DOJ, Patent Office warn against patent wars over standard technology

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If a company holds a patent that becomes an industry standard, known as a standards-essential patent, the company must agree to license the patent on "fair, reasonable and non-discriminatory" terms.  

But that commitment has not stopped some patent owners, including Google, from suing to stop other companies from using technologies covered by standards-essential patents.

As part of its sweeping antitrust investigation of Google, the Federal Trade Commission last week pressured the company to sign a legal order limiting its ability to sue over standards-essential patents.

In their statement, the Justice Department and the Patent Office wrote that because switching to another technology can be prohibitively expensive, the patent owner can exploit its market power by "asserting the patent to exclude a competitor from a market or obtain a higher price for its use than would have been possible before the standard was set, when alternative technologies could have been chosen."

Even if the other companies agree to pay higher royalty fees for access to the technology, those fees are often passed on to consumers in the form of higher prices, the agencies wrote.

The offices said that blocking a product from the market may be justified if a company refuses to pay a reasonable royalty fee or even engage in negotiations with the patent holder.

The Justice Department and the Patent Office sent the policy statement to the International Trade Commission, which considers requests from companies to block products from the market over patent infringement.

The agencies noted that the International Trade Commission has a legal mandate to consider the effects of its decisions on the public interest. They wrote that if granting an exclusion order would harm the public interest, the commission could deny the request or delay the order to give the companies more time to negotiate a license agreement.  

Sen. Patrick Leahy (D-Vt.) and former Sen. Herb Kohl (D-Wis.) sent a letter to the Justice Department in March, urging the agency to provide guidance to the International Trade Commission about the potential anti-competitive harm of lawsuits over standards-essential patents.