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NATIONAL UNIVERSITY OF SINGAPORE: FACULTY OF LAW

GLOBAL EXPLOITATION OF IP 2012/2013 LL5071

SUBMISSION OF WRITTEN ASSIGNMENT

Submitted By A0098282U

Total Word Count (Excluding Footnotes) 3805

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Introduction

On one hand, injunctions have been considered important tool in the set of remedies under patent

law. They help courts in upholding the right to exclude available under it.1 On the other,

routine grant of permanent injunctions in every case of infringement has proven contentious.2 In

United States (US), the Supreme Court ruled against automatic grant of permanent injunctions

under findings of infringement in the case of Ebay v MercExchange3 and held that a four factor

test will have to be satisfied before permanent injunction could be granted.4

Although much debate surrounds this issue, a critical factor is added to it when the patents

involved are Standard Essential Patents (SEPs). This paper discusses the justifiability of

1 Elizabeth Siew-Kuan NG, Evolving Landscape Of Patent Remedies in a Changing Marketplace (2012) 24

SAcLJ 634 at 642. Also see, Richard T. Holzmann, Infringement of the United States Patent Right A Guide for

Executives and Attorneys, (Quorium Books, 1st Ed, 1995) at page 181, quoting Court of Appeals for the Federal

Circuit.

2 Carl Shapiro, Injunctions, Hold-Up, and Patent Royalties American Law and Economics Review at page 281,

citing the NTP RIM case; available at the URL http://faculty.haas.berkeley.edu/shapiro/royalties.pdf last visited on

30 March 2013.

3 126 S Ct 1837 (2006).

4 Ibid at 1839; to get a permanent injunction, plaintiff must establish that:

i. it has suffered an irreparable injury;

ii. remedies available at law, such as monetary damages, are inadequate to compensate for that injury;

iii. considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted;

and

iv. the public interest would not be disserved by a permanent injunction.

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injunctions within the context of SEPs and the FRAND5 terms to which their licensing is subject.

This paper will also look at their justifiability in case of Green technologies.6

5 Also known as RAND commitments; stand for Fair Reasonable And Non Discriminatory or Reasonable and

Non Discriminatory, respectively. In this article, FRAND will consistently be used to denote either of the two. For

an introduction, see Doug Lichtman, Understanding The Rand Commitment, 47 Hous. L. Rev. 1023 at 1025.

6 The term has been used broadly in this paper to represent a set of technologies that have the potential of

contributing towards the goals set by an international treaties such as the United Nations Framework Convention on

Climate Change (UNFCCC), or towards developing more efficient and environment friendly sources of energy.

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SEPs and FRAND commitments

The process of standard setting has been considered foundational to technological advances.7

Adopted internationally, they confer several benefits on the businesses including increased

efficiencies in the business processes and accessing more markets.8

Moreover, in the field of Information and Communication Technologies (ICT), standards are

absolutely essential to the interoperability of different component parts and products from

different manufacturers 9 Thus, compliance with the standards set by a Standard Setting

Organization (SSO) which de facto governs a particular area of technology, acquires the force

of a rule which must be complied with, if a business wishes to remain competitive.10

7 Ken Krechmer, Technical Standards: Foundations of the Future, Communications Standards Review, 4,

available at the URL http://delivery.acm.org.libproxy1.nus.edu.sg/10.1145/240000/230872/p4-

krechmer.pdf?ip=137.132.123.69&acc=ACTIVE%20SERVICE&CFID=305374154&CFTOKEN=70177735&__ac

m__=1364630773_01e97ed435836fbe2d674d42abbd2a0e last visited on 29 March 2013.

8 Benefits of International Standards, available at URL

http://www.iso.org/iso/home/standards/benefitsofstandards.htm last visited on 29 March 2013.

9 The force multiplier for ICT innovation ISO/IEC joint technical committee 1 JTC 1 Information technology

standards at page 5, available at URL http://www.iso.org/iso/ict_innovation.pdf last visited on 29 March 2013.

Also see, Mark A. Lemley, Intellectual Property Rights and Standard-Setting Organizations, 90 Cal. L. Rev. 1889

at 1897 where he distinguishes between two types of standards: those which are concerned with interoperability and

those which are concerned with quality or safety. Standards in ICT industry, of which the smart phones and related

patents form part, usually belong to the former category and therefore have greater implication on the content of the

present article.

10 For example, if a hypothetical cell phone manufacturer chooses not to follow the standard set by ETSI covering

GSM technology, his cell phones would be incompatible with all the telecom service providers which are providing

GSM services compatible with the standard. The utility of his phone thus, would be restricted to areas covered by

transmission of 3G network (assuming that he has chosen to incorporate the UMTS standard), and thus, is likely to

have severe competitive disadvantage in the judgment of potential customers. This may be especially true in

developing countries where 3G network is still catching up.

