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Loophole for Google in FTC order on essential patent injunctions?

1/9/2013 COMMENTS (0)

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.

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