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Solutions to patent hold-up beyond FRAND: an SOS to SSOs.

While standard setting has well-recognized benefits to industry and consumers alike, the process is also subject to possible abuse by owners of standard essential patents (SEPs), who may through patent hold-up frustrate the efficient implementation of the standard. Even when a standard-setting organization (SSO) requires covenants to license on fair, reasonable and nondiscriminatory (FRAND) terms, threats of injunctions and other tactics by SEP owners have potential anticompetitive effects. SSOs may play a useful role, beyond securing FRAND commitments, in further reducing the prospect of patent hold-up. While some policymakers and SSOs have embraced ex ante licensing negotiations as a means to prevent hold-up, there are also other, nonmonetary solutions to consider. This article suggests a number of nonmonetary solutions, including limits on injunctive relief, increased disclosure of prior licensing rates, and mandatory ADR, that SSOs may adopt to streamline the licensing of FRAND-encumbered patents and thus reduce hold-up.

KEYWORDS: SSO, FRAND, hold-up, antitrust, injunction, ADR

I. INTRODUCTION

The international system pursuant to which standard setting organizations (SSOs) vet and adopt technical standards applicable to many of our most popular consumer products--known as de jure standards--is in need of some help, and the SSOs are in a position to offer it. Chief among the present problems with the system is the inability of parties to readily agree on the royalty rates covering the patents essential to practice the de jure standards (also known as standard essential patents or SEPs), and the prospect of anticompetitive effects if owners of SEPs refuse to license their patents on reasonable terms. An injunction or an exclusion order based on a single SEP has the potential to block the sale or importation of products incorporating thousands of different patented technologies.

Few seriously question the value of SSOs, such as the Institute of Electrical and Electronics Engineers (IEEE) and the International Telecommunication Union (ITU), to enhance the interoperability of technical devices and, in the process, spur the globalization of markets and international competition. Healthy competition between manufacturers of smartphones, for example, would not be possible if Apple's iPhone could not interact with the same wireless network as Samsung's Galaxy phone. However, at the same time as it enhances competition in the consumer markets, the adoption of de jure standards necessarily favors some patents and their owners to the exclusion of others. The winners in the standard setting process--the owners of SEPs--may acquire enhanced market power and, with it, the ability to demand exorbitant royalty rates by threatening to deny implementers of the technical standards access to their essential technology.

As explained below, the SSOs' traditional solution to this "patent hold-up" problem has been to require participants in the standard setting process (1) to disclose in advance any patents that may be essential to the de jure standard and (2) to commit to license any SEP on fair, reasonable, and nondiscriminatory (FRAND) terms. (1) Typically, SSOs have not gone further in getting involved in the licensing of SEPs or in the determination of what constitutes compliance with FRAND commitments. For example, the IEEE's bylaws provide that: "The IEEE is not responsible for identifying Essential Patent Claims for which a license may be required, for conducting inquiries into the legal validity or scope of those Patent Claims, or for determining whether any licensing terms or conditions provided in connection with submission of a Letter of Assurance, if any, or in any licensing agreements are reasonable or nondiscriminatory." (2)

This article will examine the potential anticompetitive effects that remain after owners of SEPs have made FRAND commitments and what solutions exist to minimize such effects. The focus here will be on solutions to the problem of patent hold-up that do not involve ex ante discussions of royalty rates. (3) This article will focus instead on nonmonetary solutions, such as voluntary restrictions on rights to injunctive relief, disclosure of past royalty rates and terms, and provisions for mandatory alternative dispute resolution, which can be incorporated into the bylaws and operating documents of SSOs. Through the implementation of such nonmonetary solutions, SSOs can play a significant role in solving the ongoing problem of patent hold-up.

II. BACKGROUND

The development of de jure standards carries with it the prospect of both substantial procompetitive benefits and significant anticompetitive effects. The challenge is to minimize the latter without sacrificing the former. Recent experience has shown that FRAND commitments may be a necessary but not always sufficient solution to the problem of patent hold-up.

AUTHORS' NOTE: The views expressed in this article are ours and do not necessarily reflect those of the firm's clients.

A. Standards and SEPs

The development of standardized technologies is widely regarded as not only valuable to consumers, who enjoy the benefits of increased interoperability of products, but also to the industry engaged in the practice, through encouragement of competitive markets and globalization, reduction of barriers to entry for new market competitors, and increasing rates of technological development. Generally speaking, standards originate through one of two processes. Standards may be set by de facto means, whereby one competitor's approach becomes so widely used that it is adopted by the market as a whole. (4) Standards may also be set intentionally by collective action, through de jure means, whereby a trade association or SSO facilitates the cooperation of industry developers to create a universal standard for performing a specific function. (5)

The standards associated with third generation (3G) and fourth generation (4G) Long Term Evolution (LTE) mobile phone communication technology exemplify the beneficial nature of de jure standards. The European Telecommunications Standards Institute (ETSI), the Alliance for Telecommunications Industry Solutions, and the IEEE, among other SSOs, worked with industry innovators and manufacturers to develop uniform standards for the performance of certain functions commonly used by an array of mobile phone manufacturers. As a result, mobile devices manufactured incorporating the 3G and 4G LTE functionality are able to connect with the same wireless networks and provide alternative product choices to consumers, thus fostering a more dynamic, competitive marketplace.

When adopting a technical standard, an SSO necessarily chooses a technology associated with certain patents over competing technologies and alternative patents. The choice has potentially significant consequences for the market power of the SEPs that are necessary to implement the de jure standard. IEEE provides a typical definition of an SEP: a patent "necessary to create a compliant implementation ... of the [Proposed] IEEE standard" when there exists no "commercially and technically feasible non-infringing alternative." (6) Patent owners have a natural incentive to advocate for de jure standards that read on their patents given the promise of increased market power and royalty fees, the economic and technical development advantages associated with early access to the use of key patents, and the potential reputational benefits associated with participation in the development of standardized technology. Once the standard is adopted, however, owners of SEPs have a natural incentive to demand large royalties, as alternative technologies are essentially eliminated by the standard setting process.

B. Patent ambush and patent hold-up

Along with the benefits of adopting de jure standards, there is the potential for abuse by owners of SEPs. A patent holder who fails to disclose its potentially applicable intellectual property (IP) rights during the standard setting process might exploit its new-found market power if its IP is essential to the de jure standard ultimately adopted by the SSO. In such circumstances, a patent holder, despite its lack of disclosure, might nonetheless extract higher royalty rates for its patent due to the value it gained through its incorporation in the standard. This practice, known as "patent ambush," has been challenged as anticompetitive both by the Federal Trade Commission (FTC) and in district courts. (7) To prevent this potential abuse, SSOs typically require membership in the organization in exchange for participation in the standard setting process, and they condition membership on firms' disclosure of all the patents they control that may potentially become SEPs through the standard setting process. (8) SSOs' implementation of strict disclosure requirements has been regarded by many as a relatively effective measure in limiting patent ambush. (9)

Even patents that have been fully disclosed during the standard setting process may subsequently become the source of another form of patent hold-up. Generally, patent hold-up "arises when a gap between economic commitments and subsequent commercial negotiations enables one party to capture part of the fruits of another's investment." (10) In the context of standard setting, patent hold-up can also occur when an SEP owner, its patents having been disclosed and incorporated into the standard, subsequently declines to cooperate with potential licensees. By failing to cooperate, the SEP holder prevents or delays the licensure of its essential technology, and thus the implementation of the entire standard, or alternatively, creates an infringement cause of action against implementers of the de jure standard. As with the problem of patent ambush, this type of patent holdup is attributed to the increased market power that inclusion in a standard provides an SEP owner. (11) Left to their own devices, SEP owners may be inclined to abuse their potentially increased market power, or at minimum, alter their licensure demands based on the change in circumstances associated with their patent(s)' inclusion in the standard. Unlike patent ambush, however, this type of patent hold-up cannot be resolved simply by ex ante patent disclosure policies. SSOs' traditional solution is to demand FRAND commitments from their members. The nature and purpose of the requirement that participants license their SEPs on FRAND terms, as well as the limitations on FRAND as a remedy for patent hold-up, are the subjects of the next two sections.

C. FRAND commitments

1. THE NATURE AND PURPOSE OF FRAND The primary way in which SSOs have attempted to offset the increased market power awarded to SEP owners has been to require that they agree, prior to the adoption of the standard, to license their SEPs on FRAND terms. (12) SSOs have implemented these requirements in slightly different ways. The IEEE, for instance, requires that an identified potential SEP owner or applicant submit a letter of assurance to the SSO prior to the adoption of the standard that states one of three things: (1) that it does not "own, control, or have the ability to license" any SEPs, (2) that it will not enforce SEP claims against any entity making use of the standard, or (3) that it will ultimately license the SEPs on reasonable terms. (13) In a more direct policy, the VITA Standards Organization (VITA), the standards development arm of VMEbus International Trade Association, an SSO responsible for the development of many computer functioning standards, requires specifically that members grant licensure of SEPs on "fair, reasonable and non-discriminatory terms." (14)

2. SSO NEUTRALITY In the past, SSOs have often manifested an unwillingness to do more than require FRAND commitments to remedy the problem of patent hold-up. SSOs have generally taken the position that, because their expertise is in setting the technological standards, not navigating the economic or legal implications associated with the enhancement of market power due to such de jure standards, they have no responsibility for ensuring that licensing of SEPs takes place on fair and reasonable terms. The IEEE, for example, attempts to absolve itself from responsibility for IP disputes arising from their standards by disclaiming responsibility in its operations manual and bylaws for the FRAND commitments and other IP policy established by the bylaws themselves. (15)

Despite the prospect that uncertain FRAND requirements will result in patent infringement litigation, (16) SSOs are understandably reluctant to maintain their involvement through the successful implementation of their standards and the licensure of SEPs. An SSO's value, purpose, and continued existence depend on the voluntary participation of its members, and some patent holders have already suggested that overly restrictive SSO IP policies, as they relate to FRAND commitments, will deter their participation in formal standard setting. (17)

Moreover, the position of neutrality taken by an SSO with respect to the licensing negotiations of its members after a standard has been adopted may be part of a conscious effort on the part of the organization to immunize itself from antitrust liability. Specifically, the SSO may be seeking to avoid becoming embroiled in allegations that its members' post hoc conduct, including violations of FRAND commitments, has resulted in anticompetitive effects. Whether a statement in an SSO's bylaws expressing such neutrality is sufficient to provide complete antitrust immunity, however, is far from clear.

