Antitrust Law Daily Wrap Up, TOP STORY: FTC issues final consent order in Google/Motorola Mobility action over patent practices, (Jul 24, 2013)

By Jeffrey May, J.D.

The FTC has approved a modified complaint and consent order in its action against Google Inc. and its wholly-owned subsidiary Motorola Mobility LLC for allegedly engaging in unfair methods of competition in violation of the FTC Act relating to the licensing of standard essential patents (SEPs) for cellular, video codec, and wireless LAN standards. The modifications come in response to suggestions made in some of the 25 comments received by the agency during the public comment period for the proposed settlement, which was announced in January (In the Matter of Motorola Mobility LLC, Dkt. C-4410, FTC File No. 121 0120, announced July 24, 2013).

Complaint

The complaint, as modified, alleges that “Google, and its predecessor in interest, Motorola Mobility, Inc. (“Motorola”), engaged in unfair methods of competition by breaching its commitments to standard-setting organizations (“SSOs”) to license its standard essential patents (“SEPs”) on fair, reasonable, and nondiscriminatory (“FRAND”) terms. Google violated its FRAND commitments by seeking to enjoin and exclude willing licensees of its FRAND-encumbered SEPs.”

It does not include language found in the proposed complaint that the respondents' conduct amounted to “unfair acts or practices.” The final complaint drops the allegation that: “Google’s conduct is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and is not outweighed by countervailing benefits to consumers or competition, and constitutes unfair acts or practices in violation of Section 5 of the FTC Act.”

In a letter to commenters, the FTC noted that “[r]emoving this count does not indicate a Commission view on the application of its unfair acts or practices authority in other matters alleging harm to competition or the competitive process.”

The Commission dismissed commenters' concerns that prohibiting injunctions through a consent order alleging unfair methods of competition could reduce incentives to innovate and to participate in the standard setting process and that the action was outside of the agency's authority to challenge unfair methods of competition under Section 5 of the FTC Act. Also rejected was the suggestion that the conduct challenged in the complaint was protected by the Noerr-Pennington doctrine.

Consent Order

The Commission determined that it was in the public interest to issue a final consent order with certain modifications to which Google had consented. The FTC made technical modifications to several provisions in the order. These revisions were explained in the letter to commenters.

According to the FTC, the order “sets up a process that allows firms implementing standards that include technology covered by Google’s SEPs to obtain a license on FRAND terms, and to have those terms decided by a neutral third party if necessary.”

The FTC defended a provision (contained in Paragraph IV.F) in the consent order that allows Google to respond if a SEP holder violates its own FRAND commitment by seeking to enjoin the use of its SEPs in Google products. The agency explained that, “[w]ithout the provision, the Order would prohibit Google from responding to Potential Licensees who violate their own FRAND commitments by seeking to exclude or enjoin Google products that incorporate the Potential Licensee’s SEPs.” It was noted that the inclusion of the provision in the order should not be interpreted as Commission support for incorporating so-called “defensive use” exceptions into FRAND commitments.

Included in the changes to the consent order are modifications to provisions pertaining to the arbitration process established to resolve disputes over FRAND terms. For instance, language was added to explain the process when a potential licensee does not timely select a qualified arbitration organization. According to the FTC, other modifications “improve the description of the procedure to initiate arbitration.”

In its letter to commenters, the FTC also highlights the agency's decision to remove language that required Google to include an offer to license when responding to a request to license an SEP from a potential licensee. Paragraph V.A. of the consent order still requires Google to respond within 60 days to the potential licensee's request. However, Google's response can now be “dictated by the circumstances,” according to the Commission.

Attorneys: Peggy Bayer Femenella for FTC. John D. Harkrider (Axinn, Veltrop & Harkrider LLP) for Google Inc. and Motorola Mobility LLC.

Companies: Google Inc.; Motorola Mobility LLC

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