Thursday, May 19, 2022

FTC chair Lina Khan tells ITC 'exclusionary relief is [...] against the public interest where a court has been asked to resolve FRAND terms and can make the SEP holder whole': Philips v. Thales et al.

It's hard to think of a standard-essential patent (SEP) holder I trust less to be fair than Philips. Before Philips settled with Xiaomi, there were clear signs of Philips just seeking leverage from injunctions and trying to prevent Xiaomi's licensing negotiators from knowing the terms of comparable license agreements. There also appear to be interesting issues in the multijurisdictional dispute between Philips and French industrial giant Thales, and this week the Chair of the Federal Trade Commission, Lina Khan, filed a public-interest statement in the investigation of Philips's complaint against Thales and several other defendants. She was joined by Commissioner Rebecca Kelly Slaughter (like her, a Democrat--and that party now has a 3-2 majority of the votes as the Senate confirmed Álvaro Bedoya).

SEPs have so far not really been a priority topic for Ms. Khan (nor for Jonathan Kanter's Antitrust Division of the DOJ). Also, it's important to note that the statement in ITC investigation no. 337-TA-1240 is not based in antitrust law per se: the two commissioners make it clear that they are not claiming to have identified a violation of the federal antitrust laws (Sherman Act, FTC Act). There's also a disclaimer regarding the specific issues in the case. But the bottom line is that they urge the ITC, a U.S. trade agency with the quasijudicial power to order import bans against infringing products, to seriously consider whether monetary relief would be sufficient to make SEP holders (in this case, Philips) whole. Administrative Law Judge David P. Shaw recommended an import ban, though he also recommended that it "be delayed by 12 months" in order to "mitigate its effects on third parties" by giving the respondents sufficient time not only to develop workaround products but also to have them (re-)certified. A 12-month workaround period is unusually ong by ITC standards, but if any truly essential patent was at issue, it couldn't be worked around even in 12 months.

All of this is, of course, subject to whether the decision made by the Commission, the ITC's top-decision making body, results in a finding of a violation at all.

Assuming that the ITC's final determination comes down to an infringement finding and an import ban is ordered (with or without a grace period), there'll be a Presidential review. And at that stage the FTC's input could make a decisive impact. U.S. presidents typically delegate the authority to veto ITC import bans to the U.S. Trade Representative.

Just yesterday, IPWatchdog published an opinion piece by former two-term ITC chair Deanna Tanner Okun warning against weakening the ITC's Sec. 337 remedy (import bans) with respect to SEPs. That article expresses concern over the new SEP policy statement that is in the making. But I'm sure Mrs. Tanner Okun isn't happy about the two FTC commissioners' public-interest statement in the Philips case either.

Finally, let me show you the document (for the first time I'm using DocumentCloud to publish a document here, as I continue to have issues with Scribd):

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