Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 1 of 11 PageID #: 2184
`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 1of11PagelD#: 2184
`
`
`
`
`
`
`
`
`
`
`EXHIBIT D
`EXHIBIT D
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 2 of 11 PageID #: 2185
`
`UNITED STATES DEPARTMENT OF JUSTICE AND
`UNITED STATES PATENT & TRADEMARK OFFICE
`
`POLICY STATEMENT ON REMEDIES FOR STANDARDS-ESSENTIAL PATENTS SUBJECT TO
`VOLUNTARY F/RAND COMMITMENTS
`
`January 8, 2013
`
`The U.S. Department of Justice, Antitrust Division (DOJ), and the U.S. Patent &
`
`
`
`
`
`Trademark Office (USPTO), an agency of the U.S. Department of Commerce, provide
`
`the following perspectives on a topic of significant interest to the patent and standards-
`
`setting communities: whether injunctive relief in judicial proceedings or exclusion orders
`
`in investigations under section 337 of the Tariff Act of 19301 are properly issued when a
`
`patent holder seeking such a remedy asserts standards-essential patents that are
`
`encumbered by a RAND or FRAND licensing commitment.2
`
`
`
`The patent system promotes innovation and economic growth by providing
`
`incentives to inventors to apply their knowledge, take risks, and make investments in
`
`research and development and by publishing patents so that others can build on the
`
`disclosed knowledge with further innovations. These efforts, in turn, benefit society as a
`
`whole by disseminating knowledge and by providing new and valuable technologies,
`
`
`
` 1
`
` Although the focus of the present policy statement is on exclusion orders issued pursuant to 19 U.S.C. §
`1337, similar principles apply to the granting of injunctive relief in U.S. federal courts, which is governed
`by the standards set forth by the U.S. Supreme Court in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388
`(2006). The present policy statement is not, however, intended to be a complete legal analysis of injunctive
`relief under the eBay standard.
`
` 2
`
` For purposes of this statement, a patent is RAND- or FRAND-encumbered where a patent holder has
`voluntarily agreed to license the patent on reasonable and non-discriminatory (RAND) terms or fair,
`reasonable, and non-discriminatory (FRAND) terms while participating in standards-setting activities at a
`standards-developing organization (SDO). In the United States, SDO members may commit to license all
`of their patents that are essential to the SDO standard on RAND terms. In other jurisdictions, SDO
`members may commit to license such patents on FRAND terms. For the purposes of this letter, F/RAND
`refers to both types of licensing commitments. Commentators frequently use the terms interchangeably to
`denote the same substantive type of commitment.
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 3 of 11 PageID #: 2186
`
`
`
`lower prices, improved quality, and increased consumer choice.3 The DOJ and USPTO
`
`recognize that the right of a patent holder to exclude others from practicing patented
`
`inventions is fundamental to obtaining these benefits. It is incorporated into section 337
`
`of the Tariff Act of 1930 itself, which forbids the unlawful “importation into the United
`
`States . . . of articles that . . . infringe a valid and enforceable United States patent.”4 As
`
`noted in the Administration’s 2010 Joint Strategic Plan on Intellectual Property
`
`Enforcement, “[s]trong enforcement of intellectual property rights is an essential part of
`
`the Administration’s efforts to promote innovation and ensure that the U.S. is a global
`
`leader in creative and innovative industries.”5
`
` Accordingly, as historically has been the
`
`case, exclusion typically is the appropriate remedy when an imported good infringes a
`
`valid and enforceable U.S. patent.
`
`Standards, and particularly voluntary consensus standards set by standards-
`
`developing organizations (SDOs), have come to play an increasingly important role in
`
`our economy.
`
`6
`
` Voluntary consensus standards, i.e., agreements containing technical
`
`
`
` 3
`
` 4
`
` 5
`
` See, e.g., OFFICE OF THE U.S. INTELLECTUAL PROP. ENFORCEMENT COORDINATOR, OFFICE OF MGMT. &
`BUDGET, EXEC. OFFICE OF THE PRESIDENT, 2010 JOINT STRATEGIC PLAN ON INTELLECTUAL PROP.