The leading authority on the antitrust liability of an association is American Society of Mechanical Engineers, Inc. v. Hydrolevel Corp. (18) The case involved allegations that a member of the American Society of Mechanical Engineers (ASME), whose vice president was also a vice chairman of the society, had orchestrated a campaign against a competitor's low-water level cutoff device and had stated that the rival device violated ASME's model code. (19) Relying on general principles of agency law, the Supreme Court in Hydrolevel held that ASME could be held liable for the actions of its officers and agents taken with apparent authority:

   [A] standard-setting organization like ASME can be rife with
   opportunities for anticompetitive activity. Many of ASME's
   officials are associated with members of the industries regulated
   by ASME's codes.... When the great influence of ASME's reputation
   is placed at their disposal, the less altruistic of ASME's agents
   have an opportunity to harm their employers' competitors through
   manipulation of ASME's codes. (20)


Despite the sweeping language in Hydrolevel exposing trade associations to antitrust liability on an agency theory, subsequent decisions by the lower courts have recognized limits to such liability, based on the requirement of showing "concerted action" under section 1 of the Sherman Act. For example, in Alvord-Polk, Inc. v. F. Schumacher & Co., the Third Circuit observed that "the Hydrolevel rule that an association's economic power may justify its being held liable for the actions of its agents cannot be extended to defeat the 'concerted action' requirement of Section 1." (21)

A closely watched antitrust case involving claims against an SSO is True Position v. LM Ericsson Telephone Co. (22) The complaint by True Position alleges that several leading telecommunications companies abused their positions of authority within the Third Generation Partnership Project (3GPP) to exclude TruePosition's technology from the latest LTE global standard. The district court denied 3GPP's motion to dismiss TruePosition's amended complaint, finding that the allegations involved more than mere membership in an SSO and more than mere knowledge of wrongful conduct. (23) The case against 3GPP was allowed to proceed to discovery, because the district court held that the alleged anticompetitive actions by the telecommunication companies against TruePosition were undertaken with 3GPP's apparent authority.

It may be that, under Hydrolevel and its progeny, a district court would not find section 1 liability on the part of an SSO based simply on the breach of a member's FRAND commitment. On the other hand, given the potential antitrust liability when a member is alleged to have acted with apparent authority, SSOs would seem to have some natural incentive to minimize the risk of anticompetitive effects from patent hold-up by owners of SEPs. In other words, SSOs may profess neutrality in their members' licensing negotiations, but they also appear to have some skin in this game. This natural incentive to minimize antitrust risk would seem to complement the SSOs' broader interests in implementing standard setting policies that avoid the disruption caused by patent hold-up and that reduce the costs to those entities practicing their standards. Indeed, whatever their true motivation, SSOs appear to have taken the cue and cooperated with the enforcement agencies in terms of addressing the problem of patent hold-up. In a recent speech, one official from the Justice Department's (DOJ) Antitrust Division noted favorably that several SSOs, including the ITU, ETSI and the American National Standards Institute, have actively engaged in discussions with the enforcement agency about the potential abuses of SEPs and have considered the agency's proposals for curbing the practice of patent hold-up. (24)

III. THE SHORTCOMINGS OF FRAND

A. No guarantee of a meeting of the minds

FRAND commitments do not ensure that a licensing agreement will be reached between owners of SEPs and implementers of the essential technology. What constitutes fair, reasonable and nondiscriminatory terms is often in the eyes of the patent holder. At the same time, unresolved disagreements between SEP owners and prospective licensees have precipitated both claims of patent infringement and counter-accusations of anticompetitive effects.

The limited effectiveness of FRAND commitments is reflected in the many judicial and administrative proceedings involving the licensure of smartphone technology. (25) The longstanding dispute between Microsoft and Motorola in Washington district court is just one example of how far apart parties can be in their assessments of what constitutes a license on FRAND terms. (26) The patent litigation between the two high-tech giants involved Motorola's RAND-encumbered technologies essential to implement the 802.11 wireless and H.264 video standards. Motorola had demanded a rate of 2.25% of the price of the Microsoft end products, which amounted to more than $4 billion a year in royalties for the use of its patents in Windows, Xbox, and other Microsoft products. Microsoft countered that a payment of $1.2 million annually would represent a reasonable royalty. Ultimately, after a lengthy court hearing, Judge James Hobart found the RAND commitment was much closer to the figure offered by Microsoft. In his April 25, 2013, order, Judge Hobart set RAND rates on Motorola's SEPs that translated to approximately $1.8 million in annual royalty payments by Microsoft. (27)

Adding to the complications caused by unresolved FRAND disputes are the number of different venues in which such licensing issues might be adjudicated. In addition to U.S. district courts, disputes over FRAND commitments are subject to adjudication in foreign courts, as well as in administrative proceedings before the International Trade Commission (ITC). (28) For example, before Judge Hobart issued the findings on RAND rates in the Microsoft-Motorola litigation, a German court had issued an injunction against Microsoft relating to two of Motorola's SEPs. That foreign decree was subsequently enjoined by the U.S. district court. (29)

Even assuming that the judicial and administrative proceedings ultimately result in valid FRAND determinations, it is difficult to characterize the process as an efficient means of establishing licensing terms. Years of costly litigation may stand between a FRAND commitment and a licensing agreement. Litigation costs, moreover, may not be the only adverse consequence of imprecise FRAND commitments. Disputes over FRAND may give rise to threats of injunctive relief and exclusion orders, which are discussed in the next section as a potential source of anticompetitive effects.

B. Anticompetitive effects from injunctive relief and exclusion orders

Several enforcement officials have publicly questioned whether requests for equitable relief are inherently inconsistent with FRAND commitments. (30) Some have also suggested that the threats by an owner of a FRAND-encumbered patent to seek injunctive relief or an exclusion order may, under certain circumstances, give rise to anticompetitive effects. (31) Deputy Assistant Attorney General Renata Hesse observed in a speech last year that "[i]n most cases, injunctions and exclusion orders (or the threat of one) do not encourage the beneficial use of a standard; they merely tip the bargaining power in favor of the patent holder." (32) Nor is the impact of disputes over FRAND and requests for injunctions and ITC exclusion orders limited to the patent holder and the prospective licensee; such patent disputes "have the potential to impact competition in an entire market, and not just a bilateral relationship between a single patent holder and a single potential licensee, because the market itself now depends on standardization in order to function." (33)

The legal theory pursuant to which breaches of FRAND commitments give rise to anticompetitive effects is reflected in, among other places, the Qualcomm-Broadcom litigation. Qualcomm prevailed in the district court on the argument that its alleged breach of FRAND was subject, at most, to common law remedies. On appeal, (34) Broadcom was able to convince the Third Circuit that Qualcomm's allegedly false promise to license its patents on FRAND terms, when ETSI was in the process of selecting a telecommunications standard, was a legally cognizable violation of section 2. (35) By coupling a refusal to license on fair and reasonable terms with the threat of injunctive relief for patent infringement, owners of FRAND-encumbered SEPs are believed to exert considerable pressure on those who incorporate such technology into their products. This pressure, and the prospect of extracting supracompetitive royalties, is enhanced by the fact that an injunction from a district court or an exclusion order from the ITC based on a single SEP has the potential to stop entirely the sale or importation of products incorporating a multitude of different patents.

Some of the potential leverage that an owner of SEPs may have exerted in the past has been curtailed by the U.S. Supreme Court's 2006 eBay decision. (36) Prior to eBay, the "general rule" was that a prevailing patent holder was entitled to a permanent injunction absent "exceptional circumstances" or "in rare instances" to protect the public interest. (37) The Supreme Court rejected in eBay this general rule, in favor of a four-factor test that the patent holder must satisfy:

   A plaintiff must demonstrate: (1) that it has suffered an
   irreparable injury; (2) that remedies available at law, such as
   monetary damages, are inadequate to compensate for that injury; (3)
   that, considering the balance of hardship between the plaintiff and
   defendant, a remedy in equity is warranted; and (4) that the public
   interest would not be disserved by a permanent injunction. (38)


Patent infringement cases involving SEPs post-eBay have cited at least two of these factors as reasons to deny injunctive relief. (39) For example, in Apple, Inc. v. Motorola, Inc., Judge Richard Posner explained the district court's denial of injunctive relief for alleged infringement of cell phone and cell tower technology by observing that the owner of the FRAND-encumbered SEPs at issue, Motorola, "implicitly acknowledged that a royalty is adequate compensation for a license to use that patent." (40) Similarly, Judge Robert denied Motorola's claims against Microsoft for injunctive relief on the basis that a RAND license for its technology "will make Motorola whole" for Microsoft's use of its SEPs. (41)

Nevertheless, there remains the prospect, even after eBay, of injunctions to owners of FRAND-encumbered patents. First, there is at least one example of a district court, post-eBay, granting injunctions to a patent owner despite its FRAND commitment. (42) Plus, as discussed further below, the ITC is not subject to the eBay standards in its issuance of exclusion orders. (43) Finally, even the threat of an injunction, in an imperfect judicial system, may exert its own sort of pressure on implementers of technical standards to pay supracompetitive royalty rates to avoid litigation risk. Threats may be particularly effective when directed at less sophisticated or inadequately represented technology users. (44)

C. The case against an absolute bar on injunctions and exclusion orders

Given the potential anticompetitive effects attributable to a request from an owner of a FRAND-encumbered patent for either an injunction or an exclusion order, an obvious question to ask is whether the problem can be solved simply by imposing, either judicially or legislatively, an absolute bar on such equitable relief. The answer is not so obvious. There may be both legal and economic reasons sons why a flexible approach, consistent with the multifactor approach under eBay, is a more desirable alternative.

