USPTO, NIST, and DOJ Antitrust Division Withdraw SEP Injunction Policy Statement

14 June 2022 Innovative Technology Insights Blog
Author(s): Kate E. Gehl

On June 8, 2022, the U.S. Department of Justice, Antitrust Division (DOJ), the U.S. Patent and Trademark Office (USPTO), and the National Institute of Standards and Technology (NIST) withdrew — without replacing — a Trump-era policy statement issued in 2019 (2019 Policy Statement) regarding the scope of available remedies for the infringement of standard essential patents (SEPs) subject to fair, reasonable, and non-discriminatory (FRAND) commitments.1 This leaves participants in the standard-setting process without any formal guidance regarding available remedies for SEP licensing practices or enforcement priorities in this area.

The Withdrawn 2019 Policy Statement and SEP Policy History

The withdrawn 2019 Policy Statement offered the three agencies’ view that the courts should apply traditional patent law to issues of infringement of SEPs subject to FRAND commitments rather than apply special rules to SEPs (for instance, limiting a SEP holder’s right to seek injunctive relief). Specifically, the 2019 Policy Statement provided that a patent owner’s FRAND commitment was a relevant factor for a court or tribunal considering infringement remedies but that the commitment was not necessarily an outright bar to an injunction. The 2019 Policy Statement grew out of an administration that viewed the “hold-up” problem in the standards-setting process — where SEP holders refuse to give licenses unless their demands (like higher royalties) are met — as fundamentally not an antitrust problem. At the time, the Trump Administration’s DOJ viewed the more pressing antitrust concern to be the ability of standard-setting organizations to force holders of SEPs to grant licenses on FRAND terms, which the Trump DOJ viewed as overly favoring SEP users (i.e., implementers) and thereby reducing incentives to innovate.

The withdrawal did not reinstate the Obama Administration’s 2013 Policy Statement on this same issue. The 2013 Policy Statement recognized the rights of a SEP holder to exclude others from practicing the patented invention but expressed the view that some limits on injunctions should apply when the SEP owner had voluntarily committed to license the SEP on FRAND terms.

Notably, the agencies also chose not to adopt a draft policy (Draft Policy Statement) they had proposed in December 2021, which garnered hundreds of public comments on both sides of these issues. In some respects, the Draft Policy Statement had looked to return to the Obama-era anti-SEP injunction policy. For example, the Draft Policy Statement had stated the Supreme Court precedent in eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006) generally weighed against SEP injunctions where the SEP holder has made a FRAND commitment. The Draft Policy Statement had also said monetary remedies will usually be adequate to compensate fully the SEP holder for any infringement. However, in what could be categorized as an attempt to strike a more balanced approach, the Draft Policy Statement had further noted that injunctions could still be appropriate where an SEP implementer is unwilling or unable to enter into a license on FRAND terms. The Draft Policy Statement also had provided guidance on what demonstrates “good-faith” negotiations over SEPs subject to FRAND commitments.

The Impact of the Withdrawal of Any SEP Injunction Policy

While many expected a version of the Draft Policy Statement to be adopted in place of the 2019 Policy Statement, the draft was issued before the confirmation of Laurie Locascio as Director of the NIST and Kathi Vidal as Director of the USPTO.2 Thus, it may be that the agencies could not reach a consensus on the language for a replacement policy. It is also possible that the decision not to issue any revised policy is the agencies’ attempt to put an end to the back-and-forth that has occurred over the past decade in terms of each administration’s approach to SEP licensing issues and to let the agencies’ actions speak for themselves.

Regardless of the reasoning behind this development, by scrapping the 2019 Policy Statement without issuing any replacement, the agencies leave SEP holders and SEP implementers with less clarity regarding how these agencies will treat SEP licensing issues, including when the government may step in or seek to hold SEP holders/implementers accountable under the antitrust laws for conduct related to standards setting activities.

But the absence of a policy statement does not necessarily mean there is no policy. For instance, in the DOJ’s press release on the withdrawal, Assistant Attorney General Jonathan Kanter is quoted as stating the DOJ will take a “case-by-case” approach to SEP licensing with the goal of encouraging good-faith licensing practices and creating more consistency in antitrust enforcement policy. Kanter also flagged that DOJ will “carefully scrutinize opportunistic conduct by any market player” with a focus on “abusive practices that disproportionately affect small and medium sized business or highly concentrated markets” or where the competitiveness of “emerging technologies” is implicated. These comments suggest that DOJ may well decide to apply the antitrust laws to SEP disputes given the right circumstances, particularly where technology startups or other smaller market players are involved. This would mark a departure from Trump-era SEP policy.

The lack of a policy statement on SEP remedies also means the courts will be left to decide on a case-by-case basis (without any policy statement to fall back on as a guidepost) whether an injunction is appropriate in an SEP dispute under the framework for injunctions in patent litigation set out in eBay. SEP holders and implementers may also see an increase in litigation as both types of stakeholders test the boundaries of the new regime.

Because the full implications of this development could take months, if not years, to unfold, participants in standard-setting processes may want to closely monitor the agencies’ actions and related developments in this space.

1 A FRAND commitment is where a patent holder voluntarily agrees to make a license for a patent available to all licensees on fair, reasonable, and non-discriminatory (FRAND) terms.

2 The Senate confirmed DOJ Assistant Attorney General Jonathan Kanter one month before issuance of the Draft Policy Statement.

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