Response to the US Department of Justice call for Public Comments on SEPs Part 4 of 6

I submitted comments to the US Department of Justice’s call for comments that we previously discussed here.  Since they are rather long, I have decided to serialize them over a series of shorter posts.  For those interested in reading my comments as a singular unit they are available on the DOJ’s website here.

Responses Specific Questions in DOJ’s Call for Public Comment (1-3)

(1)   Should the 2019 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments be revised?

U.S. law as accurately summarized in the 2019 statement had not changed in the past two year. Revising the 2019 statement will return the USG thumb to the scale in support of big tech.

If this administration wants, nonetheless, to issue a revised statement, which in my view as a mistake, I believe the following modifications the 2021 Proposal would render it complementary to the 2019 Statement:

  • On page 2 modifying the following sentence: Strategies by either SEP holders or implementers to gain undue leverage in licensing negotiations can cause multiple harms, including non-F/RAND patent royalties, increased costs, and delayed introduction of standardized products and services, expensive and disruptive litigations, declining participation by innovators (especially those from smaller organizations with less financial clout) in standardization, and increased distrust amongst the various parties within the SEP licensing ecosystem. This increased distrust has the potential to foster a vicious cycle of increasing harms.

 

  • On page 4 modifying the following sentence: Without adequate incentives, such as injunctive relief and/or punitive-type damages designed to encourage unwilling licensees to contribute to a consensus-based process, patent holders may opt for closed, proprietary standards that do not offer the same benefits of interoperability and enhanced consumer choice.

 

  • On Page 7, inserting the following sentence: “… including the IPR holders and those seeking to implement the standard.” These clear rules should also account for any timing complexities which may arise due to a temporal mismatch between when the relevant standard has been adopted and when an IPR has taken its final form or complexities from the multinational nature of SDOs and the relevant IPRs. Such an accounting may be as simple as creating a safe harbor where the SDO member unilaterally promises that any IPRs that it owns that are found to be SEPs will be subject to the relevant SDO’s IPR policy.   Of course, individual parties may voluntarily contract for or agree to specific…

 

  • On page 9, inserting the following sentence: patent after agreeing to a However, this right of a licensee, post-agreement, to challenge the validity of essentiality of a licensed patent should not be interpreted as the right to demand fluctuating royalty rates (whether daily, monthly, or quarterly) based on the periodic number of valid and essential SEPs then owned by licensor, or the global adjudication of the validity and essentiality of all licensor SEPs, as a preconditions to entering into a SEP license.

 

  • On page 10, modifying the following sentence: A F/RAND commitment does not preclude enhanced damages for willful infringement or other equitable relief, as appropriate, if a potential licensee acts in bad faith.

 

(2) Does the draft revised statement appropriately balance the interests of patent holders and implementers in the voluntary consensus standards process, consistent with the prevailing legal framework for assessing infringement remedies?

The 2021 Proposal while noting the ways SEP owners can abuse the system, does not adequately explore the many ways licensees can abuse the system nor does it fairly discuss when exclusionary remedies might in fact be permitted if not even in the public interest.  The minor edits proposed in my answer to question (1) help remedy this deficiency.

(3) Does the draft revised statement address the competition concerns about the potential for extension of market power beyond appropriate patent scope identified in the July 9, 2021 Executive Order on Promoting Competition in the American Economy?

One irony elided by the above question is that the Executive Order focuses on the potential of market abuse of digital platforms, but most implementers of SEPs are themselves digital platforms with huge countervailing market power or are non-US device manufactures with close ties to foreign governments.  To wit, the executive order[1] states:

This order affirms that it is the policy of my Administration to enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony — especially as these issues arise in labor markets, agricultural markets, Internet platform industries, healthcare markets (including insurance, hospital, and prescription drug markets), repair markets, and United States markets directly affected by foreign cartel activity.

(emphasis added).  While the Executive Order contains multiple references to how patents might be used to ill-effect in the pharmaceutical or healthcare industries, notably absent in the order is any discussion of how the F/RAND commitments might impact the policy described in the above quoted paragraph.

The 2021 Proposal serves big tech as is evident from a massive astro-turfing effort by its well-funded lobbying arm SOS, that is funded by Apple, Amazon, Google, Intel Cisco and other lobbying arms owned by same (such as the ACT Apple association of which I’ve written elsewhere;[2] CCIA, Engine, and SIIA). Big tech has united for a tweeting campaign supporting the 2021 Proposal,[3] hiding their financial interest with empty “abuse” slogans.

As explained earlier, the 2013 Policy Statement, which appears to have inspired the 2021 one, was issued as a political favor to Apple and later Google (in the Google MMI “consent”) litigation positions. That government thumb on the scale had killed Motorola that was later sold by the pound to China’s Lenovo and Google, and helped Apple become a 3 trillion company. It would be a significant error to ignore this big tech boosting aspect of the 2021 Proposal – this is why it should not be issued.

[1] Order available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/

[2] David Cohen, On Deceptive Apps and Practices: Unmasking the ACT App(le) Association (JD Supra, 7 July, 2021) https://www.jdsupra.com/legalnews/on-deceptive-apps-and-practices-6209031/.

[3] https://www.saveourstandards.com/biden-administration-accepting-comments-to-stop-sep-abuse/, for the SOS member list see https://www.saveourstandards.com/get-involved/.

 

David L. Cohen, P.C. – Kidon IP
123 West 93rd Street
New York, NY 10025
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