DOJ, USPTO slam companies for improper use of standards-essential patents in asking for sales bans

January 10, 2013
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In light of recent developments on the patent wars, the U.S. Department of Justice (DOJ) and the U.S. Patent and Trademark Office (USPTO) are in talks to lay the groundwork on the increasing tactic of seeking injunctions for competitors’ products using standards-essential patents as basis. These “exclusion orders” are meant to keep competitors from improperly using one’s own intellectual property. But the government agencies in this regard say tech companies are using their patents in tactics that are unfair, and anti-competition.

Lately, the biggest cases of intellectual property infringement involves Apple against Samsung (mostly as a proxy for Android, being the most successful Android manufacturer to date), and the patents owned by Google. The results of the cases are unpredictable and may have far-reaching effects on the companies concerned as well as the industry and business environment.

In Apple’s case, it won its landmark case against Samsung, basically saying that Samsung copied from Apple. The accusations stemmed from the processes which Apple owned and were used in the manufacture of iPhone parts, which have turned up as part of Samsung phones. The current crop of IP related lawsuits, however, are turning out to become constricting to competition and innovation.

The lawsuits that stem from standard essential patents are said to give the owner undue competitive advantage. If the IP owner wants the technology to be adopted as a standard, the technology has to be licensed with FRAND terms: the licensee has to have “free, reasonable and non-discriminatory” use. Any contract condition which hinders or handicaps the licensee is in violation of this condition. The DOJ and USPTO’s discussions aim to ensure that the FRAND conditions for essential patents are followed.

Besides the DOJ and the USPTO, clarifying things and telling competitors not to use an exclusion strategy involving FRAND patents would also help the courts and regulators. In this case, exclusions refer to items in a contract which are not included with the use of a technology. It would also help consumers as it would promote competition and will hopefully end up with better products for the market. As an example, if an OEM were to invent a 5G protocol, the company can lay claim to it as proprietary technology and limit licensing such that the inventing company has an advantage. However, if the 5G technology were to become a part of the standards, then any such restrictions and exclusions would be in violation of the FRAND clause.

When a technology has become an accepted standard, licensing also becomes standard. The concept of fair play is part of the licensing agreement. There is no threat of a sales ban or manufacturing ban of any kind. Any deviation from a standard FRAND licensing can be considered as anti-competitive.

Of course, if a company does not want to sign up for a license agreement, or if they refuse an offer for licensing, they would have to use some other like technology in order to have the same functionality. It can be proprietary or part of the standards, it can even be under an Open License agreement. That is the risk that any company has to take.

These regulatory and enforcement agencies were not created to be active participants in the marketplace. These are supposed to be watchdogs, and act more as arbiters or referees. Like any game, spectators would not want to see the outcome decided by the referees. Instead, the game should be played by the players with as little intervention as possible from the referees, which is precisely what the DOJ and USPTO want to see.

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