Thursday, October 24, 2013

What a Difference a Year Makes: An Emerging Consensus on the Treatment of Standard-Essential Patents

Jonathan Kanter (Cadwalader) notes What a Difference a Year Makes: An Emerging Consensus on the Treatment of Standard-Essential Patents.

ABSTRACT: These days, it is difficult to identify an antitrust issue that is generating more discussion than standard-essential patents. To some, SEPs are to antitrust what Breaking Bad is to television: a complex and important subject worthy of discussion. To others, SEPs are to antitrust what Miley Cyrus is to pop culture: a fad that consumes way too much attention and distracts from other more important subjects. In either case, antitrust lawyers and economists cannot stop scrutinizing the issue with vigor, fascination, and (sometimes) an admirable level of obsession. Even just a year ago, the role of SEPs in litigation and the scope of commitments to license SEPs on fair, reasonable, and non-discriminatory terms seemed so divisive and controversial that one could not imagine any resolution in the fore. As the so-called "smartphone wars" reached a fever pitch, antitrust emerged at the center of the controversy. The U.S. Department of Justice's Antitrust Division was in the midst of reviewing two major transactions involving large patent portfolios: Google's acquisition of Motorola Mobility, along with MMI's patent portfolio, and the Rockstar Consortium's acquisition of certain patents auctioned off by then-defunct Nortel Networks.

Shortly thereafter, complaints began flowing into enforcement authorities on both sides of the Atlantic about the conduct of individual companies. The European Commission, DOJ, and Federal Trade Commission responded by opening their own conduct investigations. These events led commentators and regulators alike to grapple with two important but controversial questions: Do SEPs warrant special antitrust consideration? And, if so, how should antitrust laws address concerns inherent in the defensive use of SEPs? Quite remarkably, antitrust enforcement authorities and courts have begun to converge around answers to some of these questions. In the last year alone we have seen two FTC consent decrees, two EC Statements of Objections, and four District Court opinions all suggesting that SEPs warrant a certain degree of special treatment under U.S. and European law. Setting aside the rhetoric of interested parties on all sides of the issue-which remains as divisive as ever-one can see a consensus beginning to emerge around certain key principles. Courts, agencies, and policy makers all appear to agree that SEP holders should abide by their F/RAND commitments and refrain from obtaining injunctive relief against willing licensees. This is not to suggest that either enforcement authorities or standards bodies broadly agree on all issues related to SEPs. To the contrary, these issues remain quite contentious. Still, the emerging alignment among key decision makers is somewhat remarkable considering the intense level of attention and controversy.

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