DOJ Issues Letter Encouraging IEEE to Change Policy on Standard Essential Patents

On September 10, the DOJ issued a press release and supplement to its February 2, 2015 Business Review Letter to the Institute of Electrical and Electronics Engineers (“IEEE”), a standard-setting organization. The DOJ urged the IEEE to consider changing its patent policy to make it easier for holders of standard essential patents (“SEPs”) to pursue injunctive relief as a remedy for infringement.

In the DOJ’s 2015 Business Review Letter, it analyzed a proposed update to the IEEE’s Patent Policy’s (the “Policy”) provisions with respect to reasonable and non-discriminatory (“RAND”) licensing terms for patents essential to implementing IEEE standards. In relevant part, the update prevented SEP holders from seeking or obtaining injunctive relief as a remedy for infringement unless a putative licensee did not agree to comply with the outcome of infringement litigation; precluded parties from referencing comparable third-party licenses during licensing negotiations if those third-party licenses were accompanied by an implicit or explicit threat of injunction; and limited the scope of available royalties for essential patent licenses. In response to the IEEE’s request for a Business Review Letter, the DOJ issued the 2015 Letter and expressed its intention not to challenge the Policy as revised.

The DOJ issued this month’s unprecedented supplement to the 2015 Letter to address what it characterized as an incorrect interpretation of that Letter as an endorsement of the IEEE’s 2015 update. The 2015 Letter, the DOJ wrote, “has been cited, frequently and incorrectly, as an endorsement of the IEEE Policy, which was not [the DOJ’s] purpose or intent.” In particular, the DOJ opined that the Policy “may undercut current US law and policy” on three primary grounds: (i) it limits the scope of rights available to an essential patent owner, including seeking injunctive relief; (ii) it appears to limit the scope of available royalties; and (iii) it did not dedicate sufficient attention to potentially harmful implementer conduct seeking to undermine the bargaining position of patent owners in the standards development process.

The DOJ emphasized “the need for an open, balanced, and transparent process for standards development, which is critical to innovation.” It also suggested that the IEEE should “consider whether changes are needed to promote full participation, competition, and innovation in IEEE’s standard setting activities” and referenced policy changes that another standard-setting organization—the GSM Association—made in the wake of a lengthy DOJ investigation into what the agency characterized as an unbalanced standards development process. In this month’s supplement to the 2015 Letter, the DOJ took the unusual step of suggesting that the IEEE make it easier for essential patent holders to pursue injunctive relief.

O’Melveny has long been at the forefront of disputes over the licensing of SEPs, the antitrust implications of those disputes, and the contractual ins and outs of fair, reasonable, and non-discriminatory (“FRAND”) licensing terms. Among our many matters, we prevailed on every issue at trial in defense of an international television manufacturer against a well-known electronics giant in litigation involving patents allegedly essential to ATSC standards for digital television technology. We secured one of the largest sanctions in US history in a high-profile, multi-front antitrust and patent battle over SDRAM and DDR memory standards and products. The sanction led to a highly publicized $240 million settlement for our client. And we led a multi-year campaign against a powerful holder of SEPs that led to a landmark result by the Korea Fair Trade Commission and a landmark lawsuit being brought by the United States Federal Trade Commission. O’Melveny is currently counseling clients in a variety of industries—including the consumer electronics and automotive fields—for whom standards development, SEP licensing negotiations, and FRAND disputes are becoming more and more frequent. Companies with any questions about the potential legal implications of their licensing activity or FRAND obligations should contact the undersigned attorneys.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Ben Bradshaw, an O'Melveny partner licensed to practice law in California and the District of Columbia, Ian Simmons, an O'Melveny partner licensed to practice law in the District of Columbia and Pennsylvania, Riccardo Celli, an O’Melveny partner licensed to practice law in the Capital Region of Brussels, the Law Society England & Wales, and Roma, Courtney Dyer, an O’Melveny partner licensed to practice law in the District of Columbia and New York, Andrew Frackman, an O'Melveny partner licensed to practice law in New Jersey and New York, Philip Monaghan, an O’Melveny partner licensed to practice law in the Capital Region of Brussels, Hong Kong, the Law Society England & Wales, and the Law Society Ireland, Anna T. Pletcher, an O'Melveny partner licensed to practice law in California, Katrina Robson, an O'Melveny partner licensed to practice law in California and the District of Columbia, Michael Tubach, an O’Melveny partner licensed to practice law in California and the District of Columbia, Courtney C. Byrd, an O'Melveny counsel licensed to practice law in the District of Columbia and Maryland, Zhao Liu, an O'Melveny counsel licensed to practice law in California and the District of Columbia, Stephen McIntyre, an O'Melveny counsel licensed to practice law in California, Scott Schaeffer, an O'Melveny counsel licensed to practice law in California and the District of Columbia, Sergei Zaslavsky, an O'Melveny counsel licensed to practice law in the District of Columbia and Maryland, Laura K. Kaufmann, an O'Melveny associate licensed to practice law in California, Trisha Parikh, an O'Melveny associate licensed to practice law in California, and Brian P. Quinn, an O'Melveny associate licensed to practice law in the District of Columbia and Virginia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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