Intervening in a patent dispute between Apple and Motorola Mobility, the U.S. Federal Trade Commission has opposed bans on the sale of products that include standardized, patented technology when the patent holder has previously committed to license the patent on fair and reasonable terms.
The FTC said Wednesday it filed its amicus curiae brief in the U.S. Court of Appeals for the Federal Circuit, supporting an order by a District Court in Illinois which in June dismissed Motorola's request for an injunction that could have blocked Apple from selling iPhones and iPads in the U.S.
[ Simon Phipps tells it like it is: Why software patents are evil. | Stay ahead of the key tech business news with InfoWorld's Today's Headlines: First Look newsletter. | Read Bill Snyder's Tech's Bottom Line blog for what the key business trends mean to you. ]
Judge Richard Posner of U.S. District Court for the Northern District of Illinois dismissed patent infringement suits brought by Apple and Motorola against each other. "By committing to license its patents on FRAND [fair, reasonable, and non-discriminatory] terms, Motorola committed to license the [patent] to anyone willing to pay a FRAND royalty and thus implicitly acknowledged that a royalty is adequate compensation for a license to use that patent," the Judge wrote on Motorola's attempt to get an injunction against Apple around FRAND patents.
Motorola and Apple appealed Judge Posner's order in the Federal Circuit.
Interoperability standards can create enormous value for consumers. However, once a standard is adopted, and implementers begin to make investments tied to the standard, it becomes difficult to change a technology in the standard without affecting interoperability, the FTC said in a statement on Wednesday. The holder of a standards-essential patent can then engage in "hold-up" and seek compensation based not on the value of its invention, but on the costs and delays of switching away from the standards technology, it added.
Incorporating patented technologies into standards has the potential to distort competition by enabling owners of standards-essential patents to negotiate high royalty rates and other favorable terms, after a standard is adopted, that they could not credibly demand beforehand, the FTC said in its brief.
Standard-setting organizations often require participants to promise to license their standards patents on FRAND terms as a condition for the inclusion of their patented technology in the standard. In situations where the parties cannot agree on the terms of the license, the FTC recommended that relief available to the patent holder should be limited to allow only monetary damages.
Disputes over standards-essential patents have become common in the U.S. and Europe, and industry, courts and government bodies have weighed in against letting the patents be grounds for an injunction.
The brief by the FTC comes less than a week after a court in Seattle refused Motorola an injunction on Microsoft's products over standards-essential patents. The decision is intended to apply to a similar dispute between the two companies in Germany, wrote Judge James L. Robart of U.S. District Court for the Western District of Washington at Seattle.
The U.S. International Trade Commission also plans to look into FRAND issues, including whether an undertaking to license a patent on FRAND terms precludes a ban on a product if it infringes the patent, as it reviews an earlier decision that Apple did not infringe four patents of Samsung Electronics in its mobile devices including the iPhone and iPad.
This is not the first time the FTC has raised questions about product bans around standards-essential patents. In a statement in the public interest on an ITC investigation into complaints by Motorola against Microsoft and Apple, FTC said in June that ITC's ban orders in matters involving implementation of standards-essential patents, that were committed to be licensed on FRAND terms, have the potential to cause substantial harm to U.S. competition, consumers and innovation. (The agency made a similar testimony to the U.S. Congress in July.