Ever wonder how so many devices can operate together on a unified network like 4G or Wi-Fi? Ever stop to think about why you can send a selfie from your iPhone to someone else’s Galaxy halfway across the world without distorting your smile?
Smartphones can operate together with other smartphones because hundreds of the inventions powering those smartphones are covered by Standard-Essential Patents (SEPs).
And on Dec. 19, 2019, the United States Patent and Trademark Office (USPTO) joined the Department of Justice’s (DOJ) new policy permitting injunctive relief in SEP cases, giving SEP owners a lot more leverage when licensing their inventions to other companies.
SEPs are patents that claim an invention that must be used to comply with industry standards. Generally, these industry standards are set by standards organizations. In the telecommunications industry, for example, standards organizations have deemed some inventions essential because sharing those inventions ensures that different devices will work together on the same network.
Because SEPs must be used to comply with industry standards, owning an SEP can be quite lucrative. As a tradeoff, standards organizations require SEP owners to license their inventions on “FRAND” terms — terms that are fair, reasonable and nondiscriminatory.
Abusing an SEP can have anti-competitive effects, especially when SEP owners are negotiating FRAND licenses with and threatening injunctions over companies poised to sell technology that incorporates SEP inventions.
2013 policy discouraging injunctions
In 2013, fearing that SEP owners would take advantage of their right to obtain injunctive relief in patent-infringement cases, the DOJ issued a policy statement cautioning courts from enjoining alleged infringers of SEPs from importing or selling goods in the United States.
With that 2013 policy hanging over their heads, courts abdicated from enjoining alleged infringers in FRAND cases, and on that basis, SEP owners took a less-aggressive approach to licensing their inventions. This less-aggressive approach, according to some experts and scholars, had weakened intellectual property rights for United States companies by limiting the leverage for SEP owners when negotiating FRAND licenses. It also created a rule that did not exist for other types of patents: no injunctions for SEPs — or an uphill battle to obtain one.
2019 policy permitting injunctions
On Dec. 19, 2019, the USPTO and the DOJ departed from the old policy, issuing a joint policy statement advising that all patent owners, including owners of SEPs, can obtain injunctive relief when their patents are allegedly infringed.
According to the USPTO and the DOJ, courts had been misinterpreting the 2013 policy all along. Under the old policy, courts were improperly using an SEP owner’s FRAND commitment as a basis to limit their injunctive relief. The new policy statement clarifies that “FRAND commitment is a relevant factor in determining appropriate remedies, but need not act as a bar to any particular remedy.”
More leverage, more money; more money, more problems
SEP owners looking for more leverage in negotiating SEP licenses should start writing thank-you cards to the USPTO and the DOJ. Because SEP owners can now obtain injunctive relief in FRAND cases, they can expeditiously move to enforce their intellectual property rights and secure FRAND rates for their inventions. From an SEP owner’s perspective, then, the new policy strengthens intellectual property rights for United States companies.
From an alleged infringer’s perspective, however, the new policy stifles competition for those who must use an SEP invention to comply with industry standards. For instance, SEP owners can now take unfair advantage of the new policy by requesting licensing terms that far exceed FRAND rates, ultimately landing on terms that — from the alleged infringer’s perspective — are not fair, reasonable or nondiscriminatory. For that reason, the 2019 joint policy makes clear that SEP owners cannot use the policy as a basis to offer unreasonable FRAND rates.
With more negotiating leverage for SEPs, it is likely that licensing rates for inventions covered by SEPs will increase, helping SEP owners but harming those who need to use the underlying technology to comply with industry standards.
If you own an SEP, you can now take a more aggressive approach to policing and licensing your technology. But if you want to use an invention covered by one, you better be ready to pay for it.
Only one thing is for certain: the selfie is here to stay.