Senate Judiciary Advances American Innovation and Choice Online Act to Ramp Up Antitrust Efforts Against Big Tech

“Patent rights that have a stronger certainty of validity under Section 101 and a better chance at obtaining injunctive relief against infringers would better leverage the competition that’s already prevalent in the high-tech marketplace.”

https://depositphotos.com/70846679/stock-photo-button-legislation-on-keyboard.htmlOn January 20, the Senate Committee on the Judiciary voted 16-6 to advance S. 2992, the American Innovation and Choice Online Act, out of committee and toward a full vote on the floor of the U.S. Senate. If passed, the bill would give the Federal Trade Commission (FTC), the U.S. Attorney General and state attorneys general new powers to bring antitrust enforcement actions against major online platforms that are alleged to be engaging in discriminatory conduct by preferencing their own products and services over competing products and services that are also available on those platforms.

Covered Platforms Cannot Preference Own Products or Abuse Interoperability

The American Innovation and Choice Online Act was introduced in mid-October by Senators John Kennedy (R-LA), Amy Klobuchar (D-MN) and Chuck Grassley (R-IA). The bill is part of an increasing effort by members of both major parties to address perceived competition issues posed by major search engine, social media and e-commerce platforms. This particular bill was designed to prevent Big Tech firms from not only preferencing their own products and services but also abusing platform interoperability requirements to prevent competitors from using platforms, requiring businesses to buy certain products or services for preferred placement, misusing another company’s business data to compete and biasing search results.

Online platforms meeting the bill’s definition of “covered platform” would have to comply with provisions against conduct that would be unlawful under the bill. An online platform could qualify as a covered platform if, at any point during the year prior to an alleged violation of the act, it has at least 50 million U.S. monthly active users or at least 100,000 monthly active business users. The platform would also have to be controlled by a person who has either net annual sales or a market capitalization greater than $550 million at some point within two years prior to an alleged violation, and is a critical trading partner for any good or service sold on the platform. A “critical trading partner” under the act is any person having the ability to restrict or materially impede the access of a business user to either its customers or a tool or service that the business needs to effectively serve its customers.

The FTC and the U.S. Department of Justice (DOJ) would have to jointly designate an online provider and issue notice of the designation in the Federal Register. The designation would last for a period of seven years regardless of any change in ownership, although the FTC and the DOJ have the authority to rescind a covered platform designation at any time. Companies who operate designated covered platforms would also have the opportunity to petition the FTC and DOJ to reconsider the designation if there’s evidence that the platform no longer meets the criteria to qualify as a covered platform. Covered platform operators can also make out an affirmative defense under the bill if the alleged discriminatory conduct would not result in material harm to the competitive process by restricting or impeding the legitimate activity of business users, or the conduct was narrowly tailored, could not be achieved through less discriminatory means and was necessary to prevent a violation of federal or state law, protect user privacy or the security of non-public data or the covered platform, or maintain or enhance the core functionality of the covered platform.

Remedies for violations of the American Innovation and Choice Online Act include civil penalties that could amount up to 15 percent of the total U.S. revenue of the person charged with unlawful conduct during the period in which the act was being violated. The FTC, the U.S. Attorney General and state AGs can also pursue injunctive relief in U.S. district court, and repeat offenders, including any CEO or a corporate officer for a company committing multiple violations of the act, could be ordered by a court to forfeit any compensation earned during the 12 months preceding or following a suit filed by the FTC, DOJ or AGs under this act. Enforcement officials could also obtain emergency relief in the form of a 120-day temporary injunction if they can show claims that a covered platform took an action that would violate the bill and the action impairs the ability of business users to compete with the covered platform’s operator.

Growing Antitrust Support in D.C. Ignores Pro-Competitive Patents

Appetites for stronger antitrust enforcement against Big Tech companies have been growing since the latter stages of the Trump Administration. The DOJ joined AGs from 11 states to file the first antitrust suit against Google’s alleged anticompetitive practices in online search services and search advertising just weeks before the 2020 Presidential election took place. In the days leading up to the Senate Judiciary’s approval of the American Innovation and Choice Online Act, political news outlet Axios reported that top executives from Apple and Google engaged in strong lobbying efforts to stop the bill, with both companies arguing that the bill’s passage would undermine data privacy and security features that help consumers.

From an intellectual property rights standpoint, there’s a lot to be desired from both the American Innovation and Choice Online Act, as well as the general groundswell of support for increased antitrust enforcement against Big Tech. Patents have many pro-competitive benefits that are being completely ignored by those drafting bills to increase antitrust enforcement or enforcing current U.S. antitrust law against Big Tech firms. Patent rights that have a stronger certainty of validity under Section 101 and a better chance at obtaining injunctive relief against infringers would better leverage the competition that’s already prevalent in the high-tech marketplace, but that’s been an impossible conversation to have in D.C. Instead, bills like the American Innovation and Choice Online Act advance, giving antitrust regulators more power while doing very little to address how those companies are able to achieve market dominance by copying the technologies of other firms with impunity.

