Patent Hold-Up: Down But Not Out

Antitrust, Vol. 29, No. 3, Summer 2015. 2015 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. Patent Hold-Up: Down But Not Out B Y D A N I E L I. P R Y W E S A N D R O B E R T S. K. B E L L MANY INDUSTRY STANDARDsetting organizations (SSOs) require or encourage their participating companies to disclose known patents or patent applications that would or may be essential to the use of standards that are being developed. Many SSOs further require or encourage participants to commit at the standard-development stage to license such patents on reasonable and non-discriminatory (RAND) terms to be determined later. These SSO policies aim to prevent the owners of standardessential patents (SEPs) from engaging in a patent hold-up. Such a hold-up may occur when the SEP owners demand much higher patent royalties after the industry becomes locked in to using a standard than they could have obtained by licensing the patent before the standard s adoption. The SSOs goal is to prevent patent owners from capturing the value of the standard rather than just the intrinsic value of the patented technology. SSOs do not calculate or dictate the amount of RAND royalties or other license terms. They also generally do not permit royalty negotiations between SEP owners and other SSO participants at SSO meetings during the standard-development process, though bilateral discussions may occur elsewhere. SSOs and their participants fear that such discussions at SSO meetings could be viewed as a collusive scheme by buyers of patent licenses to depress SEP royalties, in violation of the antitrust laws. In the last 20 years, disputes about RAND-licensing obligations have embroiled the computer, telecommunications, and other technology sectors. Patent hold-up raises monopolization concerns under Section 2 of the Sherman Act and Article 102 of the EU s Treaty on the Functioning of the European Union (TFEU) because it can allow a SEP owner to achieve or increase monopoly power over a collectively-set standard. These disputes have been aggravated by the problem of royalty stacking, which occurs when there are many SEPs Daniel I. Prywes is a partner with the law firm of Bryan Cave LLP in Washington, D.C. Robert S.K. Bell is a partner with Bryan Cave LLP in its London office. The views stated in this article are their own, and not necessarily those of any clients or the law firm. owned by multiple parties used in a single standard. When this occurs, (a) the determination of an actual RAND-compliant royalty rate on a particular SEP or SEP portfolio can become exceedingly complex, and (b) the cumulative royalty burden can crowd out manufacturers ability to earn a profit on the standardized product. As we explain below, owners of RAND-encumbered SEPs are facing pressure from several sources to moderate their licensing demands, making patent hold up more difficult. We also discuss industry dynamics affecting the licensing of RAND-encumbered SEPs and identify likely future areas of discord under both U.S. and EU antitrust law. The Federal Circuit s Royalty Rulings Under general patent principles, courts will award a reasonable royalty for the unauthorized infringement of a patent, usually through attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began. 1 In Ericsson, Inc. v. D-Link Systems, Inc., 2 the U.S. Court of Appeals for the Federal Circuit addressed for the first time the calculation of RAND rates on SEPs. Ericsson had sued several firms to enforce its patents that were essential to the use of a widely used Wi-Fi standard developed under the auspices of the Institute of Electrical and Electronics Engineers (IEEE). During the standard-development process, Ericsson had committed to license its SEPs on RAND terms. The court s ruling placed downward pressure on the royalty rates available on RAND-encumbered patents. The Ericsson panel started with general patent principles that apply even where no RAND commitment was given. The court explained that where multi-component products are involved, the governing rule is that the ultimate combination of royalty base and royalty rate must reflect the value attributable to the infringing features of the product, and no more. 3 Apportionment is required between the value added by patented and unpatented features because the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product. 4 The Ericsson panel explained that in the case where the entire value of a machine as a marketable article is properly and legally attributable to the patented feature, the damages owed to the patentee may be calculated by reference to that value. However, in the usual case where the patent is not so S U M M E R 2 0 1 5 2 5

