USPTO And DOJ Shocked (Shocked!) That Companies Abuse Patents, But For The Wrong Reasons

from the it's-a-step,-but... dept

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.

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Comments on “USPTO And DOJ Shocked (Shocked!) That Companies Abuse Patents, But For The Wrong Reasons”

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Anonymous Coward says:

You have to understand that they are not actively looking into the patent situation as a whole. These guys aren’t the ones dealing with the consequences, and they’ll be quick to tell you that they don’t have time to delve into such blogs as techdirt to really sift out the details.

The fact that they are starting to see the tip of the iceberg is in itself monumental. It’s at the point where they’ll start looking into it, those comments about the non SEPs may now become relevant enough from them to actually think about them.

With any luck they’ll actually look at the issue from beyond a “dirty theives” perspective of enforcement and maybe, just maybe they’ll dive into the water and discover just how big that iceberg really is.

Anonymous Coward says:

Google: exactly as planned

I am beginning to suspect that the reason Google did not drop these legacy Motorola efforts is so they could drop them as the remedy for a FTC settlement. Had they dropped these efforts before, they would have to drop something else as part of the settlement, since the FTC had to make them do something to save face.

This way, it was a win/win/win situation: Google gets rid of these efforts which they probably did not want in the first place, Google does not have to do many more concessions above that, and the FTC gets to tell Google to do something.

DannyB (profile) says:

Companies should stop participating in FRAND

It seems there is no benefit to an innovator to put their patents under FRAND.

An FRAND patent on actual technology isn’t an effective counter weapon against insane software patents like bouncy scrolling, pinch to zoom or rectangles with round corners, or making your device “too thin”.

If you try to use your FRAND patent as a counter weapon, it gets argued that you should not be able to get an injunction. Nor should you be able to negotiate rates similar to a software patent you are being attacked with.

If the party infringing your FRAND patent doesn’t take a license, you can’t get an injunction, you can’t negotiate, if you begin negotiations then the infringer will take your very first offer and run to the court claiming it’s too high and the court should establish a fair rate — but the party will only accept the court’s judgement if the party believes the rate is low enough. (I won’t name names here.)

Despite that the infringer can only get a license to an FRAND patent if they also license their own patents back under FRAND terms, the infringer won’t do this.

In short, the infringer will claim that the innovator’s FRAND patents are worth nothing while the infringer’s software patents are worth everything and should entitle the infringer to the entire market.

(I use terms like ‘infringer’ and ‘innovator’ here just to put one possible perspective on things from one party’s point of view that may be unfamiliar to some.)

In short, there seems to be no reason to have an FRAND patent. Just get a real patent on your real technology and negotiate individually with other industry players, and not at all with some other players to give them a taste of their own “no license under any conditions” medicine.

velox (profile) says:

“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”


Following profit-motive, the next 3 most important factors for the production of goods and services at a fair price are: competition, competition and competition.

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