1. LEGAL OBSTACLES: THE NOERR PENNINGTON DOCTRINE As a matter of law, a per se rule of antitrust liability based on a request for injunctive relief by an owner of FRAND-encumbered patents might run afoul of the Noerr-Pennington doctrine. Pursuant to that doctrine, which is grounded in two commercial disputes before the U.S. Supreme Court, (45) a party that exercises its First Amendment right to petition the government for relief is generally immune from antitrust liability, even if the petitioning activity has the potential to cause anticompetitive effects. (46)

Recent decisions in the context of disputes over compliance with FRAND commitments suggest that district courts will be receptive to arguments that patent claims, including requests for injunctive relief, enjoy Noerr-Pennington protection from antitrust claims. For example, in Apple, Inc. v. Motorola Mobility, Inc., (47) Apple asserted a counterclaim that Motorola violated section 2 by its "abuse of the standard-setting process" and "Motorola's deceptive conduct and failure to offer a ... license" consistent with its FRAND commitment. (48) The district court dismissed Apple's antitrust claims, on the grounds that, because "Motorola's enforcement of its patents is privileged conduct protected by the First Amendment, the Noerr-Pennington doctrine applies." (49)

The Noerr-Pennington doctrine played a similar role in disposing of unfair competition claims brought by three manufacturers of wireless Internet products against Innovatio IP Ventures. (50) The three manufacturers--Cisco Systems, Motorola Solutions, and Netgear--alleged in their declaratory judgment action that Innovatio engaged in unfair competition by sending letters to 8,000 end-users of Wi-Fi technology, alleging that they were infringing its patents and demanding a license fee. (51) Included in the manufacturers' complaint was the allegation that Innovatio's conduct was in violation of its obligation to license its patents on RAND terms. (52)

While the district court recognized that Innovatio's right to injunctive relief was curtailed by its RAND commitment, it declined to go further and find antitrust liability on the basis of its infringement action. (53) Since Innovatio had at least a "plausible argument" that its infringement claims were still viable, notwithstanding that it had made a RAND commitment, the district court concluded that the company was protected from unfair competition claims based on the Noerr-Pennington doctrine. (54)

Given the district court's recognition of the Noerr-Pennington doctrine as a source of antitrust immunity, a rule that categorically denies injunctive relief to owners of FRAND-encumbered patents would not necessarily deter all such requests for relief. Invariably, owners of SEPs would still have arguments for why they had a good faith basis, under eBay, for requesting an injunction and why, accordingly, they enjoy immunity from antitrust liability.

2. ECONOMIC CONSEQUENCES OF A BAN ON ALL EQUITABLE RELIEF Beyond the constitutional constraints on prohibiting owners of FRAND-encumbered patents from seeking injunctions or exclusion orders, economic considerations may also counsel against imposing an absolute bar on such equitable relief. Such a bar would alter, perhaps significantly, parties' bargaining positions in SEP licensing disputes. The stakeholders involved in the "smartphone wars" have weighed in on whether these remedies are important tools for encouraging participation in standards-setting and maintaining an appropriate balance in SEP licensing negotiations (55) or, alternatively, misplaced powers that undermine the solutions that SSO disclosure policies and FRAND commitments themselves were intended to create. (56)

Though district courts have generally declined to grant FRAND-encumbered patent holders injunctive relief, (57) the President, (58) FTC, (59) and DOJ and U.S. Patent and Trademark Office (USPTO) (60) recognize situations in which exclusionary relief for FRAND-encumbered patent holders may be appropriate. In their enforcement actions and public commentary, the executive branch and its agencies have acknowledged the market reality that FRAND licensing disputes are not universally attributable to FRAND-encumbered patent holders' attempted exploitation of their SEPs' inclusion in a standard; rather, potential licensees also have the capacity to delay or prevent FRAND-encumbered patent licensing by engaging in "reverse hold-up" or "hold-out," essentially "refus[ing] to negotiate a FRAND license with the SEP owner or refus[ing] to pay what has been determined to be a FRAND royalty." (61) Within the executive branch, the prevailing view appears to be that flexible caveats based on these potential hold-out scenarios should be carved out of any attempted bar to injunctive or exclusionary relief.

The chief concern is that, without these protections, potential licensees may gain too much negotiation leverage, and individual technological innovators may be discouraged from participating in collaborative standard setting for fear of overly restrictive IP commitments. In light of this concern, the USPTO and DOJ counseled in their January 8, 2013 Joint Policy Statement that:

   An exclusion order may still be an appropriate remedy in some
   circumstances, such as where the putative licensee is unable or
   refuses to take a FRAND license and is acting outside the scope of
   the patent holder's commitment to license on FRAND terms. For
   example, if a putative licensee refuses to pay what has been
   determined to be a FRAND royalty, or refuses to engage in a
   negotiation to determine FRAND terms, an exclusion order could be
   appropriate. Such a refusal could take the form of a constructive
   refusal to negotiate, such as by insisting on terms clearly outside
   the bounds of what could reasonably be considered to be FRAND terms
   in an attempt to evade the putative licensee's obligation to fairly
   compensate the patent holder. An exclusion order also could be
   appropriate if a putative licensee is not subject to the
   jurisdiction of a court that could award damages. This list is not
   an exhaustive one. (62)


In In re Motorola Mobility, Inc. and Google, Inc., the FTC incorporated similar policy considerations into the consent decree that resolved its investigation. While it did not eliminate Google's and Motorola's right to an exclusionary remedy on their FRAND-encumbered patents, the FTC provided similar, but somewhat more restrictive, caveats to those described by the DOJ and USPTO in their statement above. The order made the availability of the remedy contingent upon the specific actions of the licensee--whether it refused terms set by a court order or made a statement "in writing or in sworn testimony that it will not license the FRAND Patent on any terms." (63) By requiring that the potential licensee's refusal must come through a written statement or "sworn testimony" or that the refusal occur in response to a court order, the consent order diminishes the likelihood that the FRAND-encumbered patent holders will be able to exercise an exclusionary remedy, while retaining the possibility as a last resort. (64)

Upsetting this balance may have significant consequences. An absolute bar on injunctive or exclusionary relief to holders of FRAND-encumbered patents might prove especially detrimental to the bargaining position of smaller firms, new market participants, or research-and-development-focused firms that participate in SSOs and are therefore subject to FRAND obligations but may not be capable of surviving drawn out negotiations. (65) At the same time, in terms of shifting bargaining power, such an absolute bar on this type of equitable relief to holders of FRAND-encumbered patents may disproportionately favor firms who do not participate in standard setting and therefore hold a greater number of non-FRAND-encumbered patents that are still commercially valuable. Barring all exclusionary or injunctive relief in this fashion would expand the inequality in bargaining power between FRAND-encumbered patent holders and non-FRAND-encumbered patent holders, allowing firms that hold patents not deemed SEPs to use the threat of injunctive relief to attempt to extract exorbitant royalties from licensee competitors while relying on those same competitors' FRAND commitments to compel them to license their SEPs on more reasonable terms. In this way, such an absolute bar would raise the relative value of commercially valuable, non-standard-essential patents and discourage participation in standard setting processes that require FRAND commitments. The greater disparity between SEPs and non-SEPs may also increasingly frustrate cross-licensing agreements. Indeed, commenters have recognized that firms have superior leverage when licensing "FRAND-free" patents, and that the IP protected by these FRAND-free patents takes on a relatively higher value. (66)

Among the firms that stand to benefit the most from restrictions on equitable relief are those with patent portfolios more heavily weighted in design patents than in technical patents, which are more likely to be incorporated into standards. Firms with design-heavy patent portfolios may disproportionately benefit from participation in technical standard setting processes, as their participation assures their licensure of the technical SEPs on FRAND terms without encumbering their design patents that may be of comparable commercial value. A bar on FRAND-encumbered patent holders' right to seek injunctive relief against firms that infringe their FRAND-encumbered patents would only intensify this asymmetry.

It is not surprising then, that Apple, a firm that famously places high value in its image and simple, innovative designs, would support an absolute bar on FRAND-encumbered patent holders' rights to injunctive relief. (67) Apple developed and holds a number of important design patents related to the iPhone that have not been included in the technical standards-setting processes associated with developing interoperable smartphone technology. (68) If some of these important design patents were not implicated by any technical standard, they may remain FRAND-free, though arguably just as essential to smartphone functionality. (69) While it is likely not the intention of the SSOs coordinating technical standard setting, this asymmetry in terms of FRAND commitments may be over-incentivizing design relative to technical innovation. The market impact of this trend would likely be augmented by an absolute bar on exclusionary and injunctive relief to holders of FRAND-encumbered patents. (70)

The imbalance in terms of availability of equitable relief between design and technical patents would likely have practical consequences at the bargaining table, especially in direct cross-licensure negotiations. Firms with design patents not encumbered by FRAND commitments would be free to seek steeper royalty rates from competitors who have fewer remedies at their disposal associated with the enforcement of their technical, FRAND-encumbered patents. (71) The barring or weakening of remedies for FRAND-encumbered patent holders may lead to potential licensees' willingness to hold out for significantly lesser, and perhaps submarket, royalty rates. (72) Although the source of this imbalance may be a policy aimed at curbing patent hold-up among SEPs, its unintended consequences may be significant and far-reaching. As John D. Harkrider points out, "[I]f firms are free to refuse to pay for their use of SEPs without any risk of injunctions..., that may lead to underinvestment in standards development and related innovation. What's more, it may increase the comparative value of low-quality software and design patents, which do not have FRAND limitations." (73)

Ultimately, the availability of exclusionary or injunctive relief should be a question of striking the appropriate balance in bargaining power. At a minimum, it should not be assumed that an absolute bar on equitable relief is the most procompetitive outcome, simply because it might deter some patent hold-up among owners of SEPs. Instead, policy makers should also consider the consequences from a reduction in FRAND-encumbered patent holders' bargaining power relative to owners of non-FRAND-encumbered patents and other interested parties.

