Justice Department's New Position on Patents, Standard Setting, and Injunctions

Abstract

A deep split in American innovation policy has arisen between new economy and old economy innovation. In a recent policy statement, the Antitrust Division of the Justice Department takes a position that tilts more toward the old economy. Its December, 2019, policy statement on remedies for Standard Essential Patents issued jointly with the U.S. Patent and Trademark Office and the National Institute of Standards and Technology reflects this movement. The policy statement as a whole contains two noteworthy problems: one is a glaring omission, and the other is a mischaracterization of the scope of antitrust liability. Both positions are strongly relevant to the pending Qualcomm litigation in the Ninth Circuit. First, the Statement say nothing about the conduct of patent holders. The Patent Act authorizes patent injunctions “in accordance with the principles of equity.” Under the equitable principle of “unclean hands,” a patentee who is in serious default of its own legal obligations cannot obtain an injunction, at least not until its own bad conduct has been terminated. Second, the Statement’s declaration that FRAND disputes do not raise antitrust issues is false. In the first instance FRAND disputes are about contracts. But if a firm’s anticompetitive use of FRAND-encumbered patents meets the power and conduct requirements of the antitrust laws it can be unlawful under them as well. Guidelines from the government are very useful when they state the law or an agency’s own enforcement position, or when they clarify ambiguities. But they are not legislation. They do not bind courts, other government agencies, or private plaintiffs, particularly not when they conflict with clearly established law.