FTC testifies on hold up by standard essential patent holders

Commissioner Edith Ramirez of the U.S. Federal Trade Commission has delivered testimony before the Senate Judiciary Committee on competition concerns with standard essential patent holders. Patent holders can work within standard setting organizations to ensure standardized technology across devices and systems. Although this has obvious procompetitive benefits, the FTC said that this practice could allow standard essential patent owners to “negotiate high royalty rates and other favorable terms after a standard is adopted that they could not have credibly demanded beforehand.”

To get around such hold up, the patent holder can make a RAND (reasonable and non-discriminatory) commitment to license its patent in exchange for a royalty. Yet problems persist, as the patent holder may be using its RAND commitment to seek an exclusion order for infringement, blocking the sale or import of the infringing products from the U.S. market. The patent holder could also “demand higher royalties or other more costly licensing terms.”

In its testimony, the FTC stated that federal district courts and the International Trade Commission, under its public interest authority, will be able to limit hold up.

Full content: FTC Press Release

Related content: Reasons to Reject a “No Injunctions” Rule for SEPs and FRAND-Obligated Patents

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