IV. HELP FROM SSOS BEYOND FRAND

One possible SSO solution to the problem of patent hold-up that does not necessarily implicate the availability of equitable relief but which has gained some traction in the standards community is the ex ante disclosure of maximum royalty rates. (74) Under this policy, standard setting participants declare the maximum royalty rate and most restrictive licensing terms that they intend to seek should their patents be incorporated into the subject standard. Certain SSOs have embraced a form of this policy with the intention of resolving licensing disputes and potential hold-ups before the standard is set. The policy encourages the disclosure of competitive rates, especially in situations where alternative patents have been disclosed by other participants along with more reasonable licensing terms. Further, it allows the standard setting body to seek out or incorporate alternative technology before sinking significant costs into the incorporation of a technology containing patents likely to lead to hold-up. (75) VITA and IEEE have incorporated versions of this policy into their IP policies. While the IEEE encourages this type of disclosure/6 the VITA Standards Organization requires it. (77)

The IEEE bylaws provide: "At its sole option, the Submitter may provide with its assurance any of the following: (i) a not-to-exceed license fee or rate commitment, (ii) a sample license agreement, or (iii) one or more material licensing terms." (78) On the other hand, the VITA Standards Organization requires that "[e]ach WG Member must declare the maximum royalty rate for all patent claims that the VITA Member Company he or she represents (or its Affiliates) owns or controls and that may become essential to implement the Draft VSO Specification." (79) In separate Business Review Letters, the DOJ has expressed its intention to evaluate these ex ante policies under the rule of reason. (80)

Still, even under a more lenient rule of reason standard, there remains some prospect that ex ante negotiations within the standard setting process could be challenged as an anticompetitive restraint of trade, such as price fixing. (81) So long as there remains any exposure to antitrust liability, even if limited to the burden of defending a merit-less less private complaint, some SSOs might be reluctant to pursue ex ante licensing solutions beyond securing FRAND commitments from their members. (82)

The degree of antitrust exposure to SSOs or their members from such ex ante solutions to patent hold-up is beyond the scope of this article. Any exposure does suggest, however, the value of also considering nonmonetary solutions, which might prove to be more attractive to some SSOs. Indeed, as discussed below, there are a number of nonmonetary solutions to the problem of patent hold-up, beyond securing FRAND commitments, that entail little, if any, antitrust risk to SSOs. Moreover, when balanced against the threat posed by litigation of the sort brought by TruePosition against 3GPP, which seeks to extend antitrust liability to SSOs for alleged abuses of the standard setting process, the implementation of such nonmonetary solutions may serve an SSO's goal of minimizing antitrust risk.

A. Limits on ITC exclusion orders

One relatively straightforward reform, which SSOs can help advocate for, is to bring the standards of ITC exclusion orders in line with eBay's multifactor approach to awarding injunctive relief. (83) In a Statement on the Public Interest before the ITC, the FTC declared that "ITC issuance of an exclusion or cease and desist order in matters involving RAND-encumbered SEPs, where infringement is based on implementation of standard technology, has the potential to cause substantial harm to U.S. competition, consumers and innovation." The FTC went on, "Simply put, we are concerned that a patentee can make a RAND commitment as part of the standard setting process, and then seek an exclusion order for infringement of the RAND encumbered SEP as a way of securing royalties that may be inconsistent with that RAND commitment." (84)

Various commenters have conjectured for years that the inconsistent availability of exclusionary remedies is contributing to patent hold-up. (85) They have proposed congressional or agency action that would reform the ITC standard to limit the abuse of the exclusionary remedy and theoretically alleviate hold-up. (86)

More specifically, the suggestion has been made that the ITC standard for exclusionary relief should be conformed to the eBay standard used by district courts. (87) This change could potentially be brought about by executive or congressional action, (88) or by the ITC itself. (89) Those that propose congressional action envision a congressional enactment effectively overruling Spansion that would require the ITC to apply the eBay factors when considering actions for exclusionary relief under section 337. (90)

Short of legislative action, there may be executive and administrative steps that can be taken to accomplish the same goal. While the President has the ability to influence future ITC decisions by overruling those of which he disapproves, as he did in 2013 for the first time since 1987, (91) some envision that the ITC may itself push to institute changes by adaptation rather than outright reform. For example, Colleen Chien and Mark Lemley suggest that the ITC may already have the ability to interpret its public interest power more broadly, thus allowing it to issue more "flexible" remedies, even though it does not have the authority to award money damages. (92) Section 337 provides the ITC with somewhat broad discretion to equitably craft its exclusion order to cover only certain existing products, (93) to potentially take effect at a certain time in the future, (94) or to condition the importation of the products during the sixty-day Presidential review period on bond or penalty payments. (95) Considering the costs that may be shifted to consumers if an exclusion order is granted on a FRAND-encumbered patent, the ITC can use softer remedies like those above to address innocent infringement of FRAND-encumbered patents, reserving the exclusion order for last resort cases of deliberate infringement. (96)

Ultimately, though, even if reforms are put into place to conform the standards for exclusion orders to the eBay test for injunctive relief, the more general threat posed by requests for equitable relief remains, particularly when directed at smaller, less sophisticated consumers of technology. It is in this context that SSOs can play a vital role, as discussed in the next section, by incorporating appropriate limitations on the availability of injunctive relief and exclusion orders into their own bylaws.

B. Express waivers of injunctive relief

The enforcement agencies have provided a roadmap of sorts for SSOs to incorporate into their bylaws limitations on the right to injunctive relief and exclusion orders.

When the FTC concluded its investigation of Google and Motorola, its complaint and consent decree reflected the view that the patent holder's request for injunctions against implementers of the SEPs was generally inconsistent with FRAND commitments. The prohibition on injunctive relief in the consent decree, however, was not absolute. (97) Motorola is precluded from seeking injunctive relief on its FRAND-encumbered patents when the implementers of its patented technology refuse to take a license under any terms or on FRAND terms determined by a court or arbitrator. (98) Similarly, Renata Hesse, of the DOJ's Antitrust Division, suggested that injunctive relief should be available only when the party implementing the standard is unwilling to abide by the FRAND terms established by a neutral third party. (99)

Rather than leaving the matter to a court or a government agency, SSOs can play an important role in striking the proper balance between prohibiting injunctions as part of a broader FRAND commitment and carving out exceptions to protect the legitimate interests of the patent holders. The rights and remedies of the patent holders and their prospective licensees will likely be more clear if the SSOs provide, ex ante, express limitations on equitable relief. Moreover, patent hold-up (and the possible anticompetitive effects associated with such conduct) may be less of a threat than if the matter is left to analysis under the four-part eBay standard because alleged infringers of the FRAND-encumbered patents will be able to rely on express waiver, not just the eBay standard, as a basis to deny equitable relief to the patent holder.

C. Disclosure of past royalty rates

In addition to ex ante licensing disclosures of the sort implemented by VITA and IEEE, (100) SSO policies providing for disclosure of prior licensing terms may assist in setting parameters for "reasonable" royalty rates and licensing terms in FRAND-encumbered patent negotiations without involving the SSO in setting monetary limits on the present SEPs. Although she does not lay out a specific proposal, Deputy Assistant Attorney General Renata Hesse recently suggested that SSOs "[mjake improvements to lower the transactions cost of determining F/RAND licensing terms," noting that one possibility would be to "explore setting guidelines for what constitutes a F/RAND rate." (101) Because each technology and each standard that SSOs create is undeniably different and nuanced, generic rate guidelines based on a convention or formula are unlikely to be effective in facilitating licensing negotiations. One way to provide more specific guidelines, as discussed above, is for SSOs to mandate that participating entities disclose ex ante maximum royalty rates. Short of that, an SSO might "serve as a clearinghouse for information on licensing terms," (102) facilitating the disclosure and exchange of prior licensing terms of SEPs included in standards previously adopted by the SSO.

With certain restrictions, SSOs could make rates and terms from prior standards and from prior agreements licensing the currently disputed SEPs available to the FRAND-encumbered patent holders and their potential licensees. While the relative value of each FRAND-encumbered patent is sure to be disputed, information from prior licensing agreements will nonetheless inform these disputes regarding appropriate rates and terms so that justifiable market realities behind deviation from prior rates and terms drive the negotiations. Though the utility of such a system will certainly be questioned, (103) this policy could eliminate rate-related uncertainties that lead to hold-up, level the playing field between licensors and licensees, and drive agreements on reasonable rates with deviations likely to be agreed upon because of the justifiable free market value of the IP at stake, not the negotiating posture of the parties.

As illustrated by the 4G LTE standards, disclosure of rates is not likely to devolve into the establishment of uniform per patent rates. (104) The data analyzed by Peter Quies in his article on the 4G LTE standards shows that, while the number of patents in each participant's portfolio is correlated to its overall royalty rate, the relationship is not linear and holders of a small number of important patents may yield portfolio-based licensing rates equal to or exceeding those of the holders of the highest numbers of patents. (105) This sampling of data further shows how valuable prior rate disclosures, collected and protected by SSOs, could be in discouraging hold-up in FRAND-encumbered patent licensing disputes. The disclosures create a spectrum of licensing rates with clear points of comparison.

While a determination of the merits behind the rate charged for each patent portfolio could only be made with acute technical knowledge of the standard and the patents included, access to this type of data provides potential floor and ceiling parameters for future licensing negotiations, as Renata Hesse seems to have envisioned. SSOs that are able to provide basic royalty rates and terms of prior licensing agreements, covering both the SEPs currently at issue and SEPs included in prior standards, are likely to reduce the frequency and duration of patent hold-up licensing disputes involving the FRAND-encumbered patents.

