Present environment surrounding standard-essential patents in the United States

September 2013 | PROFESSIONAL INSIGHT | INTELLECTUAL PROPERTY

Financier Worldwide Magazine

Industrial standards are everywhere today. From mobile phones you use to call your friends to DVDs you watch on relaxing weekends, industrial standards are used in just about everything you touch every day. They come in any form or type. You may know some of them, but you do not know many of them. Industrial standards play an important role in providing uniformity to different developers, and consumers demand interoperability. A lack of industrial standards is inconvenient, sometimes dangerous, and is immediately noticeable. The wave of standardisation permeates our world, and that is certainly true in the practice of intellectual property.

A patent grants an inventor an exclusive right over his or her invention for a limited period of time. In some cases, an invention may be directed to technology that is necessary to comply with an industrial standard. Standard-essential patents are patents that contain claims covering such technology. Simply put, one will infringe a standard-essential patent to comply with the standard. Of course, in reality, nothing is simple. Whether a patent is a standard-essential patent is not often easy to determine. Even after a patent can be properly determined as a standard-essential patent, debate continues over how we should treat it. Should we treat those patents just like any other patents? Or should we treat them differently and limit reliefs granted when infringement of those patents is proven and their validity is sustained? There have been discussions about the enforceability of standard-essential patents. Courts and legislatures are responding but have not reached consensus. Judging from recent events, however, the environment surrounding standard-essential patents appears to have become hostile toward patentees.

This hostility is perhaps best demonstrated by an investigation before the US International Trade Commission (USITC) in the matter of Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, Investigation No. 337-TA-794, which is one of many patent battles between Apple and Samsung. In the complaint filed at the USITC, Samsung accused Apple of infringing Samsung’s patent. In the investigation, the USITC determined on 4 June 2013 that certain models of Apple’s iPhone infringed Samsung’s patent and subsequently issued an exclusion order barring imports of the popular smartphone into the United States. In addition, the USITC issued a cease and desist order that prevented Apple from engaging in certain activities, such as selling the smartphones, in the US. By law, the president is required to review the USITC’s determinations to issue exclusion orders and conduct a policy evaluation of the orders. Historically the president has rarely overturned the USITC’s determinations to issue exclusions orders. The president has overturned the USITC determinations only a handful of times, and the last time that happened was a quarter of a century ago.

On 3 August 2013, this rare move occurred. By the letter from Ambassador Michael Froman, the US Trade Representative (USTR), the exclusion order issued by the USITC barring the importation of Apple’s iPhone was disapproved. The reason for the disapproval was that Samsung’s patent was considered to be a standard-essential patent. Citing a Policy Statement released by the Department of Justice and the US Patent and Trademark Office on 8 January 2013, the USTR was concerned about “the potential harms that can result from owners of standards-essential patents (SEPs) who have made a voluntary commitment to offer to license SEPs on terms that are fair, reasonable, and non-discriminatory (FRAND), gaining undue leverage and engaging in ‘patent hold-up’, i.e., asserting the patent to exclude an implementer of the standard from a market to obtain a higher price for use of the patent than what would have been possible before the standard was set, when alternative technologies could have been chosen”. At the end of the letter, the USTR cautioned to the USITC that, in the future, cases involving standard-essential patents, the USITC should be certain to: (i) examine thoroughly and carefully on its own initiative the public interest issues presented both at the outset of its proceeding and when determining whether a particular remedy is in the public interest: and (ii) seek proactively to have the parties develop a comprehensive factual record related to these issues in the proceedings before the Administrative Law Judge and during the formal remedy phase of the investigation before the Commission, including information on the standards-essential nature of the patent at issue if contested by the patent holder and the presence or absence of patent hold-up or reverse hold-up.

As can be seen in the letter from the USTR, it will become more difficult to obtain an exclusion order at the USITC for infringement of a standard-essential patent in the future.

Naoki Yoshida is a partner at Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P. He can be contacted on +813 3431 6943 or by email: naoki.yoshida@finnegan.com.

Naoki Yoshida

Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.