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However, any particular standard may involve use of one or more patented technologies, and the

incorporation of the said standard by business entities will then lead to inevitable infringement of

the same. Negotiating licenses for all such patents becomes very difficult in view of the large

number of patents involved and fragmented ownership of the same.11

FRAND terms potentially

help parties navigate such patent thickets.12

However, FRAND is a generic name given to commitments by parties to separate SSOs. The

exact contents of the commitment, thus depends on the specific policies of the SSO.13

In

addition, the determination of an overarching legal nature of FRAND commitments too has met

with several theoretical impediments.14

One of the biggest conundrums arising out of this

situation is of grant of injunctions over patents which are covered by FRAND commitments.

Global Smart Phone Wars and SEPs

Whereas in spite of the inherent weaknesses of the FRAND system, there wasnt any noticeable

binge litigation over it earlier, intense competition in the Smartphone industry over the past few

years did not let this position be. More importantly, injunctions are now being actively sought in

these cases on patents covered by FRAND commitments.

11

See, Doug Lichtman, supra note 5 at page 1024-1025. Many other issues may affect the viability of a negotiation

process such as determining the validity of the patent and determining whether it is truly essential.

12 A term used to signify an overlapping set of patent and rights requiring that those seeking to commercialize new

technology obtain licenses from multiple patentees, Carl Shapiro, Navigating the Patent Thicket: Cross Licenses,

Patent Pools, and Standard Setting, Innovation Policy and the Economy, Volume 1 available at URL

http://www.nber.org/chapters/c10778.pdf , last visited on 31 March 2013.

13 See, Mark A. Lemley, supra note 9 at 1904.

14 See, Doug Lichtman, supra note 5 at page 1025-1026, discussing whether FRAND commitments are a license or

a promise to license, and whether the disputes arising out of the determination of FRAND terms will be considered a

contractual dispute or a patent infringement dispute.

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To highlight the important issues in this context that have been considered by courts around the

world, I will briefly discuss a few of the important cases.

Germany

Germany is being considered a hotbed for patent litigation15. Last year in May, injunction was

granted by a court in Mannheim, Germany, against Microsoft in the matter of SEPs owned by

Motorola. Before that, in 2011, the same court had granted injunction against Apple, also in the

matter of SEPs owned by Motorola.16

However, the enforcement of this injunction, in so far as SEPs were concerned, was suspended

by the appeals court for the duration of the pending appeal as on a summary analysis, Apple was

found to have successfully availed of the Orange Book defense.17

The Orange Book defense is a unique feature of the German jurisprudence.18

This test places

reliance on the competition law framework for denying injunctions in case of SEPs. The test

postulates that:-

i. The defendant unconditionally offers to enter into a license agreement [] for the

patent at a particular royalty rate [];

15

A RANDom glance abroad: German Patent Courts and the Orange Book defense available at URL

http://essentialpatentblog.com/2013/01/a-random-glance-abroad-german-patent-courts-and-the-orange-book-

defense/ last visited on 30 March 2013.

16 Motorola wins Apple wireless patent fight in Germany available at URL

http://www.bbc.co.uk/news/technology-16112259 last visited on 30 March 2013.

17 Florian Mueller, Motorola can't enforce standard-essential patents against Apple in Germany while appeal is

pending -- huge victory for Apple, bad news for Google, available at URL

http://www.fosspatents.com/2012/02/motorola-cant-enforce-standard.html last visited on 30 March 2013.

18 Supra note 15.

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ii. The defendant behaves as if it is an actual licensee, and pays royalties into an escrow

account,19

and if the patent holder refuses such offer, then the defendant may avail of a defense against

grant of injunction by alleging that the refusal amounts to abuse of dominant position under the

competition laws of the European Union (EU).20

However, it is seen that availing of the defense has proven difficult as a result of defendant being

required to meet very high standards.21

Recently, another injunction was issued in Germany

against a Chinese company ZTE over 4G technology related SEPs owned by another Chinese

company, Huawei.22

At the same time, sensing inconsistency between its own approach and that

of EU cases over the competition law analysis of this issue, a few issues in this regard have been

elevated to the Court of Justice of the European Union (CJEU).23 It will be interesting to note

what the CJEU determines in this case.

19

Ibid. For an English translation of the decision laying down the Orange Book Standard, Case No. KZR39/06, refer

to URL http://www.ipeg.eu/blog/wp-content/uploads/EN-Translation-BGH-Orange-Book-Standard-eng.pdf, last

visited on 31 March 2013.