C O V E R S T O R I E S far-reaching, courts must insist on a more realistic starting point for the royalty calculations by juries often, the smallest saleable unit and, at times, even less. 5 Under a prior Federal Circuit ruling, Where the smallest saleable unit is, in fact, a multi-component product containing several noninfringing features with no relation to the patented feature... the patentee must do more than refer to the value of the smallest saleable unit to estimate what portion of the value of that product is attributable to the patented technology. 6 The Ericsson panel then proceeded to address additional principles that apply when RAND commitments have been given. It ruled that juries should be instructed that they must enforce the licensor s actual RAND promises and do not have an option to ignore them. 7 It also explained that the royalty award on a RAND-encumbered patent must be computed based on the incremental value that the patented invention adds to the product, not any value added by the standardization of the technology. 8 This is consistent with the recommendations of antitrust authorities. 9 In addition, the patented feature must be apportioned from all of the unpatented features reflected in the standard, especially where SEPs claim only limited aspects of the overall standard. 10 Outside the RAND context, courts often employ the 15-factor test from Georgia-Pacific Corp. v. U.S. Plywood Corp. 11 as the basis for determining a reasonable royalty. The Ericsson panel explained that several of these factors (such as the patent owner s right to refuse to license altogether, or the right to favor those in a commercial relationship with the licensor) are inconsistent with the RAND concept and should not be considered. 12 Thus, jury instructions in a RAND case must be tailored to the scope of the RAND commitment and may not simply utilize all of the Georgia- Pacific factors. Other Rulings RAND Computations. In several recent cases, trial judges have calculated RAND royalty rates, and in another a trial court upheld a jury s RAND calculation. 13 All were decided before the December 2014 ruling in Ericsson. In the judge-decided cases, the courts analysis was very detailed and demonstrated the difficulties in computing a RAND rate. Complicating factors include the vast number of SEPs used in technologically complex standards, the multiple types of products in which the standard is implemented, the difficulty in finding closely comparable licensing arrangements to use as benchmarks, and the difficulty in separating the value of a patent from the value of the standard. The most important feature of these rulings is the final result: the trial courts awarded the SEP owners significantly less than what they had demanded as RAND royalties, and in some cases only a tiny fraction of the demand. That fact alone should exert downward pressure on future RAND licensing demands. The approaches taken in three of these rulings were discussed in a recent issue of this magazine. 14 A key problem the courts faced was lack of a quantifiable method free of rough subjective judgments to determine the importance and value of one SEP (or SEP portfolio) relative to other SEPs and unpatented features of a standard. 15 One would expect that the best means of sorting through the RAND-calculation morass would be through examination of comparable licenses. But the trial courts have been exceptionally strict in accepting other license arrangements as comparable. For example, other licenses have been deemed not comparable where they resulted from litigation settlements that contained multiple elements, where no RAND commitment had been made, where there was a special relationship between the parties, where there was pervasive infringement, where the other licenses were granted in a different time period, and where the geographic scope was different. 16 Ericsson and one other Federal Circuit ruling may mark the beginning of a more relaxed approach. In Ericsson, the court held that juries should be permitted to consider licenses based on the entire market value of a product (generally an inappropriate royalty base) as long as they are given proper cautionary instructions about the need for apportionment. 17 In Apple Inc. v. Motorola, Inc., decided in April 2014, the court ruled that whether other licenses were sufficiently comparable to one party s calculation of a reasonable royalty goes to the weight of the evidence, not its admissibility. 