`ENFORCEMENT 3 (2010) [hereinafter 2010 JOINT STRATEGIC PLAN],
`http://www.whitehouse.gov/sites/default/files/omb/assets/intellectualproperty/intellectualproperty_strategic
`_plan.pdf. (“Enforcement of intellectual property rights is a critical and efficient tool we can use, as a gov-
`ernment, to strengthen the economy, support jobs and promote exports. Intellectual property supports jobs
`across all industries, and in particular where there is a high degree of creativity, research and innovation.”).
`
` 19 U.S.C. § 1337(a)(1)(B)(i) (2006).
`
` 2010 JOINT STRATEGIC PLAN, supra note 3, at 4.
`
`2
`
` Congress and the Executive Branch have recognized the benefits of voluntary consensus standards. SDOs
`play an essential role in the development of such standards. See, e.g., National Technology Transfer and
`Advancement Act of 1995, Pub. L. No. 104-113 § 12(d), 110 Stat. 775, 783 (1996), 15 U.S.C. § 272 note
`(2006)); OFFICE OF MGMT. & BUDGET, EXEC. OFFICE OF THE PRESIDENT, OMB CIRCULAR A-119, FED.
`PARTICIPATION IN THE DEV. AND USE OF VOLUNTARY CONSENSUS STANDARDS AND IN CONFORMITY
`ASSESSMENT ACTIVITIES (1998), www.whitehouse.gov/omb/circulars_a119; see also Mem. from the Exec.
`
`
` 6
`
`
`
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 4 of 11 PageID #: 2187
`
`
`
`specifications or other criteria, are generally produced by private-sector organizations
`
`engaged in the development of standards.7
`
`
`
`Voluntary consensus standards serve the public interest in a variety of ways, from
`
`helping protect public health and safety to promoting efficient resource allocation and
`
`production by facilitating interoperability among complementary products.
`
`8
`
`
`
`Interoperability standards have paved the way for moving many important innovations
`
`into the marketplace, including the complex communications networks and sophisticated
`
`mobile computing devices that are hallmarks of the modern age. Indeed, voluntary
`
`consensus standards, whether mechanical, electrical, computer-related, or
`
`communications-related, have incorporated important technical advances that are
`
`
`
`Office of the President on the Principles for Fed. Engagement in Standards Activities to Address Nat’l
`Priorities for the Heads of Exec. Dep’ts and Agencies (Jan. 17, 2012),
`http://www.whitehouse.gov/sites/default/files/omb/memoranda/2012/m-12-08_1.pdf.
`
`7 Participation in their development is optional and the resulting standards are generally intended for
`voluntary use. U.S. Dep’t of Commerce, Standards and Competitiveness: Coordinating for Results 5
`(2004), http://www.ita.doc.gov/td/standards/pdf%20files/Standards%20and%20Competitiveness.pdf.
`In the United States alone, there are approximately 50,000 private-sector voluntary standards developed by
`more than 600 organizations. See Overview of the U.S. Standardization System, Am. Nat’l Standards Inst.,
`http://www.standardsportal.org/usa_en/standards_system.aspx (last visited Dec. 7, 2012). The U.S.
`standards system is tremendously diverse, resulting in a system that is largely sectoral in focus. This is a
`logical approach because SDOs developing standards for use in each industrial sector, such as the
`information technology, telecommunications, automotive, medical devices, and building technology
`sectors, are most likely to understand that sector’s needs and to know what standards best meet those needs.
`Many products, including those in the telecommunications sector, are based on multiple voluntary
`consensus standards developed by a number of different SDOs with different patent-licensing policies.
`
` 8
`
` Due to the important role of F/RAND-licensed intellectual property in the standards process, we
`understand that the National Science and Technology Council Subcommittee on Standards, which includes
`broad representation from stakeholder agencies, plans to study this issue to explore any broader potential
`impacts of this, and other, related policies.
