In response to Qualcomm's motion to stay FTC's antitrust remedies, industry body says DOJ antitrust chief has "aspirational policy positions"

Over the course of the last 14 months, U.S. Antitrust AAG (Assistant Attorney General) Makan Delrahim has been mentioned here on half a dozen occasions, most of which were directly--and some of them at least indirectly--related to his tireless advoacy on his former client Qualcomm's behalf (1, 2, 3, 4, 5, and 6). In the second one of those posts, I quoted an article (PDF) according to which Mr. Delrahim's positions "lack legal support" and are simply "out of sync with a large and growing body of US case law" on such issues as injunctive relief and FRAND royalty rates.

In an amicus curiae brief filed last week to support the FTC's opposition to Qualcomm's motion to stay the enforcement of antitrust remedies, ACT | The App Association described that lack of legal support and desynchronization with case law as follows:

"[...] Mr. Delrahim expressly desires to change Supreme Court precedent, whereas the district court and this Court are required to apply existing law. Notably, AG Barr, in sworn testimony to the FTC, has also voiced views and 'theories' contrary to Mr. Delrahim's aspirational policy positions." (emphasis in original)

That's a diplomatic way of saying that the man who is often referred to as "U.S. antitrust chief" (though the Federal Trade Commission is safely outside his sphere of influence, which is why he's resorting to amicus briefs) has an agenda of swimming against the judicial tide in the FRAND/SEP context.

Not only is Mr. Delrahim at loggerheads with the case law but most industry players disagree with him. ACT says in its filing that "[t]he companies and associations that have joined [ACT | The App Association] in efforts to curtail SEP abuses represent over $100B annually in R&D spending across a range of industries, own hundreds of thousands of patents (including SEPs), employ 50 million+ Americans, and contribute trillions of dollars to annual U.S. GDP." (emphasis in original)

As to Mr. Delrahim allegedly "expressly desir[ing] to change Supreme Court precedent," I've looked up the speech ACT is referring to. What he said is a bit more nuanced. He argued that the Supreme Court "has not yet commented on [a particular] issue," though he did concede that "[i]n a handful of cases, the U.S. Supreme Court has recognized that there can be antitrust liability for collusive activity that manipulates the standard-setting process to gain an advantage over rivals," and "recognizes that concerted action among implementers or innovators at the same level of the supply chain could constitute an antitrust violation." But, in general, ACT is right that Mr. Delrahim's approach to SEP-related legal questions is that he'd rather make new law than just live with the existing one.

Not only in this context but generally speaking, the ACT's filing complement and reinforces the FTC's opposition brief to Qualcomm's motion, lodged with the Ninth Circuit after an endeavor to the same end failed in Judge Koh's court, for an enforcement stay. Where the FTC stays true to its low-key tone, the ACT is far more combative and directly points the appeals courts to some striking contradiction and inconsistencies between what Qualcomm and its amicis are saying now and what Qualcomm has said and done before, including that "[Qualcomm] even sued a rival chipmaker for breach of FRAND based on the rival's refusal to license [Qualcomm]." (emphasis in original) The ACT brief also notes that Qualcomm Technology Licensing's current president, Alex Rogers, said the following more than a decade ago (he was a vice president at the time): "Saying [Qualcomm] refuse[s] to license competitors is like saying McDonald's refuses to sell hamburgers [...] It's nuts. It's crazy."

With respect to the public interest, Qualcomm's allegations of irreparable harm, and the strategic interests of an amicus like Ericsson, the ACT brief is direct and forceful where the FTC is rather low-key. When it comes to the merits, however, the FTC's brief does a really great job defending Judge Lucy H. Koh's ruling. In a recent post I already took the position that it doesn't make sense that a refusal to deal can only constitute an antitrust violation if it's bad for short-term profitability. The FTC cites to a Third Circuit decision, ZF Meritor LLC v. Eaton Corporation, that explains this very well. Let me quote that one more extensively than the FTC (facing page limits) did, but not without pointing out that the specific context here was exclusive dealing, which is also an issue in the FTC v. Qualcomm case but not relevant to the motion for an enforcement stay:

"Although the Supreme Court has created a safe harbor for above-cost discounting, it has not established a per se rule of non-liability under the antitrust laws for all contractual practices that involve above-cost pricing. See Cascade Health Solutions v. PeaceHealth, [...] (9th Cir. 2007) (stating that the Supreme Court's predatory pricing decisions have not 'go[ne] so far as to hold that in every case in which a plaintiff challenges low prices as exclusionary conduct[,] the plaintiff must prove that those prices were below cost'). Nothing in the case law suggests, nor would it be sound policy to hold, that above-cost prices render an otherwise unlawful exclusive dealing agreement lawful. We decline to impose such an unduly simplistic and mechanical rule because to do so would place a significant portion of anticompetitive conduct outside the reach of the antitrust laws without adequate justification.

"'[T]he means of illicit exclusion, like the means of legitimate competition, are myriad.' Microsoft, [...] ('Anticompetitive conduct can come in too many different forms, and is too dependent on context, for any court or commentator ever to have enumerated all the varieties.') [...]"