18 Injunctions. A SEP owner s most powerful leverage is the threat of an injunction against implementers of the applicable standard. But it has become increasingly difficult for SEP owners to obtain injunctive relief in the United States and Europe. To begin, in ebay Inc. v. MercExchange, LLC, 19 the Supreme Court ruled in 2006 that a patent owner is not automatically entitled to an injunction against infringers, but instead must satisfy the traditional standards in equity for the award of injunctive relief (including proof of irreparable harm and consideration of the public interest). This principle applies to patents generally, not just RAND-encumbered SEPs. Subsequently, in April 2014, the Federal Circuit ruled in Apple Inc. v. Motorola, Inc. that while there is no per se prohibition of injunctions against infringers of RAND-encumbered SEPs, a SEP owner may have difficulty establishing irreparable harm since money damages in the form of RAND-based royalties should be adequate. 20 On the other hand, the court there noted that an injunction may be justified where an infringer refuses a RAND royalty or unreasonably delays negotiations to the same effect. The court ultimately held that no injunction was appropriate in that case because there was no evidence that the infringer was refusing to agree to a RAND license. The U.S. Department of Justice has expressed the view that injunctions to enforce RAND-encumbered SEPs are inappropriate except where the infringer unreasonably refuses to 2 6 A N T I T R U S T

negotiate in good faith or to commit to accept a license at a negotiated or adjudicated RAND rate. 21 The Federal Trade Commission s views are consistent. In July 2013, the FTC issued an administrative complaint against Motorola Mobility alleging that SEP owners violated Section 5 of the FTC Act by seeking injunctions against the use of their RAND-encumbered patents. 22 This resulted in a consent order in which the SEP owners agreed not to seek injunctions to enforce RANDencumbered SEPs unless infringers refuse to accept a license at a RAND rate to be determined through a detailed dispute-resolution system. 23 Patent owners are generally able to seek an exclusion order at the International Trade Commission under Section 337 of the Tariff Act of 1930, which, if granted, bars the importation of patent-infringing goods into the United States. The Federal Circuit s ebay standard, which narrowed the availability of court injunctions for patent infringement, does not apply to Section 337 proceedings. But in August 2013 the U.S. Trade Representative rejected an ITC exclusion order aimed at products incorporating RAND-encumbered SEPs. 24 Since then, the ITC has not issued any exclusion orders involving RAND-encumbered SEPs, and observers doubt it will do so in circumstances where an infringer agrees in principle to accept a RAND-compliant rate. In April 2014, the EU Commission issued two competition decisions addressing whether the owner of a RANDencumbered SEP could seek injunctions without engaging in an abuse of dominance under TFEU Article 102. In the first case, the EU Commission determined that Motorola could not obtain an injunction against Apple s use of a RANDencumbered SEP because Apple was willing to accept a license on RAND terms. 25 The EU Commission also rejected Motorola s attempt to condition the licensing of its SEPs upon Apple s agreement not to challenge the essentiality, validity, or infringement of Motorola s SEPs. Samsung also accepted an EU Commission Commitment Decision under Article 9 of Commission Regulation 1/2003 (the EU s procedural antitrust regulation) without conceding liability for any alleged violation of the EU competition rules. 26 Under pressure from the EU Commission, Samsung committed (1) not to seek injunctions in the ensuing five years on its SEPs used in smartphones and tablets, (2) to provide a 12-month period for Samsung and potential licensees to negotiate a RAND license, and (3) to participate in a court or arbitration procedure to set RAND rates if no agreement is reached. Together, these rulings give potential licensees in the EU substantial breathing room to avoid injunctions on RANDencumbered SEPs, provided they are willing to accept RAND-compliant licenses determined through negotiation or a dispute-resolution process. But the European Court of Justice is the ultimate arbiter of EU competition law. It is now considering the extent to which EU law permits an SEP owner, Huawei Technologies Co., to seek and obtain injunctions against firms using RAND-encumbered SEPs. The EU Advocate General has recommended to that Court that injunctions not be available where the SEP owner presents the potential licensee with detailed license terms and the potential licensee responds in a diligent and serious manner, such as by offering to submit to a court or arbitration tribunal the calculation of the RAND license terms. 