Thursday, January 10, 2013

Google promises to act fairly when licensing Standard-Essential Patents

Thursday, January 10, 2013
Last week the U.S. Federal Trade Commission (FTC) announced that it would not pursue an antitrust lawsuit against Google Inc. after a two year investigation. The FTC ruled on two distinct issues namely the first being whether the company had provided favorable rankings for its own proprietary advertisements in its search engine algorithms, and secondly whether Google was in compliance with the fair, reasonable, and non-discriminatory (FRAND) terms with respect to licensing of their “standard-essential patents”. This article speaks to the second issue. 

In the technology industry some patents earn the distinction of being deemed “standard-essential patents”. In other words, working the invention in the patent is required in order to comply with industry set technical standards. Owners of such standard-essential patents must allow for fair licensing to third parties in order to provide a gateway of interoperability of building technology on these standards. 

The fair licensing scheme, as mentioned previously, is stated to be fair, reasonable, and non-discriminatory (FRAND). There is neither US legislation nor express direction in jurisprudence to define each of these terms; however, Professor Mark Lemley of Stanford University added interpretation in front of the United States Senate Committee on the Judiciary. Therefore with limited interpretation, such a regime is murky to interpret and continues to be an evolving area of law. 

The FTC took the initial position that Google was not in compliance with FRAND principles prejudicing competition. Accordingly, FTC Chairman Jon Leibowitz stated:  

“Google’s unfair conduct threatened to block consumers’ access to critical electronic devices including laptops, tablet computers, smartphones and gaming systems, or it could have increased the cost of these products by requiring manufacturers to pay higher licensing fee which then would have been passed on to consumers,” 

Last year Google acquired Motorola Mobility principally for their 17000+ patents within the mobile technology space. Numerous patents within this acquired portfolio were deemed to be standard-essential patents with respect to allowing devices such as smartphones, tablets, and personal computers to effectively connect to wireless networks. Recognizing this issue, Jon Leibowitz stated:  

“These essential patents and others like them are the cornerstone of the system of interoperability standards that ensure that wireless internet devices and mobile phones can talk to each other,” 

Competitor products such as various other smartphone providers would be unfairly prejudiced without fair licensing agreement and limit their commercial viability in the field. 

Google entered into a legally binding consent decree affirming that it would abide by the FRAND principles and provide fair licenses for third parties with regards to Google’s standard-essential patents.

Many view the outcome of this investigation as incremental improvement for the clarity of this specialized area of patent law. Furthermore, this may serve to be a template for other technology patent licensing cases which arise and providing guidance to issues regarding equitable licensing schemes for standard-essential patents, and potentially reducing avoidable issues in litigation.

By: Kamaldeep Sembi