Richard Lloyd

While patent owners in the US in recent years have become accustomed to change in the legal environment courtesy of the Supreme Court and Congress, some have also had to contend with the much broader application of competition laws by local antitrust authorities. The Federal Trade Commission (FTC) has taken a lead role in actively policing the licensing activities of standard essential patent (SEP) holders, starting with Rambus in the mid-2000s and most recently with its investigation into Qualcomm’s licensing practices.

Under President Obama, the Antitrust Division of the Department of Justice also became more outspoken on the rights of SEP owners, with comments from the division’s head in 2012 prompting the standards setting organisation the IEEE to change its patent policy in 2015. In short, the prevailing antitrust climate, like many aspects of the patent landscape, has become far tougher for SEP owners in the US.

But to what extent might that change under the new administration? Recently there have been some signs of significant pushback against what some see as the over-reaching of antitrust authorities into SEP licensing. In a strongly worded dissent to the FTC’s decision to bring a lawsuit against Qualcomm, then Commissioner Maureen Ohlhausen, was sharply critical of the move claiming that it was, “based on a flawed legal theory that lacks economic and evidentiary support”.

In a new paper in the Stanford Technology Law Review Ohlhausen, who is now Acting Chairman of the FTC, has again criticised the use of antitrust laws by regulators to police the licensing practices of SEP owners and, in particular, to ensure that licensors do not subject device makers and other manufacturers to patent hold-up. The paper, entitled “The elusive role of competition in the standard-setting antitrust debate”, is particularly critical of the FTC’s use of section 5 of the FTC Act which prohibits “unfair methods of competition”; this, Ohlhausen claims, goes beyond the reach of the antitrust statute.

“Wielding antitrust broadly to nip possible hold-up in the bud, enforcers have expanded liability to capture the behavior and outcomes divorced from harm to competition,” she writes. “They have tried to shoehorn conduct within antitrust proscriptions that simply does not fit.” She then goes onto add, “It also threatens to upset the balance between patent holders’ rights and consumers’ access to technology.”

Many licensors would argue that that balance has become dangerously skewed in recent years in a manner that threatens to undermine investment in R&D. Ohlhausen is clearly cognisant of those concerns and in another paper from earlier this year wrote: “I worry that today’s calls for diluted patent rights often go beyond incremental adjustment and threaten to weaken patents systemically.”  

Like many parts of the decision-making apparatus in Washington, the FTC is in a state of considerable flux, with three of the five commissioner spots left unfilled. It’s still not clear who will fill those vacancies and whether Ohlhausen will take charge on a permanent basis. President Trump has picked a head for the DOJ’s Antitrust division, nominating Makan Delrahim who boasts considerable IP expertise and whose nomination has been broadly welcomed.  If Ohlhausen’s view of how antitrust law should be applied to patent rights becomes the dominant narrative in the new administration, then the licensing of SEPs and the underlying value of those grants could be in for considerable change.