This article discusses standard essential patents and their intersection with antitrust law. The article analyzes case law regarding potential antitrust liability when negotiating licenses for standard essential patents under FRAND commitments, as well as the DOJ’s joint Draft Policy Statement on Licensing Negotiations and Remedies for Standards Essential Patents.
II. Antitrust Liability For Standard Essential Patent Conduct
A. What are Standards, Standard Essential Patents, and FRAND?
Today, much of our everyday technology, especially that which utilizes patented inventions, is covered by standards. From the air conditioning unit cooling your house to the car you drive to the phone in your pocket, standards exist that define the norms or requirements for each component and procedure such as dimensions, materials, performance, design, or operation. In fact, your phone alone is covered by multiple standards, such as those that define the use of wireless signals including WiFi and 4G or 5G, those that define the way in which the phone streams media, and those that cover the design and operation of the semiconductor chips inside the phone. As new technologies are developed, standards help fuel dynamic competition by ensuring market-wide acceptance of the most innovative new technologies and help ensure the compatibility and interoperability of products within an industry. See Statement of Interest of the United States at 4, Cont’l Auto. Sys., Inc. v. Avanci, LLC (N.D. Tex. 2020) (No. 3:19-CV-02933).
These standards are typically set by private Standards Setting Organizations (SSOs), which are also known as Standards Developing Organizations (SDOs). These SSOs are organizations typically made up of individuals, companies, and/or officials of governmental groups within the relevant industry. Since standards may set a single method or means of compliance, they can direct the movement of technology within an industry. Patents determined to be “essential” to a standard once it is set are called “standard essential patents” (“SEPs”). A patent is “essential” if it is not possible to make or use products that comply with the standard without infringing that patent. See e.g., ETSI Rules of Procedure Annex 6: ETSI Intellectual Property Rights Policy at 48 (December 1, 2021), available at https://www.etsi.org/intellectual-property-rights. Thus, patents that actually are SEPs may be practiced broadly within an industry. This potential encourages broad participation in SSOs from many of the more innovative companies to influence standard setting and try to recommend the technologies to be incorporated into standards in their relevant industries.
In order to ensure that the economic benefits from standardization are shared among participants, SSOs often require companies that wish to contribute technology to the standards setting process to adopt intellectual property rights (“IPR”) policies. Common terms for such policies require that participants disclose patents they hold that may be essential to the standard, and to commit to license any patents they hold that are deemed “essential” on fair, reasonable, and non-discriminatory (“FRAND”) terms. See e.g., id. at 42-43. However, what is fair, reasonable, or non-discriminatory is often undefined by the IPR policies, and FRAND royalty rates are rarely determined by the SSOs. It is not surprising then that many licensing negotiations over access to essential patents end in disagreement and litigation over whether those terms comply with FRAND. As part of this litigation, many potential licensees have brought antitrust claims against SEP holders under Section 2 of the Sherman Act.
This antitrust litigation has led to splits among the courts as to whether certain actions taken by SEP holders when participating in SSOs and licensing their SEPs amount to an antitrust violation. This article will explore whether and when the alleged failure of a SEP holder to negotiate on FRAND terms may amount to antitrust liability. Specifically, this article will provide an overview and comparison of recent antitrust cases involving claims that SEP holders breached their FRAND commitments. Additionally, this article will explore the potential effects of the DOJ’s recent issuance of a joint Draft Policy Statement on Licensing Negotiations and Remedies for Standards Essential Patents in December 2021, and President Biden’s issuance of the Executive Order on Promoting Competition in the American Economy in July 2021. Finally, the article will explore the DOJ’s potential appetite for bringing antitrust actions against SEP holders under the current administration, and future potential rulemaking by the FTC related to SEP licensing conduct.
