In a December 7 speech before the Berkeley-Stanford Advanced Patent Law Institute, the US Department of Justice Antitrust Division (DOJ) Assistant Attorney General Makan Delrahim (AAG Delrahim) announced that the DOJ will withdraw its assent to the 2013 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary FRAND Commitments (the Policy Statement) and elaborated upon the DOJ’s enforcement approach to standard setting organizations (SSOs).

WHAT HAPPENED:

  • AAG Delrahim voiced support for the right of patent holders to seek injunctions against misuses of their technologies. According to AAG Delrahim, the appropriate test for injunctive relief in patent cases is the one articulated by the US Supreme Court in eBay v. MercExchange. Under the eBay standard, to obtain an injunction, a patent holder must demonstrate that:
    • It has suffered an irreparable injury;
    • Remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
    • Considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
    • The public interest would not be disserved by a permanent injunction.
  • AAG Delrahim expressed concern that the Policy Statement, which in his view suggests that injunctions may not serve the public interest, may bias courts applying the eBay test against issuing injunctions. Because AAG Delrahim’s stance is that injunctions frequently do serve the public interest, he is worried that the Policy Statement will cause confusion. Based on this worry and AAG Delrahim’s disagreement with the Policy Statement’s position, the DOJ will withdraw its assent to the Policy Statement.
  • AAG Delrahim also elaborated upon his concerns with SSOs. He explained that an SSO can act anti-competitively in carrying out two tasks. First, an SSO can act anti-competitively while carrying out the standard setting process (g., by refusing to license a new and innovative technology by a maverick firm that the members of the SSO view as threatening). Second, an SSO can act anti-competitively in adopting and implementing patent policies (e.g., by adopting licensing terms that favor implementers over patent holders).

WHAT THIS MEANS:

  • Though the DOJ is withdrawing its assent to the Policy Statement, it will attempt to replace it with a new one. AAG Delrahim said that the DOJ will engage the Patent Office to initiate this process. The DOJ is likely to push for language more favorable to standard essential patent holders seeking injunctions.
  • The withdrawal of the Policy Statement may affect patent cases not only before federal district courts, but also before the International Trade Commission (ITC). The Policy Statement was designed to inform the ITC, as well as federal courts, on the appropriateness of issuing an exclusion order in patent cases.
  • Delrahim announced two policies the DOJ will adopt with respect to SSOs. First, the DOJ will investigate and bring enforcement actions against standard setting practices that are anticompetitive. Second, the DOJ will embrace a policy of encouraging competition between SSOs. As part of the policy, the DOJ may, for example, scrutinize competitors for coordinating a group boycott of an SSO with a patent policy that is unfavorable to their interests.
  • The speech was consistent with AAG Delrahim’s previously voiced support of standard essential patent holders and concerns about SSOs. While under AAG Delrahim’s leadership, the DOJ’s enforcement posture will likely align with his views.

The US International Trade Commission (ITC) issued an opinion dismissing United States Steel Corporation’s antitrust claim made under Section 337 of the Tariff Act of 1930 against several Chinese steel manufacturers or distributors, ruling that a complainant must show an antitrust injury even in a trade case.

WHAT HAPPENED

  • On Monday, March 19, three of the ITC’s four sitting commissioners upheld an administrative law judge’s (ALJ) decision to eliminate the antitrust claim from US Steel’s trade case against Chinese steel manufacturers.
  • US Steel’s claims were made pursuant to Section 337 of the Tariff Act of 1930. Section 337 has primarily been used by US companies to bar the import of items that infringe upon intellectual property rights. A violation of Section 337 requires a showing of “[u]nfair methods of competition [or] unfair acts in the importation of articles.”
  • US Steel took a rather novel approach and based one of its Section 337 claims on Section 1 of the Sherman Act. Specifically, US Steel alleged a conspiracy between the Chinese manufacturers to fix prices at below-market prices and control output and export volumes. Though US Steel based its claim on the Sherman Act, it argued before the ALJ and the ITC that it did not need to show antitrust injury to sustain its antitrust claim. US Steel reasoned that because Section 337 is designed to protect American companies and workers, it needed only show harm to those groups.
  • In November 2016, an ALJ granted the Chinese manufacturers’ motion to dismiss the antitrust claims, confirming that US Steel is required to show antitrust injury to state an antitrust claim under Section 337.
  • The ITC affirmed the ALJ’s dismissal of US Steel’s antitrust claim because it did not meet the pleading requirements of the Sherman Act under substantive federal antitrust law; such an antitrust claim requires antitrust injury to be alleged. The ITC explained that it relies on existing bodies of substantive federal law to avoid conflicts with federal precedent.
  • Under US antitrust law, for US Steel to properly allege antitrust injury on the allegation that its competitors fixed prices at below-market prices, the below-market pricing must be predatory. That is, US Steel would be required to prove (a) below-cost pricing and (b) that the Chinese steel manufacturers had a dangerous chance of recouping their losses. US Steel did not—and conceded it could not—satisfy the pleading standard for predatory pricing.

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