27 He has further recommended that (a) injunctions be available if potential licensees do not engage in diligent and serious negotiations, and instead engage in conduct that is purely tactical and/or dilatory and/or not serious, and (b) SEP owners should be permitted to ask the potential licensee to provide a bank deposit or guarantee for past or future use of the SEP pending adjudication of the RAND rate. 28 The Court s ruling is expected in summer 2015. EU courts have not yet provided guidance for calculating RAND rates. Initiatives by Standard-Setting Organizations The IEEE is a leading SSO with hundreds of standards covering products in the computer and telecommunications industries. It has been among the most pro-active SSOs in developing policies to limit patent hold-up. For years, under its patent policy, the IEEE has asked SEP owners to commit during the standard-development process to license their SEPs on RAND terms (which at the SEP owner s election, could be royalty-free). 29 On February 2, 2015, the DOJ approved a business review letter request from the IEEE regarding proposed revisions to IEEE s patent policy. 30 Several aspects of the approved policy align with recent court decisions, while others take a stronger position to combat patent hold-up. 1. Injunctions. The policy expressly states that the SEP owner s RAND commitment carries with it a commitment that it shall neither seek nor seek to enforce a Prohibitive Order [i.e., an injunction]... unless the implementer fails to participate in, or to comply with the outcome of, an adjudication, including an affirming first-level appellate review... by one or more courts that have the authority to determine Reasonable Rates and other reasonable terms and conditions.... 31 DOJ recognized that this policy is more restrictive that its own recent guidance. 32 To the extent that general injunction standards do not already limit the availability of injunctive relief against SEP infringers, the IEEE policy will further reduce the injunction risk facing infringers of IEEEstandardized SEPs. 2. Reasonable Rate. The policy specifies that a Reas - onable Rate for RAND purposes is one that excludes the value resulting from inclusion of the SEP s technology in the IEEE standard. The IEEE also adopted principles generally consistent with the emphasis in recent Federal Circuit rulings (discussed above) favoring (a) use of the smallest saleable unit as the royalty base, and (b) careful apportionment of the value of the owner s SEP relative to other SEPs and elements of a product. 33 3. Licensing to All Levels of Production. The policy requires a SEP owner to grant RAND licenses to companies S U M M E R 2 0 1 5 2 7

C O V E R S T O R I E S at all levels of production (i.e., producers of both components and end-products). This was prompted by some SEP owners preference to license only manufacturers of the end product, which facilitated efforts to demand royalties based on the end product s market value. The DOJ explained, however, that the royalty rate need not be the same at all levels of production, and in each case it should reflect the value of the patented technology. 34 4. Reciprocity Grant Backs. The policy permits a SEP owner to make a RAND commitment subject to reciprocity, meaning that the SEP owner will be required to grant RAND licenses to others who own SEPs for the same standard only if they agree to grant back RAND licenses to their own SEPs (even if the licensee never made a RAND commitment to IEEE). 35 The RAND royalty rate for the license and grant-back license would not necessarily be the same, as they may have different technical significance. While this policy appears to favor SEP owners, it comes with baggage. The owner of a RAND-encumbered SEP may not require grant-back licenses to the licensees patents that are not essential to the same IEEE standard, nor may the SEP owner require that the licensee also take licenses to nonessential patents. 36 5. Binding Assignees of RAND-encumbered Patents. The policy states that RAND commitments are intended to be binding on assignees of the SEPs, and requires assignors of RAND-encumbered patents to take steps to ensure that assignees are bound by the RAND commitment. The DOJ observed that these provisions should decrease uncertainty about the reliability of [RAND commitments] over the long term, thereby easing licensing negotiations and strengthening the standardization process. 