The adoption of a standard enables the SEP holder to exert leverage over the entire industry by demanding excessive royalties and threatening to enjoin the sale of standard-compliant products. Unlike with ordinary patents--which an infringer can often design around to produce a materially similar product-- it is commercially infeasible for an individual manufacturer to decline to incorporate a commercially accepted standard (and hence the SEPs) into a new product. Indeed, the very purpose of interoperability standards is to incorporate identical standard-compliant features into products so that different manufacturers’ products will work together. Failing to adopt the H.264 standard would make Microsoft’s products unable to process the large volume of video content using that standard, and failing to adopt the 802.11 standard would make its products unable to communicate with the large installed base of Wi-Fi routers in both private and public places."

Google should really think about whether it wants to be seen as the worst patent abuser among large IT companies in the history of the industry. While competition enforcers around the globe and many industry leaders agree that SEPs are not supposed to be used as nuclear weapons, there still isn't even one statement in Google's (Motorola's) favor. Not even one.

Also, Google's approach to patent litigation just suffered a major setback in an ITC investigation of a complaint HTC filed against Apple last year. An ITC judge threw out five Google patents that HTC was using against Apple because Google apparently didn't truly sell all of the substantial rights to HTC.

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