Qualcomm has the right to file an optional reply brief, and I guess it will. At that point, or on some other occasion should there surprisingly be no reply brief, I'll go into more detail on some of the theories. Below please find the FTC filing as well as the ACT's high-energy and high-value amicus brief:

19-07-18 FTC Opposition to ... by Florian Mueller on Scribd

19-07-19 ACT the App Associ... by Florian Mueller on Scribd

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On DOJ's behalf, former Qualcomm lawyers file amicus brief in support of Qualcomm and point to paper co-authored by Qualcomm lobbyist: Ninth Circuit appeal of consumer class certification

This is the first part of today's little trilogy of FRAND-related posts.

In early May, the Antitrust Division of the DOJ, under Qualcomm's former outside counsel and now-Assistant Attorney General Makan Delrahim, filed an amicus brief with the United States District Court for the Northern District of California more than three months after the FTC v. Qualcomm trial (!), seeking to dissuade--to no avail, as we know by now--Judge Lucy H. Koh from ordering injunctive remedies against the chipset maker that generates two thirds of its profits from patent licensing, not product sales. The FTC sharply disagreed with this attempt by a government department to influence the outcome of an antitrust case brought by an independent government agency, and Judge Koh, in her late-May ruling, gave the DOJ's initiative short shrift.

The Antitrust Division of the DOJ, which has so far been disproportionately more active filing amicus briefs than actually enforcing the antitrust laws (though Mr. Delrahim is now apparently taking aim at Apple and Google). And on Monday, the AAAG (Antitrust AAG), did it again. The latest filing supports Qualcomm's Ninth Circuit appeal of Judge Koh's certification of a 250-million-consumer class seeking an average of $20 per U.S. smartphone purchaser from Qualcomm on the grounds of supra-FRAND patent license fees ultimately having been passed on to consumes (this post continues below the document):

19-06-10 Amicus Brief by US... by on Scribd

This latest DOJ amicus brief is at least timely (filed one week after Qualcomm's opening brief in accordance with applicable rules); it is a joint filing by the DOJ with the states of Texas, Ohio and Louisiana; and while the consumer class action got consolidated with the FTC case, a reversal of class certification wouldn't weaken the FTC's case in any way, so I was going to say that at least the DOJ is not antagonizing a federal government agency again. But... unfortunately there's footnote 7, and that footnote is so insane that it makes the early-May request for a hearing on remedies appear reasonable by comparision:

"7 Caution is particularly appropriate with respect to this case because the interaction of antitrust law and patent rights in cases like this one is in flux. Although claims of the sort in this case are grounded in certain scholarly literature, see Fiona M. Scott Morton & Carl Shapiro, Strategic Patent Acquisitions, [...] (2014), such claims and theories of liability remain controversial, and more recent scholars have questioned their viability, see Douglas H. Ginsburg, Koren W. Wong-Ervin & Joshua D. Wright, The Troubling Use of Antitrust to Regulate FRAND Licensing, [...] (2015); Assistant Attorney General Makan Delrahim Delivers Keynote Address at University of Pennsylvania Law School: The 'New Madison' Approach to Antitrust and Intellectual Property Law (Mar. 16, 2018), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-keynote-address-university."

First, FRAND abuse is not just a subject of academic debate as the term "grounded in certain scholarly literature" suggests. There's FRAND case law in the U.S., especially in the Ninth Circuit. Decisions, not just writings.

But the unbelievable absurdity here is something else. AAG Delrahim was outside counsel for Qualcomm for many years (which may be the reason for which he didn't formally sign last month's filing with Judge Koh's court); as I already pointed out last month, his deputy Andrew Finch joined him from a law firm that has also done a lot of high-profile work for Qualcomm. So the two first signatories of the filing are former Qualcomm lawyers who behave as if they were still were. That would be a credibility issue, but what is really an insanity here is that they seek to support their claim of FRAND antitrust laws being "in flux" by pointing to "scholars" taking that position--and then they point to a paper co-authored by Qualcomm lobbyist Koren W. Wong-Ervin (whom I already mentioned last fall) and a speech by Mr. Delrahim (again, a former Qualcomm lawyer) himself.

Mrs. Wong-Ervin is just one of three authors of that paper; but the fact that someone who shortly thereafter was hired to become a Qualcomm lobbyist was involved taints that paper in this Qualcomm-specific context.

So they ignore U.S. case law on standard-essential patent (SEP) abuse by portraying it as just a subject of academic debate, and then they suggest there's a more recent countercurrent, but they base that claim on a paper co-authored by a Qualcomm lobbyist and a speech by Qualcomm's best friend in the U.S. government (and the first signatory of the amicus brief in question), Mr. Delrahim.

The DOJ can do better than that. I really do have the greatest respect for the department and have supported the DOJ's positions on various occasions (once even in the "travel ban" context), but--sorry to say so--no matter how hard I try, I can't have respect for such idiocies as footnote 7.

