Sunday, October 20, 2013
Sean Gates (MoFo) describes Standard-Essential Patents and Antitrust: Of Fighting Ships and Frankenstein Monsters.
ABSTRACT: Standard-essential patents have been at the heart of a debate about the reach of U.S. antitrust law. In recent years, the focus has been on whether breach of a good faith commitment to license on reasonable and non-discriminatory terms can be the basis for a monopolization claim. The question is whether, in the absence of any fraud or deception at the time of the RAND commitment, an antitrust violation occurs when a holder of a RAND-encumbered patent either refuses to grant a license on RAND terms or seeks injunctive relief.In consent decrees, the Federal Trade Commission has stated that such conduct may violate Section 5 of the FTC Act as an unfair method of competition. But no court has ruled on such a theory. And the Commission has been careful to distinguish between Section 5, which only the FTC can enforce, and Section 2 of the Sherman Act, which the Department of Justice and private litigants may enforce. Whether a breach of a RAND commitment may be a violation of Section 2 thus remains open to debate. But recent patent law developments may undermine any Section 2 theory. And breach of a RAND commitment as a Section 2 violation may face a difficult legal path in any event. The time may have thus come to talk of other things, such as outsourcing patent enforcement by operating companies to patent assertion entities. Some have complained that such arrangements may violate the antitrust laws. If the theory gains any traction, such outsourcing may become like the fighting ships of shipping conference lore or the Frankenstein monsters of raising rivals' costs theory.