37 The FTC has taken the position that it is an unfair method of competition (in violation of FTC Act Section 5) for an assignee of SEP rights to disregard the assignor s licensing commitment to the SSO when the assignee knew of the commitment when receiving the assignment. 38 Patent-law principles may also support treating such a commitment as binding on an assignee. 39 Even though the IEEE portrayed its revised patent policy as bringing greater clarity to its prior policy, the IEEE stated that its revised policy will not retroactively amend previously accepted Letters of Assurance. 40 Thus, pre-existing RAND commitments should not be subject to the revised policy. It remains to be seen if other SSOs will follow the IEEE s lead and adopt similar policies. The IEEE s revised policy was controversial among some member firms. Qualcomm, which relies heavily on licensing its patents, has stated that it is reconsidering its participation in IEEE standard-setting activity and will not make RAND licensing commitments under the new policy, and InterDigital has made similar statements. 41 In any event, since the revised IEEE policy generally aligns with the legal developments discussed above, it is less radical than portrayed by its critics. Ex Ante Disclosures and Industry Perspective The patent hold-up problem, and the difficulty in calculating RAND-royalty rates, would be greatly reduced if SSOs were informed before (ex ante) a standard is finalized of the maximum licensing demands of those who own potential SEPs. Once other SSO participants were put on notice ex ante of those maximum demands, it would be difficult for them (or others) to claim later that the announced terms were not RAND-compliant. The DOJ has favored such policies. It previously issued business review letters that approved two SSOs policies promoting ex ante disclosure of maximum licensing terms but prohibiting the joint negotiation of licensing terms under SSO auspices. 42 SSO participants have not widely supported that approach in practice. For example, as disclosed by the IEEE in its recent business review letter request, SEP owners have disclosed maximum licensing terms in just two out of 40 RAND letters of assurance given since the IEEE s policy allowing the optional, ex ante disclosure of maximum terms was adopted in 2007. 43 Why have patent owners (as well as most SSOs) been unreceptive to what seems like the obvious solution to the patent hold-up problem? A major reason, according to industry officials, is fear that ex ante licensing disclosures would diminish their leverage in asserting SEPs defensively if other SEP owners sue them for infringement. Specifically, if one SEP owner commits to a specific RAND ceiling, that owner may fear that it would be bound by that ceiling if the owners of other SEPs (who may not have made a RAND commitment or specified a maximum rate) sue it for royalties or seek injunctive relief. In short, the very uncertainty associated with the imprecise nature of a RAND commitment has defensive value, discouraging licensees who also own SEPs from engaging in their own patent hold-ups. SEP owners do not want to unilaterally disarm through ex ante disclosures. This phenomenon is consistent with the thesis of some commentators that the very incompleteness of SSOs RAND rules may be an intended and efficient feature of SSO contracts that encourages participation in standard-development work. 44 In practice, manufacturers often do not even seek royalties for their SEPs because of fear that, if they do so, they will face Mutual Assured Destruction (MAD) from other SEP owners who may then assert their own royalty demands. This is particularly acute in certain standards, such as with the estimated 3,000 SEPs needed to use the IEEE s Wi-Fi standard 802.11, 45 which has figured in multiple lawsuits. The crosslicensing of large patent pools is another strategy used to avoid MAD. SEP owners also are reluctant to make ex ante disclosures of maximum licensing terms because of fear that any figure quoted initially (when the value of a patent is poorly understood) could either relinquish too much value on the low side or, on the high side, discourage inclusion of the technology 2 8 A N T I T R U S T

