Google pact with FTC could affect other patent disputes

NEW YORK Sun Jan 6, 2013 12:29pm EST

A neon Google logo is seen at the new Google office in Toronto, November 13, 2012. REUTERS/Mark Blinch

A neon Google logo is seen at the new Google office in Toronto, November 13, 2012.

Credit: Reuters/Mark Blinch

NEW YORK (Reuters) - While the focus of last week's agreement between the Federal Trade Commission and Google Inc was search, the deal's restrictions on how Google uses its patents could have a broader impact on the technology industry.

Under the deal, which ended an antitrust investigation by the FTC and disappointed many critics, Google will make only minor changes to its search business.

But Google is also now limited in when it can seek injunctions against products from rival companies that use certain of its patents.

Throughout recent smartphone wars and other major patent litigation, holders of so-called standard essential patents have been accused of using them to bully competitors into paying high licensing rates or as leverage in patent disputes.

The FTC's deal with Google clarifies the uncertainty over how standard essential patents can be used, said Colleen Chien, a professor specializing in patent law at Santa Clara University School of Law in California.

The deal set out a process by which technology makers can avoid injunctions and patent holders know they are going to get compensated, Chien said. "The FTC has deflated the power of the injunction and also the incentives to not pay that have existed."

In its case against Google, the FTC claimed that Google and its subsidiary Motorola Mobility Inc had breached commitments to standard-setting bodies to license its patents on terms that are fair, reasonable and non-discriminatory. As part of the deal, Google agreed to drop claims for injunctive relief against competitors in certain patent disputes around the world. It also agreed to submit to the jurisdiction of a court or arbitrator when disputes over payment rates arise.

Throughout the FTC's investigation, Google was represented by Susan Creighton of Wilson Sonsini Goodrich & Rosati and John Harkrider of Axinn, Veltrop & Harkrider. The FTC retained Beth Wilkinson of Paul, Weiss, Rifkind, Wharton & Garrison.

'TEMPLATE'

The FTC said Thursday that the threat of injunction by a holder of an essential patent hurts competition. The agreement with Google could be used as a "template" for other patent disputes, it said.

Unlike a court decision, the FTC's agreement with Google is not binding on other companies. But it could give leverage to defendants in disputes with essential patent holders that could be used in court.

"We know in today's world, defendants are getting more aggressive," said Matthew Woods, an antitrust and patent attorney at Robins, Kaplan, Miller & Ciresi. "Defendants will seize on this and tell courts that injunctions are something the court should not even countenance."

But the agreement with Google may not be all good news for patent users, according to Jay Jurata, an antitrust partner at Orrick, Herrington & Sutcliffe, who said that it could have unintended consequences.

The elaborate agreement allows Google to seek injunctions against companies that are unwilling to pay for a license on fair, reasonable and non-discriminatory terms. But the question of when a company is considered an unwilling licensee is one that the FTC may have unwittingly allowed holders of essential patents to manipulate, said Jurata.

"They provided a road map for other standard essential patent holders to engage in opportunistic behavior to paint otherwise willing licensees as unwilling licensees," he said.

Miller of Robins Kaplan also cautioned that the FTC's deal with Google may be unique because of the company's giant size and dominance, which can attract the attention of regulators.

"There are a lot litigants who aren't going to see this agreement as restraining them, because they don't have the same portfolio as Google," Miller said.

(Reporting by Andrew Longstreth; Editing by Eddie Evans and Maureen Bavdek)

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Comments (2)
cyke1 wrote:
Anyone else see a problem here how google gets investigated for antitrust issues for trying to protect their patents yet Apple which has been 10x worse gets away scott free?

Jan 06, 2013 1:03pm EST  --  Report as abuse
TheBasicMind wrote:
@cyke. No problem at all. Apple have invested in patents for years and are using them as they are allowed to be used. Google’s problem is they had no patents, wanted had made no such investment, out of desperation bought an entire company just to get a portfolio, but the company they bought had already committed all the patents that might have been of use to Patent Pools, where they had agreed to provide those patents on a FRAND basis. That commitment was entirely a matter of choice and is roughly equivalent to saying “I’m committing my technology to a standard and sharing my patents with other manufacturers in the standard so we can get this standard to market. I therefore forsake the value of this patent as a standalone legal instrument and agree to make only nominal claims for license fees according to the rules laid out by the patent pool, because I can see together participating in a standard, I can make more money from this than if keep the full power of my patent but have to keep my technology isolated.” Rather than admit they had purchased a dud, Google then proceeded to tear up their FRAND commitments and continue to use the patents as though they had not been committed to a patent pool. They were able to do this because the procedural framework for enforcing patents is distinct from the procedural instruments available to users of tech in a patent pool (and BTW it a point of patent pools, that end customers shouldn’t have to worry about negotiating with all parties in the pool and exhausting every angle and claim pool participants might conceive of for insisting on a license before using the tech – such clearance in advance would be complex and a disadvantage to pool members and the patent pool is formed precisely to avoid this problem).

Similarly if when parking your car you and another vehicle knock into each other, but you own the car park, the procedural instrument available to you is somewhat more powerful than the other car owner (e.g. You could get your staff to clamp the other car to gouge payment out of the other owner there and then) but that doesn’t make it right, or ethical, or ultimately even legal to do and you should expect there to be legal repercussions if you take that line.

Jan 07, 2013 2:49am EST  --  Report as abuse
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