Innovator Organizations Applaud Delrahim Action on SEPs, Plead for Restoration of Injunctive Relief for Infringement

“The letter explains that injunctions are necessary to address the widespread patent infringement that has occurred in recent years; infringement that risks innovators’ ability to continue to innovate and create next generation technologies.”

A number of organizations, including Ericsson, Nokia, Philips, Qualcomm, the Innovation Alliance and the Licensing Executives Society, have sent two separate letters to U.S. Attorney General William Barr, USPTO Director Andrei Iancu, and Secretary of Commerce Wilbur Ross stating their support for the United States’ decision to withdraw the Department of Justice (DOJ), Antitrust Division’s assent to the 2013 joint DOJ-U.S. Patent and Trademark Office “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments” (the 2013 Joint Policy Statement).

The letter sent by Ericsson, Nokia, Philips, and Qualcomm begins by explaining that those signing the letters collectively spend many billions of dollars annually on “the development of cutting-edge standards that substantially contribute to the social welfare and quality of life of U.S. consumers,” and “and employ tens of thousands of people in the U.S.” The letter goes on to explain that injunctions are necessary to address the widespread patent infringement that has occurred in recent years; infringement that risks innovators’ ability to continue to innovate and create next generation technologies. Without property protections it is economically irrational to invest the billions of dollars required to create cutting-edge technologies.

The letter also explains that the right to exclude is not only enshrined in the U.S. Constitution, but is mandated by the TRIPS Agreement. “A broad rule severely limiting the ability to enforce or even seek prohibitive orders against infringers… would conflict with the [World Trade Organization] WTO Standard,” the letter explains. Thus, withdrawal from a Policy Statement that limits—or even prohibits—various prohibitive orders is not only good policy from the perspective of allowing creators to protect their innovations, but good policy because it makes the U.S. compliant with WTO obligations.

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Delrahim Takes a Stand on the 2013 Joint Policy Statement

This chapter in the Standard Essential Patent discord began in December 2018, when Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice, Makan Delrahim, indicated that the Antitrust Division was withdrawing its assent to the 2013 Joint Policy Statement during remarks delivered at the 19th Annual Berkeley-Stanford Advanced Patent Law Institute.

The 2013 Statement advised that injunctions or International Trade Commission exclusion orders may not be appropriate with respect to standard-essential patents, as they may be “inconsistent with the public interest.” The statement said:

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. As a result, the owner of that patented technology may gain market power and potentially take advantage of it by engaging 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.

Critics have characterized this reference to patent hold-up as a false flag that simply has not been an issue. But the Joint Statement went on to say that “such an order may harm competition and consumers by degrading one of the tools [standards developing organizations] SDOs employ to mitigate the threat of such opportunistic actions by the holders of F/RAND-encumbered patents that are essential to their standards.”

Implementer Opposition

In January, six trade associations came out in opposition to Delrahim’s move to withdraw from the Joint Policy Statement, claiming that it provided “much-needed guidance regarding the intersection of standardization, intellectual property, and the vital role of competition law” and “discouraged abusive tactics, such as improperly using injunctions, used to assert pressure on would-be innovators that utilize standards to compete.” The letter further expressed confusion over Delrahim’s views and criticized his implication that FRAND licensing is compulsory.

Specifically, Delrahim said in his December remarks at the Patent Law Institute:

This joint statement should not be read as a limitation on the careful balance that patent law strikes to optimize the incentive to innovate.  There is no special set of rules for exclusion when patents are part of standards.  A FRAND commitment does not and should not create a compulsory licensing scheme…. In particular, I have criticized the argument that it ought to be a violation of antitrust law for a holder of a standard-essential patent, or SEP, to exclude competitors from using the technology, including by seeking an injunction against the sale of infringing goods—I think that argument is wrong as a matter of antitrust law and bad as a matter of innovation policy.

