FTC Testifies Before Congress on Impact of Patent Hold-up on Competition and Standard-Essential Patents

By on July 31, 2013

by Karne Newburn

On July 30, 2013, Suzanne Munck, Chief Counsel for Intellectual Property at the Federal Trade Commission (FTC), testified before the Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights, on the impact of patent hold-up on competition, and standard-essential patents (SEPs).  The hearing covered standard-essential patent disputes and antitrust law. 

Ms. Munck’s testimony focused on SEPs that a patent holder has committed to license on reasonable and non-discriminatory (RAND) terms.  The hold-up, in this context, is the potential that a SEP holder violates its RAND commitment, and then uses the leverage acquired from the standard setting process to negotiate higher royalties or other favorable terms after the standard’s adoption than it could have beforehand.  She explained that patent hold-up is harmful because it can deter innovation, discourage the adoption of standards, reduce the value of standard setting and pass on excess costs to consumers.

To mitigate the threat of patent hold-up she testified that the FTC has “advocated for remedies in district courts and at the International Trade Commission (ITC),” submitted statements to the Federal Circuit and the ITC expressing its concerns, and pursued enforcement actions related to standard setting activity.  Specifically related to enforcement, she commented on the FTC’s ability to use its Section 5 authority when someone claims infringement for intellectual property that is unenforceable or expired, or when someone threatens to sue without any intent to sue.

Ms. Munck concluded with the following remarks: “[T]he Commission believes that competition and intellectual property laws work together to promote innovation.  Voluntary consensus-based standard setting facilitates this purpose; however, including patented technology in a standard creates the potential for patent-hold up.  The Commission will continue to advocate before the federal courts and the ITC for policies that mitigate the potential for patent hold-up, and will bring enforcement actions where appropriate.” 





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