Other than that footnote, that amicus brief is reasonable, even though reasonable people can disagree with it. The key antitrust issue here is this: Illinois Brick doesn't give indirect purchasers (here, the consumers bought phones, but the makers of those devices paid patent royalties to Qualcomm) standing to seek damages under federal antitrust laws; but many states have, as some say, "repealed" (or one might also say "worked around") Illinois Brick by allowing such claims under state competition laws. California is one of those "repealer" states, while the states that joined the DOJ in this week's filing (Louisiana, Ohio, and Texas) are among the states that declined to do so. The biggest question in this appeal is whether Judge Koh correctly held that states like the three I just mentioned have no interest in precluding their citizens from seeking compensation from a California company (here, Qualcomm) under California state law, given that many or even most of them presumably purchased their phones in their home states, not California.

The U.S. Chamber of Commerce has also filed a brief in support of Qualcomm's appeal of the class certification decision, as has the Washington Legal Foundation.

While I think Judge Koh's class certification decision should be upheld, I wouldn't deny that Qualcomm and its amici reasonably dispute that California law should benefit non-Californian smartphone purchasers. The federal government as well as some "non-repealer" states can legitimately raise a federalist issue here, whether or not one ultimately agrees with them. But footnote 7 is just too much. It shows that the DOJ's Antitrust Division, under AAG Delrahim, is simply in the tank for Qualcomm. "Qualcomm, right or wrong, our former client"--that appears to be the attitude. And it led those Qualcomm allies to claim that "scholars" disagree on how to handle the complicated intersection of patent rights and antitrust laws only because Qualcomm and its allies, unsurprisingly, have a certain position.

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FTC calls DOJ statement in Qualcomm antitrust case "untimely," says it "misconstrues applicable law and the record": inter-institutional quarrel

On Thursday, one week after the Department of Justice submitted its puzzling Statement of Interest in the FTC v. Qualcomm antitrust case awaiting Judge Lucy H. Koh's judgment in the Northern District of California, the Federal Trade Commission filed a response that is as concise as it is informative at different levels (this post continues below the document):

19-05-09 FTC Response to DO... by on Scribd

After the ninth word ("untimely" before "Statement of Interest") it's already clear that the FTC doesn't appreciate the DOJ's bewildering kind of intervention. The FTC doesn't talk about why the DOJ would make such a filing now (and not long before, if at all), but it's easy to see: after the Apple-Qualcomm settlement, Qualcomm's allies in the federal government such as DOJ antitrust chief Makan Delrahim (whose subordinates submitted the Statement of Interest) are now concerned that Judge Koh's impending decision might have an impact on the Apple-Qualcomm deal. The DOJ primarily expressed concerns over the FTC's request that the court order Qualcomm to renegotiate all patent license agreements, and who knows what clauses in the Apple-Qualcomm contract might provide for some adjustments based on the outcome of the FTC case. Within the universe of its own that is the FTC v. Qualcomm antitrust litigation, however, the separate and now-settled Apple-Qualcomm dispute is not an outcome-determinative or even just procedurally relevant factor.

What's funny is that the FTC clarifies it "did not participate in or request [the DOJ's] filing." It's a diplomatic way of saying that the filing is unwanted, unwarranted, and unhelpful.

The related footnote (footnote 1) then notes that another district court (in Minnesota) declined to consider a Statement of Interest by the DOJ's Antitrust Division in light of "unjustified delay and the fact that [the] case [had] been fully and thoroughly briefed by all other parties." Generally, the FTC's short filing says between the lines that they totally trust that Judge Koh is not going to be impressed, swayed, or much less fooled by the DOJ's statement anyway, so while they (the FTC) "disagree with a number of contentions in the [DOJ] Statement," they just provide some examples in a footnote. The final sentence of that statement is particularly interesting in my view:

• "The Statement also cites documents that Qualcomm chose not to introduce at [the FTC v. Qualcomm] trial [...]:

  This is about an Apple-internal document that Qualcomm presented in its opening statement last month in San Diego, according to which Apple just sought to hurt Qualcomm financially but considered its technology the best. While Qualcomm would have tried to leverage that document in front of the San Diego jury (just that the case was settled before the trial began in earnest), it's interesting that it didn't bring this up in January, considering how much time Qualcomm actually had for all sorts of seemingly less relevant issues such as its (undisputed) innovation culture.

• "[...] and cites a commentator whom Qualcomm chose not to offer as a witness at trial.":

  Tihs refers to the following sentence in footnote 6 of the DOJ statement: "One commentator has observed that these documents 'potentially reveal[] that Apple was engaging in a bad faith argument both in front of antitrust enforcers as well as the legal courts about the actual value and nature of Qualcomm's patented innovation.'"

  The "commentator" is Professor Adam Mossoff, a law professor at GMU and director of the Centor for the Protection of the Intellectual Property. He's in the tank for Qualcomm and generally for patent holders; he has been for a long time, be it at Congressional hearings, conferences, or in the media. He's extremely good at it, but to portray him as a "commentator" when Qualcomm was contemplating calling him as a witness in the January trial is a distortion.