20 Article 102, Treaty on the Functioning of the European Union (TFEU).

21 Apple had to amend its offer many times before the appeals court denied injunction. See supra note 17. Microsoft

on the other hand, did not succeed in demonstrating the requirements under the Orange Book Standard in spite of

having offered a royalty rate which was 10 times the MPEG LA pool rate. See Florian Mueller, The German

approach to FRAND: let's err on the side of injunctions available at URL.

http://www.fosspatents.com/2012/05/german-approach-to-frand-lets-err-on.html last visited on 30 March 2013.

According to Mueller, the court held that it was needed to be shown that the refusal to accept the defendants offer

was an obvious abuse of dominant position, thus setting the bar very high for the defendants to cross.

22 Florian Mueller, Huawei wins German 4G (LTE) patent injunction against ZTE's base stations, available at

URL http://www.fosspatents.com/2013/03/huawei-wins-german-4g-lte-patent.html, last visited on 31 March 2013.

23 Florian Mueller, German Court refers Huawei-ZTE standard-essential patent case to Europes highest court.

http://www.fosspatents.com/2013/03/german-court-refers-huawei-zte-standard.html last visited on 30 March 2013.

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South Korea

In a patent infringement case between Samsung and Apple involving SEPs, a court in South

Korea held that seeking injunctions fell within the purpose and function of the SEP system24

and that the obligation on the patent holder to negotiate with a potential licensee in good faith is

to be complemented by such potential licensee negotiating with the patent holder in good faith.

The conduct of Apple in the case, according to the court, showed absence of good faith and on

this ground, the court granted an injunction.25

Court also held that Samsungs conduct was not anti-competitive under the Fair Trade Act.26

However, the Korean Federal Trade Commission later decided to investigate Samsungs

enforcement of its SEPs as being abuse of its dominant position.27

NetherLands

In one of the earliest and clearest pronouncements that no injunction may be granted on a

FRAND encumbered SEP, in October 2011, a court in Netherlands denied preliminary injunction

against apple over SEPs owned by Samsung. The court held that Samsungs FRAND

commitments amounted to an offer to negotiate license on FRAND terms which may be accepted

24

South Korea is Not a FRAND Rogue State! available at URL http://blog.patentology.com.au/2012/11/south-

korea-is-not-frand-rogue-state.html last visited on 30 March 2013.

25 Ibid.

26 Ibid.

27 SKorean antitrust watchdog probing Samsung, available at URL http://news.yahoo.com/skorean-antitrust-

watchdog-probing-samsung-054742860--finance.html, last visited on 30 March 2013.

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by third parties, thus leading to an enforceable contract.28

Samsung was also a denied a

permanent injunction on the same ground of FRAND commitments later in June 2012.29

Japan

A Japanese court held that by withholding information necessary for negotiating FRAND terms,

Samsung had breached its duty under FRAND commitment to negotiate in good faith. It also

found Samsung liable for misconduct in so far as it failed to meet the disclosure requirements

under it FRAND commitments to ETSI by disclosing only two years after the patented

technology had been standardized. This was held to be an abuse of rights under the Japanese law

and Samsungs patents were rendered irremediable by either injunction or damages.30

US

Although a number of disputes over SEPs have been and are currently being litigated in US31

,

the decision by judge Richard Posner in the case of Apple Inc v Motorola32

has assumed

importance in light of its implications and its role as being viewed by commentators in the wider

28

Florian Mueller, Samsung loses Dutch case against Apple over 3G patents as court gives meaning to FRAND,

available at URL http://www.fosspatents.com/2011/10/samsung-loses-dutch-case-against-apple.html lasted visited

on 30 March 2013.

29 Florian Mueller, Samsung finally wins its first offensive case against Apple -- but it's only a consolation prize,

available at URL http://www.fosspatents.com/2012/06/samsung-finally-wins-its-first.html lasted visited on 30

March 2013.

30 Japanese court deemed Samsung's delayed disclosure of essential patents abusive conduct, available at URL

http://www.fosspatents.com/2013/03/japanese-court-deemed-samsungs-delayed.html last visited on 30 March 2013.

31 See for example, Motorola Mobility v Microsoft Corporation in the Western District of Washington, InterDigital

v Huawei and ZTE in the District of Delaware, earlier, Broadcom v Qualcomm going up to the Court of Appeals for

the Federal Circuit, and several others in the US International Trade Commission.

32 869 F.Supp.2d 901

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incentive v access debate. However, for the present purposes, I will limit myself to the

discussion of FRAND encumbered SEPs.

