Monday, June 13, 2022

USPTO, NIST, and DOJ Withdraw 2019 SEP Policy Statement

I've been away for a week, so I missed the June 8 announcement that the U.S. Patent and Trademark Office (USPTO), the National Institute of Standards and Technology (NIST), and U.S. Department of Justice (DOJ) Antitrust Division have decided simply to withdraw the 2019 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (which I wrote about here), but also not to reinstate the 2013 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments and, apparently, not to go forward with some version of the Draft Policy Statement on Licensing Negotiations and Remedies for Standards-Essential Patents Subject to Voluntary FRAND Commitments (which I wrote about here).  Here is the text of the withdrawal, and here is the DOJ's press release.  Plenty of others have already chimed in about this, so I will be brief in adding my two-cents' worth.

First, although I am somewhat disappointed by the decision not to proceed with the Draft Policy Statement, which I previously described as "very balanced in its approach, repeatedly stressing the need to take into account the interests of both SEP holders and implementers and to discourage opportunistic by either of them," it's never been 100% clear to me how important these policy statements actually are.  They don't bind the courts or the ITC, after all, and these are the entities that ultimately decide what the law is.  I suppose that policy statements can be useful in understanding the enforcement agencies' views, which affect the sort of cases they are likely to bring (though most of the relevant disputes will be between private parties anyway) or positions they are likely to endorse as amici.  But at this point in time, the arguments for and against the availability of injunctive relief against willing licensees are very well known, so to the extent a given policy statement is merely persuasive authority on this issue, it doesn't really add very much to the mix.  Much the same can be said for the role of antitrust law in policing alleged abuses by SEP owners, a topic that has hardly lacked for attention over the past decade.  This is not to suggest, of course, that all of the issues that have arisen or are likely to arise have been thoroughly fleshed out.  There are still cutting-edge issues out there, including questions about what sort of conduct is evidence of an unwillingness to license; the proper methodology for determining FRAND royalties; and the applicability, if any, of antitrust law to the license-to-all versus access-to-all debate.  But the policy statements haven't really shed much light on these specific issues and, again, it's ultimately a matter for the courts in any event.

Second, on the perhaps implicit question underlying the various policy statements, of whether "holdup" or "holdout" is a greater problem, the only honest answer is that this is an empirical question, albeit one that defies easy analysis.  My own view is that firms generally act in their perceived self-interest, so that both risks arise to some degree:  SEP owners, if it is in their interest, will use the threat of injunctive relief to try to extract supra-FRAND royalties (holdup), while implementers will be tempted to engage in delay tactics if and when there is some strategic advantage in doing so (holdout).  Ideally, however, legal standards should be crafted to favor neither owners nor implementers, as ends in themselves, but to serve the public interest; and, as everyone should know by now, patents rights that are either too strong or too weak may undermine consumer welfare, which is the only interest that should matter.  In this regard, it would be great to have better information that we currently do regarding the importance of the patent incentive in fostering innovation in the IT sector specifically.  Meanwhile, however, we do have some evidence that the discretionary eBay standard for injunctive relief has had no negative, and possibly a net positive, effect on U.S. innovation (see Filippo Mezzanotti, Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D, 67 Mgt. Sci. (2021); Filippo Mezzanotti & Timothy Simcoe, Patent Policy and American Innovation After eBay: An Empirical Eexamination, 48 Res. Pol’y 1271 (2019)).  For these reasons, I thought the now-abandoned 2019 Policy Statement overemphasized the risk of holdout, and that the case-by-case approach suggested by the draft policy statement pretty much got things right.  And that case-by-case approach is, essentially, what we should expect to see the courts apply going forward, as it would have been whether or not there was a policy statement in place.   

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