in the standard. The engineers who typically participate in SSO activities are ill equipped to value their firms SEPs when considering multiple technical options for multiple potential standards. In reality, manufacturer-to-manufacturer licensing disputes are generally resolved through negotiations based on a rough estimate of the number and significance of each party s SEP portfolio and the fear of MAD if the parties cannot forge an agreement. On the other hand, when implementers square off against SEP owners heavily focused on securing licensing revenue for their innovations, the same dynamics are not at play. MAD is not as significant a factor. For these reasons, licensing-focused firms have greater leverage in RAND negotiations, and their negotiated licenses tend to result in higher royalties. This trend may be selfcorrecting over time. Any firm that develops a reputation for making high SEP demands can expect that other SSO participants will be less keen to include such a firm s technology in future standards unless its technology is substantially superior to available alternatives. The Future Despite the downward pressure on royalty rates for RANDencumbered SEPs, we are not entering a halcyon era that is free of conflict. But the main battlegrounds may shift. 1. Licensing-focused firms often participate in multiple SSOs or consortia, and may seek to shop among them for RAND policies they hope will be more accommodating to their licensing strategies. Alternatively, such firms could withdraw from SSO activity and seek to establish de facto standards by gaining wide industry adoption of their patented technology. These trends could destabilize standard-development activity, at least in the short run. In the long run, we suspect that licensing-focused firms will find little to be gained by withdrawing from broad-based SSOs like the IEEE. First, the day is past when major manufacturers knowingly incorporate vital patents into massmarket products without some protection against extreme licensing demands and business-disrupting injunctions. Second, generally applicable patent royalty principles, as set forth by the Federal Circuit and other courts, will often depress the amounts recoverable in infringement suits and will likewise limit the availability of injunctive relief even where no RAND commitment is given. 2. Because of the high cost of litigating patent suits and the courts tougher approach to RAND calculations, it is likely that future disputes reaching the courts will involve chiefly the most valuable, technologically path-breaking SEPs. In those instances, SEP owners may claim that the entire value of an end product is attributable to the patented feature, and that (consistent with Ericsson) RAND royalties should be calculated by reference to that value. Courts will have to grapple with these contentions. It is quite possible this exception will swallow the rule in the RAND disputes of greatest consequence. 3. SEP owners will likely continue to seek injunctions by claiming that implementers are unwilling to commit to accept negotiated or adjudicated RAND rates, or are unduly delaying negotiations. We predict future posturing between SEP owners and implementers on these issues, with the courts and possibly the ITC serving as referees. 4. A variety of issues may arise when SEP owners make RAND commitments conditioned on reciprocal license grant-backs of SEPs from firms that never made a RAND commitment during the standard-development process. For example, could firms that had no SEPs enforce a SEP-owning firm s reciprocal RAND commitment if other SEPowning firms refuse to agree to grant-back licenses to the first SEP-owning firm? 5. The non-discriminatory prong of the RAND commitment will become more controversial, as foreign competition authorities or courts impose their own requirements. For example, in February 2015, Qualcomm agreed to pay a $975 million fine to a Chinese antitrust authority, and also agreed to specific royalty rates and a royalty base for its SEPs on 3G and 4G technology. 46 Now that Qualcomm has been required to license SEPs in China on specific terms, firms in other countries may demand non-discriminatory licenses on the same terms. This may prompt litigation over the non-discriminatory prong of the RAND concept, which has been only vaguely defined to date. 47 Conclusion The patent hold-up problem is down but not out. A host of factors have made patent hold-up more difficult to achieve. But the conflicting interests of manufacturers and licensingfocused firms at SSOs will likely keep the pot boiling for some time to come. 1 Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). 2 773 F.3d 1201 (Fed. Cir. 2014). 