Recently, the Department of Justice’s Antitrust division (DOJ) and the Federal Trade Commission (FTC) issued a request for comment on proposed updates to their Antitrust Guidelines for the Licensing of Intellectual Property (Guidelines). Last updated in 1995, the guidelines are intended to provide clarity on potential antitrust issues that may arise in the context of intellectual property licenses. DOJ/FTC have recognized the valuable role of this guidance, and the need for it to be updated to account for legal developments in U.S. intellectual property and antitrust laws since the mid-1990’s. On September 26, 2016, ACT | The App Association submitted detailed comments to DOJ/FTC on behalf of small companies in the internet economy reflecting the importance of commitments to license standards-essential patents (SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND).
As we have discussed before in blog posts, the rise of the Internet of Things (IoT) across a wide variety of sectors and industries will be driven by industry-led standards. These standards help preserve competition, promote innovation, and ensure interoperability among billions of sensors and other devices that are internet-enabled. Recognizing that these standards almost universally include patented technologies, standards bodies typically require patent owners in this scenario to promise to license access to these patents on FRAND terms to ensure fair access to the standards, avoiding anti-competitive “locking out” of future implementers.
Without a balance between patent licensor and licensee that FRAND commitments safeguard, many companies that don’t have the resources to pay exorbitant licensing or legal fees may be blocked from using these patented technologies – even though they may be essential to the implementation of key standards like WiFi. Ultimately, this means consumers could be deprived of important innovations, or will face excessive royalties with products sold at higher costs. This is the core reason the App Association stood up the All Things FRAND movement.
The above illustrates why DOJ/FTC updates to its guidelines are so important – not only for the United States, but for the countless markets (and their regulators) that look to the United States for leadership in promoting competition. As the only voice representing small companies in this crucial debate, we submitted written comments to DOJ/FTC that:
- Providing clarity around what a FRAND commitment means will lead to better competition by reducing IP abuse and deterring unnecessary and burdensome litigation, and will benefit consumers.
- Since 1995, the DOJ and FTC (and the U.S. courts) have taken a number of significant steps to provide clarity around what FRAND behavior is and is not (and we discuss a number of these developments in our filing). The agencies should reference this in its Draft Revised Guidelines.
We are encouraged to see the DOJ and FTC step forward to update the guidelines, and appreciate efforts to provide clarity on IP licensing issues. Further, the App Association is committed to continued work on these issues with the U.S. government and other stakeholders to ensure that a balanced approach to patents can augment competition, and to further updates to the Guidelines being finalized.
[all comments submitted to DOJ/FTC in this matter can be accessed here]