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Intellectual Property

How the Google Consent Order Alters the Process and Outcomes of Frand Bargaining

Elyse Dorsey and Matthew R. McGuire, 20 Geo. Mason L. Rev. 979, 2013.

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The Federal Trade Commission (“FTC”) recently closed its investigation of Google, following a thorough analysis of numerous aspects of Google’s business conduct. The Proposed Consent Order into which the FTC and Google tentatively entered has garnered significant attention from the antitrust and intellectual property communities for a number of reasons. One important reason is that the Proposed Consent Order places serious limits upon Google’s ability to seek injunctive relief for its patents that are considered “standard-essential” and that are subject to fair, reasonable, and nondiscriminatory (“FRAND”) commitments. This limitation reflects the emerging tendency of competition agencies to consider the threat or pursuit of injunctive relief a serious competitive concern when the patent at issue is standard essential and the patent holder previously agreed to license that patent on FRAND terms.

Indeed, the issue of whether, and if so, under what circumstances, standard essential patent (“SEP”) holders should be allowed to seek, and courts should grant, injunctive relief in cases involving FRAND bargaining has been the topic of considerable debate amongst intellectual property and antitrust scholars, as well. With the closing of its Google investigation, the FTC has joined the United States Department of Justice (“DOJ”) in issuing official statements indicating that owners of SEPs who have agreed to bargain on FRAND terms may be subject to investigations and penalties simply for seeking an injunction against a member of the standard setting organization (“SSO”). This new approach portends a significant shift in the way FRAND negotiations are conducted and in the outcomes they produce. The goal of this Essay is to raise some concerns regarding this issue, and, in particular, to focus upon the potential consumer welfare effects of essentially removing the possibility of injunctive relief for FRAND-encumbered SEPs.

Part I of this Essay describes SSOs and FRAND bargaining, highlighting the potential competitive benefits and pitfalls — most notably, patent holdup — associated with them. Part II articulates the developing approaches the FTC and DOJ have taken toward the possibility of injunctive relief for SEP holders subject to FRAND commitments, noting both how these approaches have evolved over the last few years and the most recent official decisions by each agency. Part III then analyzes the desirability of these approaches; it examines the limited available evidence regarding the extent of patent holdup in FRAND negotiations, how the agencies’ latest approach seemingly departs from the traditional patent law approach to remedies, and how the unintended consequences of disallowing injunctive relief in these cases may negatively affect consumer welfare. Part IV concludes.

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