D. Binding alternative dispute resolution

Alone or in conjunction with other nonmonetary solutions to the problem of patent hold-up, SSOs may offer assistance in the form of securing agreement on alternative dispute resolution of FRAND-encumbered patent licensing disputes. Commenters have proposed that SSOs adopt binding or nonbinding alternative dispute resolution (ADR) provisions, and already, certain SSOs have adopted various forms of this policy.

VITA Standards Organization has incorporated an ADR policy into its bylaws. The policy states that:

   Any [VITA Standards Organization] member who believes a WG Member
   or the VITA Member Company that the WG Member represents has not
   complied with his/her or its obligations under this Patent Policy,
   including but not limited to obligations under Section 10.3 to
   grant licenses on terms that are fair, reasonable and
   non-discriminatory, may submit his/her claim in this respect to the
   applicable WG Chairperson. If the claim is not thereupon resolved
   on an informal basis within fifteen (15) days of its submission,
   the WG Chairperson will commence an Arbitration Procedure. (106)


While this policy appears to allow potential licensees to seek intervention through the SSO's internal arbitration procedure in the event of a FRAND-encumbered patent holder's hold-up of the licensing negotiations, the policy does not assert that the arbitration will be the sole and binding remedy. A more specialized SSO, the Blu-Ray Disc Association, adopted a strict arbitration policy that necessarily limits FRAND-encumbered patent holders' and potential licensees' rights to traditional judicial remedies. The policy states: "Any dispute between a Member and another Member over whether the Member is offering a license under its Essential Patent(s) on fair, reasonable and non-discriminatory terms and conditions ... shall be decided by a single neutral arbitrator appointed under the International Rules of the American Arbitration Association." (107) A mandatory ADR policy like that established by the Blu-Ray Association can operate to preempt parties' rights to traditional judicial remedies. The Blu-Ray policy requiring members to arbitrate disputes surrounding the licensing of FRAND-encumbered patents has been recognized in federal court, and the case against the member organization was, in fact, dismissed in favor of arbitration. (108) Likewise, mandatory arbitration provisions will compel dismissal of an ITC action. (109)

Implementing a mandatory arbitration requirement for FRAND-encumbered patent licensing disputes may be viewed as an extreme remedy for the hold-up problem. Indeed, SSOs have been wary of adopting this policy, and its merits have been widely debated. As Michael Lindsay and Robert Skitol point out, implementation of a mandatory arbitration policy would be a stark contrast to SSOs' traditional focus on technological development and their neutrality stance with regard to subsequent licensing disputes. (110) A mandatory arbitration requirement would deprive standard setting participants of a degree of control over the licensing of their SEPs that are included in the standard. In a binding arbitration format, the standard setting participants would also lose their right to appeal the decision of the arbiter in a court. (111) SSOs might be particularly concerned that member organizations and potential future collaborators would see the policy as enough of a detraction from the traditional rights of SEP holders that a significant number of these firms would decline to participate in the standard setting process or would seek the involvement of an SSO with a more SEP-friendly ADR policy.

With these concerns over the implementation of a mandatory arbitration procedure at the SSO level in mind, Mark Lemley and Carl Shapiro have suggested a somewhat flexible arbitration approach designed to allay the concerns of innovators. (112) Under Lemley and Shapiro's model, FRAND-encumbered patent holders would be required to make an initial offer on purely monetary FRAND terms to identified licensees for the licensure of their entire portfolio of SEPs that have been incorporated into the standard. (113) As a part of their commitments to the SSO in exchange for inclusion in the standard, standard setting participants would be required to submit to binding arbitration over any licensing disputes regarding their FRAND-encumbered SEPs. (114) The key exception that makes the Lemley and Shapiro model unique, and in line with emerging policies on the availability of injunctive relief, (115) is that a FRAND-encumbered patent holder's mandatory arbitration commitment would be satisfied if the potential licensee refuses to make a counteroffer on FRAND terms, refuses to reciprocate on the licensure of its SEPs that read on the subject standard, or refuses to submit to the binding arbitration. (116) After satisfying this commitment, FRAND-encumbered patent holders would be free to seek traditional judicial and agency remedies, including injunctive or exclusionary relief. (117)

The suggestion of binding arbitration, along with Lemley and Shapiro's accompanying policies for the valuation of SEPs and the availability of exclusionary relief for infringement of FRAND-encumbered patents, is not without its detractors. (118) The Hoover Institution Working Group, for example, questions whether the FRAND-encumbered patent hold-up problem is sufficiently widespread to warrant such a break from the traditional licensing procedure, (119) and whether the establishment of a mandatory arbitration procedure would reduce the number of instances in which FRAND-encumbered patent holders and potential licensees freely settle on licensing terms. (120) Still, given the substantial transaction costs associated with traditional judicial remedies, as illustrated by the ongoing smartphone wars, ADR policies deserve serious consideration by SSOs as at least part of the solution to the problem of patent hold-up.

V. CONCLUSION

There is unlikely to be a single solution to the problem of patent hold-up that serves all SSOs, their members, and the implementers of technical standards. FRAND commitments are certainly not, by themselves, such a silver bullet. The negotiation of reasonable royalty rates for SEPs is more likely to be facilitated by SSOs that actively seek to find the right combination of ex ante disclosure requirements and nonmonetary solutions to the problem of patent hold-up.

(1) When the word "fair" is omitted, commitments to license patents on reasonable and nondiscriminatory terms are known as RAND obligations. This article will generally refer to FRAND commitments, unless addressing a RAND commitment in the context of a specific de jure standard.

(2) See IEEE Standards Ass'n, Standards Board Bylaws 17 (Dec. 2013), available at http://standards.ieee.org/develop/policies/bylaws/sb_bylaws.pdf [hereinafter IEEE Bylaws].

(3) Some SSOs, such as VMEbus International Trade Association (VITA) and IEEE, have adopted provisions for patent owners to make more rate-specific assurances about future royalty rates as a way to further combat the problem of patent hold-up. See infra section IV.

(4) This process occurs through natural market progression, potentially resulting in an approach so commonly used that it may become "folly" to attempt to diverge from the "ingrained" standard. See Tony Casson & Patrick S. Ryan, Open Standards, Open Source Adoption in the Public Sector, and Their Relationship to Microsoft's Market Dominance, in Standard's Edge: Unifier or Divider? 87, 87 (Sherrie Bolin ed., 2006) (discussing the Microsoft Word electronic document format and the QWERTY keyboard formation as essentially de facto standards).

(5) Some structure to the decentralized process of developing domestic standards is provided by the American National Standards Institute (ANSI), a nongovernmental organization that accredits domestic SSOs according to certain broad requirements, facilitates domestic standards development, and represents domestic interests in international standards development activities. More than 200 ANSI-accredited SSOs currently operate in the United States, representing the interests of over 200 overlapping public and private organizations. See ANSI, Standards Activities Overview, http://www.ansi.org /standards_activities/overview/overview.aspx?menuid=3 (last visited Jan. 22, 2014).

(6) IEEE Standards Ass'n, Understanding Patent Issues During IEEE Standards Development 1, http://standards.ieee.org/faqs/patents.pdf [hereinafter IEEE FAQs].

(7) See, e.g., In re Rambus Inc., 2007-1 Trade Cas. [paragraph] 75585 (CCH) (F.T.C. Feb. 2, 2007) (alleging that respondents fraudulently or deceitfully induced an SSO to adopt a certain standard that read on respondent's patents), rev'd in ?part on other grounds, 522 F.3d 456 (D.C. Cir. 2008) (determining that the SSO's loss of an opportunity to negotiate more favorable licensing terms did not constitute antitrust injury); Qualcomm, Inc. v. Broadcom Corp., 548 F.3d 1004, 1016-19 (Fed. Cir. 2008) (determining that Qualcomm breached its disclosure duty when it failed to disclose its patents that "reasonably might be necessary" for the implementation of the standard).

(8) For example, the IEEE requires that "[i]ndividual participants of a call for patents are required to notify the IEEE of the identity of a holder of any potential Essential Patent Claims (but not the identity of the Essential Patent Claim) where (1) the individual participant is personally aware that the holder may have a potential Essential Patent Claim; (2) the holder is the participant or an entity the participant is from, employed by, or otherwise represents; and (3) the potential Essential Patent Claim is not already the subject of any existing Letter of Assurance. If such a participant is uncertain whether the patent is essential, the participant still shall notify the IEEE (or cause the IEEE to be notified) of the possibility because they are personally aware of a claim that is a potential Essential Patent Claim." IEEE FAQs, supra note 6, at 4-5.

(9) See M. Sean Royall et al., Deterring "Patent Ambush" in Standard Setting: Lessons from Rambus and Qualcomm, Antitrust, Summer 2009, at 37.

(10) Joseph Farrell et al., Standard Setting, Patents, and Hold-Up, 74 Antitrust L.J. 603-04 (2007).

(11) See generally Anne Layne-Farrar & A. Jorge Padilla, Assessing the Link Between Standard Setting and Market Power (Mar. 5, 2010), available at http://papers.ssrn.com/so13/papers.cfm?abstract_id=1567026, which questions whether the conceptual presumption that inclusion in a standard boosts the value of an SEP actually holds true in practice. The authors conclude that net gain in market power is often zero; yet, inarguably, the inclusion of a patent in a viable, successful standard is a significant change in circumstance that will often reset parties' negotiations over licensure terms.

(12) FRAND-encumbrances may originate not only from requirements imposed by SSOs through formal standard-setting procedures but also through self-imposed requirements related to the development of de facto standards. See Nadia Soboleva & Lawrence Wu, Standard Setting: Should There Be a Level Playing Field for All FRAND Commitments?, CPI Antitrust Chron., Oct. 2013. The scope of this article, however, is limited to those FRAND commitments imposed by SSOs.

