The Department of Justice’s (DOJ) antitrust division has placed standards setting organisations (SSO) firmly in its crosshairs.
In a series of comments at an antitrust event held by the Heritage Foundation earlier this week in Washington DC, Andrew Finch, principal deputy assistant attorney general for antitrust at the DOJ, revealed that the division is investigating whether SSOs balance the interests of both patent owners and the users of IP.
In prepared remarks, Finch told the audience that: “The department has begun scrutinising what may appear to be either buyer cartel or seller cartel types of behaviour that may be designed to artificially shift bargaining leverage from IP creators to implementers or vice versa. In particular we’ve been looking at the rules of standard setting organisations that purport to clarify the meaning of reasonable and nondiscriminatory and that may instead serve to skew the bargaining clearly in the direction of one party or the other.”
Although he did not single out an SSO by name, there seems little doubt that the agency is looking at the updated patent policy that was introduced by the Institute of Electrical and Electronics Engineers (IEEE) in 2015 and was met with strong opposition from a group of standard essential patent (SEP) owners including Qualcomm, Ericsson, Nokia and InterDigital.
Those companies have refused to comply with the terms of the new policy which they view to be unfairly biased in favour of businesses that use their patented technology (commonly referred to as implementers). As well as criticising the actual content of the policy, Qualcomm et al were also highly critical of the process by which the policy was changed. They claim it failed to seriously consider their concerns, even though the changes were approved by majority vote at every stage.
The new policy was green lighted by the Obama administration in the form of a business review letter which, critics maintain, subsequently encouraged overseas authorities, such as those in China, to clamp down on the licensing policies of some SEP owners in local markets.
Finch did not elaborate on what, if any, action the DOJ might take against SSOs, but he indicated that he and his colleagues would be working to change part of the prevailing narrative that has hamstrung SEP owners around the world. “The division’s senior leadership intends to engage in further advocacy efforts both in the United States and internationally on this issue in the coming year elaborating on the way that antitrust enforcers and courts may help to restore the balance in IP and antitrust law,” he commented.
It is interesting to note that IP and antitrust was one of just three topics that he touched on in his prepared remarks which might be an indication on just how focused the DOJ is on the topic. You can see a video of the Heritage event here with Finch’s comments starting at around the 2:30 mark.
It has been clear for some time that the current US administration represents a sharp change of direction from the Obama White House in how it views the application of antitrust law in IP and, more specifically, how it affects the licensing of standard essential patents. Put simply, the current administration has given every indication that it feels that IP has become the victim of antitrust overreach in recent years.
In a speech last November, Finch’s boss, Makan Delrahim, gave the first sign of an about-turn in policy to one more in favour of IP owners. “I worry that we as enforcers have strayed too far in the direction of accommodating the concerns of technology implementers who participate in standard setting bodies, and perhaps risk undermining incentives for IP creators, who are entitled to an appropriate reward for developing break-through technologies,” Delrahim told the audience at the University of Southern California.
Late last week the US antitrust czar appeared at an event at George Mason University where his comments again touched upon the need for balance between patent owners and implementers. At that event he was asked by a reporter in the room from MLex about the IEEE business review letter and whether that was still the DOJ’s position. According to one audience member he responded by saying that it hadn’t been revoked but that the letter had been interpreted in ways that are inconsistent with antitrust law.
Delrahim’s November speech clearly has some in the tech community worried and on Wednesday a group of businesses including Apple, Cisco, Microsoft and Samsung wrote to the DOJ antitrust chief to express their unease over some of his comments. “We are concerned that the policy approach announced in the USC speech may undermine fundamental licensing obligations that our companies and our customers rely upon,” the letter said. It went onto stress that hold-up is a competition law problem that harms consumers and that diversity in the approaches taken by SSOs should be welcomed.
The apparent shift at the DOJ does not mean that SEP owners are suddenly going to have it all their own way. In his comments Finch referred to a recent district court case, which he didn’t name but is presumably the TCL v Ericsson SEP licensing decision. This was handed down late last year and turned not on questions of antitrust but on a contractual dispute focused on whether Ericsson was in breach of its FRAND obligations and what royalty rate TCL should be expected to pay for a licence. That case is largely seen to have gone against the patent owner, Ericsson, after the judge ruled that TCL should pay much lower rates than the Swedish company had asked for.
The DOJ’s message appears to be that, as in TCL v Ericsson, it should be left to the courts not antitrust authorities to weigh in on patent owners’ licensing practices. “If a patent holder is alleged to have violated a commitment to a standard-setting organisation, there are common law remedies that can be available to address that misconduct,” Finch explained at the Heritage event.