DOJ and USPTO Issue Policy Statement on Remedies for F/RAND-Encumbered SEPs

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1 JANUARY 7-11, 2013 THIS WEEK S CONTRIBUTING AUTHOR IS DINA KALLAY EDITED BY KOREN W. WONG-ERVIN PATENTS DOJ and USPTO Issue Policy Statement on Remedies for F/RAND-Encumbered SEPs On January 8, the DOJ and the USPTO issued a joint policy statement on whether injunctive relief in judicial proceedings or exclusion orders in investigations under section 337 of the Tariff Act of 1930 are properly issued when a patent holder seeking such a remedy asserts standardsessential patents (SEPs) that are encumbered by a F/RAND licensing commitment. The statement contends that: 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 exclusion order 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 an SDO [standard setting organization]. (Statement at 6.) However, [a]n 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. (Id. at 7.) The statement sets forth the following non-exhaustive list of situations in which an injunction or exclusion order may be appropriate: [I]f a putative licensee refuses to pay what has been determined to be a F/RAND royalty (id.); If a putative licensee refuses to engage in a negotiation to determine F/RAND terms ( [s]uch a refusal could take the form of a constructive refusal to negotiate, such as by insisting on terms clearly outside the bounds of what could reasonably be considered to be F/RAND terms in an attempt to -1-

2 evade the putative licensee s obligation to fairly compensate the patent holder ) (id.); or [I]f a putative licensee is not subject to the jurisdiction of a court that could award damages (id.). The statement further notes that: (Id. at 8.) Although we recommend caution in granting injunctions or exclusion orders based on infringement of voluntary F/RAND-encumbered patents essential to a standard, DOJ and USPTO strongly support the protection of intellectual property rights and believe that a patent holder who makes such a F/RAND commitment should receive appropriate compensation that reflects the value of the technology contributed to the standard. The DOJ and USPTO urge the USITC 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. (Id. at 9.) The statement further recommends that, it may be appropriate for the USITC, as it has done for other reasons in the past, to delay the effective date of an exclusion order for a limited period of time to provide parties the opportunity to conclude a F/RAND license. (Id. at 10.) Finally, determinations on the appropriate remedy in cases involving F/RAND-encumbered, standardsessential patents should be made against the backdrop of promoting both appropriate compensation to patent holders and strong incentives for innovators to participate in standardssetting activities. (Id.) The statement is in line with a similar position taken by the FTC in a statement filed with the ITC last June, in which it urged the ITC to take competition issues into account when considering SEP cases. Policy Statement, available at Melissa Lipman, DOJ, USPTO Fight Import Bans in Essential-Patent Cases, Law360 (Jan. 8, 2013), available at Motorola Mobility Withdraws ITC Essential-Patent Claims Against Microsoft Following its Consent Agreement with the FTC On January 8, Motorola Mobility, a wholly owned subsidiary of Google, filed a motion to terminate an ITC investigation in part with respect to two standard-essential patents (SEPs) allegedly violated by Microsoft s Xbox. The termination was sought on the basis of Motorola s withdrawal of its allegations with respect to the two SEPs; Motorola did not withdraw its -2-

3 allegations against Microsoft with respect to three remaining non-seps. With respect to the two SEPs, Motorola stated that it intends to enforce its rights for past damages in related actions against Microsoft brought in the Western District of Washington and the Western District of Wisconsin. The motion to terminate follows last week s consent agreement package with the FTC under which Google agreed to certain limitations on its ability to seek injunctions or exclusion orders based on FRAND-encumbered SEPs. Motion to terminate, available at Stewart Bishop, Google Drops ITC Essential-Patent Claims Against Microsoft, Law360 (Jan. 9, 2013), available at Better Information on Patent Ownership May Aid Competition Enforcement, DOJ Official Says Speaking last week at the USPTO Roundtable on Real Party in Interest Information, Assistant Chief of the U.S. Antitrust Division s Competition Policy Section, Jeffrey M. Wilder, stated that requiring patent holders to disclose more information about the controlling owner of their patent would help U.S. competition agencies in their analysis of mergers and anticompetitive use of conduct. The USPTO is considering changing its rules to require patent holders to record real party in interest information. Public comments on this topic are due by January 25, In supporting the proposed changes, Wilder also noted that greater transparency about patent ownership might help reduce litigation by patent-assertion entities. Source: Roundtable on Proposed Requirements for Recordation of Real-Party-in-Interest Information, available at jsp Bankruptcy Court Approves Kodak s $525M Sale of Its Digital Imaging Patent Portfolio On January 11, a New York bankruptcy court approved Eastman Kodak Co. s $525 million sale of its digital imaging patents portfolio. Under the terms of the sale agreement, Kodak will license its patents to a consortium of 12 companies organized by Intellectual Ventures Management LLC and RPX Corp. The court also approved an agreement to settle current patent-related litigation between Kodak and participants in the deal, including Apple, FlashPoint Technologies, and Fujifilm Corp. -3-