Although, after the case of Ebay v MercExchange, injunction analysis in US on finding of patent

infringement is governed directly by the four factor test, this is not the only ground on which the

court discusses unavailability of injunctive relief to Motorola. The four factor analysis, the court

observed, applied to both Motorola and Apples demands for injunction.33 Two other factors,

however, applied solely to Motorolas SEP.

I will now discuss these two factors, which in my opinion represent the two opposing views on

the contentious issue of grant of injunctions on FRAND encumbered SEPs.

1. Default unavailability of injunctive relief once a patent has been committed to be licensed

on FRAND terms

The court held that the fact of Motorola committing to license its SEP on FRAND terms meant

that it implicitly acknowledged that a royalty is adequate compensation for a license to use that

patent34 and was not therefore, justified in pleading otherwise. Citing a report by the Federal

Trade Commission (FTC), the court observed that the imbalance of negotiating power that is

created by a possibility of the patent holder getting a injunction against the potential licensee, is

in tension with the FRAND regime. Once a patent is standardized, switching costs are high and

therefore the prospective licensee may be forced to settle on royalty rates which reflect patent

33

Ibid at 915.

34 Ibid at 914.

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hold-up, rather than the value of the patent relative to alternatives35 thus leading to harmful

effect on competition.

2. Adverse effect on patent holders negotiating power in the absence of a threat of

injunction

This argument by Motorola voices the other side of the concern: block denial of injunctive relief

in FRAND cases may lead to abuse of patent holders rights by prospective licensees. What

happens if, absent the threat of injunction, prospective licensees pressure the licensor into terms

much lower than what might judicially be determined as FRAND, knowing that the actual

process of determination is costly?

The court however, rejected the argument, holding that law does not recognize a right to

injunction so that the settlement terms for the plaintiff could be better than what they would

otherwise be. In addition, the court also observed that whereas threat of costly litigation would

affect patent holders bargaining power, it will similarly affect licensee and it may choose to

settle to better terms than litigate.

Should injunctive relief be granted over SEPs?

This debate forms a part of the larger debate raging in the US, and across the world, over the

very suitability of the current patent regime. Arguments leave the legal realm and enter the

domain of policy.36

However, even within the specific debate of SEPs governed by FRAND,

35

Ibid.

36 For a glimpse of the two sides of the debate, see Richard Posner, Why There Are Too Many Patents in America,

available at URL http://www.theatlantic.com/business/archive/2012/07/why-there-are-too-many-patents-in-

america/259725/, last visited on 31 March 2013, and Richard A. Epstein, Richard Posner Gets It Wrong, available

at URL http://www.hoover.org/publications/defining-ideas/article/123926, last visited on 31 March 2013.

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strongly opposing views on grant of injunctions have been expressed. A very good overview of

these views can be found in the Briefs filed by various parties in the appeal against the District

courts decision to the US Court of Appeal for the Federal Circuit in the Apple v Motorola37

case.

A number of players in the industry have filed their briefs in support of the district courts

decision and of Apple. FTC reiterated its proposition that threat of injunction may confer hold up

value on the SEP holder and irreparable harm, balance of harms and public interest within the

Ebay analysis38

should accordingly be interpreted as being against injunction.39

In another

publicly available brief, Intel echoes these points, arguing against reversal of district courts

decisions.40

However the main thrust of argument against District courts decision raised by Google, is that

the court erred in categorically barring injunctive relief for infringement of standards-essential

patents41. It argues that no such bright line rule exists in law and that the proper test to be

37

Supra note 32.

38 See supra note 4.

39 Brief Of Amicus Curiae Federal Trade Commission Supporting Neither Party available at URL

http://www.ftc.gov/os/2012/12/121205apple-motorolaamicusbrief.pdf last visited on 31 March 2013.

40 Brief For Amicus Curiae Intel Corporation In Support Of Apple Inc. And Next Software, Inc available at URL

http://essentialpatentblog.com/wp-content/uploads/2013/03/13.03.20-Intel-Amicus-Brief-Supporting-Apple.pdf last

visited on 31 March 2013. Other parties which have filed briefs in support of Apple are include Microsoft, the

Business Software Alliance and a group of university professors arguing inter alia that the District courts analysis

of facts on Ebay factors is correct. See, Florian Mueller, BSA and four law professors agree: injunctions should

'ordinarily' not be available for SEPs, available at URL http://www.fosspatents.com/2013/03/bsa-and-four-law-

professors-agree.html, last visited on 31 March 2013 and also, Intel files amicus brief supporting Apple in Federal

Circuit appeal of Judge Posner decision available at URL http://essentialpatentblog.com/2013/03/intel-files-

amicus-brief-supporting-apple-in-federal-circuit-appeal-of-judge-posner-decision/ last visited on 31 March 2013.