The FTC notes that it "supports and is prepared to provide further briefing and argument on remedy should the Court’s liability ruling make such briefing and argument necessary," but in yesterday's filing also notes that the question of whether liablity and remedy should be evaluated separately had already been addressed earlier, and the parties had in fact provided briefing on remedy as the FTC's summaries of various documents (or passages thereof) show:

• ECF No. 314: "Court rejecting Qualcomm bifurcation proposal"

• ECF No. 916: "extensive discussion of remedy issues"

• ECF Nos. 928, 929, 932, 933: "party briefs on remedy evidence"

• ECF No. 967: "Qualcomm proposed conclusions of law on remedy"

There's no question that the DOJ's Antitrust Division is trying to help Qualcomm against the FTC (and, by extension, Apple, whose credibility the DOJ's statement calls into question), but this effort is unlikely to bear any weight whatsoever with Judge Koh and, with respect to the FTC, may even have been counterproductive. The FTC is a government agency, but it's independent: the President appoints the commissioners, but he can't fire them during their term. The DOJ's Antitrust Division, by contrast, reports to the Attorney General, whom the President can replace whenever he wants. The FTC cherishes its independence, and by interfering with its case, the DOJ may actually just have created a situation in which it's institutionally important for the FTC to show its independence by statements such as the one filed yesterday and whatever statements, decisions or actions may follow. There comes a point where even a commissioner inclined or prepared to settle the case with Qualcomm on a certain set of terms may have to worry about institutional implications.

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Assistant Attorney General Delrahim appears unreceptive to FRAND arguments, yet the DoJ is not above the law

This is a follow-up to last month's post on an open letter that 77 former government officials and professors (of law, economics, and business) sent Assistant Attorney General Makan Delrahim in order to remind him of long-standing and consistent U.S. policies on standard-essential patents (SEP) under both Republican and Democratic administrations. I've meanwhile become aware of the AAG's reply, which does not provide any indication that he's on the side of innovation and fair competition.

To his response, Mr. Delrahim attached a letter dated February 13, 2018 from about a dozen academics and former government officials that support the statements he makes, which he describes as "the United States' policies" (we'll talk about that further below). With the greatest respect for those individuals, they do not collectively counterbalance the 77 signatories of the letter that criticized Mr. Delrahim's statements. That's not just a matter of numbers: for an example, there is no former FTC chairman among them.

Also, before the academics' February letter, there was a very impressive industry letter to AAG Delrahim in January, signed by industry bodies such as CCIA, the Fair Standards Alliance, the Software & Information Industry Association (SIAA), and ACT | The App Association, but also by major tech companies such as Apple, Intel, Microsoft, Samsung, HP, Dell, and Cisco. It's very hard to understand why neither of those letters appears to have given AAG Delrahim pause. Does he seriously think he can make his contribution to #MAGA by acting against the likes of Apple, Intel, HP, and Microsoft--and trade organizations that have such companies as Google among their membership?

There's one little passage in Mr. Delrahim's response to the professors and former government officials that strikes me as being hostile in a way that isn't particularly subtle: "[...] we are happy to receive your or your clients' views [...]" (emphasis added)

The 77 signatories wrote him in their own names, not on behalf of clients. Just like I could cite examples of signatories of the other (anti-FRAND) letter who have attorney-client relationships with certain organizations, that may very well also apply to some of the 77 FRAND defenders. However, the FRAND cause really does get a lot of support from competent people who simply understand the devastating impact on innovation and competition that standard-essential patents (SEP) abuse has. The cause is so strong and important that many thought leaders are glad to defend it without anyone paying them for it.

In general, one of the things I like about President Trump and his administration is that they speak out without too much constraint from traditional, conventional etiquette (including, but not limited to, political correctness). It's important to be open and direct. However, in AAG Delrahim's case I'm afraid that his thinking (that anyone who disagrees with him likely does it because he's retained by someone) makes it even harder to help him understand the real issues. He appears to genuinely believe that holdout (companies not paying license fees they owe) is a bigger problem than holdup (SEPs being used as "one bullet to kill"). That's unsupported by any evidence. It would obviously be inappropriate, regardless of his gratuitous reference to the signatories' "clients," to suspect some kind of conspiracy between him and the enemies of FRAND access to industry standards, but according to Wikipedia, Qualcomm is one of his former clients.

What's way more important than present or past, disclosed or undisclosed, existing or imaginary attorney-client relationships is what the law says. Further above I mentioned that he refers to his outlier positions as "the United States' policies." With the greatest respect for the Department of Justice and its officials (though the DoJ has, to the best of my knowledge, never been under even a fraction of this much fire from the White House), "the United States' policies" on antitrust were never made by the DoJ's related division. There's also the Federal Trade Commission (FTC), but above all, let's not forget about the judges.

