All quiet except on the FRAND front: nine of my ten previous posts discussed FRAND SEP issues, and the tenth one is a case in which the patent-in-suit may be standard-essential as well. The latest news is Google's withdrawal of a request for a U.S. import ban against Microsoft's Xbox over two H.264 SEPs. Considering that the FTC-Google deal can still be revised following the 30-day public comment period, it's worth taking a closer look at the primary issue that has been identified (apart from overall concerns about the complex procedures that may incentivize opportunistic behavior by SEP holders): a defensive suspension provision.
Commissioner J. Thomas Rosch, who supported the FTC's action against Google, already raised this issue in footnote 1 of his separate statement, and expressed the wish that this shortcoming be cured before the agreement is finalized:
"I am also troubled by Section IV.F of the Proposed Order, which provides for a limited 'defensive use' exception to Google's commitment not to seek injunctive relief on its FRAND-encumbered SEPs. That is, under certain circumstances, Google may seek injunctive relief against a firm that itself files a claim for injunctive relief against Google based on the firm's FRAND-encumbered SEPs. However, my concerns in this regard are tempered by the Commission's ability to reconsider this aspect of the Proposed Order based on submissions received during the public comment period."
Microsoft Vice President & Deputy General Counsel Dave Heiner yesterday wrote in the "Microsoft on the Issues" blog that "[this] loophole is of particular concern because it appears to be very broad", as it "appears to say that Google can sue for an injunction even when no firm has sued Google": some conflict between third parties could be alleged by Google to trigger the defensive suspension clause, "and there is often ample room for disagreement about whether a particular patent is a standard essential patent in the first place". Mr. Heiner sums it up like this: "two wrongs don't make a right" -- if two parties commit any wrongdoing, they should both be held responsible for it, but one party's actual or alleged violations shouldn't legitimate the other party's misconduct.
I, too, have a fundamental problem with this approach. I believe in the rule of law. I dread the notion of letting any company -- I don't care whether this means Apple, Google, Microsoft, Oracle, you name them -- take the law into its own hands and use a nuclear patent weapon. That's what I've also been telling to people who argue (as RIM does, for example) that SEP-based injunctions should be allowed if the purpose is to settle broader disputes involving non-SEPs. That's a Wild West mentality. If there's a competition problem with anybody's use of non-SEPs, it should be investigated and dealt with, just like a competition problem relating to SEPs. But arbitrariness is not the answer: only because someone like Google or RIM feels that someone else is abusing patents (actual SEPs, alleged SEPs, or undisputed non-SEPs) doesn't give Google or RIM the right to harm competition and consumers through SEP abuse.
Apart from principle, the "defensive use" clause in the proposed FTC-Google agreement is also counterproductive. The most effective way for the FTC to discourage others from abusing SEPs against Google or its partners is not to lard the Google consent order with unmanageable, ill-conceived exceptions. The clearer and harder to circumvent the order is, the better the rest of the industry will understand what regulatory blow-back it's going to face if it engages in abusive practices. Conduct that is tolerated under some circumstances is conduct that can be condoned, and that situation would contradict the FTC's own positions.
Yesterday I harshly criticized a DoJ/USPTO policy paper not because of 95% of what it says (and which I wholeheartedly agree with) but because of one loophole I dislike. But even the DoJ/USPTO paper is clear that SEP abuse must not be tolerated, and doesn't advocate a "defensive use" exception. The FTC should recognize that the notion of mutually assured SEP-based destruction was a bad idea in the first place that no one outside the FTC and companies like Google who hope to take advantage of this shortcoming supports.
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