Keywords: federal trade commission, merger consent order, standard-essential patent holders, SEP
A new Federal Trade Commission merger consent order raises significant questions about the ability of standard-essential patent (SEP) holders to enforce their intellectual property rights. By a vote of 3-2, the FTC approved the order, which conditioned the acquisition of SPX Services (SPX), an automotive air conditioning equipment maker, by Robert Bosch GmbH (Bosch), in part, on Bosch's commitment to terminate lawsuits in which SPX had sought injunctive relief against infringement of its SEPs.
The FTC's complaint challenged the acquisition itself, but also alleged that prior to the acquisition, SPX had engaged in unfair competition in violation of FTC Act § 5 by filing actions for injunctions against willing would-be licensees of its SEPs. (The complaint cites only one patent-in-suit as an actual SEP; the others "may be essential" to a standard.") According to the complaint, SPX's actions amounted to unfair competition because of its prior commitment during the standard-setting process to license the SEPs on fair, reasonable and non-discriminatory (FRAND) terms. The FTC's majority statement warned that "[p]atent holders that seek injunctive relief against willing licensees of their FRAND-encumbered SEPs should understand that in appropriate cases the Commission can and will challenge this conduct as an unfair method of competition[.]"
The Bosch order reflects the continuing aggressiveness of the FTC and, to a lesser extent, the DOJ's Antitrust Division in enforcing FRAND commitments against the patent owners that make them. In February of 2012, the Antitrust Division cleared Google's acquisition of Motorola Mobility and suggested that it, too, might use the merger review process to extract commitments to license SEPs on FRAND terms. The Bosch order suggests an even more aggressive use of unfair competition laws to enforce private FRAND agreements. SPX's FRAND agreement did not expressly bar it from seeking injunctive relief, but the FTC's complaint nonetheless alleged that there was an implied agreement not to do so. Further, it was unclear that the patents at issue were truly standard-essential.
In a spirited dissenting statement, Commissioner Maureen Ohlhausen argued that, absent additional conduct like the deception the FTC alleged in its ill-fated Rambus litigation, "[s]imply seeking injunctive relief" based on a "FRAND-encumbered SEP" should not be a Section 5 violation. She expressed concern that the agency was overstepping its bounds, intruding into an area that the courts and the International Trade Commission can resolve satisfactorily.
Commissioner Ohlhausen also sharply criticized the Bosch order's legal underpinnings, questioning the majority's discernment of an "increasing judicial recognition" of a problem arising from SEP-based injunctions. Finally, Commissioner Ohlhausen warned that the consent order "raises more questions about what limits the majority of the Commission would place on its expansive use of Section 5 authority," and would lead the FTC to intervene in "garden variety breach of contract" disputes, including ones far removed from SEPs and FRAND agreements.
As Commissioner Ohlhausen suggests, the FTC's action here gives IP owners little comfort that the agency has yet defined limits to its application of Section 5, either generally or specifically, as a means to enforce FRAND licensing commitments. After the Bosch order, it is unclear whether any action for injunctive relief for infringement of a patent even arguably covered by a FRAND agreement—conduct that one ordinarily would expect to be immune from antitrust challenge under the Noerr-Pennington doctrine—would ever be beyond scrutiny. A company that wishes to participate in the development of new technological standards must therefore balance the benefits of developing and acquiring valuable intellectual property, and winning its incorporation into those standards, with its willingness to agree to what amounts to a compulsory license to all comers.
Originally published on December 6, 2012.
Visit us at mayerbrown.com
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© Copyright 2012. The Mayer Brown Practices. All rights reserved.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