An article (PDF) written by two Washington, DC-based antitrust lawyers, Orrick Herrington Sutcliffe's John "Jay" Jurata, Jr. and Emily Luken, for the Global Competition Review explains that Mr. Delrahim's positions "lack legal support" and are simply "out of sync with a large and growing body of US case law" on such issues as injunctive relief and FRAND royalty rates. As a tech litigation watcher I couldn't agree more.

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77 former government officials and professors remind Assistant AG Delrahim of long-standing U.S. policy on standard-essential patents

Given the importance of this subject, I'll now republish an open letter that 77 former government officials and professors (of law, economics, and business) have sent Assistant Attorney General Makan Delrahim in order to remind him of long-standing and consistent U.S. policies on standard-essential patents (SEP) under both Republican and Democratic administrations. Mr. Delrahim's outlier positions are disconcerting indeed. Access to standard-essential patents on fair, reasonable and non-discriminatory (FRAND) terms is not a "left or right" question.

I'm not aware of any other patent blogger who would have declared himself a support of Donald Trump as early or as unequivocally as I did (January 2016), and there are several policy areas in which I really like it when the Trump Administration does away with Obama policies that I consider misguided and some of which clearly failed (especially in the foreign-policy context). However, if it ain't broke, don't fix it! When it comes to SEPs, consistency and continuity with prior administrations (including, but not limited to, the Obama Administration) are the best way forward. The alternative would have the opposite effect of making America great again: SEP abuse poses a serious threat to many of America's (and the rest of the world's) most innovative companies. That's why I wish to express my support (as someone who wouldn't have been eligible to sign it) for the open letter by providing a link to its PDF version and, for your convenience, its full text below.

The order of the impressive list of signatories: first, the author of the letter (Professor Carrier); then, former high-ranking government officials; then, former mid-level government officials; finally, academics without former government positions.

-------------

May 17, 2018

BY OVERNIGHT MAIL AND E-MAIL

Assistant Attorney General Makan Delrahim
U.S. Department of Justice
Antitrust Division
950 Pennsylvania Ave., NW
Washington, DC 20530

Re: Speeches on Patents and Holdup

Dear Assistant Attorney General Delrahim:

We, 77 former government enforcement officials and professors of law, economics, and business, write to express concern with recent speeches[1] you have made that we do not believe are consistent with the broad bipartisan legal and economic consensus that has existed for over a decade regarding standard setting. We would like to raise eight issues in particular.

First, the anticompetitive harms from patent holdup have been consistently acknowledged by officials in Republican and Democratic administrations. The unanimously adopted 2007 joint agency Report, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition, explained the difference between a patentee's power ex ante (when "multiple technologies may compete to be incorporated into the standard") and ex post (when "the chosen technology may lack effective substitutes precisely because the SSO chose it as the standard"). This disparity can allow the patentee to "extract higher royalties or other licensing terms that reflect the absence of competitive alternatives." Id. at 35-36. The FTC also unanimously endorsed the 2011 Report, The Evolving IP Marketplace, which highlighted how "an entire industry" could be "susceptible" to the "particularly acute" concern of holdup, which can result in "higher prices" and "discourage standard setting activities and collaboration, which can delay innovation." Id. at 234.[2] And the National Research Council of the National Academies concluded in its Report on Patent Challenges for Standard-Setting in the Global Economy that "a FRAND commitment limits a licensor's ability to seek injunctive relief." Id. at 9.

Second, the holdup problem has been recognized by courts and standard setting organizations hemselves.[3] As one court stated, patent holdup is not a theoretical concern, but instead "is a substantial problem that [F]RAND [fair, reasonable, and nondiscriminatory licensing] is designed to prevent." In re Innovatio IP Ventures, 2013 WL 5593609, at *9 (N.D. Ill. Oct. 3, 2013).[4] As former FTC Commissioner Terrell McSweeney recently pointed out, courts in two cases awarded patentees only 1/150 and 1/500 of the royalties the patentholder sought. Commissioner Terrell McSweeny, Holding the Line on Patent Holdup: Why Antitrust Enforcement Matters, Mar. 21, 2018. The fact that SSOs— those with the most knowledge of the issues—adopt FRAND policies is itself telling proof that holdup is a problem; otherwise, why would they adopt contractual practices to prevent holdup?[5] In addition to higher royalties, expenditures can escalate as holdup increases the costs to SSOs and to those who oppose FRAND clarification. Timothy J. Muris, Bipartisan Patent Reform and Competition Policy, American Enterprise Institute Report 9 (2017).[6]

Third, we agree that “"he hold-up and hold-out problems are not symmetric." Nov. 10, 2017 speech. But we believe that it is holdup that presents the more serious antitrust concern. As an initial matter, the risks faced by innovators are consistent with the "speculative investments" always made by technology and product developers; in contrast, implementers are vulnerable to paying supra-competitive royalties based on the entire value of the product, not on the value of the patented technology. A. Douglas Melamed & Carl Shapiro, How Antitrust Law Can Make FRAND Commitments More Effective, at 7-8, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3075970, 127 YALE L.J. __ (forthcoming 2018). While we agree that coordinated action can implicate antitrust, these concerns are not presented in licensing disputes at the core of holdout. The potential for holdout exists on both sides of contracts, occurring "when one side refuses to perform in good faith or negotiate reasonably." Muris, at 9. In contrast, the holdup problem and accompanying lock-in value exist only on one side of the exchange.

