Antitrust Law Daily Wrap Up, TOP STORY—International Trade Commission Urged to Consider Damages, Rather than Exclusion Order, as Remedy for Infringement of F/RAND Licensed Patents, (Jan 8, 2013)

By William Zale, J.D.

The Department of Justice Antitrust Division and the Patent and Trademark Office (USPTO) have issued a policy statement urging the U.S. International Trade Commission (ITC) to consider whether money damages, rather than injunctive or exclusionary relief, is the appropriate remedy for infringement of a standards-essential patent when the patent holder has voluntarily committed to license its patents on reasonable and non-discriminatory (RAND) or fair, reasonable, and non-discriminatory (FRAND) terms.

Voluntary consensus standards-setting activities benefit consumers and are in the public interest, but collaborative standards setting does not come without some risks, according to the policy statement. For example, when a standard incorporates patented technology owned by a participant in the standards-setting process, and the standard becomes established, it may be prohibitively difficult and expensive to switch to a different technology within the established standard or to a different standard entirely. As a result, the owner of that patented technology may gain market power and potentially take advantage of it by engaging in “patent hold-up,” which entails asserting the patent to exclude a competitor from a market or obtain a higher price for its use than would have been possible before the standard was set, when alternative technologies could have been chosen.

A patent owner’s voluntary F/RAND commitments may affect the appropriate choice of remedy for infringement of a valid and enforceable standards-essential patent. In some circumstances, the remedy of an injunction or exclusion order may be inconsistent with the public interest. This concern is particularly acute in cases where an ITC exclusion order under section 337 of the Tariff Act of 1930 based on a F/RAND-encumbered patent appears to be incompatible with the terms of a patent holder’s existing F/RAND licensing commitment to a standards developing organization. Such an order may harm competition and consumers by degrading one of the tools SDOs employ to mitigate the threat of such opportunistic actions by the holders of F/RAND-encumbered patents that are essential to their standards, according to the policy statement.

An exclusion order may still be an appropriate remedy in some circumstances, such as where the putative licensee is unable or refuses to take a F/RAND license and is acting outside the scope of the patent holder’s commitment to license on F/RAND terms. For example, if a putative licensee refuses to pay what has been determined to be a F/RAND royalty, or refuses to engage in a negotiation to determine F/RAND terms, an exclusion order could be appropriate. An exclusion order also could be appropriate if a putative licensee is not subject to the jurisdiction of a court that could award damages, according to the policy statement.

In an era when competition and consumer welfare thrive on interconnected, interoperable network platforms, the Justice Department and USPTO urge the ITC to consider whether a patent holder has acknowledged voluntarily through a commitment to license its patents on F/RAND terms that money damages, rather than injunctive or exclusionary relief, is the appropriate remedy for infringement.

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