U.S. DOJ and PTO issue policy statement on remedies for standards-essential patents subject to (F)RAND commitments

On January 8, 2013 the U.S. Department of Justice, Antitrust Division (DOJ) and the U.S. Patent and Trademark Office (USPTO) issued a policy statement on remedies for standards-essential patents (SEP) subject to voluntary commitments to license the patents on (fair,) reasonable and non-discriminatory ((F)RAND) terms. They provided their perspectives on “whether injunctive relief in judicial proceedings or exclusion orders in investigations under section 337 of the Tariff Act of 1930 are properly issued when a patent holder seeking such a remedy asserts standards-essential patents that are encumbered by a RAND or FRAND licensing commitment.” They argue that an injunction or exclusion order for a RAND- or FRAND-encumbered SEP may be inconsistent with public policy objectives except where exceptions apply.

In the policy statement the DOJ and USPTO restate the benefits of the patent system, such as the promotion of innovation and economic growth by providing incentives to inventors. These benefits in turn benefit society as a whole, by providing new technologies and increasing consumer choice. They recognize the fundamental right of a patent holder to exclude others and to obtain these benefits.

The DOJ and USPTO then go on to describe the increasingly important role of standards and especially voluntary consensus standards set by standards-developing organizations (SDOs) in the economy. They serve the public interest in a number of ways by facilitating interoperability among complementary products which promotes efficient resource allocation and production which in turn helps to protect public health and safety. “Interoperability standards have paved the way for moving many important innovations into the marketplace….”

However, there are also risks related to the standard setting process: “…when a standard incorporates patented technology owned by a participant in the standards-setting process, and the standard becomes established, it may be prohibitively difficult and expensive to switch to a different technology within the established standard or to a different standard entirely. As a result, the owner of that patented technology may gain market power and potentially take advantage of it by engaging in patent hold-up….”

As a way to combat these risks SDOs require patent owners to commit to voluntarily licence their patents on a RAND or FRAND basis. The DOJ and USPTO argue that such commitments should be enforced in most infringement cases. However two exceptions were cited – where the putative licensee is either “unable or refuses to take a F/RAND license and is acting outside the scope of the patent holder’s commitment to license on F/RAND terms” or where he is “not subject to the jurisdiction of a court that could award damages.” This list of exceptions is not exhaustive but serves to identify the relevant factors when deciding whether the issuance of an exclusion order should be prevented due to public interest considerations.

It remains to be seen how influential this policy statement will be with the courts. [Nicole Daniel]