B. What are the limits of antitrust liability for SEP holders?
1. The Third Circuit finds that breaching FRAND commitments may be an element in an anticompetitive scheme
In 2007, the Third Circuit issued its opinion in Broadcom v. Qualcomm (“Broadcom”), finding that a patent holder’s deceptive conduct before an SSO could create a cognizable antitrust violation. Since then, Broadcom has often been cited in cases involving claims against SEP holders as a basis for antitrust liability. See e.g., Research In Motion Ltd. v. Motorola, Inc., 644 F. Supp. 2d 788, 795 (N.D. Tex. 2008); Apple Inc. v. Samsung Elecs. Co., Ltd., 11-CV-01846-LHK, 2011 WL 4948567, at *4 (N.D. Cal. Oct. 18, 2011); Wi-LAN Inc. v. LG Elecs., Inc., 382 F. Supp. 3d 1012, 1023 (S.D. Cal. 2019). Following that line of cases, the FTC recently brought a lawsuit against Qualcomm for what it alleged was anticompetitive behavior related to Qualcomm’s licensing of its SEPs, but the Ninth Circuit in FTC v. Qualcomm (“Qualcomm”) distinguished Broadcom, rejecting the argument that a violation of FRAND terms could independently create antitrust liability. Similarly, a currently pending appeal in front of the Fifth Circuit in Continental v. Avanci LLC (“Continental”) calls into question the holding in Broadcom and may create a split among the circuit courts. Ultimately, these cases blur the line as to whether, when, and to what extent antitrust liability exists related to SEP holder’s licensing activities.
In Broadcom, Broadcom alleged that Qualcomm, a member of the European Telecommunications Standards Institute (“ETSI”), among other SSOs, committed an antitrust violation because it purportedly breached its FRAND commitment under the Universal Mobile Telecommunications System Standard set by ETSI. Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 304 (3d Cir. 2007). Broadcom alleged that Qualcomm breached its FRAND commitment by demanding discriminatorily higher royalties from competitors and customers using Wideband CDMA chipsets covered by SEPs that were not manufactured by Qualcomm. Id. Further, Broadcom asserted that Qualcomm acquired monopoly power when it allegedly deceived SSOs to incorporate Qualcomm’s patented technology by falsely agreeing to license the SEPs on FRAND terms as required by the SSOs’ policies on IPRs. Id. Qualcomm filed a motion to dismiss, which was granted by the District Court for the District of New Jersey at the pleadings stage on grounds of failure to state a claim, and the case went on appeal to the Third Circuit. Broadcom Corp. v. Qualcomm Inc., Case No. 05-3350, 2006 WL 2528545, at *19 (D.N.J. Aug. 31, 2006), aff'd in part, rev'd in part and remanded, 501 F.3d 297 (3d Cir. 2007).
The Third Circuit reversed the District Court’s dismissal, in part, as to Broadcom’s claim under Section 2 of the Sherman Act and held that “(1) in a consensus-oriented private standard-setting environment, (2) a patent holder's intentionally false promise to license essential proprietary technology on FRAND terms, (3) coupled with an SDO’s reliance on that promise when including the technology in a standard, and (4) the patent holder’s subsequent breach of that promise, is actionable anticompetitive conduct.” Broadcom, 501 F.3d at 314. The Third Circuit reasoned that “deception in a consensus-driven private standard-setting environment harms the competitive process by obscuring the costs of including proprietary technology in a standard and increasing the likelihood that patent rights will confer monopoly power on the patent holder.” Id. (citing In the Matter of Rambus, Inc., No. 9302, at 68 (F.T.C. Aug. 2, 2006), available at 2006 WL 2330117 (holding that “distorting [the SDO's] technology choices and undermining [SDO] members’ ability to protect themselves against patent hold-up caused harm to competition”)). Further, the Third Circuit, relying on Broadcom’s allegation that the SSO would not have standardized the Qualcomm technology but for Qualcomm’s promise, stated that “[d]eceptive FRAND commitments, . . . may result in such harm.” Id. (citing Rambus at 66 (noting that SDO’s rules requiring members to disclose IPRs and commit to FRAND licensing “presented the type of consensus-oriented environment in which deception is most likely to contribute to competitive harm”). With this decision, some envisioned that the Third Circuit had opened the gate for antitrust claims to be brought against SEP holders when they allegedly breach their FRAND commitments. However, courts generally have not followed in Broadcom’s footsteps.
2. The Ninth Circuit holds that breaching FRAND is a matter for contract and patent law
In 2017, the FTC brought suit against Qualcomm to enjoin Qualcomm’s SEP licensing practices for cellular baseband processors that were essential to cellular communication standards. Fed. Trade Comm’n v. Qualcomm Inc., 969 F.3d 974, 986 (9th Cir. 2020). In Qualcomm, the FTC alleged that Qualcomm harmed competition, in part, by withholding its processors from customers unless the customer licensed its SEPs and by refusing to license its SEPs to competitor processor manufacturers. Complaint at 2-3, Fed. Trade Comm’n v. Qualcomm Inc., 2017 WL 242848 (N.D. Cal.). Further, the FTC alleged that Qualcomm’s “no license-no chips” policy, its refusal to license to competitors, and its purportedly unreasonable SEP license royalty—calculated as a percentage of the cell phone’s price—constituted breaches of its FRAND commitments to multiple SSOs. Id. at 2-3 and 23-24.