`
`
`
`
`
`3
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 5 of 11 PageID #: 2188
`
`
`
`fundamental to the interoperability of many of the products on which consumers have
`
`come to rely.9
`
`
`
`However, collaborative standards setting does not come without some risks. For
`
`example, when a standard incorporates patented technology owned by a participant in the
`
`standards-setting process, and the standard becomes established, it may be prohibitively
`
`difficult and expensive to switch to a different technology within the established standard
`
`or to a different standard entirely. As a result, the owner of that patented technology may
`
`gain market power and potentially take advantage of it by engaging in patent hold-up,
`
`which entails asserting the patent to exclude a competitor from a market or obtain a
`
`higher price for its use than would have been possible before the standard was set, when
`
`alternative technologies could have been chosen. This type of patent hold-up can cause
`
`other problems as well. For example, it may induce prospective implementers to
`
`postpone or avoid making commitments to a standardized technology or to make
`
`inefficient investments in developing and implementing a standard in an effort to protect
`
`themselves. Consumers of products implementing the standard could also be harmed to
`
`the extent that the hold-up generates unwarranted higher royalties and those royalties are
`
`passed on to consumers in the form of higher prices.
`
`10
`
`
`
`
`
` 9
`
` See SUBCOMM. ON STANDARDS, NAT’L SCI. & TECH. COUNCIL, OFFICE OF SCI. & TECH. POLICY, EXEC.
`OFFICE OF THE PRESIDENT, FED. ENGAGEMENT IN STANDARDS ACTIVITIES TO ADDRESS NAT’L PRIORITIES:
`BACKGROUND AND PROPOSED POLICY RECOMMENDATIONS 1 (Oct. 10, 2011),
`http://standards.gov/upload/Federal_Engagement_in_Standards_Activities_October12_final.pdf.
`
`10 See U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, ANTITRUST ENFORCEMENT AND INTELLECTUAL
`PROPERTY RIGHTS: PROMOTING INNOVATION AND COMPETITION 35-36 (2007),
`http://www.justice.gov/atr/public/hearings/ip/222655.htm.
`
`
`
`
`4
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 6 of 11 PageID #: 2189
`
`
`
`
`In an effort to reduce the occurrences of opportunistic conduct in the adoption of
`
`voluntary consensus standards, while encouraging participants to include the best
`
`available technology in standards, some SDOs have relied on voluntary licensing
`
`commitments by their participants, including commitments to license the patents they
`
`own that are essential to the standard on F/RAND terms. SDOs and their members rely
`
`on these voluntary F/RAND commitments to facilitate the bilateral licensing negotiations
`
`necessary for successful widespread adoption of a standard and to provide assurances to
`
`implementers of the standard that the patented technologies will be available to parties
`
`seeking to license them.11
`
`
`
`In making such voluntary F/RAND licensing commitments, patent holders that
`
`also sell products and services related to the standard benefit from expanded marketing
`
`opportunities, and patent holders that focus on licensing their inventions benefit from an
`
`expanded source of revenues. These incentives encourage patent holders to contribute
`
`their best technology to the standardization process. F/RAND commitments may also
`
`contribute to increased follow-on innovation by allowing non-discriminatory access to
`
`networks both to new entrants and to established market participants to introduce new
`
`generations of network-operable devices.
`
`12
`
` In light of these and other potential benefits,
`
`the United States continues to encourage systems that support voluntary F/RAND
`
`licensing—both domestically and abroad—rather than the imposition of one-size-fits-all
`
`
`11 By participating in the standards-setting activities at the SDO and by voluntarily making a F/RAND
`licensing commitment under the SDO’s policies, the patent holder may be implicitly acknowledging that
`money damages, rather than injunctive or exclusionary relief, is the appropriate remedy for infringement in
`certain circumstances, as discussed below.
`
`12 See Letter from Thomas O. Barnett, Assistant Att’y Gen., U.S. Dep’t of Justice, to Robert A. Skitol, Esq.