(13) See IEEE Bylaws, supra note 2, at 16. Specifically, IEEE requires that royalty-seeking SEP holders provide in the letter of assurance, "[a] statement that a license for a compliant implementation of the standard will be made available to an unrestricted number of applicants on a worldwide basis without compensation or under reasonable rates, with reasonable terms and conditions that are demonstrably free of any unfair discrimination. At its sole option, the Submitter may provide with its assurance any of the following: (i) a not-to-exceed license fee or rate commitment, (ii) a sample license agreement, or (iii) one or more material licensing terms." Id.

(14) See VITA Standards Org., Policies and Procedures [section] 10.3.1 (rev. 2.7, Nov. 2011), available at www.vita.com/home/VSO/VSO.html [hereinafter VITA Policies and Procedures] ("Each [Working Group] Member agrees, on behalf of the VITA Member Company he or she represents, that it will grant to any [Working Group] Member, VITA Member Company, or third party a nonexclusive, worldwide, nonsublicensable (except to the extent necessary 'to have made'), perpetual patent license (or equivalent non-assertion covenant) for its patent claims essential to the Draft [VITA Standards Organization] Specification on fair, reasonable and non-discriminatory terms to use, make, have made, market, import, offer to sell, and sell, and to otherwise directly or indirectly distribute products that implement the Draft [VITA Standards Organization] Specification."); see also ETSI, Rules of Procedure [section] 6.1 (Mar. 2013), available at http://www.etsi.org/images/files/IPR/etsi-ipr-policy.pdf ("When an ESSENTIAL [intellectual property right] relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licenses on fair, reasonable and non-discriminatory ("FRAND") terms and conditions....").

(15) See IEEE-Standards Ass'n, Standards Board Operations Manual 35, [section] 6.3.1 (Dec. 2013), available at https:/ /standards.ieee.org/develop/policies /opman/index.html ("The IEEE is not responsible for identifying Essential Patent Claims for which a license may be required, for conducting inquiries into the legal validity or scope of Patents Claims, or determining whether any licensing terms or conditions provided in connection with submission of a Letter of Assurance, if any, or in any licensing agreements are reasonable or nondiscriminatory. Users of this standard are expressly advised that determination of the validity of any patent rights, and the risk of infringement of such rights, is entirely their own responsibility/'); see also IEEE Bylaws, supra note 2, at 17.

(16) See, e.g., Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 877 (9th Cir. 2012) (acknowledging the fact that "[c]ourts and commentators are divided as to how, if at all, RAND licensing disputes should be settled").

(17) See, e.g., Letter from Jon Han, Vice President of IPR & Licensing, Ericsson Inc., to Federal Trade Commission (Feb. 22, 2013) in response to Decision and Order In the Matter of Motorola Mobility LLC and Google Inc., File No. 121-0120, available at http://www.ftc.gov/sites/default/files/documents /public_comments/2013/02/563708-00019-85568.pdf [hereinafter Ericsson

Public Comment] ("Ericsson believes that the specific procedures described in the Order, if widely adopted, may cause unintended and undesirable consequences, particularly within the telecommunications industry. For example, unnecessary restrictions on the availability of injunctive relief against unwilling licensees may discourage companies such as Ericsson from contributing to open standards, with their demonstrated benefits of improving consumer choice, lowering prices, and encouraging ongoing innovation.").

(18) 456 U.S. 556 (1982).

(19) Id. at 561-62.

(20) Id. at 570-71.

(21) 37 F.3d 996 (3d Cir. 1994). The Third Circuit in Alvord-Polk concluded that a reasonable jury could find the requisite concerted action on the part of the association. Id. at 1010.

(22) Civil Action No. 11-4574 (E.D. Pa. filed July 20, 2011).

(23) Although trade associations are sometimes referred to as "walking conspiracies," it is generally recognized that mere membership and attendance at meetings is insufficient to establish concerted action. See, e.g., In re Processed Egg Prods. Antitrust Litig., 821 F. Supp. 2d 709, 733 (E.D. Pa. 2011).

(24) Renata Hesse, Deputy Ass't Att'y Gen., Antitrust Div., U.S. Dep't of Justice, The Art of Persuasion: Competition Advocacy at the Intersection of Antitrust and Intellectual Property, Remarks in Seattle, Washington (Nov. 8, 2013), available at http://www.justice.gov/atr/public/speeches/301596.pdf [hereinafter Hesse Nov. 2013 Speech].

(25) See, e.g., In re Certain Wireless Commc'n Devices, Portable Music and Data Processing Devices, Computers and Components Thereof, Inv. No. 337TA-745, 2012 ITC LEXIS 1125 (Ct. Int'l Trade Apr. 24, 2012); Microsoft Corp. v. Motorola, Inc., No. 10-cv-1823, 2012 U.S. Dist. LEXIS 170587 (W.D. Wash. Nov. 30, 2012); Apple, Inc. v. Motorola Mobility, Inc. No. ll-cv-178, 2012 U.S. Dist. LEXIS 157525 (W.D. Wis. Nov. 2, 2012); Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. 111. 2012).

(26) This patent dispute has spanned the purchase, and subsequent sale, by Google Inc. of a substantial portion of Motorola Mobility. See Press Release, Google, Lenovo to Acquire Motorola Mobility from Google (Jan. 30, 2014), available at http://investor.google.com/releases/2014/0129.html. Regardless of what relationship Google's sale of Motorola might have to the latter's patent disputes with Microsoft and others, it seems evident that drawn-out FRAND-related disputes have the potential to cause serious disruption to companies' long-term business plans.

(27) Microsoft Corp. v. Motorola, Inc., No. 10-cv-1823, 2013 U. S. Dist. LEXIS 60233 at *303 (W.D. Wash. Apr. 25, 2013). Specifically, Judge Hobart found the upper bound of a RAND royalty for Motorola's H.264 SEP to be 16.389 cents per unit, and the upper bound of a RAND rate for Motorola's 802.11 SEP portfolio to be 19.5 cents per unit.

(28) Some commentators have expressed concern about the prospect of exclusion orders issued by the International Trade Commission (ITC), see infra note 86, while others have supported the ITC as an appropriate venue for resolving disputes over FRAND-encumbered patents. See Geoffrey Marine, Why ITC Is a Good Place to Adjudicate SEP-Based Patents, Law360 (July 23, 2013), http://www .laws360/articles/458772/why-itc-is-a-good-place-to-adjudicate-sep-based-patents.

(29) The Ninth Circuit affirmed the decision by Judge Hobart to enjoin the German injunction in favor of Motorola and against Microsoft. See Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012).

(30) See, e.g., Renata B. Hesse, Deputy Ass't Att'y Gen., Antitrust Div., U.S. Dep't of Justice, Remarks before the Global Competition Review 2nd Annual Antitrust Law Leaders Forum: IP, Antitrust and Looking Back on the Last Four Years 18-19 (Feb. 8, 2013), available at http:/ /www.justice.gov/atr/public/speeches/292573.pdf [hereinafter Hesse Feb. 2013 Speech] (recommending limiting injunction actions for FRAND-encumbered SEP claims); Joseph F. Wayland, Acting Ass't Att'y Gen., Antitrust Div., U.S. Dep't of Justice, Remarks Before the Fordham Competition Law Institute: Antitrust Policy in the Information Age: Protecting Innovation and Competition 11 (Sept. 21, 2012), available at http://www.justic.gov/atr/public/speeches/287215.pdf ("[M]aking a RAND commitment under standards body's policies would appear to be at odds with seeking an ITC exclusion order against a licensee willing and able to take a license on RAND terms ."); Jon Leibowitz, Chairman, Fed. Trade Comm'n, Remarks before the Sixth Annual Georgetown Law Global Antitrust Enforcement Symposium (Sept. 19, 2012), available at http://www.ftc.gov/speeches/leibowitz/120919jdlgeorgetownspeech.pdf ("Seeking an injunction or an exclusion order for a standard essential patent is in tension with the RAND commitment].]").

(31) Hesse Feb. 2013 Speech, supra note 30, at 19-21.

(32) Hesse Nov. 2013 Speech, supra note 24, at 5.

(33) Hesse Feb. 2013 Speech, supra note 30, at 18.

(34) Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 306 (3d Cir. 2007).

(35) A defense of no antitrust liability asserted by Rambus Inc. was successful in an enforcement action brought by the FTC on a similar theory of patent ambush. Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008). The Court of Appeals for the D.C. Circuit, reviewing the FTC's enforcement order against Rambus, held that (notwithstanding the deceptive conduct) the SSO's loss of an opportunity to negotiate more favorable licensing terms from Rambus did not constitute antitrust injury. Id. at 467.

(36) eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006).

(37) Id. at 393-94.

(38) Id. at 391.

(39) See generally Microsoft Corp. v. Motorola, Inc., No. 10-cv-1823, 2012 U.S. Dist. LEXIS 170587 (W.D. Wash. Nov. 30, 2012); Apple, Inc. v. Motorola Mobility Inc., 886 F. Supp. 2d 1061 (W.D. Wise. 2012); Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. 111. 2012).

(40) Apple, Inc., 869 F. Supp. 2d at 914.

(41) Microsoft Corp., 2012 U.S. Dist. LEXIS 170587, at *29.

(42) See, e.g., Commw. Scientific & Indus. Research Org. v. Buffalo Tech. Inc., 492 F. Supp. 2d 600 (E.D. Tex. 2007).

(43) On June 4, 2013, the ITC found a violation by Apple of certain Samsung patents and issued a limited exclusion order that banned the importation of some older models of the phone. In re Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, Inv. No. 337-TA-794, 2013 ITC LEXIS 815 (Int'l Trade Comm'n June 4, 2013). Despite receiving public comments from several technology companies disapproving of an exclusion order in such circumstances, the ITC concluded that "Samsung's FRAND declarations do not preclude that remedy." Id. at *8. The ITC's order in this matter was subsequently vacated by the Obama administration, but the prospect of future exclusions in favor of owners of FRAND-encumbered patents remains.

(44) See, e.g., In re Innovatio IP Ventures, LLC Patent Litig., MDL Docket No. 2303, 2013 U.S. Dist. LEXIS 15968, at *25 (N.D. 111. Feb. 4, 2013). In Innovatio, the targets of the patent owner's presuit demand letters were not the manufacturers who incorporated the wireless technology into their products, but the downstream users, such as bakeries, restaurants, cafes, hotels, and other small businesses.

