Wednesday, August 3, 2022

Continental, Apple, others want FCC to overstep its mandate by injecting itself into standard-essential patent licensing and litigation

Certain companies and their lobbying fronts are pushing the U.S. Federal Communications Commission (FCC) to support those organizations' efforts to devalue standard-essential patents (SEPs). The most vocal one of them is automotive supplier Continental (see Conti's latest filing, dated July 29), but Apple and its astroturfers (see this July 2021 filing (PDF)) are also involved.

The specific context has docket no. OET 19-138 and relates to the use of the 5.850-5.925 GHz spectrum block for Cellular-V2X (C-V2X) purposes. Put differently, Conti, Apple, and their friends are trying to hijack a spectrum regulation process for their gain, and their pretext--the suggestion that ruthless SEP holders would otherwise threaten the viability of the standard--is simply made up. The SEP holder with the most clout in U.S. politics, Qualcomm, opposes that initiative.

Let's go for a quick, virtual walk around Washington, D.C., and "visit" the various agencies of the Executive Branch that are actually in charge of SEP policy and/or the related enforcement:

  • 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States Patent & Trademark Office (USPTO), and the National Institute of Standards and Technology (NIST) have recently withdrawn a SEP policy statement. At the same time they declined to agree on a new one or reinstate an Obama-era position that was favored by implementers like Apple.

    The fact that those three agencies determined it was better to let the market and--to the extent necessary--courts sort SEP things out strongly counsels against the FCC taking a position on the most controversial of SEP-related questions, which is the proper licensing level and royalty base.

  • The Federal Trade Commission (FTC) challenged Qualcomm's licensing-centric business model, but lost the appeal and ultimately gave up. The bottom line was that patent holders like Qualcomm enjoy wide latitude in defining and implementing their business models, and it's very hard to obligate them to do business with a third party on the latter's preferred terms. While other circuits, such as the D.C. Circuit, could theoretically reach different conclusions than the Ninth Circuit, the FTC v. Qualcomm outcome, too, should dissuade the FCC from taking steps that would invite legal challenges. A solid Supreme Court majority is absolutely not in favor of federal agencies overstepping their mandate.

  • Then there's also the United States International Trade Commission (USITC, or just ITC), which can order import bans if patent rights are infringed (and provided that it's not against the public interest, which is, however, a narrow exception).

It's not a question of whether the FCC is important. No one would doubt that. It's just that too many cooks in the SEP policy kitchen are not a good idea. On its face, Conti's (and its allies') argument is that the FCC should just exercise its regulatory authority in connection with the reservation of spectrum for one specific standard. But the issues, particularly access to exhaustive component-level SEP licenses, have far wider ramifications.

Now, Conti points the FCC to the fact that it mandated FRAND licensing of SEPs in the context of ATSC Conti at least once misspells ATSC as "ATCS" and there are other typos in its recent submissions to the FCC, of which "AUtomotvie" is the most striking one. But compared to last year's Epic Games v. Apple judgment (271 typos and similar mistakes; an average of more than 1.5 per page) that's not too bad.

With respect to ATSC 1.0, the FCC didn't decree that component makers had to be licensed. The agency merely reminded SEP holders of their FRAND licensing obligation without narrowing the meaning of FRAND, which is what Conti and its allies are seeking here. Spectrum regulation isn't FRAND interpretation.

The FCC should not buy those unsubstantiated allegations of widespread problems in SEP licensing. Well over half of the automotive industry (based on car sales volumes) has already taken the Avanci 4G patent pool license. The two exits from the wireless component market that Conti mentions are not even anecdotal evidence: the car industry is affected by a chipset shortage, not by an insufficient number of actual and potential suppliers.

Conti is telling the FCC what the Fifth Circuit rejected (even twice): the notion that Conti is being harmed by the fact that SEP holders prefer to license Conti's customers over licensing Conti itself. The only harm Conti is really suffering here is entirely self-inflicted and amounts to the legal fees it keeps wasting in its crusade against SEP holders.

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