Along with advancing the American Innovation and Choice Online Act, the Senate Judiciary had also scheduled discussion of S. 2710, the Open App Markets Act. Similarly, this bill applies existing U.S. antitrust law under the FTC Act or the Clayton Act for enforcement actions against companies that engage in anticompetitive practices in app stores, such as requiring app developers to use a favored in-app payment system for accessing consumers through that app store. While scheduled for the same hearing in which the American Innovation and Choice Online Act was advanced, there has been no further action on the Open App Markets Act as of this writing.

 

Image Source: Deposit Photos
Author: Konstantinp
Image ID: 70846679

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3 comments so far.

  • [Avatar for mike]
    mike
    January 26, 2022 05:01 pm

    It seems the Senate Judiciary Committee remains ignorant that an enforceable patent in the hands of a small innovator is the best way to break up antitrust behavior, incentivize innovation, and progress the arts and sciences.

    Unfortunately, small innovators no longer have that ability, due to eBay, the America Invents Act, Alice, TC Heartland, and Oil States. (The Leahy-Cornyn legislation “Restoring the America Invents Act” would cause even more damage.)

    If they want to ramp up antitrust efforts against big tech, they should focus on enabling innovators to have enforceable patents when issued from the USPTO.

  • [Avatar for Greg DeLassus]
    Greg DeLassus
    January 26, 2022 04:10 pm

    This particular bill was designed to prevent Big Tech firms from not only preferencing their own products and services but also abusing platform interoperability requirements to prevent competitors from using platforms, requiring businesses to buy certain products or services for preferred placement, misusing another company’s business data to compete and biasing search results.

    Great idea. I hope that this bill moves forward, and across the finish line.

    Patent rights that have a stronger certainty of validity under Section 101 and a better chance at obtaining injunctive relief against infringers would better leverage the competition that’s already prevalent in the high-tech marketplace…

    I know that this is a popular idea around these parts, but the above is not a very convincing assertion. Patent rights are only pro-competitive relative to the Googles and Facebooks of the world if the patent is controlled by a competitor to Google and Facebook. If one resolves the enforceability issues wrought by Alice and eBay, that will make Google’s own patents or Facebook’s own patents more enforceable against these hypothetical competitors, just as it makes the hypothetical competitors’ patents more enforceable. Who can say whether the net effect of that battle would be more pro-competitive or anti-competitive?

    Consider the January 8, 2022, 1:48 pm complaint from Michael on the below-linked thread. He complains that “[b]ig companies whine about having to spend money to defend against people like me. Instead, they could simply talk to us, negotiate fair prices for licenses, and probably end up spending less.” In other words, it is not clear that resolving the Alice and eBay problems would result in a world in which small inventors’ patents become a pro-competitive tool against Google or Facebook. It is just as likely that the small inventors would see a modest pay-day, after which their patents would become one more tool in the anti-competitive arsenals that Google and Facebook can deploy.

    https://www.ipwatchdog.com/2022/01/07/big-techs-great-patent-troll-smash-grab/id=142518/

  • [Avatar for Anon]
    Anon
    January 26, 2022 03:29 pm

    I am a bit confused by the writing in the article.

    Did you mean (instead) to say that granted patents should be afforded stronger certainty (against 101 challenges), and should be afforded a more appropriate application of injunctive relief** would be better weapons for the aim of the bill?

    As it is, I read that ONLY THOSE patents that may have stronger certainty against 101 challenges (that is, the subset of innovation that withstands the current Judicial onslaught by the way of 101 challenges) should also be given a stronger preference for injunctive relief.

    This second position I cannot support.

    ** Not delved into in your article, but “appropriate application of injunctive relief” means that the US Code on Injunctions:

    35 U.S. Code §?283. Injunction

    The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.

    Would be read in that the first principle of equity is to make the transgressed as whole as possible (and this is NOT so strictly viewed as in regards to monetary remuneration).

    Would be read in that a second principle of equity is to recognize that WHAT is transgressed is the patent right itself (a negative right) and NOT directly a product that reads on a patent claim.

    Understanding that the transgressed item is a negative right aligns with the negative nature of an injunction, and it is quite easy to THEN follow that injunctions simply ARE the best way of making the transgressed as whole as possible. In this manner the wooden thinking of “injunctions are the ‘atom bomb’ of remedies” does not overtake the primary principles of equity.