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Draft Standard-Patent Policy Draws Former Officials’ Opposition

Feb. 4, 2022, 2:35 PM

Proposed policy changes on patents essential to industry standards threaten the standardized technology ecosystem, a bipartisan group of patent office and Justice Department antitrust leaders are warning.

A draft statement the Biden administration released in December is a “solution in search of a problem,” the former officials said in a comment submitted to the Justice Department. The officials argue the new approach targets theoretical concerns while tipping the scales against owners of standard-essential patents, or SEPs.

Andrei Iancu, the patent office director under President Donald Trump, as well as Michelle Lee and David Kappos, both of whom led the patent office under President Barack Obama, signed on to the comment.

“This is a bipartisan view and we are expressing our collective concern with the change in direction,” Iancu said.

Other signatories included Makan Delrahim and Christine Varney, former leaders of the DOJ’s antitrust division. Three previous directors of the National Institute of Standards and Technology, Patrick Gallagher, Willie May, and Walter Copan, also signed the letter.

‘Misguided’ and ‘Unrealistic’

The draft policy would amend 2019 Trump administration guidance, which made clear that SEP holders are entitled to seek court injunctions blocking use of inventions if licensing negotiations fail. Previous Obama-era guidance suggested injunctions in SEP cases could harm competition.

According to the new draft, developed by the DOJ, the patent office and NIST, money will usually be adequate to compensate a SEP holder for infringement. The statement allows that an injunction may be justified when a company is unwilling to take a license that is fair, reasonable, and non-discriminatory, or FRAND.

“Strategies by either SEP holders or implementers to gain undue leverage in licensing negotiations can cause multiple harms, including non-F/RAND patent royalties, increased costs, and delayed introduction of standardized products and services,” the draft policy statement said.

Biden administration officials have spoken of concerns about abuse of standard-essential patents and patent owners seeking inflated licensing fees because of the patent’s essential nature, referred to as “patent holdup.”

The former officials balked at “holdup” concerns, saying “decades of experience with licensing” haven’t generated meaningful data to support allegations of SEP owners unfairly extorting implementers. That kind of data is also missing from the policy statement, they said.

The officials also called the statement’s framework for good faith negotiations “misguided and unrealistic.”

“These are complex negotiations, very fact-dependent, very circumstance-dependent,” said Iancu, adding the negotiations are often between sophisticated parties and involve global patent portfolios.

“For the government to step in and provide a set of instructions, if you will, on how to negotiate ahead of time is, in our view, problematic,” Iancu said.

Statement Support

The draft policy statement comes after President Joe Biden in July encouraged officials to consider revising the 2019 policy statement, framing it as part of an effort to “protect standard-setting processes from abuse.” The public comment period closes Friday.

More than two dozen law professors, including Stanford’s Mark Lemley, Rutgers’ Michael Carrier, and Robin Feldman of the University of California, said in a comment posted last month the statement takes a “reasonable, balanced approach.”

“It will contribute to greater predictability and will encourage both new innovation and reasonable implementation of that new innovation,” they wrote.

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editor responsible for this story: Renee Schoof at rschoof@bloombergindustry.com