After a bench trial, the District Court for the Northern District of California agreed with the FTC. The District Court found, among other things, that Qualcomm’s “no license-no chips” policy was anticompetitive and concluded that Qualcomm’s refusal to license to rival chipmakers violated its FRAND commitments, which constituted an antitrust “duty to deal.” Fed. Trade Comm’n, 969 F.3d at 987. As a result, the District Court issued a permanent, worldwide injunction which ordered Qualcomm to make its SEPs available to its competitors and prohibited Qualcomm from conditioning the supply of chips on whether a customer had purchased a license. Fed. Trade Comm’n v. Qualcomm Inc., 411 F. Supp. 3d 658, 818 and 820-21 (N.D. Cal. 2019), rev’d and vacated, 969 F.3d 974 (9th Cir. 2020). Qualcomm appealed this decision to the Ninth Circuit.
In 2020, the Ninth Circuit reversed the District Court’s ruling, finding that Qualcomm was under no antitrust duty to license its SEPs to competitors, Qualcomm’s SEPs royalty rates and “no license-no chips” policy did not amount to an anticompetitive surcharge on competitors, and that the remedy for any breach of Qualcomm’s FRAND commitments lies in contract and patent law. Fed. Trade Comm’n, 969 F.3d at 1005. Specifically, the Ninth Circuit reasoned that the one, limited exception to the Supreme Court’s general rule that there is no antitrust duty to deal did not apply simply because the defendant had made a contractual FRAND commitment to the SSO and refused to license to competitors. Id. at 993-95. The exception, which comes from Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), states that “a company engages in prohibited, anticompetitive conduct when (1) it unilateral[ly] terminat[es] . . . a voluntary and profitable course of dealing, (2) the only conceivable rationale or purpose is to sacrifice short-term benefits in order to obtain higher profits in the long run from the exclusion of competition, and (3) the refusal to deal involves products that the defendant already sells in the existing market to other similarly situated customers.” Id. at 993-94 (internal citations omitted). Here, the Ninth Circuit held that the exception did not apply because the policy to only license at the customer level predated Qualcomm’s monopoly power, was consistent with industry practice, was instituted as a response to changes in patent law regarding exhaustion, and did not single anyone out but instead was applied uniformly industry wide. Id. at 994-95.
Further, the Ninth Circuit in its opinion distinguished Broadcom stating that in the present case, “the district court found neither intentional deception of SSOs on the part of Qualcomm nor that Qualcomm charged discriminatorily higher royalty rates to competitors and . . . customers using non-Qualcomm chips.” Id. at 996–97. Importantly, the Ninth Circuit reasoned that competitors were permitted, by Qualcomm, to practice Qualcomm’s SEPs without paying royalties, and the royalty rates offered to customers did not discriminate based on the source of the customer’s chips. Id. at 997. Ultimately, the Ninth Circuit characterized the Third Circuit’s holding in Broadcom as an “intentional deception” exception to the general rule that breaches of SSO commitments do not give rise to antitrust liability. Id. In the Qualcomm case, however, the Ninth Circuit held that there were “persuasive policy arguments” that antitrust law should not be used to remedy SSO and FRAND disputes, which are essentially contractual disputes. Id. Thus, while the Ninth Circuit came out on the side of the SEP holder, it distinguished Broadcom, characterizing it as an exception, thereby avoiding an outright split among the circuit courts.
3. What will the Fifth Circuit do with a similar question?
More recently in 2020, a similar question as to whether a SEP holder’s alleged breach of its FRAND commitment exposes the SEP holder to antitrust liability has been brought before the Fifth Circuit in Continental v. Avanci. Continental is a Tier 1 supplier of components to automobile manufacturers, including connected components that practice cellular standards. Complaint at 2, Cont’l Auto. Sys., Inc. v. Avanci, LLC, (N.D.C.A 2019) (Case No. 5:19-cv-02520). In 2019, Continental sued the Avanci patent pool and its members. Id. The Avanci patent pool was formed to help license the cellular patents of multiple SEP holders to automobile manufacturers. In its suit, Continental claims the defendants committed antitrust violations by breaching their FRAND commitments to the SSOs where the relevant cellular standards were set. Id. at 7. Continental alleged that the defendants intentionally deceived the SSOs when they agreed to license their SEPs on FRAND terms and then refused to license the SEPs to Continental and instead charged Continental’s vehicle manufacturer customers non-FRAND rates. Id. at 52-53. Thus, Continental’s allegations align with those of Broadcom and Qualcomm—namely, that a SEP holder’s alleged breach of their FRAND commitment to SSOs by not licensing on FRAND terms amounts to an antitrust violation. More specifically, the allegation that Avanci would only license at the customer level closely matches the allegations of Qualcomm, while the allegation that the royalty rate was not a FRAND rate closely matches the allegations of Broadcom.