4 Source: Maria Chutchian, Kodak s $525M Digital Imaging Patent Sale Gets Green Light, Law360 (Jan. 11, 2013), available at The Supreme Court Denies Cert in Retractable Techs. v. Becton, Refusing to Revisit Cybor Corp. v. FAS Techs On January 7, the U.S. Supreme Court followed the Solicitor General s recommendation in denying a petition for a writ of certiorari in Retractable Techs., Inc. v. Becton, Dickinson & Co. One of the main issues in the case was whether, in reviewing a district court s interpretation of a patent claim, the court of appeals should give deference to the district court s resolution of subsidiary factual questions, or rather should interpret the claims de novo. Under the current rule, set forth in the Federal Circuit s en banc decision in Cybor Corp. v. FAS Techs, Inc., 138 F.3d 1448, claim construction is purely a legal issue subject to de novo review on appeal. In Retractable Techs., the district court construed a patent claim one way while, on appeal, a divided Federal Circuit panel interpreted it de novo another way. When the court declined to rehear the case en banc and reconsider the standard of review, Judge O Malley wrote a vigorous dissent that Chief Judge Rader and Judge Moore joined. Speculation that this dissent may lead the Supreme Court to hear the case ended when it declined to do so. Given the strong feeling among many attorneys and some Circuit court judges that the de novo standard is not always appropriate, some believe the issue is likely to return to the Supreme court in another case in the future. Order denying certiorari available at Solicitor General s Amicus Brief available at Ryan Davis, Top Court s Denial Won t Be Last Word on Claim Construction, Law360 (Jan. 7, 2013), available at a654-4cdb-8c8dc783e58c93c0&utm_source=newsletter&utm_medium= &utm_campaign=ip -4-

5 Swedish Mobile Operator Files Antitrust Complaint Against Rivals for Transferring Mobile-Frequency Licenses to a Joint Venture Swedish mobile operator Tre, a unit of Hutchinson 3G, has lodged a complaint with the Swedish competition authority KKV against its rivals Tele2 and Telenor, alleging that they violated Swedish antitrust law by transferring mobile-frequency licenses to a network joint venture. According to Tre, the pooling of two operators frequencies in the 900MHz and 2.6GHz bands gives the Net4Mobility venture an unfair advantage over operators with fewer frequencies because the bands could be used both for existing mobile services and next generation 4G mobile broadband. The Net4Mobility partners contend that the sole justification for creating the venture was to pool limited resources such as frequency licenses, and further note that Hutchinson 3G is itself a partner in network-sharing deals. The transfer was approved by the Swedish Post and Telecom Authority (PTS) in February At that time, the PTS stated that even if changes in the market shares of the parties could harm competition, the positive effects on the broader economy would largely compensate. Tre and incumbent Swedish telephone company Telia are challenging the PTS s decision in a separate proceeding before an administrative court on the grounds that the PTS had a duty to consult market players and the competition authority prior to approving the transfers. The PTS contends that it followed proper procedure, stating that its first duty is to minimize red tape and to ensure that decisions are adopted as quickly and inexpensively as possible. Source: Magnus Franklin, Tele2-Telenor Mobile-License Pooling Draws Swedish Antitrust Complaint, MLex (Jan. 9, 2013), available at PHARMACEUTICALS Pfizer and Mutual Pharmaceutical Seek Dismissal of Putative Class Actions Alleging Unlawful Pay-For-Delay of a Muscle-Relaxant Generic On January 7, King Pharmaceuticals, a unit of Pfizer Inc., and generic drug maker Mutual Pharmaceutical Co. filed a motion to dismiss putative class actions brought by pharmacies and drug wholesalers alleging that a 2005 licensing agreement between the defendants amounted to an unlawful conspiracy to delay entry of a generic version of the muscle-relaxant drug Skelaxin. The complaints also allege that the defendants filed sham patent infringement suits in order to delay entry of generic Skelaxin into the market. The defendants contend that neither the language of the licensing agreement nor the allegedly sham patent infringement claims prevented Mutual from introducing a generic Skelaxin to the market. -5-

