In a move that struck some by surprise, the US Patent Office and the Department of Justice put out an interesting statement arguing that companies need to stop abusing promises for fair, reasonable and non-discriminatory (FRAND) licenses
(pdf) for standards essential patents (SEPs). They argued, quite reasonably, that lawsuits over SEPs can stifle innovation and block competition. Well, duh. While many are interpreting this as having to do with the FTC/Google settlement, which touched on exactly this issue, the DOJ/USPTO letter seems much more focused on trying to knock some sense into the International Trade Commission (ITC) concerning how it deals with the patent cases it hears. As we've been discussing for years, patent holders get two (entirely) separate cracks at using the legal process to slap down those they accuse of patent infringement. First, there's the federal court system, which is what most people think of when they think about patent disputes. The second is going to the ITC
and seeking to ban the product from entering the country (i.e., getting an injunction).
The ITC process does not follow the same rules or timeline as the legal process and so you could have a situation where courts go one way and the ITC goes another. Either way, an injunction via either the courts or the ITC is like a death sentence for a product, so most companies figure out a way to "settle" a case when it reaches the injunction stage, so it becomes like a forced license at a ridiculously high price. Thanks to the MercExchange
ruling at the Supreme Court, the federal courts are much more hesitant to issue injunctions these days, but for the ITC it's the only
remedy they have -- and while they don't always use it, they do use it often enough.
The FTC has lately been expressing growing concern about the ITC's somewhat cavalier attitude towards the impact of the injunctions it gives out, and this DOJ/USPTO paper appears to be another push against the ITC. The statement makes it clear that the ITC needs to recognize that it's core mission is focused on what's best for "the public health and welfare of consumers," and thus, when it comes to standards essential patents, it needs to take into account whether or not the public good is actually served by issuing an injunction.
This is all good and we agree.
But... why is this limited to SEPs? This is an all too typical reaction from government bureaucrats on these issues. They're all up in arms that (*gasp*) companies might use the government granted monopoly privilege
to do exactly what it's designed to do: to exclude others in order to drive up the price and limit competition. The real focus should be on whether or not the patents themselves
are what's best for the public health and welfare, not whether or not the FRAND agreements on the tiny subset of all the patents out there, the SEPs, are what's best.
The whole thing is somewhat comical when you think about it. The government gives companies the ability to exclude others via a government granted monopoly. It doesn't take a degree in economics to understand that when you give someone the right to exclude others, limit competition and drive up the price of things, that's what's going to happen -- and it's not going to be the best thing for the public health. But rather than recognize that crux of the issue, the response is just to focus on a core subset of patents, the standard essential ones.
Oh, and concerning the Google/FTC settlement, Google finally dropped its ITC effort
against Microsoft. Honestly, Google should have done that a while back. Yes, Google inherited the situation from Motorola, but what an amazing statement it would have made about the companies position on patents and the patent wars if it had simply dropped such ITC actions upon the close of the acquisition.
Either way, all of this is yet another example of just how broken the patent system remains. And while it's nice to see the DOJ and USPTO at least paying lip service to the problems of the patent system, it's unfortunate that they think the problem is about "standards essential patents," rather than patents themselves, which create the identical problem for others.