Thursday, June 28, 2012

Six senators oppose exclusion orders over standard-essential patents

I previously mentioned "letters from six senators, led by Senators Herb Kohl (Chairman of the Subcommittee on Antitrust, Competition Policy and Consumer Rights) and Mike Lee (Ranking Member of the same subcommittee)". PoliticoPro had reported on it, but made the letter available to paying subscribers only. Today the letter (dated June 19, 2012) also showed up on the ITC document server.

Here's the first half-page of the two-page letter (click to enlarge):

The antitrust-savvy signatories are, besides Chairman Herb Kohl (a Democrat from Wisconsin) and Ranking Member Mike Lee (Utah), Senators Jon Kyl (Arizona; notably, the Republican Whip), John Cornyn (Texas), Jim Risch (Idaho), and John Hoeven (North Dakota). All of these senators, except for Senator Kohl, are Republicans.

You can find the full text of the letter further below. As you can see in the header shown further above, it was filed in the investigations of both Google/Motorola complaints (the one against Apple as well as the one against Microsoft).

Meanwhile, the ITC has already commenced a thorough review of the preliminary ruling on Motorola's complaint against Apple, and FRAND issues receive a lot of attention based on the review questions. The ITC is still working on its decision on a review of the initial determination in the Xbox case. Google/Motorola just argued that the ITC shouldn't pay attention to Judge Posner's recent ruling.

Prior to the letter from the six senators, the following comments on the public interest had been sent to the ITC:

Full text of the Senators' letter

Dear Chairman Okun:

We write to express concerns with regard to the availability of the exclusion order as a remedy for cases in which "stanard-essential patents" (SEPs) are asserted. Although we take no position on the particular merits of the above-captioned cases, we urge the Commission to consider the following public interest arguments carefully as it proceeds with these and other matters in which SEPs are at issue.

Business and consumers depend on a reliable standards-setting process to promote interoperability and expand choice. Industry standards underpin many of the technologies incorporated in common products used to play online video, connected to the Internet, watch DVDs, or communicate via smartphone. These standards are crucial to ensuring that consumers have access to a competitive market of compatible products.

Many companies that participate in setting industry standards contribute patented technology to the standardization process. As a result, standard-essential patents are inevitably infringed when the standard is implemented. The standards setting process thus depends on a commitment from companies contributing patents to license those patents to all parties implementing the standard on reasonable and non-discriminatory (RAND) terms.

For the standards setting process to function effectively, companies that commit to license their SEPs on RAND terms must seek to resolve disputes over patents through a royalty agreement or judicial determination of a reasonable rate. As these companies have pledged not to exercise exclusivity over such patents, they should not expect the grant of an exclusion order when they are in violation of an obligation to license the patents on RAND terms.

Any precedent that would enable or encourage companies to include their patented technology in a standard, commit to license included patents on RAND terms, and then seek to secure an exclusion order despite a breach of that commitment would thus implicate significant policy concerns. Such an outcome would severely undermine broad participation in the standards-setting process, which would in turn threaten the meaningful benefits these standars provide for both industries and consumers.

Given the value and importance of industry standards, we trust that you will carefully consider and give due weight to these critical public policy concerns in your analysis. Please keep us advised as your decision making process proceeds.



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