Innovators Respond

In the letter sent today by Ericsson, Nokia, Philips and Qualcomm to Iancu and Ross, the companies championed this view, urged Ross and Iancu to voice their support for Delrahim’s view, and further elaborated on the reasons the 2013 Joint Policy Statement was problematic. In part, the letter argued that the Policy Statement did not give sufficient consideration to the phenomenon of “hold-out,” or long term, strategic infringement that takes place after innovator companies have invested in developing a particular technology. The companies said that the Policy Statement “encouraged and emboldened” such hold-out and the practice became more prevalent after 2013.

The letter added that the Joint Policy Statement was at odds with the 2014 Federal Circuit decision in Apple v. Motorola, in which, “the court found no reason to create a separate rule or analytical framework for addressing injunctions for FRAND-assured patents, noting that the eBay framework provides ample flexibility for addressing the unique aspects of FRAND-assured patents and industry standards in general.”

In a second letter sent today, seven organizations—the Alliance of U.S. Startups & Inventors for Jobs, the American Conservative Union, the Conservatives for Property Rights, the Innovation Alliance, the Licensing Executives Society (U.S.A. and Canada), Inc., the National Small Business Association, and the U.S. Business & Industry Council—likewise supported Delrahim’s position and said that a series of court decisions over the last decade have turned the tide against patent owners, causing the United States to fall from first to twelfth place on the Global Innovation Policy Center’s IP index in 2018. The organizations described the 2013 Joint Policy Statement as being “at best confused on how to maintain the incentive to innovate in a standard-development context,” applauded Delrahim’s decision to withdraw, and urged Barr and Ross to “discount the arguments of those who claim that increased innovation and job creation require weaker patents and less of the ‘exclusive Right’ the U.S. Constitution contemplates.”

According to Delrahim’s remarks, his office will be working with the USPTO “to draft a new joint statement that better provides clarity and predictability with respect to the balance of interests at stake when an SEP-holder seeks an injunctive order.”

While it remains largely unclear what the 2013 Joint Policy Statement’s true effect or purpose really was, patent owners will generally welcome Delrahim’s decision as providing clarity and leaving judges to decide cases based on the evidence before them.

The STRONGER Patents Act, introduced in the Senate by Senator Chris Coons (D-DE), Senator Dick Durbin (D-IL), Senator Mazie Hirono (D-HI), and supported in the House of Representatives by Congressman Steve Stivers (R-OH), would restore the presumption of injunctive relief upon a finding that a patent is both valid and infringed. In a recent interview with IPWatchdog.com (publication forthcoming), Congressman Stivers indicated that there was a chance that the STRONGER Patents Act could move in the 116th Congress, but that he was particularly optimistic that something could be achieved within the next three to four years.

The lack of real injunctive relief for innovators and hold-outs, sometimes referred to as efficient infringement, will continue to be an important topic moving forward as patent reform continues to be discussed inside the Beltway in Washington, D.C.

 

 

 

 

 

 

The Author

Eileen McDermott

Eileen McDermott is the Editor-in-Chief of IPWatchdog.com. Eileen is a veteran IP and legal journalist, and no stranger to the intellectual property world, having held editorial and managerial positions at several publications and industry organizations. She has acted as editorial consultant for the International Trademark Association (INTA), chiefly overseeing the editorial process for the Association’s twice-monthly newsletter, the INTA Bulletin. Eileen has also served as a freelance editor for the World Intellectual Property Organization (WIPO); as senior consulting editor for the Intellectual Property Owners Association (IPO) from 2015 to 2017; as Managing Editor and Editor-in-Chief at INTA from 2013 to 2016; and was Americas Editor for Managing Intellectual Property magazine from 2007 to 2013.

Eileen McDermott

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 5 Comments comments. Join the discussion.

  1. concerned March 19, 2019 5:11 am

    Representative Steve Stivers, that has his upcoming article in IP Watchdog, is my Representative. I will get my story in front of him, my story that IP Watchdog was so generous to publish.

