Today the Federal Trade Commission (FTC) announced the finalization of the consent order settling the Google (Motorola Mobility) antitrust case with respect to FRAND-pledged standard-essential patents (SEPs). As the announcement says, the U.S. antitrust agency made merely "technical modifications" in response to public comments received after publication of the original version published in early January 2013 (initial commentary on announcement, explanation of deal structure, comparison with FTC-Bosch settlement).
The FTC has done Google a favor by no longer alleging anticompetitive conduct:
"The Commission has decided to remove the count from the complaint alleging that Google has engaged in unfair or deceptive acts or practices. Removing this count does not indicate a Commission view on the application of its unfair acts or practices authority in other matters alleging harm to competition or the competitive process."
The fact that the original version of the order said so nevertheless means something.
It's a done deal now, so I'm going to focus on what this means for pending and future FRAND SEP litigation involving Google (Motorola Mobility) or other SEP holders.
Simultaneously with the final order, the FTC published a letter it sent to public commenters explaining the modifications made and the rationale behind them. Generally, the text of the order itself is going to have more weight than additional explanations provided by the FTC. In May, Google told the United States Court of Appeals for the Federal Circuit that "[t]he FTC consent decree does not prevent Motorola from seeking an injunction [against Apple]" (which the FTC letter published today actually confirms) and said that "[t]o the extent the Commission's statement [the one at the time of the original announcement] suggests otherwise, it was incorrect and cannot alter the terms of the actual consent decree". And the FTC confirms this in footnote 11, saying that "[a]n Order is interpreted by its terms alone, and those terms are not modified by ancillary documents or statements made by the Commission or Commission staff". Nevertheless, the FTC's open letter to public commenters will be leveraged by parties to disputes as they seek to persuade courts of law of particular interpretations of the final FTC-Google agreement and debate SEP-related policies in different contexts.
In its letter, the FTC stresses the case-speficc nature of the settlement ("The Order was negotiated in response to the specific facts of this case."). In March a relatively litigious SEP holder, InterDigital, already said that this settlement "is not a basis to adjudicate subsequent cases". But this is not a binary question of 0% or 100%. The question is how much weight the FTC-Google deal will have relative to case law and other persuasive authority. It's going to "compete" for weight with rulings by federal courts, decisions by other governmental agencies (DoJ, ITC), policy papers, other write-ups, and even with decisions by courts and regulators in other jurisdictions such as the European Union. I don't think anyone can predict how influential the FTC-Google deal as a whole will be in, say, a year from now. It's not even clear how much weight a particular court will give it tomorrow.
A key concern about the FTC-Google deal related to the "defensive use" exception, and the mutual pursuit of ITC import bans over FRAND-pledged SEPs by Ericsson and Samsung shows that this is not in the interest of consumers. The FTC defends its decision not to fix this problem, the letter says that "its inclusion in the Order does not indicate a particular view about defensive-use exceptions generally".
Footnote 10 says the following about implications for patent assertions against Android device makers:
"Contrary to suggestions by commenters, the provision is not triggered by all injunction actions against an Android OEM based on alleged infringement of an SEP. Rather, the provision only allows Google to seek an injunction in response to an action for infringement against an Android OEM if the SEP holder seeks an injunction and alleges that software or another product supplied by Google to the OEM infringes the relevant SEPs."
I would agree that the above should be the result of a reasonable interpretation of that clause. The problem I see here is the legal uncertainty this creates, and that footnote (even if given a maximum of weight) won't prevent Google or others from claiming that the requirements for "defensive use" are met. Just yesterday I reported (again) on a claim of standard-essentiality that HTC brought to dodge a Nokia patent. HTC just made the claim (which, by the way, involved the Google Cloud Messaging protocol) and triggered an arbitration proceeding, but ultimately it didn't even want the arbitration proceeding to go forward. Also, the question of whether a particular component of a product found or alleged to infringe implements a given patent comes up all the time in connection with patent exhaustion defenses, and plaintiffs and defendants alike sometimes take positions on exhaustion that are less than reasonable. The FTC's letter makes reasonable interpretations somewhat more likely -- but that's the extent of it.
My favorite sentence in the FTC statement is this one (from footnote 13):
"It is important to highlight that the Order, including the arbitration provision, does not negate or alter traditional burdens of proof, or deprive implementers of their rights to seek judicial review, challenge infringement, or raise defenses such as validity, exhaustion, and essentiality."
These rights of implementers/defendants are also key to the ongoing EU antitrust investigations of Motorola Mobility's use of FRAND-pledged SEPs against Apple and Microsoft.
The FTC also supports the principle that a party must have the right to appeal a rate-setting decision without the threat of an injunction in order to "ensure the fairness of the FRAND Determination Action".
There are definitely some things that I like a lot about the FTC's letter. I just disagree on where to "strike[] a balance between Google's rights and interests as a patent holder, and the rights and interests of implementers". That balance must be struck for sure. I just don't think that, in order to strike that balance, one must allow SEP-based injunctions in situations in which Google can simply sue for damages and post-judgment royalties. In his Apple v. Motorola ruling, Judge Posner addressed this question, and I agree with him.
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