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.
Executive Summary
The 2013 statement was a favor to Apple and Google and was widely misinterpreted and misused (often intentionally by opportunistic infringers found by courts and/or the ITC to be “unwilling). It was used to remove injunctive relief against companies found by courts to be “unwilling”.
The 2019 statement was the result of two years of consultations, and aimed to correct the misinterpretation, capture 2013-2019 developments in US law, take the government’s thumb off the scale.
The proposed 2021 statement is not based on extensive consultation. It appears to be a return to putting the US government’s thumb on the scale in favor of big tech giants. It would perpetuate misrepresentation of U.S. law.
Ironically, while the July 9, 2021, Executive Order focuses on the potential for market abuse by digital platforms, the proposed 2021 statement facilitates abusive hold-out by dominant platforms.
The proposed statement suggests a no-injunctions rule that is inconsistent with black letter U.S. law. If such rule were in place infringers, especially powerful ones like tech giants, will never accept a FRAND license. The main beneficiaries from the proposed policy statement would be big tech and big Chinese phone makers. It would also encourage China’s continue abusive persecution of innovative U.S. companies with which I have had a personal experience. I recommend against adoption of the proposed statement.
General Comments
Before providing a response to the specific questions raised by the DOJ, I thought it important to provide some background to the issue that informs much of my thinking on this topic.
I. The 2019 Policy Statement
In December 2019, the DOJ, the U.S. Patent & Trademark Office (USPTO), and the National Institute of Standards and Technology (NIST) announced a joint U.S. government policy statement (“2019 Statement”) on remedies for standards-essential patents that are subject to voluntary F/RAND commitments.[1]. The Statement was the result of over two years of inter-agency consultations with stakeholders and discussions among its signatory agencies and with others in the U.S. Administration.[2] the 2019 Statement corrected misunderstandings about a prior 2013 statement and summarized 2013-2019 U.S. case law on remedies for infringement of these patents.[3]
II. The 2013 Policy Statement – An Obama Era DOJ Favor to Apple and Google
The 2019 Policy Statement succeeded the now-withdrawn January 2013 DOJ-USPTO policy statement (“2013 Statement”) on a similar topic[4]. The 2013 Statement not only had fewer signatories but was also narrower in scope than the Policy Statement. Moreover, it appeared without warning and, as rumor has it, took ostensible colleagues at the Federal Trade Commission (“FTC”) by surprise. The 2013 policy expressed former DOJ-USPTO views on how the International Trade Commission (“ITC”) should consider the existence of F/RAND commitments when considering “injunctive relief…or exclusion orders in investigations under section 337 of the Tariff Act of 1930” where the asserted patents were essential patents subject to such commitments.[5]
The release of 2013 Statement was unusual in that it did not follow any public notice and was not accompanied by any press releases or statements by the heads of its two signatory agencies. This was reflective its private-deal nature. Indeed, the 2013 Statement is widely understood to have been tied to the Obama administration’s effort to support Apple’s positions in extensive U.S. and worldwide patent litigations with Motorola and Samsung Electronics. As part of the Samsung-Apple litigation, Samsung brought a Section 337 case against Apple at the ITC, seeking an exclusionary order against the latter’s alleged infringement of Samsung patents and alleging that Apple failed to negotiate in good faith towards a license. Apple brought similar allegations against Samsung’s negotiation conduct as a defense.[6] DOJ itself had opened an antitrust investigation into Samsung’s conduct in its battle with Apple, which it later closed without action or any finding that Samsung’s efforts to enforce its standards-essential patent rights had violated the antitrust laws. DOJ referenced the 2013 Statement in the press release announcing the close of the Samsung investigation.[7]
In June 2013, five months after the 2013 Statement was released, the ITC determined that Samsung negotiated in good faith while Apple did not prove that Samsung have breached its F/RAND commitment.[8] Conversely, it found that Apple has failed to negotiate in good faith through engaging in “reverse patent hold-up”.[9] The ITC concluded that Samsung has proven Apple’s violation of section 337, and that the appropriate remedy should be an exclusion order prohibiting Apple from continuing to import its infringing devices into the U.S.[10]
In August 2013, in an extremely rare, proactive exercise of the U.S. President’s authority to evaluate ITC decisions to issue exclusion orders,[11] then-U.S. Trade Representative, Michael Froman (“USTR”), vetoed the ITC’s June 2013 exclusion order against Apple before it took effect. The USTR repeal of the order was executed through the issuance of a policy letter “disapproving” the issuance of an exclusion order in that matter, which heavily relied on the DOJ’s pro-Apple 2013 Statement.[12] But it should not have been a surprise, as President Obama was known to have very close ties with Silicon Valley in general and Apple in particular[13] – even singling out Apple for a special mention during a 2013 State of the Union Address.[14]
Around the same time, the FTC similarly invested vast resources to support Apple in its parallel litigation with Motorola. In that litigation, a federal judge similarly determined that Apple revealed itself as an unwilling licensee. Specifically, the judge wrote: “[Apple’s intentions] became clear only when Apple informed the court . . . that it did not intend to be bound by any rate that the court determined.” The judge further concluded Apple was trying to use the FRAND rate litigation simply to determine “a ceiling on the potential license rate that it could use for negotiating purposes . . . .”[15]. At the time, the FTC also reached a consent order with Google (that has bought Motorola’s patent portfolio, by-then weakened by the USG campaign against its positions). That consent order supported Google’s anti-patent policy positions.[16] It is therefore no surprise that Apple, Google and other big tech allies like Amazon, Cisco and others support the currently proposed draft statement – it gives them an even better sweetheart deal than the private deal they received through the 2013 statement.