41 Florian Mueller, Google tells appeals court Apple is 'unwilling licensee', seeks injunction over FRAND patents,

quoting from the Opening brief filed by Google / Motorola in appeal against the District court decision, available at

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applied is the Ebay factors, which leaves ample judicial discretion for the courts to determine the

validity of an injunction, based on the circumstances and the specific terms of the FRAND

commitment entered into by the patent holder.42

Qualcomm on the other hand, has filed its brief in support of Google.43

On similar lines, it argues

that the rule that traditional equitable principles do not permit denial of injunction in a broad

swath of cases laid down in the Ebay case44 has been violated by the District court by denying

injunctions to all FRAND encumbered patents and that specific FRAND commitments should

be made a factor in the courts analysis of the ebay factors.45

In addition to the legal analysis, what the Google and Qualcomms arguments point out is the

policy argument that refers to the second factor discussed by the district court.46

It presents a

counter situation to patent hold-up; one of patent hold out, where the patent holder is bound

by irrevocable FRAND commitment and loses the leveraging power of injunctions, thus

allowing other entities to continue infringement without paying a royalty for a very long time.47

The question becomes one of balancing the extremes.

URL http://www.fosspatents.com/2013/03/google-tells-appeals-court-apple-is.html last visited on 31 March 2013.

However, the District court did note one exception; where a prospective licensee refuses pay royalty rates that have

been determined to be FRAND. See supra note 32at page 914.

42 See Florian Mueller, supra note 41.

43 Florian Mueller, Qualcomm asks appeals court to reject categorical rule against injunctive relief in FRAND

context, available at URL http://www.fosspatents.com/2013/03/qualcomm-asks-appeals-court-to-reject.html, last

visited on 31 March 2013.

44 See supra note 4 at page 1840.

45 Supra note 43.

46 See discussion on page 11, supra.

47 Supra note 43.

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It is submitted, first, that the answer must not be sought in isolated analysis of relevant practices,

involving a singular branch of legal doctrine, such as patent law or competition law.48

Since so

many aspects of law and policy affect SEPs, it is found difficult to fit FRAND commitments into

an existing legal model.49

Courts around the globe have indeed recognized that SEPs under

FRAND commitments evoke the need for a special status, separate from other patents.50

It is submitted that a better model needs to be developed internationally which combines the

relevant doctrines of patent law, competition law and other relevant doctrines51

in a manner that

suits the specific needs of SEPs.52

48

As clearly, Google/Motorola wish the Court of Appeals to do, by focusing only on Ebay factors, which are a part

of infringement analysis of patents. It may be argued that the public interest aspect of four factors may indeed

involve a discussion of other factors affecting the case. It is however, submitted that the clear effect of competition

law on the analysis is much more specific than a wider discussion of public interest and needs therefore, to be given

a similar specific treatment.

49 See, supra note 14.

50 See discussion on pages 6 to 14 above. Even South Korea and Germany, which have granted injunction over

FRAND encumbered patents have recognized this. For example, see Seoul Central District Court Media Report -2

(Samsung v Apple) (an unofficial English translation of the South Korean decision on Samsungs SEPs) on page 4,

available at URL https://docs.google.com/file/d/0B1Qqijz4aI6hdW9xU3pGN2N6VDQ/edit?pli=1 last visited on 31

March 2013 []in case of a standard essential patent [ ]or in case of a patent that has been selected by a

standardization body and having declared the FRAND declaration, the scope of the rights relating to such standard

essential patent may necessarily be limited in light of the purpose and philosophy behind the patent law. The

Orange Book standard in Germany also affords a defense against injunction by invoking Article 102 of the TFEU.

Even in US, it was precisely this status that the District court sought to uphold when it invoked factor number 1

above; See page 10 above.

51 Such as those involving the law of contracts.

52 The author is aware that this is a controversial proposition that may be countered by several arguments, such as

that the FRAND commitments are made at specific SSO level composed of parties from different countries and no

overarching national or international system exists which could enforce all of the SSOs to conform to a standard

model of FRAND commitments. However, my suggestion is premised on the proposition that given the

fragmentation of applicable rules and the resultant uncertainty, there exists a need for such a system that may

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On the question of grant of injunctions, it is submitted that the District courts decision should be

upheld by the Courts of Appeal. FRAND commitments, it is submitted, have strong implication

on the very nature of rights held by the patent holder and therefore warrant a modification of the

traditional remedies available.53

A FRAND commitments are voluntary and are a quid pro quo for their declaration as essential.54

They are given with the prospect of earning royalties and the commitments thus entail a promise,

to license to anyone so long as fair and reasonable royalties may be earned. They also lead to

very high switching costs once they have been adopted as the standard over other competing

technologies. Therefore, in the absence of a FRAND commitments, they may indeed confer

artificial market power over the patent holder. A threat of injunction therefore, may lead to anti

competitive behavior.

