Reply of J. Gregory Sidak, Chairman, Criterion Economics, to the Written Submission of Chairwoman Edith Ramirez of the Federal Trade Commission on the Public Interest
Posted: 24 Jul 2015
Date Written: July 20, 2015
The statement of Edith Ramirez, Chairwoman of the FTC, in ITC Inv. No. 337-TA-613 (Remand) addresses cases in which an SEP holder asks the ITC to issue an exclusion order against an infringer of a FRAND-committed patent. The Chairwoman suggests that an SEP holder should be able to obtain an exclusion order only if it can prove that the infringer was “unwilling” to negotiate a FRAND royalty. If an SEP holder is not able to provide such evidence, the Chairwoman suggests that the ITC should not issue an exclusion order, so as to “establish a balanced approach to ITC remedies by ensuring that a SEP holder follows through with its FRAND licensing commitment, while at the same time recognizing that both the SEP holder and the standards implementer have a duty to negotiate in good faith towards a meaningful resolution of FRAND issues.” The Chairwoman's recommendation would produce the perverse result that an SEP holder that has made a FRAND offer could not obtain an exclusion order against an implementer that has rejected that FRAND offer. The Chairwoman also implicitly suggests that the ITC should simultaneously assume the existence of patent holdup and also require an SEP holder to provide evidence of reverse holdup. Such an asymmetric approach to the risk of patent holdup and risk of reverse holdup has no support in economic theory. Further, the Chairwoman's proposal contradicts the decision of the Court of Justice of the European Union (CJEU) in Huawei Technologies v. ZTE Corp. in 2015. In that case, the CJEU found that an SEP holder does not abuse its dominant position by requesting a remedy against an implementer if the SEP holder has made a written offer to the implementer and the implementer continues to use the SEPs, does not reply promptly to the offer, or engages in dilatory tactics. Moreover, the Chairwoman’s approach contradicts the Federal Circuit’s 2014 decision in Ericsson v. D-Link and Ambassador Michael Froman’s recommendations to the ITC in 2013. In Ericsson v. D‑Link, the Federal Circuit clarified that a jury may be instructed that a theoretical conjecture of patent holdup can affect the computation of a FRAND royalty only when empirical evidence supports that conjecture. Ambassador Froman’s letter raised concern over patent holdup and reverse patent holdup but did not imply that either form of opportunistic conduct was more likely to arise in practice. Rather, Ambassador Froman emphasized that the ITC’s decision whether to issue an exclusion order should depend on the specific circumstances of the case.
Keywords: FRAND, standard-essential patent, SEP, International Trade Commission, Ericsson v. D-Link
JEL Classification: K10, O30, O34, O38
Suggested Citation: Suggested Citation