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FTC\'s Assault on IP: Regulatory Patent Reform?
- 1. The Federal Trade Commission’s Assault on IP: Regulatory ‘Patent Reform?’ Chris Compton Jan. 22 , 2009 WSGR Client MCLE Day San Francisco, CA
- 15. Thank you Copyright Chris Compton, WSGR 2009 WSGR Client MCLE Day
Hinweis der Redaktion
- INTRO: Looking today at patent reform from the perspective of the FTC’s recent enforcement actions. Questions posed include: + Is legislative reform still needed, and if so, in what respects? + Have the antitrust enforcers gone too far, particularly concerning hostility to NPEs and Standard Setting abuse, threatening to stifle rather than encourage SSOs and so deter innovation rather than foster it.
- Theme: The FTC has aggressively pursued an enforcement agenda during the past 5 years directed at perceived abuses of IP. + Some might see it as an assault on IP, to extent the FTC is seeking to constrain the exercise of market power arising from IP. + Others think it an overdue recognition that IP plays a crucial role in our economy and the competitiveness of our markets, and has been abused. FTC, like DOJ, address IP issues in mergers. But today we focus on single firm conduct, and FTC enforcement efforts under Sherman Sec. 2 and FTC Act section 5, which prohibits “Unfair methods of competition” arguable broader than Sherman Act’s monopolization offense. My personal conclusions: + FTC should tread cautiously in taking Section 5 beyond Sherman 2 violations. + FTC should not extend its SSO enforcement to FRAND violation claims. + FTC should rethink its hostility to NPEs, and any sense that their IP rights are somehow less than practicing entities.
- Legislative Recommendations by FTC 2003 and 2007 Reports led up to Sept. 8, 2008 “Unilateral” DOJ Report, next slide.
- “ Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act.” --DOJ Report “seriously overstates the level of legal, economic, and academic consensus regarding Section 2” --FTC majority said the DOJ’s proposed standards “would make it nearly impossible to prosecute a case under Section 2 of the Sherman Act.” --“At almost every turn, the Department would place a thumb on the scales in favor of firms with monopoly or near-monopoly power and against other equally significant Shearing Plough from 2d Circuit, where FTC sought cert and DOJ disagreed (not granted, so FTC lost). Compare Cipro from Fed Circuit, Oct. 2008. Leegin: FTC Commissioner Harbor’s unusual “white letter” urging that Dr. Miles rule of per se illegality be retained linkLine now pending in Supreme Court, from 9 th Circuit.
- FTC has largely been unsuccessful in pursuing its reverse payments agenda. Cipro held that absent fraud on Patent Office or sham litigation, no antitrust liability if settlement is within the exclusionary scope of the patent. --Rule of reason applies. Non-rebuttable presumption that patent is valid and infringed, absent fraud or sham. Supreme Court has not granted cert, though 6 th Circuit in In re Cardizem, 332 F.3d 896 (2003) found per se illegality in settlement that also delayed others’ entry, since generic agreed not to relinquish its 180 day exclusivity and also agreed not to market even non-infringing versions of the drug.
- Note only Rambus has been tested in court, and was under Section 2 (Section 5 subset). Others were consents brought under FTC Act Section 5., Dell had dissent by Mary Asquinaqua re no showing of actual knowledge, no market power. Remedy in both Dell and Unocal: no enforcement of IP (compulsory free license). Rambus defeat for FTC in DC Circuit: FTC’s alternative theories of deceptive conduct. But for deception, JEDEC would have either: (1) Chosen different technology Remand to for further evidentiary proceedings (2) Secured FRAND commitment from Rambus Loss of opportunity to secure higher prices not “antitrust harm” “ Staggering lack of defining details” in SSO’s IP disclosure policies raised doubts about deception
- Analysis and Statement by FTC: SSO context was critical. Mere breach of licensing commitment not enough. Patent hold up after lock in and reliance was oppressive and likely to result in higher prices and undermine SSO process. Note that noone sought to license N-Wave technology before 2002 “revised” commitment letter. N-Data was small, immediately caved when FTC came knocking.
- Both “unfair method of competition” and also “unfair or deceptive act or practice.” UMC : 1. Oppressive or coercive conduct 2. Having adverse effect on competition UDAP : 1. Likely to cause substantial injury to consumers 2. Not reasonably avoidable by them 3. Not outweighed by countervailing benefits to consumers or competition.
- AAI: Says Sherman Section 2 also breached (prob w/ causation; with “acquisition” of Monop Power via later breach—absent “false promise.” Note: Broadcom v. Qualcom (3d Cir Sept 2007): No problem with difficulty of determining FRAND, sufficient to uphold dismissal. -- Intentionally false promise to ETSI, if relied upon, can be exclusionary violation of Sec. 2. --DC Cir in Rambus distinguished it; to extent inconsistent with Discon , holding that mere loss of opportunity to extract higher payments is not antitrust harm, reject it
- Rosch: May 2008 Paper: “Patent Trolls: Broad Brush Definitions and Law Enforcement Ideas.” See Oct 2008 speech, favoring more use of Section 5, while acknowledging that after several court defeats in 1980s, only used occasionally --E.g., Valassis , where only “invitation to collude” (no agreement) in press conference.
- Kovacic dissent in N-Data worried about private suits following Sec. 5 enforcement. Public Comments, including by several SSOs, expressed concern re overly broad interpretation or application of N-Data. --Each SSO different --SSO serve different masters: participants (IBM vs. Rambus); others in industry; suppliers, customers, those outside SSO. --Must remain flexible re rules to encourage participation; speed vs. certainty; collusion in ex ante negotiations vs. later hold-up. David Meyer, DOJ in March 2008 after N-Data: --”When is patent holdup in the SSO context an antitrust problem?” --SSOs need flexibility, encouragement to craft solutions that work for them. --Participants should not look to antitrust as “a shield” against patent owners. --If AT claims too easy, it will “threaten the efficiency of the standards development process.” -AT shd focus on process, not whether prices seem too high. EC: 7/30/07 Statement of Objections to Rambus; Oct. 1 vs. Qualcomm.
- eBay : Injunctions no longer automatic. Apply tradition equity test: irreparable injury, adequacy of legal remedy, balance of hardships. KSR: 35 U.S.C. 103 says grant only if invention is “non-obvious.” Rejected Fed Circuit’s requirement of showing a teaching, motivation or motivation to combine prior art teachings. If a design need or market pressure with a finite number of identified, predictable solutions, invention may just be product of ordinary skill and common sense. --Post KSR, USPTO rejections way up, as are rejections in district courts. Quanta: Rejects Fed Circuit on patent exhaustion test, where LG licensed Intel and then tried to collect royalties from customers too. Medimmune: Supremes struck down special dec relief rule for patent cases. Can license and still seek Dec Judgment. Microsoft: No liability for copying overseas from master disk created in U.S. Seagate : No presumption of wilfulness just because no opinion of counsel. In re Bilski: Repudiated business method patentability tests created by Fed Circuit, of “questionable validity” in eBay.
- Harbour term ends Sept. 2009, creating another vacancy