Sources:
[1] Department of Justice, United States Patent and Trademark Office, and National Institute of Standards and Technology Announce Joint Policy Statement on Remedies for Standard-Essential Patents (Dec. 19, 2019) https://www.justice.gov/opa/pr/department-justice-united-states-patent-and-trademark-office-and-national-institute-standards (“DOJ Press Release”); U.S. Patent and Trademark Office, U.S. Patent and Trademark Office releases policy statement on standards-essential patents subject to voluntary F/RAND commitments: Extensive Discussions Yield Balanced Policy (Dec. 19, 2019) https://www.uspto.gov/about-us/news-updates/us-patent-and-trademark-office-releases-policy-statement-standards-essential (“UPSTO Press Release”).
[2] See in the title of USPTO Press release (“Extensive Discussions Yield Balanced Policy”) as well as in its second paragraph (“The statement was the product of extensive consultations with stakeholders, including diversely situated business entities and trade groups, in addition to comprehensive discussions among the signatory agencies and others in the Administration”).
[3] Available on the UPSTO and DOJ websites, respectively, at https://www.uspto.gov/sites/default/files/documents/SEP%20policy%20statement%20signed.pdf or https://www.justice.gov/atr/page/file/1228016/download.
[4] Policy Statement on Remedies for Standards Essential Patents Subject to Voluntary F/RAND Commitments (Jan. 8, 2013) (withdrawn).
[5] Id. at 1 (“[DOJ and USPTO] provide the following perspectives on a topic of…: whether injunctive relief in judicial proceedings or exclusion orders in investigations under section 337 of the Tariff Act of 1930”). See also Policy Statement at 3 note 6.
[6] See Inv. 337-TA-794 In re Certain Electronic Devices, including Wireless Communication Devices, Portable Music and Data Processing Devices and Tablet Computers (public version issued July 5, 2013) https://essential
[7] Department of Justice, Statement of the Department of Justice Antitrust Division on Its Decision to Close Its Investigation of Samsung’s Use of Its Standards-Essential Patents (Febr. 7, 2014) https://www.justice.gov
/opa/pr/statement-department-justice-antitrust-division-its-decision-close-its-investigation-samsung.
[8] In re Certain Electronic Devices, supra note 7, at 59.
[9] In re Certain Electronic Devices, supra note 7, at 62-63 (“Apple’s submission to the Commission…indicates that Apple has no intention of paying Samsung any royalties until after the conclusion of litigation… Apple’s position illustrates the potential problem of so-called reverse patent hold-up, a concern identified in many of the pubic comments received by the Commission. In reverse patent hold-up, an implementer utilizes declared-essential technology without compensation to the patent owner under the guise that the patent owner’s offers to license were not fair or reasonable. The patent owner is therefore forced to defend its rights through expensive litigation.”).
[10] See https://www.usitc.gov/secretary/fed_reg_notices/337/337-794_notice06042013sgl.pdf
[11] The previous occurrence of such a USTR “veto” of an ITC exclusionary order occurred 26 years earlier, by President Ronald Reagan in 1987, see Angelo Young, Barack Obama Overrides US Global Trade Watchdog’s Ruling on Apple Products; The Last President To Veto ITC Ruling Was Ronald Reagan In 1987, Int’l Business Times (Aug. 4, 2013) https://www.ibtimes.com/barack-obama-overrides-us-global-trade-watchdogs-ruling-apple-products-last-president-1371073.
[12] Michael Froman, Disapproval of the U.S. International Trade Commission’s Determination in the Matter of Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, Investigation No. 337-TA-794 (Aug. 3 2013) https://ustr.gov/sites/default/files/08032013%20Letter_1.PDF. The USTR letter clarified that it did not “revisit the [International Trade] Commission’s legal analysis or its findings based on its record.” and that it was “not an endorsement or a criticism of the Commission’s decision or analysis.”
[13] See, e.g., Siva Vaidhyanathan, Was Obama Silicon Valley’s President? The Nation (Jan 2, 2017) https://www.thenation.com/article/archive/was-obama-silicon-valleys-president/; Jenna Wortham, Obama Brought Silicon Valley to Washington, New York Times (Oct 25, 2016) https://www.nytimes.com/2016/10/30/magazine/barack-obama-brought-silicon-valley-to-washington-is-that-a-good-thing.html; Seth Fiegerman, Obama’s Staff is Taking Over Silicon Valley, CNN Business (Aug. 11, 2016) https://money.cnn.com/2016/08/11/technology/obama-staff-silicon-valley/index.html
[14] See Jim Tanous, Apple Noted During State of the Union for US Manufacturing Push, The Mac Observer (Feb. 12, 2013) https://www.macobserver.com/tmo/article/apple-noted-during-state-of-the-union-for-us-manufacturing-push.
[15] Apple, Inc. v. Motorola Mobility, Inc., No. 11-cv-178-bbc, slip op. at 5 (W.D. Wis. Nov. 8, 2012) (dismissing matter after finding that Apple was not willing to accept court’s FRAND rate).
[16] Press Release, Google Agrees to Change Its Business Practices to Resolve FTC Competition Concerns in the Markets for Devices Like Smart Phones, Games and Tablets, and in Online Search (Jan. 3, 2013) https://www.ftc.gov/news-events/press-releases/2013/01/google-agrees-change-its-business-practices-resolve-ftc.
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