Avanci filed a motion to dismiss, and the DOJ filed a statement of interest in which it agreed with Avanci that antitrust claims under Section 2 of the Sherman Act which are based on alleged breaches of contractual FRAND commitments do not sound in antitrust law. Statement of Interest of the United States at 8, Cont’l Auto. Sys., Inc. v. Avanci, LLC (N.D. Tex. 2020) (No. 3:19-CV-02933). The DOJ argued that neither a SEP holder’s efforts to maximize its licensing rates nor a SEP holder’s alleged “deception” regarding the rates it intends to charge that come after agreeing to abide by FRAND constitute unlawful exclusionary conduct. Id. at 11 and 15. Additionally, the DOJ in its statement acknowledged the holding by the Third Circuit in Broadcom and submitted that the District Court should decline to follow it because, in part, “contract and patent laws adequately police the types of potentially problematic behavior (deception regarding contractual commitments and breaches of those commitments) alleged in the complaint.” Id. at 9.
The District Court ultimately held that Continental lacked antitrust standing because the alleged anticompetitive conduct that was directed at the downstream customers did not create an antitrust injury for the upstream suppliers, such as Continental. Cont’l Auto. Sys., Inc. v. Avanci, LLC, 485 F. Supp. 3d 712, 730-31 (N.D. Tex. 2020). Additionally, the District Court held that even if Continental had standing, it failed to indicate how the alleged deception had excluded competitors from the market: that is, what potential alternatives there were for the SSOs to adopt or how the alternatives were excluded from incorporation into the standards because of defendants’ allegedly fraudulent FRAND commitments. Id. at 735, fn. 15. Further, the District Court agreed with the Ninth Circuit’s holding in Qualcomm that “[a]n SEP holder may choose to contractually limit its right to license the SEP through a FRAND obligation, but a violation of this contractual obligation is not an antitrust violation.” Id. at 734. The District Court then stated it “does not agree with [Broadcom] concluding that deception of an SSO constitutes the type of anticompetitive conduct required to support a § 2 claim.” Id. at 734-35.
Continental appealed the District Court’s dismissal to the Fifth Circuit. The Fifth Circuit has not yet issued an opinion, but it has held oral arguments and has received a number of amicus briefs, with SEP holders such as Qualcomm and InterDigital as well as a patent pool MPEG-LA backing Avanci and with companies such as Apple, Tesla, and Honda, as well as the Fair Standards Alliance and ACT, backing Continental. See Bryan Koenig, “Apple Blames Trump DOJ IP Stance For ‘Flawed’ Nokia Ruling,” Law360, February 17, 2021, https://www.law360.com/articles/1356030; Tiffany Hu, “5th Circ. Told Reversing Nokia Win May Threaten Patent Pools,” Law360, April 26, 2021, https://www.law360.com/articles/1378829; Matthew Perlman, “Qualcomm, InterDigital Back Avanci Patent Pool At 5th Circ.,” Law360, April 27, 2021, https://www.law360.com/articles/1379162. Under the new administration, the DOJ has not weighed in at the appellate level.
During oral arguments, one of the trends of the questions from the panel included whether no individual licenses were being offered or whether the licenses were just not being offered at prices Continental liked. See Matthew Perlman, “5th Circ. Focused On Disputed Offers In Avanci Antitrust Case,” Law360, October 7, 2021, https://www.law360.com/articles/1428767. Similarly, the panel asked Continental why the customers, the ones for which the licenses were allowed, were not the ones in court. See id. However, the panel also asked the defendants whether it is appropriate to dispose of the case on a motion to dismiss, considering the complexity of the issues and the interest that has been shown through amicus filings on both sides. See id. Thus, it is unclear which way the Fifth Circuit may come out on the appeal. It remains to be seen whether the Fifth Circuit will embrace Broadcom, will follow Qualcomm and distinguish Broadcom while upholding the dismissal, or will actively decline to follow Broadcom while upholding the dismissal. It also remains to be seen what the DOJ’s position on the matter will be under the new administration which recently released an updated Draft Policy Statement on Licensing Negotiations and Remedies for Standards Essential Patents.
