Law360 | August.01.2013
Orrick antitrust and competition partner Jay Jurata authored an article entitled “White House Should Rein In The ITC On SEPs,” discussing a recent International Trade Commission ruling and its impact on standard-essential patents. An excerpt from the article is included below.
The patent at issue in the ITC case was a patent Samsung claimed was essential to the Universal Mobile Telecommunications Standard for cellular networks. Despite making this pledge, however, Samsung sought to have the ITC exclude Apple’s products before ever making an offer to Apple on reasonable and nondiscriminatory terms. Specifically, Samsung refused to license its SEP unless Apple paid Samsung 2.25 percent of the price of each iPhone and iPad, or granted Samsung a license to the non-SEPs that make Apple products so unique.
Allowing Samsung to obtain an exclusion order undercuts the purpose of its promise to license on reasonable terms. Nonetheless, the ITC rejected that defense. The ITC further concluded that issuing an exclusion order was consistent with the “public interest,” despite Samsung’s promise to waive that right in return for having its technology included in the standard.
The ITC’s decision sets a dangerous precedent that extends far beyond Apple and Samsung. Once a standard is adopted, industry participants have no choice but to comply with that standard. Exclusion orders thus provide substantial leverage that allows SEP owners to demand royalties in excess of what is “reasonable.” Potential licensees are willing to pay such excessive royalties to ensure their products are not excluded from being sold. The result is higher prices for consumers and decreased innovation.