Fourth, patentees that obtain or maintain monopoly power as a result of breaching a FRAND commitment present a standard monopolization case. E.g., Broadcom v. Qualcomm, 501 F.3d 297, 314 (3d Cir. 2007); Microsoft Mobile v. Interdigital, 2016 WL 1464545, at *2 (D. Del. Apr. 13, 2016).[7] FRAND breaches could satisfy the section 2 elements of exclusionary conduct by demonstrating an exclusion of competitors (the exclusion of rival competitive technologies not chosen by the SSO) that results in competitive injury (price increases and innovation harms from the breach) and acquisition or maintenance of monopoly power (obtained through the breach). Moreover, the conduct here is not protected under the "absolutist position" that Noerr-Pennington "immunizes every concerted effort that is genuinely intended to influence governmental action," as this would allow parties to violate the antitrust laws, for example by being "free to enter into horizontal price agreements." Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 503 (1988). Instead, a breach of a FRAND promise is "distinguish[able] from Noerr and its progeny" because it is "the type of commercial activity that has traditionally had its validity determined by the antitrust laws themselves." Id. at 505; see also FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 424-25 (1990).

Fifth, while we agree that patents are important for innovation and that injunctive relief often is appropriate, we do not agree that patents provide an unqualified "property right to exclude" that is accompanied by an injunction and a conclusion that "unilateral patent hold-up" is "per se legal." Mar. 16 speech. Hornbook law does not give property owners absolute rights to exclude. There are at least 50 doctrines (such as adverse possession, easements, eminent domain, nuisance, and zoning) that limit property owners' rights. Michael A. Carrier, Cabining Intellectual Property Through a Property Paradigm, 54 DUKE L.J. 1 (2004). Landowners, for example, cannot exclude others from entering their land to save lives or property or to avoid some other serious harm.[8] Relatedly, in upholding the inter partes review process for administratively reconsidering patents, the Supreme Court recently held that "[p]atents convey only a specific form of property right—a public franchise." Oil States Energy Servs. v. Greene's Energy Group, 2018 WL 1914662, at *8 (U.S. Apr. 24, 2018).

Sixth, the position that patent infringement necessarily results in an injunction is, for good reason, no longer the law. More than a decade ago, the Supreme Court ruled unequivocally that courts must decide whether to grant injunctions "consistent with traditional principles of equity, in patent disputes no less than in other cases." eBay v. MercExchange, 547 U.S. 388, 394 (2006); see also 35 U.S.C. § 283 (patent statute provides that courts "may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable"). In fact, the Federal Circuit, not historically associated with insufficient protection of patent rights, has made clear that the eBay framework "provides ample strength and flexibility for addressing the unique aspect of FRAND committed patents and industry standards in general." Apple v. Motorola, 757 F.3d 1286, 1332 (Fed. Cir. 2015). Because there could be thousands of patents in a product today, it is not appropriate uniformly to apply standards from the 18th century.

Seventh, pointing to exclusive rights granted to patentees as a type of natural property right ignores the uncontroversial utilitarian framework for the patent grant. The Supreme Court has long made clear the primacy of the utilitarian justification. E.g., Graham v. John Deere, 383 U.S. 1, 9 (1966). Exclusive rights exist not to bestow upon patentees a moral right to a reward but to promote the best interests of society. That is why patents, like other forms of intellectual property, are subject to doctrines (like novelty, nonobviousness, the written-description and enablement disclosure requirements, and a limited 20-year term) that ensure that protections for market competition balance patents' incentive effects. Relatedly, it tells only half the story to focus on the incentives relevant to the initial invention while ignoring follow-on innovation, which is just as important and may be undermined significantly when patent owners abuse their FRAND obligations.[9] Suggesting (without offering evidence) that any diminished return to patent holders reduces innovation and welfare "is inconsistent with both sound economic analysis and patent law," as "FRAND commitments that reduce excessive royalties further the policies of both the antitrust laws and the patent laws." Melamed & Shapiro, at 9. And it is also inconsistent with the Supreme Court's recent clear reminder (in a 7-2 ruling written by Justice Thomas) that patents "involv[e] public rights." Oil States, 2018 WL 1914662, at *6.

Eighth, we do not believe that holding patentees to their promise to license on FRAND terms "amount[s] to a troubling de facto compulsory licensing scheme." Mar. 16 speech. Compulsory licensing occurs when the government forces a patentee to license against its wishes. In contrast, here the holder of a standard essential patent voluntarily chooses to license on a FRAND basis, receiving in exchange the SSO's "seal of approval" and the potential for significantly increased volume that comes with that seal, which is well worth the FRAND promise. Unlike other patents, holders of standard essential patents are protected from competition and guaranteed to collect royalties.