3 Id. at 1226 (emphasis added). 4 Id. 5 Id. at 1227 (emphasis added). 6 VirnetX v. Cisco Sys., Inc., 767 F.3d 1308, 1327 (Fed. Cir. 2014). 7 Ericsson, 773 F.3d at 1231. 8 Id. at 1232. 9 See, e.g., Statement of the Federal Trade Commission, In the Matter of Robert Bosch GmbH, FTC File No. 121-0081, at 2 (Apr. 24, 2013), available at http://www.ftc.gov/sites/default/files/documents/cases/2012/11/ 121126boschcommissionstatement.pdf. 10 Ericsson, 773 F.3d at 1232. 11 318 F. Supp. 1116 (S.D.N.Y. 1970), modified, 446 F.2d 295 (2d Cir. 1971). 12 Ericsson, 773 F.3d at 1230 31. See Microsoft Corp. v. Motorola, Inc., No. C10-1823-JLR, 2013 WL 2111217, at *19 (W.D. Wash. Apr. 25, 2013) (identifying the Georgia-Pacific factors which need modification in the RAND context). 13 Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., Case No. 6:11-cv-343, 2014 U.S. Dist. LEXIS 107612 (E.D. Tex. July 23, 2014) (bench trial); Realtek Semiconductor Corp. v. LSI Corp., No. C-12-3451- S U M M E R 2 0 1 5 2 9

C O V E R S T O R I E S RMW, 2014 WL 2738216 (N.D. Cal. June 16, 2014) (upholding jury determination of RAND rate); In re Innovatio IP Ventures, LLC Patent Litig., MDL No. 2303, Case No. 11-C-9308, 2013 WL 5593609 (N.D. Ill. Oct. 3, 2013) (bench trial); Microsoft, 2013 WL 2111217 (bench trial). 14 Gregory K. Leonard & Mario A. Lopez, Determining RAND Royalty Rates for Standard-Essential Patents, ANTITRUST, Fall 2014, at 86. 15 See, e.g., Innovatio, 2013 WL 5593609, at *10, 30, 43. 16 Commonwealth, 2014 U.S. Dist. LEXIS 107612, at *35 37, 40; Microsoft, 2013 WL 2111217, at *18, 65 72, 74 83, 88 89; Innovatio, 2013 WL 5593609, at *30 36. 17 Ericsson, 773 F.3d at 1228. See Commonwealth, 2014 U.S. Dist. LEXIS 107612, at *42 (royalty computed as a flat rate on each [infringing] end product sold because that is consistent with the parties expectations). 18 757 F.3d 1286, 1326 (Fed. Cir. 2014). 19 547 U.S. 388 (2006). 20 Apple, 757 F.3d at 1332. 21 See U.S. Dep t of Justice & U.S. Patent and Trademark Office, Policy Statement on Remedies for Standard-Essential Patents Subject to Voluntary F/RAND Commitments 7 8 (Jan. 8, 2013) [hereinafter Joint DOJ/PTO State - ment], available at http://www.justice.gov/atr/public/guidelines/290 994.pdf; Renata B. Hesse, Deputy Assistant Att y Gen., U.S. Dep t of Justice, A Year in the Life of the Joint DOJ-PTO Policy Statement on Rem - edies for F/RAND Encumbered Standards-Essential Patents, Joint DOJ-PTO Statement 8 10 (Mar. 25, 2014), available at http://www.justice.gov/atr/ public/speeches/304638.pdf. 22 Complaint, Motorola Mobility LLC, FTC Docket No. C-4410 (July 23, 2013), available at http://www.ftc.gov/sites/default/files/documents/cases/ 2013/07/130724googlemotorolacmpt.pdf. 23 Decision and Order, Motorola Mobility LLC, at 9 12, FTC Docket No. C-4410 (July 23, 2013), available at http://www.ftc.gov/sites/default/files/docu ments/cases/2013/07/130724googlemotorolado.pdf. Earlier in 2013, the FTC entered an order prohibiting a SEP owner from seeking injunctions against willing RAND licensees. Decision and Order, Robert Bosch GmbH, FTC File No. 121-0081, at 13 14 (Apr. 24, 2013), available at https:// www.ftc.gov/sites/default/files/documents/cases/2013/04/130424 robertboschdo.pdf. 24 See Letter from Michael B.G. Froman, Ambassador, U.S. Trade Rep., to Irving A. Williamson, Chairman, ITC (Aug. 3, 2013), available at http://www. ustr.gov/sites/default/files/08032013%20letter_1.pdf. 25 European Comm n, Press Release, Antitrust: Commission Finds that Motorola Mobility Infringed EU Competition Rules by Misusing Standard Essential Patents (Apr. 29, 2014), available at http://europa.eu/rapid/ press-release_ip-14-489_en.htm. 26 Summary of Commission Decision of 29 April 2014 relating to a proceeding under Article 102 of the Treaty on the functioning of the European Union and Article 54 of the EEA Agreement (Case AT.39939 Samsung Enforcement of UMTS standard essential patents) (notified under document number C(2014) 2891 final), 2014 O.J. (C 350) 8; European Comm n, Press Release, Antitrust: Commission Accepts Legally Binding Commit - ments by Samsung Electronics on Standard Essential Patent Injunctions (Apr. 29, 2014), available at http://europa.eu/rapid/press-release_ip-14-490_en.htm. 27 Opinion of EU Advocate General Wathelet, Huawei Techs. Co. v. ZTE Corp., Case C-170/13, 88 (Nov. 20, 2014), available at http://curia.europa.eu/ juris/document/document.jsf?text=&docid=159827&pageindex=0&do clang=en&mode=req&dir=&occ=first&part=1&cid=194872. 28 Id. 88, 93. 