Google's handling of mobile patents comes under scrutiny
By Chantal Tode
October 11, 2012
FTC focuses on standard essential patents
While Google has long claimed to be the victim of others using patents to gain a competitive advantage in the mobile market, an investigation by the Federal Trade Commission into Google’s use of standard essential patents suggests the company’s own actions may be questionable.
The FTC has widened an ongoing antitrust investigation into Google’s search advertising business to include mobile patents and the conduct of Motorola, according to a New York Times article. If the FTC were to bring an antitrust action against Google for the way it is using standard essential patents, this might devalue the Motorola acquisition and mobile patents more broadly.
“The result of such an action would be to reduce the value of standard essential patents generally because it would demonstrate that the FTC is going to be aggressive about overseeing the use of those patents,” said C. Graham Gerst, partner at Global IP Law Group LLC, Chicago.
“All entities would see some diminution in the value of those assets and Google, Motorola would be one of those entities,” he said.
Fair and reasonable
Google completed its acquisition of Motorola earlier this, explicitly stating that one of the reasons why it wanted to buy the handset manufacturers is because of its robust mobile patent holdings and to protect itself against legal actions by others.
At issue in the FTC investigation, which was reportedly initiated several months ago, are standard-essential patents. These patents cover technology that is required to practice a given industry standard.
Companies holding standard essential patents typically makes a commitment to license them on fair, reasonable and non-discriminatory terms, meaning they cannot prevent a competitor's from selling a product using these patents as long as that company is willing to pay on those terms.
Standard essential patents are typically very hard to design around, meaning that if a company wants to practice a certain standard, it either has to license the patent or infringe it. Because these patents are so widely used and proving any infringement is usually very straightforward they have typically been viewed as the Holy Grail of patents.
However, there is growing concern that mobile companies are not acting fairly when it comes to standard essential patents.
In one recent legal case, Motorola sought an injunction against Apple based on a group of patents that included some standard essential patents. Motorola claimed Apple was unwilling to pay fair and reasonable terms for the license.
“The argument goes that the combined entity of Google and Motorola is attempting to use patents to exclude competitors from the marketplace,” Mr. Gerst said. “The judge was very critical of the effort to use patents in this manner.”
Additionally, the FTC expressed concern to Congress this summer that companies owning standard essential patents may be trying to impede the competition by asking the courts to block these firms from the U.S. market. Companies may be using the threat of an injunction to demand higher royalties, with such activities deterring innovation.
“What has changed over the last 12 months has been that antitrust authorities in Europe and at the FTC are looking very closely at the use of standard essential patents to block competition in the marketplace as opposed to merely generating revenue,” Mr. Gerst said.
“This is an ongoing process that will take some time,” he said. “The FTC has not gone after anyone in an aggressive manner yet but the information gathering step is typically a precursor of an aggressive action.”
There are several reasons why there is growing focus on standard essential patents in the mobile space more broadly, and not just on how Google is handling them.
“The whole industry is based on communication,” Mr. Gerst said. “For two parties to communicate, they have to have an agreed upon set of rules for communication, so standards are very essential.
“Secondly, this is one of the biggest, most profitable industries in the world,” he said. “Thirdly, competition is extremely robust and parties are looking to whatever leverage they can find to gain market share.
“It is going to come down to what constitutes fair, reasonable and non-discriminatory terms. Once that determination is made, if a party is willing to pay, it can’t be enjoined.”
Chantal Tode is associate editor on Mobile Marketer, New York
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