The Federal Trade Commission (FTC) has long been concerned about the competitive impact of patent litigation related sales injunctions based on standard essential patents (SEPs). It is recently reached a settlement with Google in which the search and mobile giant will agree not to use its patents to “stifle competition.” Not only will Google not seek sales injunctions for SEPs, certain SEPs will be available to anyone who wants to use them free of charge.
Industry standards are essential to the interoperability of modern technology. Everything from the internet to WiFi to cellular data is based on industry standards such as the 802.11 WiFi standard, or the LTE “4G” cellular data standard. When companies that own patents that are needed to implement a standard participate in the creation of a standard, the industry associations invariably insist that any patents held by a participating company must be licensed to anyone who wants it on “FRAND” terms: fair, reasonable, and non-discriminatory. Those patents that fall under those requirements are called “standard essential patents,” or SEPs.
There is obviously a great benefit to a company in having one of its patents be a SEP: anyone who wants to implement the standard has to take a license. What the company gives up is a certain amount of flexibility in licensing. It is compelled to license the technology to its most bitter rivals, and it must do so on non-discriminatory terms.
In a filing from June, 2012 with the International Trade Commission, the FTC said that “incorporating patented technologies into standards also has the potential to distort competition by enabling SEP owners to negotiate high royalty rates and other favorable terms, after a standard is adopted, that they could not credibly demand beforehand, conduct known as ‘patent hold-up.’”
Beyond patent hold-up, the FTC is concerned that if an industry giant such as Google or Apple wins a sales injunction for an SEP it reduces the products available to consumers, and allows the patent owner to increase prices and or market share in an anti-competitive fashion.
This has become a bigger issue for Google since its acquisition of Motorola Mobility, which owns many cellular communications related SEPs. It has been reported that Google is close to reaching an agreement with the FTC that it will not seek sales injunctions against companies infringing its SEPs.
This does not mean that Google will not be enforcing its patents: it will continue to demand license fees on its patents, other than those it has agreed with the FTC to license for free. Google could presumably still seek a sales injunction if an infringing company refuses to negotiate a royalty or license fee with Google.
