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Extra-Jurisdictional Remedies Involving Patent Licensing

 |  November 21, 2016

Posted by Social Science Research Network

Extra-Jurisdictional Remedies Involving Patent Licensing

Koren W. Wong-Ervin, Joshua D. Wright, Bruce H. Kobayashi & Douglas H. Ginsburg (George Mason University)

Abstract:      In the last several years, competition agencies around the world have imposed or considered imposing extra-jurisdictional remedies on patent holders, particularly owners of standard-essential patents (SEPs) upon which the patent holder has made a commitment to license on fair, reasonable, and non-discriminatory (FRAND) terms. For example, in January 2013, the U.S. Federal Trade Commission (FTC) entered into a consent agreement with Motorola Mobility and its parent, Google, that, except in limited circumstances, prohibits the companies worldwide from seeking injunctive relief against infringers of any FRAND-assured SEP in its global portfolio. Similarly, the Korea Fair Trade Commission and the Taiwan Fair Trade Commission are reportedly considering imposing worldwide restraints on Qualcomm’s enforcement of its global patent portfolio in order to remedy alleged competition violations involving the company’s patent licensing practices.

Imposing worldwide remedies can conflict with principles of international comity and result in significant substantive conflicts with the antitrust agencies of other countries given the wide variety of approaches taken globally on antitrust matters involving intellectual property rights (IPRs), particularly with respect to honoring an IPR holder’s core right to exclude. This has the potential to produce significant negative effects on competition and welfare, particularly if conduct that is widely considered to be generally procompetitive is the object of the worldwide prohibition. Even when attacking universally condemned activity such as price fixing, global remedies risk overdeterrence when national authorities do not coordinate to adjust the penalties they impose. Moreover, as explained below, extra-jurisdictional remedies are likely unnecessary to resolve any alleged harm to consumers in the jurisdiction imposing them.

Each competition agency forgoing global remedies does not prevent competition law solutions to global harms, and is appropriate to mitigate the risk of overdeterrence. Honoring principles of comity also can mitigate a race to the bottom in competition law enforcement by preventing the lowest common denominator approach to competition law remedies from governing across the board. Indeed, some, including officials at the highest levels of the U.S. government, have raised concerns that foreign governments may be “using numerous mechanisms, including [antitrust laws] to lower the value of foreign-owned patents” in order to benefit those within their countries who implement foreign technology ; that is, the competition authority may be enforcing competition law not solely to protect their consumers from potentially anticompetitive licensing practices, but also to benefit local implementers or a “national champion” in a way that is inconsistent with the procompetitive goals of the competition laws of other jurisdictions. While competition officials across the globe have emphatically denied such claims, imposing welfare reducing global remedies on patent licensing, in addition to reducing competition and welfare, will also draw increased criticism and threaten to harm an agency’s credibility with stakeholders, the international antitrust community, and the public.

This article discusses the various approaches taken thus far, as exemplified by four recent decisions: one by the FTC against Google/MMI; two by the European Commission (DG Comp) against Motorola and Samsung, respectively; and one by China’s National Development and Reform Commission (NDRC) against Qualcomm. In contrast with the FTC’s investigation, the latter three limit remedies to the patent holder’s domestic practices in the licensing of their domestic patents (i.e., activity and patents within the territory of the investigating authority), illustrating nicely remedies that are consistent with principles of international comity.

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