(45) See generally United Mineworkers of Am. v. Pennington, 381 U.S. 657 (1965); E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1960).

(46) Nevertheless, the Noerr-Pennington doctrine has never provided absolute First Amendment immunity whenever petitioning activity is involved. In the context of judicial petitioning, the Supreme Court has recognized a "sham" exception that consists of a two-part test. Litigation is considered to be a sham and, therefore, not entitled to First Amendment immunity if it is both (1) "objectively baseless"; and (2) subjectively motivated by a desire on the part of the litigant to impose anticompetitive harm from the judicial process, as opposed to harm from any judicial relief obtained. Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 56-57 (1993).

(47) 886 F.Supp. 2d 1061 (W.D. Wise. 2012).

(48) Id. at 1076.

(49) Id.

(50) In re Innovatio IP Ventures, LLC Patent Litig., MDL Docket No. 2303, 2013 U.S. Dist. LEXIS 15968, at *25 (N.D. 111. Feb. 4, 2013).

(51) Id. at *28.

(52) Id.

(53) Id. at *52.

(54) Id. Even though the demand letters sent by Innovatio constituted presuit communications, the district court held that they were still subject to Noerr-Pennington protection. Id. at *36-42 (recognizing that sending presuit letters may be a necessary component of enforcing patent rights).

(55) See, e.g., Ericsson Public Comment, supra note 17, at 4 ("FRAND licensing, with the possibility of using injunctive relief to protect standard-essential patent holders' rights, has provided the necessary incentives for innovators to direct research and development resources to standardization efforts, and will continue to do so in the future if left unchanged.... Removing or limiting possibilities for a fair return on investments in standardization would undermine incentives for technology developers to invest in open, standardized technology and instead encourage a shift towards proprietary technologies.").

(56) See, e.g., Letter from E. Joshua Rosenkranz, on behalf of Apple, Inc., to Fed. Trade Comm'n (Feb. 22, 2013) in response to Decision and Order In the Matter of Motorola Mobility LLC and Google Inc., File No. 121-0120 at 4, available at http://www.ftc.gov/sites/default/files/documents/public_comments/2013/02/563708-00029-85598.pdf [hereinafter Apple Public Comment] ("First and foremost, a FRAND commitment reflects a promise of access to standardized technologies. It is not a means for SEP holders to bully companies. Injunctions distort the FRAND bargain. An injunction threat presents would-be licensees with the dilemma of (i) having its products enjoined from sale, or (ii) agreeing to excessive licensing fees or conditions. As long as a holder of a FRAND-encumbered SEP can hold the threat of an injunction over a standard implementer's head, any negotiation, arbitration, or litigation between the parties will be corrupted by the SEP holder's impermissible exercise of collectively generated monopoly power.").

(57) See supra note 39.

(58) Letter from Ambassador Michael B. G. Froman, Executive Office of the President, The U.S. Trade Rep., to Hon. Irving A. Williamson, ITC Chairman, 2 (Aug. 3, 2013), available at http://www.ustr.gov/sites/default/files /08032013%20Letter_1.PDF [hereinafter Executive Veto Letter].

(59) Decision and Order in Motorola Mobility LLC and Google Inc., F.T.C. Docket No. C-4410 at 8 (July 24, 2013).

(60) U.S. Dep't of Justice & U.S. Patent and Trademark Office, Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments 7 flan. 8, 2013), available at http://www.justice .gov/atr/public/guidelines/290994.pdf [hereinafter DOJ & PTO Policy Statement].

(61) Executive Veto Letter, supra note 58, at 2.

(62) DOJ & PTO Policy Statement, supra note 60, at 7; see also Executive Veto Letter, supra note 58, at 2 n.3 (quoting the DOJ & PTO Policy Statement).

(63) Decision and Order in Motorola Mobility LLC and Google Inc., F.T.C. Docket No. C-4410 at 8 (July 24, 2013) (emphasis added). In total, the FTC laid out four situations in which Google and Motorola may seek "Covered Injunctive Relief for alleged Infringement of a FRAND Patent." Id. This relief is permissible when the potential licensee: "(1) is outside the jurisdiction of the United States District Courts;... (2) has stated in writing or in sworn testimony that it will not license the FRAND Patent on any terms;... (3) refuses to enter a License Agreement covering the FRAND Patent on terms that have been set in the Final Ruling of a Court or through Binding Arbitration; or (4) does not provide the written confirmation requested in a FRAND Terms Letter within thirty (30) days of when the FRAND Terms Letter was delivered...." Id.

(64) See id.

(65) See Damien Geradin, Anne Layne-Farrar & Jorge A. Padilla, The Complements Problem within Standard Setting: Assessing the Evidence on Royalty Stacking, 14 B.U. J. Sci. & Tech. L. 144, 174 (2008) ("Without the option of making an equity argument in court for injunctive relief, patent holders within standard setting could face the threat of concerted buyer power reducing their [intellectual property rights] returns to sub-competitive levels."); see also Elyse Dorsey & Matthew R. McGuire, How the Google Consent Order Alters the Process and Outcomes of FRAND Bargaining, 20 Geo. Mason L. Rev. 979, 994-95 (2013) ("In essentially disallowing (or at least seriously burdening) an SEP holder's ability to seek an injunction, the FTC and DOJ appear to be effecting a significant alteration to the FRAND bargaining landscape . . . [that may] be rendering FRAND negotiations more opaque. Thus, whether this new landscape benefits consumers is an open question.").

(66) Jonathan Radcliffe & Gillian Sproul, FRAND and the Smartphone Wars, Intell. Prop. Mag., Dec. 2011 / Jan. 2012, at 47 ("Subject to abuse of dominance issues, FRAND-free patents give considerably greater leverage, especially in the telecoms sector.... The strategic value of the patents lies in the fact that

they can be deployed normally, that is to say, without the patentee having to modify its enforcement and litigation strategy to take account of possible FRAND-related defences.").

(67) See Apple Public Comment, supra note 56.

(68) See Christopher V. Carani, Apple v. Samsung: Design Patents Take Center Stage, Landslide, Jan./Feb. 2013, at 26 ("Prior to 2007, Apple, in its storied history, never had filed more than 38 U.S. design patent applications in a single calendar year. In 2007, however, Apple filed 124 design patent applications--a 400 percent increase from 2006. (Interestingly, Steve Jobs himself was a named coinventor on over half.).").

(69) See, e.g., U.S. Patent No. 7,479,949 (filed Jan. 20, 2009) ("A computer implemented method for use in conjunction with a computing device with a touch screen display comprises: detecting one or more finger contacts to determine a command for the device, and processing the command.").

(70) See Radcliffe & Sproul, supra note 66, at 47 ("[A]n owner of FRAND-encumbered patents is at a disadvantage in litigation as compared to an owner of FRAND-free patents--no injunction and only a reasonable royalty versus an injunction and whatever terms can be extracted.").

(71) See Executive Veto Letter, supra note 58; see also Jay Jurata et al., White House Reins in ITC on Standard-Essential Patents, 18 Cyberspace L. 1 (2013).

(72) See John D. Harkrider, Seeing the Forest Through the SEPs, Antitrust, Summer 2013, at 26 (discussing the relative profitability of smartphone-technology-producing firms that hold large numbers of SEPs, like Nortel, Motorola Mobility, and Nokia, and those that do not hold large numbers of SEPs, like Apple). Harkrider observes that "[w]hile patent holders generally have no obligation to license their patents, it seems odd to argue that a 10 percent royalty is an appropriate measure of damages for a design feature, such as swipe to unlock or the rounded comers of an iPhone, while arguing that a 2.25 percent royalty for essential telecommunications functionalities that drive consumer demand for smartphones ... is outrageously extortive."

(73) Id.; see also Radcliffe & Sproul, supra note 66, at 47 ("A clever design registration programme coupled with continual innovation will generate rights in the look and feel of smartphones and computer tablets which may be asserted against competitors with FRAND impunity.").

(74) Variations of this idea have been suggested by commenters for years. See, e.g., Robert A. Skitol, Concerted Buying Power: Its Potential for Addressing the Patent Holdup Problem in Standard Setting, 72 Antitrust L.J. 727, 742-44 (2005).

(75) See Michael A. Lindsay, Negotiating Royalty or Other License Terms Before the Standard is Set, Spring 2009 American Intellectual Property Law Association Meeting, available at http://www.dorsey.com/files/upload/lind say_negotiating_royalties_AIPLA_spring09.pdf (paraphrasing the reasoning of the DOJ, which determined a version of the ex ante disclosure policy to be appropriate and procompetitive).

(76) See IEEE Bylaws, supra note 2, at 16; see also Business Review Letter from Thomas O. Barrett, Ass't Att'y Gen., Antitrust Div., U.S. Dep't of Justice, to Michael A. Lindsay, Esq., Dorsey & White (Apr. 30, 2007), available at http://www.justice.gov/atr/public/busreview/222978.pdf [hereinafter IEEE Business Review Letter] (stating that the DOJ would not pursue antitrust charges against the IEEE for its policy encouraging ex ante disclosure of maximum royalty rates and most-restrictive nonmonetary licensing terms).

(77) See VITA Policies and Procedures, supra note 14, [section] 10.3.2.

(78) IEEE Bylaws, supra note 2, at 16.

(79) VITA Policies and Procedures, supra note 14, [section] 10.3.2.

(80) IEEE Business Review Letter, supra note 76; Business Review Letter from Thomas O. Barnett, Ass't Att'y Gen., Antitrust Div., U.S. Dep't of Justice, to Robert Skitol, Esq., Drinker Biddle & Reath (Oct. 30, 2006), available at http://www.justice.gov/atr/public/busreview/219380.htm.

