In remarks on September 29, 2021, a senior official from the Department of Justice Antitrust Division (DOJ) outlined the agency’s shift in approach to issues surrounding technology industry standards. The remarks foreshadowed the DOJ’s intention to depart from certain of the prior administration’s policies, which tended to favor standard essential patent (SEP) innovators/patent holders over standard-setting organizations (SSOs) and implementers/patent licensees.
Jeffrey Wilder, the economic director of enforcement for the DOJ, emphasized that the DOJ’s current goal is to take a more balanced approach as it relates to the role of antitrust in the development, implementation, and licensing of standards and SEPs. What that means in practice is not yet clear. However, these remarks do signal a potential shift back to pre-Trump Administration antitrust policies that focused more so on antitrust concerns arising from SEP owners’ breach of commitments to license technology on fair, reasonable, and non-discriminatory (FRAND) terms and deceptive conduct in the standards-setting process.
Prior to the Trump Administration, antitrust law had been viewed as a way for the DOJ to enforce a SEP owner’s FRAND requirements in the United States. But with Makan Delrahim at the DOJ’s helm during the Trump Administration, the DOJ shifted away from this viewpoint, to one 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. In Delrahim’s view, the more pressing antitrust concern is the ability of SSOs to force holders of SEPs to grant licenses on FRAND terms, which he said dramatically favors SEP users (i.e., implementers) and reduces incentives to innovate.
As a result, Delrahim’s DOJ took several steps (some unprecedented) aimed at enforcing this new policy. This included the release of a policy statement setting forth the DOJ’s 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). It also included advocacy before U.S. courts by way of statements of interest and amicus briefs, along with the issuance in 2020 of a Business Review Letter (BRL) Supplement to one of the tech world’s leading SSOs (the Institute of Electrical and Electronics Engineers). This BRL Supplement walked back positions taken by the Obama Administration, which previously endorsed the SSO’s policy that made it difficult for SEP holders to seek injunctions and limited SEP holders’ flexibility in royalty negotiations with licensees.
Since the change in administrations in 2021, the DOJ has quietly taken steps to shift yet again the agency’s SEP policies, including reclassifying the above-referenced 2020 BRL Supplement as mere “advocacy” rather than formal guidance.
Wilder’s speech represents the most vocal move yet by the Biden Administration’s DOJ in providing participants in the standards-setting process more transparency into the DOJ’s current enforcement priorities in the SEP area and how those priorities have changed from the previous administration. Indeed, Wilder’s remarks can be read as openly disagreeing with the Trump Administration’s position that a patent owner’s breach of a FRAND commitment can never constitute an antitrust violation. Wilder instead suggests this is far too simplified a view and does not account for the myriad factors at play in the competitive landscape surrounding any given standard. Wilder promised that going forward the DOJ intends to use any available tool to provide greater transparency for participants engaged in the standards-setting process, including additional speeches, guidance documents, amicus briefs, and statements of interest in litigation.
From a substantive perspective, Wilder’s remarks do not indicate a dramatic shift by the DOJ from pre-Trump Administration policies. Wilder recognized that it is vital that the agency continue to support the standard-setting process in light of its many resulting benefits to consumers. However, this does not mean the DOJ will turn a blind eye to conduct arising in the standards-setting process that historically has raised antitrust concerns.
Wilder suggested the DOJ’s main antitrust concern stems from the fact that the standards-setting process is an opportunity for direct horizontal competitors to come together and take collective action. He remarked that while this often can generate procompetitive benefits, it opens the door for market abuses as well. For example, Wilder implied that where a SEP holder intentionally makes a false promise to an SSO to license its technology on FRAND terms, where the SSO relies on that promise when including the technology in a standard, and where the SEP holder later breaches that promise, this conduct should trigger antitrust scrutiny.
Wilder further noted that the DOJ plans to open investigations and bring enforcement actions when anticompetitive conduct by SEP holders, in addition to other standards-setting participants, like implementers, harm competition. Wilder caveated this by noting that not every licensing dispute entails an antitrust problem and that antitrust claims are not a “panacea” for failed licensing negotiations.
The DOJ also plans to promote government policies that encourage good-faith licensing negotiation. Wilder suggested this would include providing additional guidance on what good faith versus bad faith negotiation looks like in this setting. The DOJ will also support SSOs’ efforts to adopt intellectual property rights policies (IPRs) that address licensing inefficiencies and enable broader dissemination of products to consumers.
Relatedly, Wilder also openly addressed the business review process as it relates to SSOs (entities that historically have made good use of the process), including the 2020 BRL Supplement (and 2021 reclassification) mentioned above related to the SEP policies of the Institute of Electrical and Electronics Engineers. He recognized the confusion the 2020 BRL Supplement caused when it questioned the merits of the initial business review conducted by the DOJ in 2015. Wilder further emphasized that the DOJ’s recent reclassification of the Supplement as advocacy was intended to “preserve the integrity of the business-review process.” These comments suggest the DOJ would like to encourage continued use of the business review process by SSOs to seek guidance regarding their IPR policies to determine whether the DOJ likely would challenge a proposed IPR policy change as anticompetitive.
Notably, Wilder also confirmed that in the wake of President Biden’s July 9, 2021 Executive Order on Competition, the DOJ has begun work to consider in conjunction with the Secretary of Commerce whether to revise their position on the intersection of intellectual property and antitrust laws, including whether to revise the Policy Statement on Remedies for Standard Essential Patents Subject to Voluntary F/Rand Commitments. When this policy statement was issued in 2019, critics viewed it as favoring SEP holders and promoting the use of injunctions or International Trade Commission exclusion orders to remedy SEP infringement. Wilder said that in his view, no policy statement should favor (or be perceived to favor) any particular stakeholders, suggesting any potential revisions to the policy will endeavor to strike a more balanced approach that holds both SEP owners and SEP users accountable for any bad faith conduct that harms consumers.
At a high level, these remarks appear to continue the Biden Administration’s tougher antitrust stance, though it is too soon to predict whether this will lead to the DOJ consistently taking a more active role in litigation on certain of these issues or result in additional DOJ investigations and enforcement actions. Because the full implications of the DOJ’s shift in SEP policy could take months, if not years, to unfold, participants in standard-setting processes – particularly those involving technology standards – may want to closely monitor the DOJ’s actions and related developments in this space. Foley & Lardner will continue to monitor the ever-evolving antitrust/SEP landscape.