C. What will be the effects of the updated Draft Policy Statement on Licensing Negotiations and Remedies for Standards Essential Patents?
In July 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. Available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/. This Executive Order called for the Attorney General and the Secretary of Commerce to consider whether to revise their position on the intersection of the intellectual property and antitrust laws to avoid the potential for anticompetitive extension of market power beyond the scope of granted patents and to protect the standards setting processes from abuse. President Biden also called for the Attorney General and the Secretary of Commerce to consider whether to revise the DOJ’s joint 2019 Policy Statement on Remedies for Standards Essential Patents Subject to Voluntary F/RAND Commitments, which it issued jointly with the United States Patent & Trademark Office (USPTO) and the National Institute of Standards and Technology (NIST).
As requested in the Executive Order, the DOJ issued a joint Draft Policy Statement on Licensing Negotiations and Remedies for Standards Essential Patents in December, along with some questions about whether revisions to the 2019 Policy Statement are necessary. U.S. Pat. & Trade Off., Nat’l Inst. of Standards and Tech., and U.S. Dep’t of Justice, Draft Policy Statement on Licensing Negotiations and Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (Dec. 6, 2021), available at https://www.justice.gov/opa/press-release/file/1453826/download. The proposed changes in the 2021 Draft Policy Statement are mostly subtle changes, suggesting courts should hesitate to grant injunctions blocking the sale of products that infringe SEPs. One notable change brought by the 2021 Draft Policy Statement is the inclusion of a more detailed analysis of what good faith negotiations between SEP holders and potential licensees should look like. Overall, it appears that under the new administration, the stance on antitrust’s proper role in policing patent disputes has at least partially shifted back toward the more interventionist approach under President Obama’s administration. Compare Draft Policy Statement (2021) at 6, fn. 9, with U.S. Pat. & Trade Off., Nat’l Inst. of Standards and Tech., and U.S. Dep’t of Justice, Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments, at 4, fn. 9 (Dec. 19, 2019), available at https://www.justice.gov/atr/page/file/1228016/download; and U.S. Dep’t of Justice and U.S. Pat. & Trade Off., Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments, at 6 (Jan. 8, 2013), available at https://www.justice.gov/atr/page/file/1118381/download.
1. Will the DOJ begin bringing antitrust actions against SEP holders?
The DOJ’s joint 2019 Policy Statement on Remedies for Standards Essential Patents Subject to Voluntary F/RAND Commitments fully withdrew the DOJ’s joint 2013 Policy Statement on Remedies for Standards Essential Patents Subject to Voluntary F/RAND Commitments. Policy Statement (2019) at 4. In a footnote while discussing the reasoning for the withdrawal, the agencies stated:
The 2013 policy statement may also have been misinterpreted to suggest that antitrust law is applicable to F/RAND disputes. Although the U.S. International Trade Commission may consider “competitive conditions in the United States economy” as part of its public interest analysis . . . that does not signify that F/RAND licensing disputes raise antitrust concerns.
Id. at 4, fn.9. This statement, while included in a footnote, could be taken to mean that the DOJ would not pursue antitrust liability for unilateral actions taken by SEP holders during licensing negotiations, for the reason that they violated FRAND commitments.
The 2021 Draft Policy Statement takes a slightly different stance on antitrust liability for SEP holders. The agencies included in a footnote:
Where there is a F/RAND commitment, the negotiation should be free of coercion, such as requiring the licensing of non-SEPs or withholding the sale of a party’s product. Conditions on licensing may also raise antitrust concerns. See, e.g., U.S. DEP’T JUSTICE & FED. TRADE COMM’N, ANTITRUST GUIDELINES FOR THE LICENSING OF INTELLECTUAL PROPERTY § 5.3 (rev’d Jan. 2017), https://www.justice.gov/atr/IPguidelines/download (discussing tying arrangements) [hereinafter Antitrust-IP Guidelines].
