Comments of ICLE, Proposed Consent Order In the Matter of Motorola Mobility LLC and Google, Inc., FTC - International Center for Law & Economics
Focus Areas:    Antitrust | FRAND | FTC | FTC Act Section 5 | licensing | patent enforcement | standard setting

Comments of ICLE, Proposed Consent Order In the Matter of Motorola Mobility LLC and Google, Inc., FTC

Comments of International Center for Law & Economics, In the Matter of Motorola Mobility LLC, A Ltd. Liab. Co., & Google Inc., A Corp.., 121-0120 (Jan. 3, 2013).

Summary

We appreciate this opportunity to comment on the proposed Consent Agreement and Order in this matter. The Order is aimed at imposing some limits on an area of great complexity and vigorous debate among industry, patent experts and global standards bodies: the allowable process for enforcing FRAND licensing of SEPs. The most notable aspect of the Order is its treatment of the process by which Google and, if extended, patent holders generally may attempt to enforce their FRAND-obligated SEPs through injunctions.

As an initial and highly relevant matter, it is essential to note that the FTC’s enforcement action in this case has no proper grounding in antitrust law. Under the doctrines set down in Trinko and NYNEX, among other cases, there is no basis for liability under Section 2 of the Sherman Act because the exercise of lawfully acquired monopoly power is not actionable under the antitrust laws. Even under Section 5 of the FTC Act the action has no basis: The Commissioners who supported the action could not agree whether its legal basis rested in unfair acts or practices or unfair methods of competition, and under an unfair methods of competition analysis (which was supported by most of the commissioners), the action is unsound because there is no evidence of consumer harm.

With respect to the terms of the Order itself, we believe that superimposing process restraints from above is not the best approach in dealing with what is, in essence, a contract dispute. Few can doubt the benefits of greater clarity in this process; the question is whether the FTC’s particular approach to the problem sacrifices too much in exchange for such clarity. FRAND terms are inherently indeterminate and flexible. Indeed, they often apply precisely in situations where licensors and licensees need flexibility because each licensing circumstance is nuanced and a onesize-fits-all approach is not workable. Enforced “certainty” by the Commission, without proper grounding in antitrust principles and doctrine, may impose costly constraints on innovation without commensurate gains.

Instead, we believe that parties should be held to the agreements they make with SSOs, whose role is to ensure that standards are workable and that the licensing of patents that read on them is not abused. This approach has worked in the past and still functions well today. The proposed Order alters the current incentive structure, encourages infringement by lowering its costs, and creates a disincentive to standardize and to license. Where anticompetitive practices occur, as with unlawful collusion, the FTC clearly has authority to act. However, blanket constraints without antitrust grounding on a crucial method of patent enforcement will weaken the very structure the FTC is trying to strengthen.

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