On the other hand, the threat of patent hold out may also be real and unfettered infringement of

an SEP may result into injury to legitimate interests of the patent holder.55

However, this

situation is remediable in terms that patent holder wanted to start with royalties. Injunctions, on

the other hand, may not be remediable in the same manner lost time in the market may not be

compensable in monetary terms due to the difficulty setting a standard for calculation of

eventually be able to develop the requisite model. A discussion on the exact scope and mechanism of such a system

or model is beyond the scope of this paper.

53 See generally, Doug Lichtman, supra note 5.

54 Supra note 32 at page 914.

55 See discussion on page 13, supra.

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damages that licensee may legally have claim to.56

Thus, it is submitted that denial of injunction

should still be the default rule with grant as an exception.57

In addition to the above, it is also submitted (perhaps only with the force of a conjecture), that

introduction of a punitive damages regime in conjunction with FRAND determination by courts,

if the court finds that the licensee acted in bad faith and with a view to pressure the patent holder

into terms which were excessively worse than the FRAND as determined by the court, may

decrease the likelihood of patent holdouts from occurring and incentivize good faith negotiations

over FRAND terms.

However, could there be any situations where a FRAND commitment me be allowed to be

revoked?

Revocation and Notice Problem

It has been observed that if firms are allowed to revoke their FRAND commitments, it might

leave existing members of the relevant SSO with debilitating uncertainty and allow firms to

engage in strategic behavior.58

Indeed if firms are allowed to revoke FRAND commitments, it

will lead to anticompetitive effects.59

It will be worse than the consequences of an injunction,

since the users of the technology will be left without any hope of obtaining a license on FRAND

56

This is not patent infringement and therefore, Lost Profit and Reasonable Royalty standard (under US law have no

application).

57 For the exception carved out by the District court, see supra note 40.

58 Mark A. Lemley, supra note 9 at page 13.

59 Jonathan Radcliffe and Gillian Sproul, FRAND and the Smartphone Wars available at URL

http://www.mayerbrown.com/Files/Publication/477a076f-dd7e-408c-8321-

64edf33c190e/Presentation/PublicationAttachment/5b202a76-bc80-4467-b286-

7a3b8e90e06d/Frand_Smartphone_Sproul.pdf last visited on 30 March 2013

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terms. It may also be noted that many SSOs require under their FRAND commitments that once

a patent owner commits to FRAND terms, the commitment is irrevocable.60

Even when the SEPs undergo change of ownership, the FRAND terms may remain enforceable.

In 2008, FTC settled a complaint against Negotiated Data Solutions (N-Data), where it

allegedly engaged in unfair methods of competition under Federal law.61

In this case, N-Data had

acquired a company, National Semiconductors (National) that owned SEPs for the Ethernet

standard and which had promised to license this technology for a one time paid-up license fee of

$1000 per licensee. However, acquiring National in full awareness of these SEPs, N-Data

attempted to revoke this FRAND commitment and threatened to sue a number of companies

using the standard.62

FTC issued a consent order according to the terms of which, N-Data was prohibited from

enforcing the patents before offering the same on terms promised by National.

60

Thomas H. Chia, Fighting The Smartphone Patent War With Rand-Encumbered Patents, 27 Berkeley Tech. L.J.

209 at page 212. Also see, Mark A. Lemley, supra note 9 on page 40.

61 FTC Challenges Patent Holders Refusal to Meet Commitment to License Patents Covering 'Ethernet' Standard

Used in Virtually All Personal Computers in U.S., available at URL http://ftc.gov/opa/2008/01/ethernet.shtm, last

visited on 31 March 2013. This case was not a full blown competition inquiry under the Sherman Act, but rather one

under section 5 of the FTC Act.

62 Paul Ragusa and Brian Boerman, Acquisition of Standard Essential Patents: Issues to Consider Before Making

the Deal available at URL

http://www.bakerbotts.com/file_upload/documents/NUAIPLAAntitrustNewsarticlePRagusaFeb2013.pdf, last visited

on 31 March 2013, citing Complaint, In the Matter of Negotiated Data Solutions LLC, FTC File No. 051 0094

(Sept. 23, 2008) at page 6

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Another consent order was issued against Google in January 2013, following the complaint that

it had reneged on the existing FRAND commitments of the acquired company, Motorola.63

While the terms are detailed and provide the narrow situations under which Google may seek

injunctive relief in addition to the procedure that it must follow before taking any such action, it

is important to note that much like the order against N-Data, the order prohibits, with limited

exceptions, Google from revoking the FRAND commitments that passed on to it as a result of its

acquisition of Motorola.64

Although in the above two cases, the acquirers had full knowledge of the fact that patents owned

by the acquiree included SEPs, there may be cases where such knowledge is absent due to poor

notice.65

Should the question of revocability be affected by this consideration?