Draft Policy Statement (2021) at 6, fn. 9. Thus, it can be inferred that the DOJ under the new administration may be interested in pursuing antitrust enforcement against some actions by a SEP holder licensing in breach of FRAND commitments. However, based on the footnote, the DOJ has only highlighted that SEPs may be used as part of a tying arrangement. Tying involves linking together two distinct products, which requires a more complicated fact pattern than simply charging a higher-than-FRAND rate. It remains to be seen whether the DOJ is aware of any such cases or has the inclination to spend valuable enforcement resources pursuing them.
2. Will there be any effect on injunctions?
In the DOJ’s joint 2013 Policy Statement, the DOJ noted that while in some circumstances an exclusionary remedy (i.e., an injunction) for infringement of a SEP subject to a FRAND commitment may be inconsistent with the public interest for those patents, an exclusionary remedy may be appropriate in other circumstances, such as when the potential licensee constructively refuses to engage in a negotiation to determine FRAND terms. Policy Statement (2013) at 6-7. However, the 2019 Policy Statement walked back the agencies’ 2013 stance that injunctions should be generally denied in infringement cases involving SEP patents unless a licensee had refused to negotiate FRAND terms. The 2019 Policy Statement instead included that infringement of SEPs subject to FRAND should be treated no differently than infringement of any other patent and that all patent remedies, including injunctions, should be available to SEP holders based on the eBay factors that courts routinely apply. Policy Statement (2019) at 4-5 and 6. Specifically, the 2019 Policy Statement included that “a patent owner’s F/RAND commitment is a relevant factor in determining appropriate remedies, but need not act as a bar to any particular remedy.” Id. at 4.
The 2021 Policy Statement, on the other hand, suggests that the eBay factors may themselves militate against an injunction when the patents are SEPs subject to FRAND commitments. Draft Policy Statement (2021) at 9. However, the 2021 Policy Statement does include:
An injunction may be justified where an implementer is unwilling or unable to enter into a F/RAND license. For example, a potential licensee could be judged unwilling to take a license if it refuses to pay what has been determined by a court or another neutral decision maker to be a F/RAND royalty.
Id. While not a full rejection of injunctions in patent infringement cases involving SEPs, the 2021 Policy Statement shows that only in select circumstances does the DOJ believe that injunctions should be awarded. It remains to be seen whether courts will heed this new advice, and whether fewer injunctions will be granted to SEP holders.
3. How will the FTC respond?
Some have speculated that, after its loss in the Ninth Circuit in Qualcomm, the FTC would prefer to make its own rules prohibiting SEP holders from behaving in certain ways that give it an “unfair” competitive advantage. There is spirited debate whether the FTC has the power to make legislative rules that govern “unfair methods of competition,” or whether it must continue to adjudicate individual cases, prove that there is harm from excluding competitors under each fact pattern, and live by the competition-related precedents developed in antitrust case law. Compare Rohit Chopra & Lina M. Khan, The Case for “Unfair Methods of Competition” Rulemaking, 87 U. Chicago L.R. 357 (2020), available at Rohit Chopra and Lina M. Khan: The Case for “Unfair Methods of Competition Rulemaking” - March 5, 2020 (ftc.gov) with Maureen K. Ohlhausen & James Rill, Pushing the Limits? A Primer on FTC Competition Rulemaking, U.S. Chamber of Commerce White Paper (Aug. 12, 2021), available at ftc_rulemaking_white_paper_aug12.pdf (uschamber.com). The Biden Executive Order on Competition suggests that the FTC should promulgate competition-related rules, and thereby test the theory that Congress gave it this power. In its recently released semi-annual regulatory agenda and accompanying Statement of Priorities, the FTC indicated it plans to follow this recommendation. See Agency Rule List - Fall 2021 (reginfo.gov) and Statement_3084_FTC.pdf (reginfo.gov). Although it did not docket any particular subject matter, like SEP licensing, as ripe for competition rulemaking, the FTC did indicate it will generally “explore whether rules defining certain ‘unfair methods of competition’ . . . would promote competition and provide greater clarity to the market.” Statement_3084_FTC.pdf (reginfo.gov). If the FTC does try to reconstitute its theory in Qualcomm as a rule requiring SEP holders to license to all comers, or if it tries to weigh in on the injunctions debate by creating a prohibition against SEP holders seeking injunctions, then it will face serious questions about whether it has the power to define “unfair methods of competition” in ways that courts have never endorsed, and indeed, which some courts have rejected. Supporters of more aggressive antitrust enforcement would say that’s the point: they would like to see the FTC regulate in areas where traditional enforcement of competition principles have not been able to reach. The answer to these questions has broad implications not only for the use of IP and standard setting, but also for the economy generally.
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