Published: 1/8/13
In this joint statement, the U.S. Justice Department’s Antitrust Division and the Patent and Trademark Office addressed the benefits of collaborative standards development through standards organizations and the risks to competition associated with patent hold-up, which may occur after standardization. According to the statement, “when a standard incorporates patented technology owned by a participant in the standards-setting process, and the standard becomes established, it may be prohibitively difficult and expensive to switch to a different technology within the established standard or to a different standard entirely.” The statement explains that this may enable a SEP holder to “engag[e] in patent hold-up, which entails asserting the patent to exclude a competitor from a market or obtain a higher price for its use than would have been possible before the standard was set, when alternative technologies could have been chosen.” Such hold-up results in consumer harm to the “extent that the hold-up generates unwarranted higher royalties and those royalties are passed on to consumers in the form of higher prices.”
The statement explains that FRAND commitments are designed as a solution to the hold-up problem that benefits both standard implementers and SEP holders. Standard implementers benefit from the assurance that they would be able to license SEPs on FRAND terms. SEP holders that make FRAND commitments benefit as well: “[P]atent holders that also sell products and services related to the standard benefit from expanded marketing opportunities, and patent holders that focus on licensing their inventions benefit from an expanded source of revenues.” The statement concludes that FRAND commitments may be incompatible with injunctive relief: “A decision maker could conclude that the holder of a F/RAND-encumbered, standards-essential patent had attempted to use an exclusion order [a form of injunctive relief] to pressure an implementer of a standard to accept more onerous licensing terms than the patent holder would be entitled to receive consistent with the F/RAND commitment—in essence concluding that the patent holder had sought to reclaim some of its enhanced market power over firms that relied on the assurance that F/RAND-encumbered patents included in the standard would be available on reasonable licensing terms under the SDO’s policy.” Such relief may be appropriate in some circumstances, however, the statement states, “such as where the putative licensee is unable or refuses to take a F/RAND license and is acting outside the scope of the patent holder’s commitment to license on F/RAND term.”