It is submitted that keeping the above discussion in view, irrevocability of FRAND terms stems

from the effect of their revocation on the market, and therefore, modifying this standard might

lead to inefficiencies in the market, even where the acquirer acts in good faith. Instead, such

situations should be minimized from arising. For example, as proposed by Deputy Assistant

Attorney General of the U.S. Department of Justice, the SSOs should provide unequivocal

clarification to the members that any acquirer of SEP is as much bound by the FRAND terms as

63

Google Agrees to Change Its Business Practices to Resolve FTC Competition Concerns In the Markets for

Devices Like Smart Phones, Games and Tablets, and in Online Search, available at URL

http://ftc.gov/opa/2013/01/google.shtm, last visited on 31 March 2013.

64 Analysis Of Proposed Consent Order To Aid Public Comment - In the Matter of Motorola Mobility LLC and

Google Inc., File No. 121-0120 available at URL

http://ftc.gov/os/caselist/1210120/130103googlemotorolaanalysis.pdf, last visited on 31 March 2013. The exceptions

were - the relevant standard no longer exists, Google no longer owns the SEPs encumbered by the FRAND

commitment, or such SEPs are no longer enforceable.

65 For a detailed discussion on the notice problem, Federal Trade Commission, The Evolving IP Marketplace:

Aligning Patent Notice and Remedies with Competition, page 73 onwards.

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the current holder, which might in turn prompt the members to make adequate disclosure to

potential acquirers.66

66

Renata Hesse, Six Small Proposals for SSOs Before Lunch, Remarks as Prepared for the ITU-T Patent

Roundtable, available at URL http://www.justice.gov/atr/public/speeches/287855.pdf, last visited on 31 March

2013.

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Green Technologies67

and Patents: Balancing access and protection

In the context of Green Technologies, can any of the arguments against grant of injunction made

in the preceding section apply here?

As argued above, FRAND commitments are a quid pro quo to inclusion of a technology in a

standard.68

Thus, any claim to similar immunity from grant of injunction as argued for in

FRAND encumbered SEPs can be made only in the context of standardization of the green

technologies. Two types of standardizations may be involved.69

First, standardization arising from the need of interoperability. For example, in the past few

years, Smart Grid technology is sought to be adopted in US and Europe which promises less

wastage and more efficient use and transmission of electricity .70

The nature of the technology is

such that interoperability will be needed among the various components of this technology for it

to be implemented. This will lead to need for standardization, and consequently, for FRAND

commitments. Indeed, European Commission is already planning to review the application of

FRAND terms on the standardizations in this technology.71

67

See, supra note 6.

68 See supra note 54 and the corresponding discussion.

69 See, supra note 9.

70 See http://www.smartgrid.gov/about_smartgridgov, last visited on 31 March 2013 and Smart grids to form a key

pillar in EU Commissions plans for reindustrialising Europe, available at URL

http://twobirdssmartgrids.com/2012/10/10/smart-grids-to-form-a-key-pillar-in-eu-commissions-plans-for-

reindustrialising-europe/ , last visited on 31 March 2013.

71 Smart grids to form a key pillar in EU Commissions plans for reindustrialising Europe, available at URL

http://twobirdssmartgrids.com/2012/10/10/smart-grids-to-form-a-key-pillar-in-eu-commissions-plans-for-

reindustrialising-europe/, last visited on 31 March 2013.

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Second, standardization arising from the need for quality or safety. Indeed environmental

considerations pose issues of safety that may be considered at the top of policy priorities thus

justifying standardization. However, it is submitted that unlike in the ICT sector, not many

equally valuable alternatives may be available to choose from, and given the voluntary nature of

FRAND commitments, owners of SEPs in such cases may see no quid pro quo and thus, may not

commit to FRAND licensing.

In addition however, there may be many other cases of green technologies where no need for

standardization exists, yet policy calls for greater access. This issue may be looked at from two

perspective.

