Federal Trade Commission.
Proposed consent agreement; correction.
The Federal Trade Commission published a document in the Federal Register of January 11, 2013, requesting public comments on an analysis of proposed consent order to aid public comment. The document inadvertently did not include the Statement of the Commission. This document contains the Statement of the Commission.
Start Further Info
FOR FURTHER INFORMATION CONTACT:
Richard Feinstein or Pete Levitas (202-326-2555), FTC, Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 20580.
In the Federal Register of January 11, 2013, in FR Doc. 2013-00465, on page 2402, the third column, second paragraph (after “Richard C. Donohue, Acting Secretary,” but before the “Statement of Commissioner Rosch,”) insert the following Statement of the Commission:
Statement of the Federal Trade Commission
The Federal Trade Commission has today voted to issue for public comment a Complaint and Order against Google Inc. (“Google”) designed to remedy Google's allegedly anticompetitive conduct resulting from breaches by Google and its subsidiary Motorola Mobility, Inc. (“Motorola”) of Motorola's commitments to license standard-essential patents (“SEPs”) on terms that are fair, reasonable and non-discriminatory (“FRAND”).
The Complaint alleges that, before its acquisition by Google, Motorola reneged on a licensing commitment made to several standard-setting bodies to license its standard-essential patents relating to smartphones, tablet computers, and video game systems on FRAND terms by seeking injunctions against willing licensees of those SEPs.
This conduct tended to impair competition in the market for these important electronic devices—products that over half of Americans own and use daily, including iPhones, iPads and Xboxes. After purchasing Motorola for $12.5 billion in June 2012, Google continued Motorola's conduct. These actions constitute unfair methods of competition, as well as unfair acts and practices, in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45.
Google's settlement with the Commission requires Google to withdraw its claims for injunctive relief on FRAND-encumbered SEPs around the world, and to offer a FRAND license to any company that wants to license Google's SEPs in the future. If accepted by the Commission, the Proposed Order may set a template for the resolution of SEP licensing disputes across many industries, and reduce the costly and inefficient need for companies to amass patents for purely defensive purposes in industries where standard-compliant products are the norm.
The Commission has a long history of using its enforcement authority to safeguard the integrity of the standard-setting process.
Standard setting can deliver substantial benefits to American consumers, promoting innovation, competition, and consumer choice. But standard setting often supplants the competitive process with the collective decision-making of competitors, requiring that we be vigilant in protecting the integrity of the standard-setting process.
Today's Commission Start Printed Page 3428action helps ensure consumers will continue to see the benefits of competition and innovation in important technology markets.
We previously explained in the Commission's unanimous filings before the United States International Trade Commission in June 2012 that the threat of injunctive relief “in matters involving RAND-encumbered SEPs, where infringement is based on implementation of standardized technology, has the potential to cause substantial harm to U.S. competition, consumers and innovation.” 
The threat of an injunction allows a SEP holder to demand and realize royalty payments reflecting the investments firms make to develop and implement the standard, rather than the economic value of the technology itself.
In addition to harming incentives for the development of standard-compliant products, the threat of an injunction can also lead to excessive royalties that may be passed along to consumers in the form of higher prices. Alternatively, an injunction or exclusion order could ban the sale of important consumer products entirely. This type of “patent ambush” harms competition and consumers and is rightly condemned by the Commission.
We take this action pursuant to the Commission's authority under Section 5 to prohibit unfair methods of competition, which both Congress and the Supreme Court have expressly deemed to extend beyond the Sherman Act.
A stand-alone Section 5 unfair methods of competition claim allows the Commission to protect consumers and the standard-setting process while minimizing the often burdensome combination of class actions and treble damages associated with private antitrust enforcement. In a society that all of us recognize is overly litigious, the judicious use of Section 5 is a sensible and practical way for the Commission to bring problematic conduct to a halt.
For these reasons, we respectfully disagree with the view of Commissioners Rosch and Ohlhausen that the conduct we challenge here, and the similar acts we challenged in Bosch, represent an undisciplined or unwarranted application of our unfair methods of competition authority. As we have previously explained, we believe that a breach of a FRAND commitment in the context of standard setting poses serious risks to the standard-setting process, competition, and consumers.
Where opportunistic behavior of the sort involved here (and in Bosch) harms, or threatens to harm, competition, the competitive process, and consumers, Commission intervention is justified. Accordingly, our colleagues' contention that we are applying our unfair methods of competition authority without regard for limiting principles is simply wrong. In fact, we note that our action is plainly consistent with several principles identified by Commissioner Rosch as justifying Commission action under Section 5.
Start Printed Page 3429
We also disagree with Commissioner Ohlhausen's claim that the proposed settlement with Google creates uncertainty for market participants. In our view, it does just the opposite. By taking action that may deter the owners of standard-essential patents from unilaterally defining the terms of FRAND agreements through the exercise of leverage acquired solely through the standard-setting process, we protect the integrity of that process. Moreover, we believe the procedures outlined in the proposed settlement will provide useful guidance to market participants, including SSOs, in developing a predictable approach to resolve licensing disputes involving standard-essential patents. This will benefit all stakeholders, including patentees, implementers, and consumers.
We also believe that Commissioner Ohlhausen is incorrect in her claim that our allegations are in conflict with prior court rulings and in particular with certain findings of the district court in Apple, Inc. v. Motorola Mobility, Inc.
The court's determination in that case, made in connection with a decision on a motion in limine—not a trial on the merits—concerned the application of Wisconsin contract law. At most, the ruling suggests there is a question of fact as to whether Motorola's injunctive relief claims violated its contract with the SSOs.
The evidence before us provides us with sufficient reason to believe that a violation of Google and MMI's FRAND commitments occurred.
Finally, we are not persuaded by Commissioner Ohlhausen's argument that the conduct alleged in the Commission's complaint implicates the First Amendment and the Noerr-Pennington doctrine. As noted above, we have reason to believe that MMI willingly gave up its right to seek injunctive relief when it made the FRAND commitments at issue in this case.
We do not believe that imposing Section 5 liability where a SEP holder violates its FRAND commitments offends the First Amendment because doing so in such circumstances “simply requires those making promises to keep them.” 
End Further Info
By direction of the Commission, Commissioner Rosch and Commissioner Ohlhausen abstaining.
Donald S. Clark,
[FR Doc. 2013-00837 Filed 1-15-13; 8:45 am]
BILLING CODE 6750-01-P