29 The IEEE asks patent holders to complete a Letter of Assurance. The current IEEE form for Letters of Assurance (with various options for the patent owner) is available at https://development.standards.ieee.org/myproject/ Public/mytools/mob/loa.pdf. 30 Letter from Renata B. Hesse, Acting Assistant Att y Gen., U.S. Dep t of Justice, to Michael A. Lindsay, Esq., Dorsey & Whitney LLP (Feb. 2, 2015) [hereinafter DOJ Business Review Letter], available at http://www.justice. gov/atr/public/busreview/311470.htm; responding to Letter from Michael A. Lindsay, Esq., Dorsey & Whitney LLP, to William J. Baer, Assistant Att y Gen., U.S. Dep t of Justice (Sept. 30, 2014) [hereinafter IEEE Business Review Letter Request], available at http://www.justice.gov/atr/public/ busreview/request-letters/311483.pdf. 31 DOJ Business Review Letter, supra note 30, at 9 10. 32 Id.; see Joint DOJ-PTO Statement, supra note at 21. 33 DOJ Business Review Letter, supra note 30, at 11 12. 34 Id. at 14. 35 Id. at 15. 36 Id. The FTC has recognized that, in some circumstances, the owner of a RAND-encumbered SEP may permissibly seek a defensive injunction against a licensee who seeks an injunction to enforce its own RAND-encumbered patents against the licensor. See Decision and Order, Motorola Mobility, supra note 23, at 12. 37 DOJ Business Review Letter, supra note 30, at 8 n.32. 38 Complaint, and Decision and Order, Negotiated Data Solutions, Inc., FTC Docket No. C-4234 (Sept. 22, 2008), available at http://www.ftc.gov/ sites/default/files/documents/cases/2008/09/080923ndscomplaint.pdf, http://www.ftc.gov/sites/default/files/documents/cases/2008/09/0809 23ndsdo.pdf). See U.S. Dep t of Justice, Statement of the Department of Justice s Antitrust Division to Close Its Investigations of Google, Inc. s Acquisition of Motorola Mobility Holdings Inc. and the Acquisition of Certain Patents 4 5 (Feb. 3, 2012) (concluding that a change in ownership of SEPs would not allow the purchaser to avoid RAND commitments), available at http://www.justice.gov/opa/pr/statement-department-justice-s-antitrustdivision-its-decision-close-its-investigations. 39 Barnes & Noble, Inc. v. LSI Corp., 849 F. Supp. 2d 925, 931 32 (N.D. Cal. 2012) (finding that a firm could assert an affirmative defense based on patent law where the licensor s predecessor allegedly engaged in standardsetting misconduct by breaching its duty to disclose a patent to an SSO). But see Vizio, Inc. v. Funai Elec. Co., No. 09-0174, 2010 U.S. Dist. LEXIS 30850, at *15 16 (C.D. Cal. Feb. 3, 2010) (no antitrust claim arose when the assignee of a patent fails to honor its predecessor s commitment that SSO participants would license on a RAND basis). 40 IEEE Business Review Letter Request, supra note 30, at 15 n.33 & 19. 41 See Qualcomm Responds to Updated IEEE Standards-Related Policy, EVALUATION ENG G (Feb. 11, 2015), http://www.evaluationengineering.com/ 2015/02/11/qualcomm-responds-to-updated-ieee-standards-relatedpatent-policy/; Letter from Lawrence F. Shey (InterDigital) to David Law (IEEE) at 2 (Mar. 24, 2015), available at http://www.interdigital.com/wpcontent/uploads/2015/03/letter-to-ieee-sa-patcom.pdf. 42 Letter from Thomas O. Barnett, Assistant Att y Gen., U.S. Dep t of Justice, to Robert A. Skitol, Esq., Drinker, Biddle & Reath, LLP, at 4, 7 (Oct. 30, 2006) [hereinafter VITA Business Review Letter], available at http://www.justice. gov/atr/public/busreview/219380.htm; Letter from Thomas O. Barnett, Assistant Att y Gen., U.S. Dep t of Justice, to Michael A. Lindsay, Esq., Dorsey & Whitney LLP, at 4, 6 7 (Apr. 30, 2007), available at http://www. justice.gov/atr/public/busreview/222978.htm. 43 IEEE Business Review Letter Request, supra note 30, at 10. 44 Joanna Tsai & Joshua D. Wright, Standard Setting, Intellectual Property Rights, and the Role of Antitrust in Regulating Incomplete Contracts, 80 ANTITRUST L.J. (forthcoming 2015). 45 Innovatio, 2013 WL 5593609, at *42 43. 46 Press Release, Qualcomm (Feb. 9, 2015), available at http://www.sec.gov/ Archives/edgar/data/804328/000123445215000031/qcom29158kex 991.htm. 47 In a recently filed suit, a smartphone manufacturer alleged that InterDigital violated its RAND commitment at IEEE and ETSI in various ways, including by use of non-disclosure clauses in licensing agreements to mask discriminatory license terms. Asus Computer Int l v. InterDigital, Inc., Case No. 15-cv-01716 (N.D. Cal. filed April 15, 2015). See generally Edward A. Gold & Scott Weingust, Exploring the Nondiscriminatory Aspect of RAND Licensing (Fall 2014), available at http://www.srr.com/article/exploringnondiscriminatory-aspect-rand-licensing-terms. 3 0 A N T I T R U S T