(81) See Thomas F. Cotter, Patent Holdup, Patent Remedies, and Antitrust Responses, 34 J. Corp. L. 1151, 1200 (2009) ("[A]ny agreement on the part of SSO members is potentially subject to antitrust scrutiny as a contract, combination, or conspiracy in restraint of trade.").

(82) See generally id. at 1203-06 ("All of this suggests, however, that even under the rule of reason, there will remain substantial uncertainty over the boundaries of lawful negotiation."); id. at 1206 (also noting that the appetite of SSOs to participate in this type of process may be weak).

(83) Spansion, Inc. v. Int'l Trade Comm'n, 629 F.3d 1331, 1359 (Fed. Cir. 2010) ("Given the different statutory underpinnings for relief before the [ITC] in Section 337 actions and before the district courts in suits for patent infringement, this court holds that eBay does not apply to [ITC] remedy determinations under Section 337.").

(84) Third Party United States Federal Trade Commission's Statement on the Public Interest, In re Certain Wireless Communication Devices, Portable Music and Data Processing Devices, Computers and Components Thereof, Inv. No. 337-TA-745 (June 6, 2012), available at http://www.ftc.gov/os/2012 /06/1206ftcwirelesscom.pdf.

(85) See, e.g., Colleen V. Chien & Mark A. Lemley, Patent Holdup, the ITC, and the Public Interest, 98 Cornell L. Rev. 1 (2012).

(86) Id. at 32-43; Mike Heins, Selling Congress on eBay: Should Congress Force the ITC to Apply the eBay Standard?, 22 Fed. Cir. B.J. 589 (2013); Harvard Law Review, Recasting the U.S. Int'l Trade Commission's Role in the Patent System, 126 Harv. L. Rev. 2337 (2013); James Boyle, Open Source Innovation, Patent Injunctions, and the Public Interest, 11 Duke L. & Tech. Rev. 30, 57-61 (2012); Taras M. Czebiniak, When Congress Gives Two Hats, Which Do You Wear? Choosing Between Domestic Industry Protection and IP Enforcement in [section] 337 Investigations, 26 Berkeley Tech. L.J. 93,130-32 (2011); Sapna Kumar, The Other Patent Agency: Congressional Regulation of the ITC, 61 Fla. L. Rev. 529, 566-67 (2009); Robert W. Hahn & Hal J. Singer, Assessing Bias in Patent Infringement Cases: A Reviezo of International Trade Commission Decisions, 21 Harv. J.L. & Tech. 457, 489 (2008).

(87) See, e.g., Hahn & Singer, supra note 86, at 489.

(88) See Boyle, supra note 86, at 61 (noting that this reform "could be done through decisions of the [Court of Appeals for the Federal Circuit] or the Supreme Court.... Alternatively, it could be done legislatively.").

(89) See Hahn & Singer, supra note 86, at 489. Hahn and Singer suggest that this reform could be undertaken by the ITC itself without executive or congressional authorization because "[t]he Tariff Act of 1930 already authorizes the ITC to take such equitable considerations into account. Section 337(c) provides that the [ITC] must consider 'all legal and equitable defenses ... in all

cases/ and the language of section 337(d)(1)--although given a narrow reading by the ITC in the past--would appear to require consideration of public interest factors before imposition of any exclusion order." Id.

(90) See Heins, supra note 86, at 608 ("Congress should anticipate more litigation by [non-practicing entities, essentially "patent trolls,"] at the ITC and should consider requiring the [ITC] to apply the eBay factors.").

(91) See Executive Veto Letter, supra note 58; see also Jay Jurata et al., supra note 71 (describing and analyzing the President's decision to overrule the ITC exclusion order that "would have prevented Apple from importing certain iPhone and iPad models that operate on the AT&T network").

(92) See Chien & Lemley, supra note 85, at 28.

(93) Id. at 32-33.

(94) Id. at 34-36.

(95) Id. at 36-39 ("Implementing bond periods longer than sixty days may require some creativity, however.").

(96) Id. at 41-42.

(97) See supra note 63.

(98) Decision and Order, In re Motorola Mobility, LLC, and Google Inc., FTC File No. 121-0120, f E (Jan. 3, 2013), available at http://ftc.gov/os /caselist/1210120/ 130103googlemotorolado.pdf.

(99) See Renata B. Hesse, Deputy Ass't Att'y Gen., Antitrust Div., U.S. Dep't of Justice, Remarks Before the ITU-T Patent Roundtable: Six "Small" Proposals for SSOs Before Lunch 9 (Oct. 10, 2012), available at http:/ /www .justice.gov./atr/public/speeches/287855.pdf.

(100) See supra section IV.

(101) Hesse, supra note 99, at 10.

(102) Michael A. Lindsay & Robert A. Skitol, New Dimensions to the Patent Holdup Saga, Antitrust, Spring 2013, at 39; see also Mark A. Lemley & Carl Shapiro, A Simple Approach to Setting Reasonable Royalties for Standard-Essential

Patents, 28 Berkeley Tech. L.J. 1135, 1141 (2013) ("SSO best practices should include a mechanism by which the owner of standard-essential patents is obligated to disclose to any willing licensee the terms on which it has already licensed its standard-essential patents to other parties....").

(103) See, e.g., Doug Lichtman, Understanding the RAND Commitment, 47 Hous. L. Rev. 1023,1044-46 (advocating the view that private, RAND-backed negotiations are a better approximation of free market competition than a publicly disclosed negotiation).

(104) See Peter Quies, Valuing Standard Essential Patents: An Examination of Announced FRAND Royalty Rates for LTE, Micronomics, Dec. 2012, available at http://www.americanbar.org/content/dam/aba/ publications/litigation _committees/intellectual/012413-valuing-standard-essential-patents -memo.authcheckdam.pdf (analyzing rates published by Eric Stasik, Royalty Rates and Licensing Strategies for Essential Patents on LTE (4G) Telecommunication Standards, 45 les Nouvelles 114, 115-16 (Sept. 2010) that participating entities voluntarily disclosed).

(105) Id. at 3-4 (noting that the holders of the smallest number of 4G LTE SEPs have proposed or extracted the highest royalty per patent and that the data suggest that the acquisition of each additional SEP will produce diminishing returns for each patent holder).

(106) VITA Policies and Procedures, supra note 14, [section] 10.5.

(107) Blu-Ray Disc Ass'n, Amended and Restated Bylaws cl. 16(5) (Vers. 2.2, Feb. 6, 2013), available at http://www.blu-raydisc.com/Assets/Downloadablefile /2013%202%206%20BDA%20Bylaws_v2_2%20Final.pdf (emphasis added).

(108) Zoran Corp. v. DTS, Inc., 2009 WL 160238, at *3 (N.D. Cal. Jan. 20, 2009) (granting a motion to dismiss in favor of resolution through

arbitration with respect to FRAND-based claims arising from the patent-holder's participation in the Blu-Ray Disc Association only) ("Unlike the broad arbitration clauses discussed above, pursuant to which all disputes merely 'touching]' arbitrable matters must be referred to arbitration, the arbitration clause in the instant case provides only that 'any dispute between a Member and another Member over whether the Member is offering a license under its Essential Patent(s) on fair, reasonable and non-discriminatory terms and conditions within the context of the provision of 16(4) shall be [arbitrated].'").

(109) See 19 U.S.C. [section] 1337(c) (2014) ("The [ITC] shall determine, with respect to each investigation conducted by it under this section, whether or not there

is a violation of this section, except that the [ITC] may, by issuing a consent order or on the basis of an agreement between the private parties to the investigation, including an agreement to present the matter for arbitration, terminate any such investigation, in whole or in part, without making such a determination."); but see InterDigital Communications LLC v. ITC, Case No. 2012-1628 (Fed. Cir. June 7, 2013) (remanding case to ITC for further proceedings after concluding that the claim that the dispute was governed by the arbitration agreement was "wholly groundless").

(110) See Lindsay & Skitol, supra note 102, at 40.

(111) See, e.g., VITA Policies and Procedures, supra note 14, [section] 10.5 (describing the internal appeal process under the arbitration format set by the bylaws of the SSO).

(112) Lemley & Shapiro, supra note 102 (favoring a mandatory "baseball-style" arbitration, though, for purposes of this article, the procedure of the arbitration is secondary to the procedure for triggering the arbitration).

(113) Id. at 1141.

(114) Id. at 1141-42 (necessarily requiring that the FRAND-encumbered patent holder forfeit its right to injunctive or exclusionary relief in favor of binding arbitration as the sole remedy).

(115) See supra section III.C.2.

(116) Lemley & Shapiro, supra note 102, at 1142.

(117) Id. at 1142-44.

(118) See generally, Pierre Larouche et al., Settling FRAND Disputes: Is Mandatory Arbitration a Reasonable and Non-Discriminatory Alternative? (Hoover Institution Working Group on Intellectual Property, Innovation, and Prosperity, Stanford Univ., Oct. 2013), available at http://www.bingham.com /Publications/Files/2013/10/Settling-FRAND-Disputes.

(119) Id. at 15-17 (questioning the magnitude of the FRAND-encumbered patent hold-up issue, and whether mandatory arbitration provides "a necessarily more efficient alternative ... to resolving FRAND disputes" than the existing structure based on FRAND commitments and resolution of disputes, where necessary, through judicial and agency proceedings).

(120) Id. at 19-21 (stating the belief that "by effectively lowering the overall cost of disagreement, [mandatory arbitration] will increase the incidence of disagreement relative to the status quo and, therefore, will have a 'chilling effect' on bilateral negotiations").

Paul H. Saint-Antoine, Partner, Drinker Biddle & Reath LLP.

Garrett D. Trego, Associate, Drinker Biddle & Reath LLP.
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Title Annotation:fair, reasonable, and nondiscriminatory; standard setting organizations; Competition Policy and Intellectual Property Rights: Legal and Economic Perspectives
Author:Saint-Antoine, Paul H.; Trego, Garrett D.
Publication:Antitrust Bulletin
Date:Jun 22, 2014
Words:14176
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