“Absent a showing of harm to competition, antitrust law is not an appropriate regime for resolving contractual disputes.”
Standard Setting Organizations (SSOs) exist to identify and select the best innovations entire industries will build upon. Those contributing patented technologies are asked to provide fair, reasonable and non-discriminatory assurances. In essence, patent owners contributing technologies are committing to provide access to their Standard Essential Patents (SEPs).
Whether one thinks it is good or bad, it is an inescapable truth that over the last decade the patent system in the United States has become weakened. The weakened patent system, and a patent grant the Supreme Court now considers to be a “government franchise,” has shifted leverage from patent owners to technology implementers.
It has always been difficult to determine what is a fair, reasonable and non-discriminatory, or FRAND, licensing rate given confidential licenses and litigation settlements. That task is becoming all the more difficult as commentators call into question the wisdom of patent hold-up theory and evidence mounts with respect to the existence of patent hold-outs choosing to efficiently infringe instead of engaging in good faith licensing negotiations.
SEPs represent pioneering innovation that entire industries will build upon. They represent ubiquitous innovation, and this creates many legal problems.
Amidst this uncertainty, in September IPWatchdog.com held a two-day symposium to discuss the state of standard essential patents in the United States. During this symposium, overwhelming consensus was achieved by the Patent Masters™ faculty and symposium attendees on a variety of principles and recommendations.
The following statements were voted on and received unanimous consent:
- 5G technology wouldn’t exist without technology innovators having spent many billions for research and development.
- Robbing innovators of due compensation makes future investment and invention more difficult and less likely.
- Whether a royalty rate qualifies as reasonable under a FRAND commitment should be based on the reasonableness of the rate given its value to a product or service.
- Patent owners not acting reasonably or in good faith in offering a license are violating their FRAND obligations.
- An unwilling SEP licensee is one who refuses to negotiate with the SEP patent owner in good faith.
- Patent antitrust law should err on the side of protecting innovation incentives.
- The district court decision in FTC v. Qualcomm is part of a trend in recent antitrust cases blurring the fundamental distinction between the role of contract law and that of antitrust law in governing disputes between sophisticated parties.
- Absent a showing of harm to competition, antitrust is not an appropriate regime for resolving contractual disputes.
- The district court decision in FTC v. Qualcomm invites plaintiffs to use the Sherman Act to reach conduct that has been generally shielded from antitrust liability.
The following statements achieved consent from at least 80% of those voting:
- Owners of SEPs should not be denied injunctive relief when patent infringement is proven and infringers refused to accept a FRAND license rate. [89% AGREE]
- Absent any concern about the possibility of an injunction being issued, infringers are incentivized to free-ride for as long as possible. [89% AGREE]
- Free-riders compete unfairly with honest licensed implementers who do pay fair royalties. [89% AGREE]
- It is difficult to reconcile the accelerated innovation and thriving competition that consumers have enjoyed in recent decades with the allegations that licensing practices around SEPs are anti-competitive. [88% AGREE]
- The combination of regressive competition law enforcement and the ever-shortening shelf-life of new technology results in rampant holdout that costs innovators tremendously. [88% AGREE]
- Patent owners seek to extract unjustified licensing payments after implementers have spent great sums investing in the implementation of the standard. [83% DISAGREE]
Therefore, it is the recommendation of the Patent Masters™ Symposium that:
- That antitrust law and policy should err on the side of incentivizing innovation and not be used to reach conduct that is a matter of private contract law between sophisticated parties.
- Patent and antitrust law and policy should recognize the substantial investment technology innovators make to create technologies like 5G wireless communications a reality, and the risks to future innovation presented by unwilling licensees who hold-out while still implementing standards.
- Patent and antitrust law and policy should recognize that a prohibition against an injunction creates a free-rider problem that allows unwilling licensees to compete unfairly with honest, licensed implementers.
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