Government Officials Warn of Wireless Patent Wars
Senior members of Justice Department and FTC express alarm at spike in technology patent disputes where litigants seek import bans of hugely popular devices.
Wed, July 11, 2012
CIO — Senior Obama administration officials on Wednesday expressed concern about the escalating patent wars that have gripped the wireless industry, warning a Senate panel that the import bans that litigants such as Google's Motorola Mobility division and Apple have been seeking could pose significant harm to consumers by driving up prices and limiting choice.
Appearing before the Senate Judiciary Committee, representatives from the Department of Justice and Federal Trade Commission stressed that seeking an exclusion order or injunction to prohibit imports of certain smartphones or other devices should be a strategy of last resort for patent holders, only to be exercised after good-faith royalty negotiations have failed and a remedy cannot be obtained through civil courts.
But often that has not been the case, as recent months have seen a flurry of litigation through which a company appeals to the U.S. International Trade Commission (ITC) to bar imports of a rival's device that allegedly infringes on its patents.
"These issues are currently front and center in the markets for smartphones and tablets, where the risk of competitive harm from such orders can be especially acute," said Edith Ramirez, a commissioner at the Federal Trade Commission. "Complex, multi-component products are the norm in IT markets. For example, a smartphone has hundreds of components and technologies that enable it to communicate over wireless networks, stream video, access the Internet and perform all of the functions that consumers expect. The vast majority of these components and technologies are covered by patents."
Ramirez said that a "conservative estimate" of the number of patents in a typical smartphone hovers in the tens of thousands, many of which are so-called standard-essential, meaning that they are tied to an industry standard that underlies core operations of the device, such as connecting to a 3G network or communicating over a Bluetooth connection.
Often, when a standards-setting organization approves a certain technology, it will secure a commitment from the owner of the essential patent to license its intellectual property to competitors under fair, reasonable and non-discriminatory (FRAND, or, alternatively, RAND) terms.
But a spate of lawsuits and countersuits seeking import bans, pitting Apple against Motorola Mobility and HTC, Motorola Mobility against Microsoft in a case involving technology in the Xbox 360, and others, has left many officials worried that the framework of standard-essential patents has become rife with abuse.
"In recent months, we have seen a growing number of companies engage in what some are calling the next wave in the tech patent wars," said Judiciary Committee Chairman Patrick Leahy (D-Vt.). "Companies that previously cross-licensed their technologies with other companies in the market are increasingly seeking to block their competitors instead."