On January 3, 2013, the Federal Trade Commission (FTC) entered into a Consent Decree with Google Inc. (“Google”) and its wholly owned subsidiary Motorola Mobility LLC (“Motorola”). The decree settles allegations that Google and Motorola violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, by engaging in unfair methods of competition and unfair practices relating to the licensing of standard-essential patents (SEPs). An SEP is a patent for a technical standard adopted by an industry standard-setting organization (SSO). In return for being included in the technical standard, companies generally must promise to license their SEPs on fair, reasonable, and non-discriminatory (FRAND) terms.
The FTC alleged that Motorola, after promising to license its SEPs on FRAND terms, wrongfully sought injunctions and exclusion orders against willing licensees of those SEPs. In doing so, the FTC believed Motorola tried to abuse the market power it gained through the standard-setting process. Google continued Motorola’s practice after its acquisition of Motorola closed in May 2012. These actions can damage the integrity of the standard-setting process and decrease the incentives to participate in the standard-setting process. Electronic device manufacturers are harmed because they implemented relevant industry standards into their products in reliance on Motorola’s promise to license its SEPs on FRAND terms. Further, this practice may decrease competition and increase prices.
The terms of the decree restrict Google from seeking injunctions on SEPs against potential licensees who are willing to enter into a license on FRAND terms. As a result, Google is prohibited from seeking injunctions, or obtaining or enforcing existing claims for injunctive relief, for FRAND-encumbered SEPs. Although Google is allowed to seek injunctions in certain narrow situations—such as when a potential licensee refuses to enter into a license agreement on FRAND terms—the decree outlines specific procedures that Google must follow when negotiating with potential licensees for its SEPs.
Although the decree is specific to Google, it has broader implications for owners of FRAND-encumbered SEPs and for potential licensees. The decree reinforces that, as a general rule, owners of SEPs may not seek injunctions. However, by establishing elaborate procedures that Google must follow before invoking an “unwilling licensee” exception to the general rule, the decree might have the unintended consequence of encouraging opportunistic behavior by SEP owners in an attempt to portray companies as “unwilling licensees.”
Specifically, the decree likely has the following implications for SEP owners:
The decree likely has the following implications for potential licensees:
If you desire more information about the implications of the FTC-Google consent decree, please contact the authors or your Orrick relationship partner.