Here's today's announcement from the FTC: "FTC Finalizes Settlement in Google Motorola Mobility Case". And here's the Final Order [PDF], based on the settlement with Google, who admitted no fault and for good reasons, in my view, in that it wasn't at fault. I've long maintained that this is a manufactured complaint to smear and harass and hamper Google by competitors, the usual suspects. And the good news is, The FTC altered the settlement terms to try for more balance than the draft it published for comment back in January.
The ban on injunctions on the Motorola FRAND patents has been lifted, although there remain certain restrictions. What does it mean? It means, to me, that there have been reverberations from the ITC decision recently to grant an injunction against Apple for reverse patent hold up, rejecting its defense that Samsung was violating its FRAND obligations by asking for too much to license. That told the world that injunctions are available to FRAND patent owners. Second, I think it means that the Microsoft/Apple/FOSSpatents campaign to make the world believe it should be impossible for FRAND patent owners to seek injunctions is failing. The tide is turning. Third, this is an order based on a settlement agreement, so it doesn't apply necessarily to anyone else but Google's Motorola patents. But it should have an impact on litigation currently in progress.
Here's the FTC's letter [PDF] explaining the changes to those who submitted comments. Remember when CCIA and RIM
told the FTC, as did many others, that banning injunctions for FRAND patents would make the patent smartphone wars worse? Well, the FTC has listened. The new settlement terms try to block both patent hold up and reverse patent hold up, in an effort to block the horrible gaming of the system we've been watching play out in litigation, although to tell you the truth all I've seen is reverse patent hold up. That is what the ITC ruled Apple was guilty of when it ordered an injunction against it. I haven't yet seen an order establishing hold up, although Microsoft is trying hard to get one in Seattle.
Here's the change at the FTC, from the letter:
The Order strikes a balance. It enables Google and implementers to negotiate a FRAND rate while protecting both parties from opportunistic behavior that is inconsistent with the FRAND agreement. An implementer can negotiate licensing terms without facing the threat of an injunction,3 but Google is not barred from responding to an implementer that misuses the protections in the Order to delay rather than facilitate entering into a FRAND license.4 In addition, Google has recourse if an implementer refuses to take steps to obtain a FRAND license, or to enter into a license after a FRAND rate is determined. Like any other licensor, Google also has the right to seek treble damages for willful infringement.
My personal view is that this is a solution to a nonproblem. No agency can alter patent law. And patent law gives all patent holders the same rights. But sometimes it's better to settle than to fight for years and years, and so that is what happened. But there was never a legal basis for saying that FRAND patent holders lose rights that patent law gives them. To do that, you'd need Congress to change patent law. I shouldn't give Microsoft ideas, I guess, but that's simply true. The FTC, despite taking on this assignment at Google competitors' urging really has no authority to alter the law that Congress wrote, I would argue. When the FTC first published the draft consent order, I believed they were overreaching, and here was part of my
3 One commenter complained that barring Google from seeking an injunction during the appeal of a FRAND Determination Action “will significantly delay resolution of licensing disputes.” However, enabling implementers to exercise their appeal rights without the threat of injunction is necessary to ensure the fairness of the FRAND Determination Action. The Order strikes a balance between Google’s rights and interests as a patent holder, and the rights and interests of implementers.
4 The Order releases Google from the ban on injunctions if, at Google’s request, an implementer does not commit to entering a License Agreement on terms decided through arbitration or a FRAND determination action in district court. While a FRAND commitment requires the patent holder to engage in good faith negotiations for a license agreement, the implementer is not free to abuse and delay that negotiation process to avoid paying royalties. The sample letter in Exhibit A provides a mechanism in the Order for Google to ensure that an implementer cannot unduly prolong the process.
If the government wants to build a highway and your house is in the way of the highway, what happens? It was wrong, and now, after listening to public comments from others filed in reaction to the draft, here is the
FTC announcement of the changed agreement:
Does the government come and tell you, "You have to move out and abandon the house. Sorry for the loss of the value of your house, but that's life. The public interest comes ahead of your individual property rights."
Is that how it works?
Of course not. The government may be able, under certain circumstances, to tell you to move in order to build the highway, but it has to *pay* you reasonable compensation. You don't have to just gulp and swallow such a loss. Why? Because no one, not the government or anyone, has the right to rob you of your property rights. It's your house. You paid money for it, and if they take it away to benefit the larger good, you should at least be paid compensation.
What about taking away certain property rights from FRAND patent holders? Why is that any different than taking away a man's house? Patents, they tell us, are property, and patents come with certain property rights, such as the right to seek injunctive relief against willful infringers and the possibility of treble damages. If you take that away, without compensation, where is the fairness in that?
