SEP Enforcement: Has The Biden Administration Tabled A Revised Policy Statement?

• Published date: 19 August 2022
• Subject Matter: Anti-trust/Competition Law, Intellectual Property, Antitrust, EU Competition , Patent
• Law Firm: Haug Partners
• Author: Mr David Shotlander and Conrad Stumpf

Six months after the Department of Justice ('DOJ'), United States Patent and Trademark Office ('USPTO'), and the National Institute of Standards and Technology ('NIST') issued a Draft Policy Statement on Licensing Negotiations and Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments, the agencies have yet to issue a final statement, and have been silent as to whether or when such a statement may issue.¹ The 2021 Draft quickly attracted substantial criticism and has not been included in recent agency updates and speeches.

Following a 2019 Policy Statement which emphasized that owners of standard-essential patents ('SEPs') may freely seek, and courts may appropriately order, injunctive relief for SEP-infringing products, the 2021 Draft purports to clarify that injunctive relief will seldom be the appropriate remedy.² This article addresses the 2021 Draft and provides a primer on standards, SEPs, Standards Setting Organizations ('SSOs'), and FRAND negotiations, including the antitrust concern over SEP policy, and the potential impact the proposed policy could have on the current SEP landscape.

I. Standards, SSOs, SEPs, and FRAND

Standards are industry established criteria or specifications that facilitate compatibility and uniformity across devices and services.³ Standards benefit manufacturers and consumers by promoting interoperability, efficiency, and further innovation.⁴ Standards are set by Standards-Setting Organizations ('SSOs'),⁵ which develop, promulgate, and revise technical standards for industry participants to adopt.⁶ SSOs generally embody companies that are active in the relevant industry, particularly SEP owners and implementers who seek to manufacture products using those standards.⁷

Among the companies comprising the SSOs and participating in the standard setting process are entities that own patents covering the potential standards.⁸ If included in the resulting standard these patents may be essential to manufacturing compliant products, and thus standard-essential. A manufacturer implementing the standard cannot make a conforming product without practicing the invention and infringing the SEPs. Consequentially, these entities must obtain a license from the SEP holder or risk patent infringement.

Many SEP holders are also market participants, and their enforcement of SEPs against implementers who seek to make or sell competing products could restrain competition.⁹ Once standards become established and switching impractical, the holders of the underlying SEPs gain considerable leverage.¹⁰ This necessitates disclosure to prevent entities that co-develop standards from blindsiding implementers with patent claims arising from that standard.¹¹ Disclosure alone, however, does not remove the leverage SEP owners have to 'hold up' competition by demanding inflated royalties or refusing to license their SEPs altogether.¹² To combat this risk, SSOs require that participants disclose any patents that are potentially essential to a standard and commit to license those SEPs on fair, reasonable, and non-discriminatory ('FRAND')¹³ terms.¹⁴

While FRAND obligations seek to balance the interests of SEP holders and implementers, controversy remains. After all, the phrase 'fair, reasonable, and non-discriminatory' is inherently ambiguous and complex.¹⁵ SEP holders may seek unreasonable or unfair terms that they attempt to pass off as FRAND, and force the SEP-infringing implementer into patent litigation. Enforcement may raise...