We applaud the energy of your leadership of the Division and support the regular reexamination of key antitrust issues. But we do not believe that the case has been made for departing from the bipartisan consensus set out in this letter. Thank you for your consideration of these views.

Sincerely,

Professor Michael A. Carrier[*]
Rutgers Law School

Professor Timothy J. Muris
Antonin Scalia Law School
Former Chairman, Federal Trade Commission

Professor of the Practice of Law A. Douglas Melamed
Stanford Law School
Former Acting Assistant Attorney General, Antitrust Division, U.S. Department of Justice

Emeritus Professor of Economics Richard J. Gilbert
University of California, Berkeley
Former Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice

Professor Fiona Scott Morton
Yale University School of Management
Former Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice

Emeritus Professor of Economics Janusz A. Ordover
New York University
Former Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice

Professor Daniel Rubinfeld
New York University School of Law
Professor of Law and Professor of Economics Emeritus, University of California, Berkeley
Former Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice

Professor Jonathan B. Baker
American University Washington College of Law
Former Director, Bureau of Economics, Federal Trade Commission

David Balto
Former Policy Director, Bureau of Competition, Federal Trade Commission

Professor Stephen Calkins
Wayne State University Law School
Former General Counsel, Federal Trade Commission

Professor Colleen Chien
Santa Clara University School of Law
Former Senior Advisor to Chief Technology Officer (CTO) of United States, IP and Innovation, White House Office of Science and Technology Policy

Professor Andrew I. Gavil
Howard University School of Law
Former Director, Office of Policy Planning, Federal Trade Commission

Professor Marina Lao
Seton Hall University School of Law
Former Director, Office of Policy Planning, Federal Trade Commission

Professor Harry First
New York University School of Law
Former Antitrust Bureau Chief, New York Attorney General's Office

Jay Himes
Former Antitrust Bureau Chief, New York Attorney General's Office

Kevin J. O’Connor
Former Antitrust Chief, Wisconsin Attorney General’s Office
Former Chair, Multistate Antitrust Task Force, NAAG

Professor John Allison
McCombs Graduate School of Business
University of Texas at Austin

Professor Margo A. Bagley
Emory University School of Law

Professor Ann Bartow
University of New Hampshire School of Law

Professor Joseph Bauer
Notre Dame Law School

Professor Jeremy W. Bock
The University of Memphis, Cecil C. Humphreys School of Law

Professor Dan L. Burk
School of Law, University of California – Irvine

Professor Darren Bush
University of Houston Law Center

Professor Michael Carroll
American University Washington College of Law

Emeritus Professor Peter Carstensen
University of Wisconsin Law School

Professor Bernard Chao
University of Denver Sturm College of Law

Professor Andrew Chin
UNC School of Law

Professor Ralph D. Clifford
University of Massachusetts School of Law

Professor Jorge L. Contreras
S.J. Quinney College of Law, University of Utah

Professor Christopher A. Cotropia
University of Richmond School of Law

Professor Joshua Davis
University of San Francisco School of Law

Professor Stacey L. Dogan
Boston University School of Law

Professor Roger Allan Ford
University of New Hampshire School of Law

Professor of Economics and Technology Management H. E. Frech III
University of California, Santa Barbara

Professor Jim Gibson
University of Richmond School of Law

Professor Emeritus Thomas L. Greaney
Saint Louis University School of Law
Visiting Professor, University of California Hastings College of Law

Professor of Economics Emerita Bronwyn H. Hall
University of California, Berkeley

Professor Jeffrey L. Harrison
College of Law, University of Florida

Professor Yaniv Heled
Georgia State University College of Law

Professor Cynthia Ho
Loyola University Chicago School of Law

Professor Tim Holbrook
Emory University School of Law

Professor Michael J. Hutter
Albany Law School

Professor Marie-Christine Janssens
KU Leuven Centre for IT & IP Law

Professor Eileen M. Kane
Penn State Law

Professor Ariel Katz
Faculty of Law, University of Toronto

Professor John B. Kirkwood
Seattle University School of Law

Professor Amy Landers
Drexel University, Thomas R. Kline School of Law

Professor Mark A. Lemley
Stanford Law School

Professor Christopher Leslie
School of Law, University of California – Irvine

Professor Doug Lichtman
UCLA School of Law

Professor Yvette Joy Liebesman
Saint Louis University School of Law

Professor Daryl Lim
The John Marshall Law School

Professor Lee Ann W. Lockridge
Louisiana State University Law Center

Professor Brian J. Love
Santa Clara University School of Law

Professor Phil Malone
Stanford Law School

Professor Jonathan Masur
University of Chicago Law School

Adjunct Emeritus Professor Stephen E. Maurer
Goldman School of Public Policy, University of California, Berkeley