The FTC is now suggesting that companies that own standards-essential patents and offer them under FRAND terms, like Motorola, should not be allowed to seek injunctions regarding those kinds of patents except in the most extreme of circumstances. But for decades, they had those property rights, the right to seek injunctive relief. How can a government agency just show up and take those traditional rights away by fiat, without reasonable compensation? That's not America, to me. I don't even like software patents, but as long as the patent system exists, you want it to be fair. And this just feels wrong.
And the key paragraph from the Final Order:
FTC Finalizes Settlement in Google Motorola Mobility Case
Agency Makes Technical Modifications to Final Order in Response to Public Comments
Following a public comment period, the Federal Trade Commission approved a modified Final Order settling charges that some of Google Inc.’s business practices could stifle competition among manufacturers of electronic devices.
The Final Order [PDF] requires Google to abide by its commitments to license its standard-essential patents on fair, reasonable, and non-discriminatory or FRAND terms. These standard-essential patents are needed to make popular devices such as smart phones, laptop and tablet computers, and gaming consoles. The agency alleged that Google had reneged on these commitments and pursued – or threatened to pursue – injunctions and exclusion orders against companies that need to use standard-essential patents held by Google’s subsidiary, Motorola Mobility LLC (MMI), in their devices and were willing to license these patents on FRAND terms.
After considering the 25 public comments that were submitted, the FTC made technical modifications to several provisions in the Order, including those pertaining to the arbitration process established to resolve disputes over FRAND terms. In a letter sent to the commenters, the agency also provided further explanation for the basis and the rationale behind several other provisions in the Google-MMI Order.
The Commission vote approving the final order and the letter was 2-1-1, with Commissioner Maureen K. Ohlhausen voting no and Commissioner Joshua D. Wright recused.
E. Nothing in this Order shall prohibit Respondents from seeking Covered Injunctive Relief for alleged Infringement of a FRAND Patent against a Potential Licensee who:
Remember when Apple told the judge in Wisconsin, the Hon. Barbara B. Crabb, that it wouldn't accept any rate she set for Apple to pay Motorola for its FRAND patents unless the rate was set as low as Apple thought would be appropriate and so
she threw out their case? Look at number 3 on the list. Those kinds of litigation hijinks won't happen again, or if they were to, the FRAND owner is free to seek an injunction.
1. is outside the jurisdiction of the United States District Courts; a Potential Licensee shall be considered within the jurisdiction of the United States District Courts if the Potential Licensee itself or any parent or other entity with control over such Potential Licensee is within 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; PROVIDED THAT for the purposes of this paragraph, challenging the validity, value, Infringement or Essentiality of an alleged infringing FRAND Patent does not constitute a statement that a Potential Licensee will not license such FRAND Patent;
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 to the Qualified Recipient(s) of the Potential Licensee; PROVIDED, HOWEVER, that Respondents shall not assert in any Court that such written confirmation constitutes a specific agreement to license on any particular terms.
That doesn't mean lawyers all over the place aren't looking at this new FTC order to try to find hijinks possibilities. That's what they do.
Update: Dan O'Connor, the Senior Director for Public Policy & Government Affairs at the Computer & Communications Industry Association (CCIA), has
some analysis on Patent Progress. Here's an excerpt:
Although I will get into the more mundane details of the Order below, the main takeaways are this:
1. The changes were largely technical in nature. Language was refined to better reflect the FTC’s stated goals, and a balanced approach to SEP enforcement was maintained. (Which is encouraging, given the
complexity of the SEP ecosystem.)
2. The FTC rejected the call (see comment by Apple), to categorically rule out injunctions in the case of SEPs (similar to the FTC’s
Bosch Order, which was technically different as the FTC has broader authority to impose conditions on mergers) or require arbitrators to examine the validity, essentiality and infringement of individual patents in the arbitration itself. Google/Motorola can still seek injunctions as long as they follow the agreed upon procedures outlined in the settlement. Furthermore, the “defensive use” exception still applies and Google/Motorola can still seek injunctions against companies that seek SEP injunctions against Google/Motorola.
3. As far as the FTC is concerned this likely puts the SEP injunction debate to rest, and the Commission is moving on to deal with larger patent system problems. First and foremost on its agenda, a 6b study that will allow the commission to examine, in detail, the business models of patent trolls. This is a major step that will give the Commission (and Congress) more raw material to pursue actions against patent trolls, particularly trolls that have questionably collusive ties to operating companies, which falls in the crosshairs of the FTC’s competition authority.