DOJ Antitrust Chief Wants To Take Thumb Off Patent Scales
By Bryan Koenig
Law360 (May 8, 2019, 7:40 PM EDT) -- The U.S. Department of Justice's antitrust chief argued again that lawmakers never meant for competition law to hinder the ability of patent holders of industry-essential technology to demand fair compensation from licensees, and said Wednesday that he's looking for a case to enshrine that view into law.
DOJ Antitrust Division chief Makan Delrahim, a patent lawyer, has long argued that owners of so-called standard-essential patents generally don't run afoul of competition law simply by charging high licensing rates — while SEP holders anchor their technology as industrial building blocks to make technologies compatible on promises to license the patents out on fair terms, Delrahim argues that any violation of that promise is likely a contractual dispute, not an antitrust one.
Key to Delrahim's ire is a 2013 guidance put out both by the DOJ and the U.S. Patent and Trademark Office that generally discouraged the use of injunctions and import bans sought by patent holders enforcing their technology. The Antitrust Division pulled out of the guidance in December, Delrahim said at a Washington, D.C., event hosted by the conservative Federalist Society, because it put a "thumb on the scale" of the debate between patent holders and patent licensees by holding that obtaining an injunction could run afoul of antitrust law.
Favoring licensees, "I don’t think is sound economics," Delrahim said. "The Supreme Court has never ruled on this, yet. I'll find the right case and hopefully they'll settle it one way or the other. And hopefully they'll be reasonable and rational in this."
Delrahim complained further that the Obama-era pushback against injunctions is being copied by other international enforcers, helping lead to a "devaluing" of intellectual property and diminished incentive to innovate and compete.
In the wake of the DOJ's decision to pull out of the 2013 guidance, industry has kept a close eye on what the USPTO might do. But Delrahim's fellow speaker Wednesday, USPTO director Andrei Iancu, simply reiterated that the agency is "looking at the issue."
"Whatever we do, we have to make sure we incentivize, if we incentivize anything at all, we incentivize good behavior," Iancu said. Regulators, he said, need to make sure they don't create rules that either patent holders or patent licensees can leverage against the other side.
Iancu said separately Wednesday, however, that a presumption against granting patent owners injunctions would "incentivize bad behavior in the marketplace," making deals less likely and increasing the likelihood instead of litigation.
Eli Mazour, a patent attorney with Harrity & Harrity LLP who interviewed Delrahim for a recent episode of his Clause 8 podcast, told Law360 in an interview Wednesday that he doubts the USPTO will diverge from the Justice Department. Mazour noted that Delrahim and Iancu acknowledged that they hold many similar views. Mazour noted further that Iancu said that the agencies try not to take opposing policy positions.
"That strongly suggests that they are aligned," Mazour said.
"The only bit of mystery is why hasn't the USPTO released that," he said further, speculating that the agency simply wants to get its ducks in a row.
Delrahim has spent much of his tenure at the helm of the antitrust division pushing a shift in policy in the patent sphere. While the Obama administration focused on preventing patent holders from using their ability to "hold up" the license bargaining process to increase licensing payments, Delrahim has pushed for a closer eye on licensees that collectively refuse to buy licenses until they can squeeze out more favorable terms, under the so-called holdout issue.
These advocacy efforts culminated in the DOJ's decision in December to pull out of the joint guidance with the USPTO, which discouraged the use of injunctions by patent holders who have agreed to license their SEPs on fair, reasonable and non-discriminatory, or FRAND, terms. In announcing the move, Delrahim said that FRAND obligations should not amount to compulsory licensing schemes and warned that some standard-setting organizations make it too easy for those who implement patents to band together and collectively bargain with patent holders.
He also said the division would work with the USPTO on a new joint statement that provides more clarity about the "balance of interests at stake when an SEP-holder seeks an injunctive order."
On Wednesday, Delrahim argued that FRAND licensing rates should be determined by the market, not judges weighing in on an antitrust violation not established by Congress.
Delrahim also hinted obliquely at potential frustration with the plurality of antitrust enforcement authority in the United States. Tension has appeared recently in the DOJ's relationship with the Federal Trade Commission over the latter's competition case against Qualcomm Inc. and the company's patent licensing practices, and in the federal enforcer's relationship with state attorneys general who've been far more aggressive in pursuing no-poach agreements in fast food and other franchise-based businesses preventing franchisees from recruiting or hiring from their sister members of the chain.
Delrahim may have had that tension in mind when discussing China's recent decision to consolidate its three nascent antitrust enforcers into one.
"They seem to have a little bit more wisdom than we do," he said. "Since we have 53 antitrust agencies in this country."
--Additional reporting by Matthew Perlman, Christopher Cole and Ryan Davis. Editing by Connor Relyea.
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