Professor Mark P. McKenna
Notre Dame Law School

Professor Michael J. Meurer
Boston University School of Law

Professor Joseph Scott Miller
University of Georgia School of Law

Professor Ira Steven Nathenson
St. Thomas University School of Law

Professor Emeritus of Economics Roger G. Noll
Stanford University

Professor Srividhya Ragavan
Texas A&M University School of Law

Professor Matthew Sag
Loyola University Chicago School of Law

Professor Christopher Sagers
Cleveland State University School of Law

Professor Sharon K. Sandeen
Mitchell Hamline School of Law

Professor Catherine Sandoval
Santa Clara University School of Law

Professor Joshua D. Sarnoff
DePaul University College of Law

Professor Kurt M. Saunders
California State University, Northridge

Professor Steven Semeraro
Thomas Jefferson Law School

Professor Lea Bishop Shaver
Indiana University School of Law

Professor Aram Sinnreich
American University, School of Communication

Professor Avishalom Tor
Notre Dame Law School

University of Haifa Faculty of Law

Professor Liza Vertinsky
Emory Law School

Professor Spencer Weber Waller
Loyola University Chicago School of Law

Daniel J. Weitzner
Principal Research Scientist, MIT Computer Science and Artificial Intelligence Laboratory
Founding Director, MIT Internet Policy Research Initiative

Professor Abraham L. Wickelgren
University of Texas School of Law

---FOOTNOTES ---

1 The Long Run: Maximizing Innovation Incentives Through Advocacy and Enforcement, Apr. 10, 2018; The "New Madison" Approach to Antitrust and Intellectual Property Law, Mar. 16, 2018; Good Times, Bad Times, Trust Will Take Us Far: Competition Enforcement and the Relationship Between Washington and Brussels, Feb. 21, 2018; Assistant Attorney General Makan Delrahim Delivers Remarks at the USC Gould School of Law's Center for Transnational Law and Business Conference, Nov. 10, 2017.

2 As you recognized in your March 16, 2018 speech, the decision to include a patent in a standard "gives the patent holder some bargaining power" and "would require the patent holder to live up to commitments as they would have bargained for it."

3 The studies cited to show the absence of holdup do not consider the counterfactual scenario: that prices could have fallen faster and output/diversity risen faster absent holdup. After all, few would argue that the Sherman Act was not necessary because, during the decade prior to enactment, "U.S. output of salt, petroleum, steel, and coal all increased significantly, and prices of steel, sugar, and lead all dropped significantly." Jorge L. Contreras, Much Ado About Hold-Up, at 22, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3123245.

4 See also Microsoft v. Motorola, 2013 WL 5373179, at *7 (W.D. Wash. Sept. 24, 2013) (rejecting argument that "hold up does not exist in the real world" and finding that such an argument "does not trump the evidence presented by Microsoft that hold up took place in this case").

5 As Richard Epstein has recognized, "[t]he intellectual history of rate regulation beg[an] with the writings of Sir Matthew Hale in the late seventeenth century," and the "[F]RAND formula" is "the best, indeed the only, approach" for "mimic[king] the performance of competitive markets" while not "undercutting their operation," which is needed since a "monopolist knows that he can extract at least some concessions from higher demanders precisely because they have nowhere else to go." Richard A. Epstein, The History of Public Utility Rate Regulation in the United States Supreme Court: Of Reasonable and Nondiscriminatory Rates, 38 J. SUP. CT. HIST. 345, 346, 348, 366 (2013).

6 It also bears mention that one cannot conclude that the "winning technology" is inherently "better than its rivals" without considering the FRAND commitment that can be critical to the standard-selection decision and can avoid an industry being locked into a non-FRAND-restricted technology. MICHAEL A. CARRIER, INNOVATION FOR THE 21ST CENTURY: HARNESSING THE POWER OF INTELLECTUAL PROPERTY AND ANTITRUST LAW 328-29 (2009); Byeongwoo Kang & Rudi Bekkers, Just-in-Time Inventions and the Development of Standards: How Firms Use Opportunistic Strategies to Obtain Standard-Essential Patents (SEPs), Aug. 28, 2013, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2284024.

7 Relatedly, seeking an injunction against a licensee willing to pay a FRAND rate—such as where LSI sought an exclusion order in the U.S. International Trade Commission before proposing a FRAND license to Realtek, Realtek Semiconductor v. LSI, 946 F. Supp. 2d 998, 1007-08 (N.D. Cal. 2013)—can constitute monopolization. Challenging behavior like this is not "hubris" (Mar. 16 speech); it is an appropriate application of antitrust.

8 Analogously, specific performance, which has the same effect in contract law as injunctions do in patent law, is only available in limited, extraordinary, circumstances. See 12 Corbin on Contracts §§ 63.1, 63.20 (rev. ed. 2012).

9 A standards organization's rule restricting the owner of a standard essential patent that makes a FRAND commitment from seeking injunctions against willing licensees is an appropriate attempt to enforce the FRAND commitment, not a return to the "DOJ's enforcement policies in the 1970s" (Mar. 16 speech) that have rightly been criticized for punishing numerous forms of procompetitive or competitively neutral licensing conduct.

* The letter presents the views of the individual signers. Institutions are listed for identification purposes only.

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