    My patent application was rejected as allegedly routine, conventional and well understood even though nobody on Earth has ever used the process. I am in appeal, and I thank Director Andrei Iancu’s new S101 guidance on practical application.

    You do not have to take my word that my process is NOT routine, well understood or conventional. “THE” Ohio State University did a 2 year comprehensive study and wrote as much documenting what the industry standard really is, and it is not my first ever process.

    You know, “THE” same Ohio State University that Representative Steve Stivers earned his MBA. Go Bucks!

    Representative Stivers is a good person. I am thankful of his support to help correct the patent madness that has gone on for way too long. And thank God for IP Watchdog!

  2. Carrie Hafeman March 19, 2019 12:27 pm

    Great article Eileen! Things appear to be pivoting in the right direction. There are more and more stories of hope for the US inventor! I will share your article on LinkedIn.

  3. Jianqing Wu March 19, 2019 2:58 pm

    I make four points:

    1. The past policy has caused the United States to fall from first to twelfth place on the Global Innovation Policy Center’s IP index in 2018. I think that no index can tell the full and true story. The true impact of the past patent policy is much and much worse and will last for half a century. The U.S. was able to become a top technological nation because it respected inventors’ rights for much of its early history. The patent system depends upon trust and credibility, which was gone. When the government created such a widespread infringement landscape and then kept invalidating patents, it just ruined such trust and credibility.

    2. Injunction is absolutely necessary. Standard-essential nature should not be treated differently. It would take much more inventive efforts, time and resources to create new technologies. If such technologies are protected with less protection, there would be fewer or more future technologies. This is the worst problem: the U.S. inventors have lost innovation passion and only a tiny portion of citizens would even bother. Most new and different technologies are not from corporations. When the government does not protect the new comers, who will create new standard?

    3. The past patent policy mistakes have dramatically changed U.S. patent share for U.S. concerns. Without injunction, patents have little value to small entities and small businesses. However, large corporations are not affected by too much because they use patents as intangible properties. Therefore, the patent-hostile policy is changing U.S. patent owners’ compositions: 53% or more patents are owned by foreign corporations and another big share is owned by international corporations for promoting foreign concerns, only a small portion of patents work for the U.S.

    4. Due to the patent hostile policy, more of existing patents will be acquired by foreign corporations and more of existing patents owned by small inventors will be abandoned.

    Congress still has not understood extremely serious problems it created. Each year’s inaction will caused damages that cannot be undone in five to ten years.

  4. Eric Berend March 20, 2019 1:47 pm

    ‘Jianqing Wu’ , @ 3.:

    Thank you for making such an accurate assessment of the state of affairs in the U.S. patent space, for small entity inventors here in America and internationally.

    If an intelligent mind such as this, whose primary language is not even English*, can clearly see the essential issue here**, than what excuse exists for supposedly more sophisticated U.S. Congresspersons and Senators?

    * – this is my assumption, without specific knowledge, but based on apparent language translation artifacts seen in various comments posted here at IPWatchdog.com of the commentator’s commentary, over the past four years or longer.
    ** – thus demonstrating the irony of the sense of the word “essential” in ‘Standard Essential Patents’. It seems a severe irony, for it to be considered as being less “essential”; than what MAY be so-called ‘Essential’ for members of an industry cartel; that inventors are motivated to try to invent, in the first place.

  5. angry dude March 20, 2019 5:07 pm

    “Essential patent” means too difficult/impossible to design around and too important to not use it in an industry standard

    makes such patent so much more valuable

    Unless standards-adopting organization like ITU can produce “prior art” reading on such patent (in which case patent can be invalidated) the industry should just suck it up and pay licensing fees – either that or not to include such patent in a standard

    Most tech patents are not essential – couple essential ones I can remember are e.g. Townshend’s patents on 56K asymmetric modem data communications and CSIRO’s patents on Wifi
    (followed by epic legal battles with big tech infringers to get paid…)

    All this talk about “standard-essential patents” is a diversion from real issues
    propagated by big industrial infringers

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