The Biden administration’s presentation late last year of a new draft policy statement regarding certain patent licensing rights has stirred controversy in the intellectual property (IP) community as it seeks to partially reverse a Trump administration policy widely perceived as more favorable to patent owners.
The dispute concerns standard essential patents (SEPs) — patents claiming inventions that must be used in order to comply with technical standards, such as the 5G mobile networking standard — which are organized by standards-setting bodies such as the Institute of Electrical and Electronics Engineers.
In exchange for having their patents included in a standard, the inventors generally are required to license their patents on fair, reasonable, and nondiscriminatory (F/RAND) terms, a term of art in IP practice.
But for many years, holders of SEPs typically struggled to prevent companies refusing to pay licensing fees on F/RAND terms from infringing their patents, as courts were reluctant to enter injunctions against those infringers. In 2019, however, the Trump administration’s Department of Justice (DOJ) and US Patent and Trademark Office (USPTO), together with the National Institute of Standards and Technology (NIST), announced a new policy recognizing that:
When licensing negotiations fail, appropriate remedies for patent infringement, including injunctive relief, should be available to SEP holders. . . . The availability of the full range of remedies is necessary in order to preserve competition and incentives for innovation, and for continued participation in standards-setting activities, which can produce substantial benefits for American consumers.
Specifically, the DOJ, USPTO, and NIST held that “a patent owner’s promise to license a patent on F/RAND terms is not a bar to obtaining any particular remedy, including injunctive relief.”
But just two years later, the Biden administration reversed course, proclaiming in a draft policy statement released late last year that “where a SEP holder has made a voluntary F/RAND commitment . . . the irreparable harm analysis, balance of harms, and the public interest generally militate against an injunction.” The new policy targets “opportunistic conduct by either SEP holders or implementers [that] makes the implementation of standards more costly and deters investment in future standards development.”
The reaction to the new policy from patent holders, including SEP owners, was swift and negative. For instance, the Innovation Alliance, a coalition of patent-heavy companies like AbbVie, Dolby, and Qualcomm, declared that the revised guidance would
cause uncertainty about the ability to protect intellectual property and so undermine incentives to engage in risky research and development. Undermine U.S. leadership in emerging and strategic technologies. . . . Create more licensing disputes and litigation. Encourage delay and other bad-faith tactics in licensing negotiations. [And] unravel existing business relationships and agreed to licensing arrangements.
Other organizations argued that treating SEPs differently from other patents by resisting the entry of injunctions when F/RAND terms are not agreed upon would cleave the IP system.
In addition, other countries that regularly see extensive patent litigation activity have recently adopted the pro-injunction stance set forth in the 2019 USPTO guidance. In 2020, the German Federal Court of Justice issued its Sisvel v. Haier opinion, which held that the defendant’s failure to articulate “unconditional willingness” to license the SEP in question, coupled with delaying tactics, meant the patent owner was entitled to an injunction. In the same year, the UK Supreme Court held in Unwired Planet v. Huawei, an opinion we explored here, that an injunction may be entered if the infringer declines to license the patent on F/RAND terms.
In contrast, the Save Our Standards organization, which includes member companies such as Amazon, Apple, Cisco, and Honda, hailed the new policy as “a welcome return to a balanced policy concerning the availability of exclusionary remedies in licensing disputes involving policy for FRAND-committed SEPs” because it would inhibit the ability of SEP owners “to threaten exclusion to increase their negotiating leverage to the detriment of standards implementers and ultimately to customers.” The Biden administration will now review the 150-plus public comments presented in response to the draft policy and will then formulate a final version, which is expected to generally resemble the draft. But patent owners shouldn’t despair: The way things are going, it will be reversed again within two to three years.
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