1. Access to potential licensees against the protection of the interests of patent owners

In January 2008, several renowned corporations such as IBM, Nokia and Sony together with

others formed the Eco-Patent Commons.72

It is declared as being an initiative to create a

collection of patents that directly or indirectly protect the environment73

Whereas on the one hand, such efforts are praiseworthy and deserve encouragement, their

effectiveness depends heavily on the altruism of patent owners and whether they consider such

sharing as promotion of innovation. As the World Business Council on Sustainable Development

72

Andrew Boynton, Eco-Patent Commons: A Donation Approach Encouraging Innovation Within The Patent

System, 35 Wm. & Mary Envtl. L. & Pol'y Rev. 659 at page 661, citing Martin LaMonica, Eco-Patent Commons

Shares Earth-Friendly Tech, CNET NEWS, (Jan.13, 2008), http://news.cnet.com/Eco-Patent-Commons-shares-

earth-friendly-tech/ 2100-13844 3-6225735.html.

73 The Eco-Patent Commons: A leadership opportunity brochure, available at URL

http://ecopatentcommons.org/publications, last visited on 31 March 2013.

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has recognized in this regard: businesses will likely not donate their best patents that may give

them a competitive advantage.74

Another important idea often floated in this regarded is of Patent Pools. Pools may increase

efficiency by reducing transaction costs and time.75

However, their success in increasing access

to green technologies again depends upon voluntary participation by entities that own important

patents.76

Moreover, whereas on one hand they can improve access, they can also have the

reverse effect because of price fixing and collusive behavior by the participating entities.77

Thus, while positive steps have been taken to provide better access while still protecting owners

interest, whatever balance may be said to exist has been achieved by voluntary actions of patent

holders and may not be enough. Need for more incentives for patent owners to contribute to

commons is clear, as well as more refinement in patent pooling mechanisms.

2. Increased access to developing and under-developed countries

Technology transfer from developed to developing countries has been adopted as a commitment

under the UNFCCC78

and affirmed even in the latest Conference at Doha. Yet much contention

74

Joshua D. Sarnoff, The Patent System and Climate Change, electronic copy available at:

http://ssrn.com/abstract=1780499, citing Deborah Behles, The New Race: Speeding Up Climate Change

Innovation, 11 N.C. J. L. & TECH. 1, 20 (2009).

75 Supra note 69 at page 677.

76 Guillaume Henry, Intellectual Property Rights and Green Technologies, available online at URL

http://www.aippi.fr/upload/Prix%20AIPPI/greentech-ipr-1st-academic-prize-dr.-guillaume-henry.pdf, last visited on

31 March 2013.

77 Supra note 69 at page 677.

78 Article 4.5, UNFCCC available at URL

http://unfccc.int/files/essential_background/background_publications_htmlpdf/application/pdf/conveng.pdf, last

visited on 31 March 2013.

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exists over the nature of role that Intellectual Property Rights (IPRs) may play in this

process.79

Consequently, UNFCCC still remains silent on this issue.

On one end of this polar debate, developed countries argue that IPRs facilitate not only

development of green technologies, but also their transfer to developing countries by providing

assurance to rights holders against loss of control over their property.80

On the other, developing

countries describe these as an obstacle and seek carving out of exceptions by compulsory

licensing.81

It has been argued that only further research will bring clarity over the details of a

possible balance between the two.82

It is submitted that while the primary mechanism for achieving effective transfer of technology

should include step by step building of transfer channels by use of tools such as Technology

Mechanism83

and Green Climate Fund84

, both the above two perspectives raise the same

question: is there any case for denying injunctions in cases of patent infringements where Green

Technologies are involved?

Green Technologies may stake a higher claim to exception from complete exclusion through

injunction from a policy perspective and the provision of damages may be a better solution. It is

however submitted that in such cases, the reasonable royalty standard may not always be

appropriate and the plaintiff may be deserving of higher standard of damages which account for

providing a means of recouping there investment as well as incentivizing further research. Such

79

Climate Change, Technology Transfer and Intellectual Property Rights: Background Paper by International Centre for Trade and Sustainable Development available at URL

http://www.iisd.org/pdf/2008/cph_trade_climate_tech_transfer_ipr.pdf, last visited on 31 March 2013. 80

Ibid at page 4. 81

See, Tim Wilson, Green Intellectual Property, The Wall Street Journal Asia [Hong Kong] 15 July 2009: 13. 82

See supra note 79 at page 8. 83

See, http://unfccc.int/ttclear/jsp/TechnologyMechanism.jsp, last visited on 31 March 2013. 84

See, The Green Climate Fund as a patent pool for innovations available at URL http://www.nature.com/nbt/journal/v30/n10/pdf/nbt.2378.pdf, last visited on 31 March 2013.

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a standard will need to be set between reasonable royalties and lost profits, which in my opinion

represent the two undesirable extremes causing tension between incentives and access.

While many arguments may exist against the feasibility of determining a correct standard in this

regard, it is argued that such a standard may act more as a benchmark for the parties in terms of

what to expect out of litigation and may thus lead to more meaningful and balanced negotiations

between the parties themselves.