Tuesday, December 7, 2021

Biden Administration publishes draft policy statement on standard-essential patents that strikes reasonable balance between patentees' and implementers' interests and bears resemblance to Huawei v. ZTE

Yesterday three U.S. government agencies--the Antitrust Division (ATR) of the United States Department of Justice (DOJ), the United States Patent & Trademark Office (USPTO), and the National Institute of Standards and Technology (NIST)--invited stakeholders to submit comments by early January on a new draft policy statement on standard-essential patents (SEPs).

I applaud the Biden Administration for taking--at least this stage--a very centrist position. Rather than go from one extreme (the Trump Administration's take on SEPs) to another, the three agencies have put forward a statement that reflects a good-faith effort to strike a very reasonable balance. The draft statement warns against the risks to innovation and standards from both the overleveraging of SEPs by their owners and what others simply call hold-out tactics by unwiling licensees. As a litigation watcher, I'm well aware of the existence of either problem.

My favorite part is in footnote 8, which says that "[p]roviding additional information with the licensing offer . . . may be particularly helpful to small entities that do not have the expertise or resources to fully address SEP issues and may lack access to information from which to draw assurance that proposed terms are F/RAND."

The step-by-step negotiation process proposed by the draft statement bears a strong resemblance to EU case law. It's pretty much how the European Court of Justice intended Huawei v. ZTE to be applied, though the post-Sisvel v. Haier I & II reality in Germany looks rather different (and even the relatively FRANDly Dusseldorf Regional Court is not going to challenge Sisvel v. Haier).

In practice, however, SEP injunctions are harder to obtain in the U.S. than in Europe due to eBay v. MercExchange, a decision the draft policy statement obviously mentions.

The draft policy statement is just that--a draft--and even the final vesion is not going to be anything more than persuasive authority in litigation. And how persuasive it will be remains to be seen, as it's obviously difficult for judges to attach much importance to policy positions that depend on which party is in power. At the beginning of this year I was pretty certain that Democrats would stay in power for several terms now, but with what has gone wrong in certain respects (with America now facing a second epidemic: crime), it's possible that Republicans will take back the White House next time. The judiciary will take note of what the executive branch has to say, but has to focus on its own case law. Even the U.S. International Trade Commission (ITC), which is a government agency, is unlikely to modify its stance on the availability of limited exclusion orders (U.S. import bans) over SEPs.

Even if Congress enacted legislation on SEPs (which is not on the horizon at this stage), it wouldn't practically change much for net implementers who do business in jurisdictions such as the UK and Germany. They'd be forced into global portfolio licenses under the threat of sales bans. The effect would then only be indirect, with net implementers possibly hoping that policy makers in Europe might be influenced by the Biden Administration--which I just don't expect to happen.

The draft statement does not touch on the question of whether an implementer who declines to take a global portfolio license should be enjoined the way it is done in the UK and Germany--nor does it say anything about the recent proliferation of antisuit (and anti-antisuit, anti-anti-antisuit, and anti-anti-anti-antisuit injunctions) in that context. Antisuit injunctions are available under U.S. law. But if foreign courts bar an implementer from seeking a U. S. antisuit injunctions by means of a (often even pre-emptive) anti-antisuit injunction, there is little that U.S. courts can do for implementers asking them for help.

While the Trump Administration's policy statement stressed that antitrust law is not above patent law, and effectively suggest that SEP issues should be dealt with under patent and contract rather than competition law, the Biden Administration's draft policy statement makes a few references to antitrust law in footnotes. For example, the statement says patents should be treated like any other property, and that "[c]onditions on licensing may also raise antitrust concerns."

There is nothing in the draft statement on the question of the proper royalty base or on suppliers' access to component-level exhaustive SEP licenses.

Different stakeholders and their lobbying fronts are going to make all sorts of demands now. From my perspective, there's no reason either side could claim that the sky is falling. Neither is anything in that draft statement ourageously unfavorable to one camp nor is the statement going to make huge impact (for the reasons I explained above). But whatever the three government agencies put forward after the current round of feedback could be more controversial.

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