It's been less than a week since the Federal Trade Commission
announced the long-awaited resolution of its antitrust
investigation of Google, and we're already up to the stage of
the backlash against the backlash against the deal. Initial
reaction, you'll recall, focused on the FTC's decision to not
bring a case against Google for its search engine practices,
which set Google's competitors grumbling about toothless
enforcement. Then, over the weekend, some smart commentary by
The New York Times and Reuters pointed out that Google had ceded
leverage in patent negotiations by agreeing to FTC-ordered
restrictions on its ability to bar competitors' products based
on alleged infringement of standard essential patents. But now
Microsoft -- which, along with Apple, has for years been
battling Google over standard essential patents in federal
district court, at the U.S. International Trade Commission and
before regulators -- is asserting that the FTC's agreement with Google includes a big loophole that will actually permit Google
broad rights to seek injunctions based on essential patents.
Microsoft's argument, put forward in a blog post Tuesday by deputy general counsel Dave Heiner, is that the FTC consent
order governing Google's licensing of standard essential
technology includes a key tit-for-tat exception that threatens
to swallow the anti-injunction provisions. The order says that
generally, Google must engage in extended negotiation and
arbitration with potential licensees before it can ask for an
injunction based on essential IP it has committed to license on
fair and reasonable terms. But there's one circumstance in which
Google doesn't have to jump through all of the procedural hoops:
If potential licensees of Google IP have themselves tried to
obtain their own injunctions on the basis of standard essential
patents, then Google can sue for an injunction.
The FTC's analysis of the consent order explains that the
provision is intended to apply when licensees have sought
injunctions against Google itself. But as Microsoft notes in
Tuesday's blog post, the exception as it appears in the consent
order doesn't actually include the words "against Google." So,
in Microsoft's reading, the order suggests that Google can seek
an injunction against competitors that have brought any
injunction claim based on any essential technology employed in a
Google product, even if those suits are against third parties
and not Google. "This exception threatens to swallow the general
rule against injunctions because Google distributes its products
through countless manufacturers, software firms and websites,"
Heiner wrote. "Those products often implement dozens of industry
standards, and there is often ample room for disagreement about
whether a particular patent is a standard essential patent in
the first place."
My understanding is that Google rivals raised concerns about
the so-called "defensive use" exception during the FTC's
negotiations with Google, but Google was adamant and the FTC
ultimately bowed to its arguments. (Google and FTC
representatives declined comment on their negotiations and on
Microsoft's assertions.)
Microsoft also claims that the defensive use exception in
the FTC order is inconsistent with the joint position paper on
injunctions and standard essential patents that the Justice
Department and the U.S. Patent and Trademark Office released
Tuesday. Microsoft reads that position paper to hold broadly
"that holders of standard essential patents should not be
permitted to seek product injunctions against firms that are
willing to take a reasonable license" and argues that the FTC
consent order "does not live up to the approach outlined by the
DOJ and the PTO." I didn't interpret the Justice Department's
position to be as definitive as Microsoft suggests, since the
paper doesn't explain how patent holders and licensees are
supposed to figure out what constitutes a reasonable licensing
offer (a determination that the FTC order leaves to fact
finders). But it is certainly true that the Justice Department
doesn't specify an exception for patent holders to sue for
injunctions when they've been hit with injunction suits.
The FTC's settlement with Google is still subject to public
comment, so I suspect we haven't heard the last of the debate
over the defensive use loophole.
Follow us on Twitter: @AlisonFrankel, @ReutersLegal | Like us on Facebook