6 Motion to Dismiss, available at Jonathan Randles, King Pharma Says Patent Deal Didn t Bar Skelaxin Generic, Law360 (Jan. 7, 2013), available at INVESTIGATIONS AND LITIGATION IN THE TECNNOLOGY SECTOR DOJ Files Antitrust Suit Against Bazaarvoice Regarding the Company s Acquisition of PowerReviews, Inc. On January 10, the DOJ filed a civil antitrust suit in the Northern District of California against Bazaarvoice Inc. challenging the company s June 2012 acquisition of PowerReviews, Inc. According to the DOJ, the $168.2 million transaction substantially lessens competition in the market for product ratings and review platforms in the U.S. and gives Bazaarvoice the incentive and ability to raise prices above a competitive level. According to the complaint, Bazaarvoice is the dominant commercial supplier of product ratings and review platforms in the U.S. and PowerReviews was its closest rival. The complaint further alleges that, prior to the transaction, PowerReviews was an aggressive price competitor and Bazaarvoice routinely responded to competitive pressure from PowerReviews. As the complaint describes, Bazaarvoice sought to stem competition through the acquisition of PowerReviews. The complaint does not include any allegations of market shares or HHIs, and relies heavily on internal company documents. The DOJ is seeking the divestiture of assets sufficient to create a separate, distinct, and viable competing business that can replace PowerReviews alleged competitive significance in the marketplace. DOJ Press Release, available at html Complaint, available at Almunia Says EC Will Continue to Press Google for Stricter and Broader Remedies than Those Obtained in the U.S. Speaking in an interview last week with the Financial Times, EC Competition Commissioner Joaquín Almunia stated that the FTC s consent agreement in the Google matter will be neither an obstacle [to the EC] nor an advantage [for Google]. Almunia stated that he is convinced that Google is diverting Internet traffic to its own services and expects Google to make changes to its core online search business practices. Noting the excellent working relationships between US and EU antitrust agencies, Almunia explained that U.S. analysis of the same conduct may be -6-

7 different, partly because [t]he way the U.S. looks at abuse of dominant position is different than the European one. Alex Barker, Antitrust Chief Holds Aces in Google Case, Financial Times (Jan. 10, 2013), available at Stefano Berra, Almunia Won t Budge on Google after FTC Decision, Global Competition Review (Jan. 11, 2013), available at Upcoming Programs How Far Can Patent Holders Go? January 15, :00-1:15 Eastern In this second program of a series of joint programs hosted by the Intellectual Property and International Committees, panelists will explore the question of how far patent holders can go in exercising their intellectual property rights, and how those limits change depending on jurisdiction. Panelists from the DOJ and private practice, including former enforcers from the KFTC and MOFCOM, will discuss issues such as refusals to license, field of use and territorial restrictions, extending the patent through post-expiration royalties, and the scope of the patent misuse doctrine under the laws of the U.S., Japan, and Korea. Location: Arnold & Porter LLP 555 Twelfth St. N.W. Room 220 Washington, D.C To attend in-person, please RSVP to To participate via teleconference, please register at IP Fundamentals for Antitrust Attorneys February 22, 2013 Noon-1:15PM Eastern In this first of a two-part series of joint programs hosted by the ABA Section of Antitrust Law and the ABA Section of Intellectual Property Law panelists will cover the fundamentals of intellectual property law for antitrust attorneys. Panelists will explore such matters as the basics of patent, copyright, and trademark law, including how you determine the bounds of a patent right, what is claim construction, what is functional language and why are software patents so -7-

8 controversial, what rights do copyrights and trademarks provide, and what is the difference between the ITC and federal court. To register and receive dial-in information, please visit A special thanks to Debbie Bellinger and Ian Horkley for their weekly contributions to tidbits. -8-