`7 (Oct. 30, 2006), http://www.usdoj.gov/atr/public/busreview/219380.pdf.
`
`
`
`
`5
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 7 of 11 PageID #: 2190
`
`
`
`mandates for royalty-free or below-market licensing, which would undermine the
`
`effectiveness of the standardization process and incentives for innovation.
`
`A patent owner’s voluntary F/RAND commitments may also affect the
`
`appropriate choice of remedy for infringement of a valid and enforceable standards-
`
`essential patent. In some circumstances, the remedy of an injunction or exclusion order
`
`may be inconsistent with the public interest. This concern is particularly acute in cases
`
`where an exclusion order based on a F/RAND-encumbered patent appears to be
`
`incompatible with the terms of a patent holder’s existing F/RAND licensing commitment
`
`to an SDO. A decision maker could conclude that the holder of a F/RAND-encumbered,
`
`standards-essential patent had attempted to use an exclusion order to pressure an
`
`implementer of a standard to accept more onerous licensing terms than the patent holder
`
`would be entitled to receive consistent with the F/RAND commitment—in essence
`
`concluding that the patent holder had sought to reclaim some of its enhanced market
`
`power over firms that relied on the assurance that F/RAND-encumbered patents included
`
`in the standard would be available on reasonable licensing terms under the SDO’s
`
`policy.13
`
` Such an order may harm competition and consumers by degrading one of the
`
`tools SDOs employ to mitigate the threat of such opportunistic actions by the holders of
`
`F/RAND-encumbered patents that are essential to their standards.
`
`
`
`13 Moreover, this type of hold-up may be exacerbated when patents are sold or otherwise transferred by
`their owners. If F/RAND licensing obligations do not travel with a transferred patent , the potential for
`hold-up from the network effects of a standard may be substantially increased. For this reason, we believe
`that F/RAND commitments should bind subsequent patent transferees. See Renata B. Hesse, Deputy
`Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Six “Small” Proposals for SSOs before Lunch:
`http://www.justice.gov/atr/public/
`Remarks as Prepared for the ITU-T Patent Roundtable (Oct. 10, 2012),
`speeches/287855.pdf.
`
`
`
`
`
`6
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 8 of 11 PageID #: 2191
`
`
`
`
`This is not to say that consideration of the public interest factors set out in the
`
`statute would always counsel against the issuance of an exclusion order to address
`
`infringement of a F/RAND-encumbered, standards-essential patent. An exclusion order
`
`may still be an appropriate remedy in some circumstances, such as where the putative
`
`licensee is unable or refuses to take a F/RAND license and is acting outside the scope of
`
`the patent holder’s commitment to license on F/RAND terms.14 For example, if a
`
`putative licensee refuses to pay what has been determined to be a F/RAND royalty, or
`
`refuses to engage in a negotiation to determine F/RAND terms, an exclusion order could
`
`be appropriate. Such a refusal could take the form of a constructive refusal to negotiate,
`
`such as by insisting on terms clearly outside the bounds of what could reasonably be
`
`considered to be F/RAND terms in an attempt to evade the putative licensee’s obligation
`
`to fairly compensate the patent holder.15
`
` An exclusion order also could be appropriate if
`
`a putative licensee is not subject to the jurisdiction of a court that could award damages.
`
`This list is not an exhaustive one. Rather, it identifies relevant factors when determining
`
`whether public interest considerations should prevent the issuance of an exclusion order
`
`
`
`14 As courts have found, when a holder of a standards-essential patent makes a commitment to an SDO to
`license such patents on F/RAND terms, it does so for the intended benefit of members of the SDO and third
`parties implementing the standard. These putative licensees are beneficiaries with rights to sue for breach
`of that commitment. See Microsoft Corp. v. Motorola, Inc., 864 F. Supp. 2d 1023, 1030-33 (W.D. Wash.
`2012); Microsoft Corp. v. Motorola, Inc.,854 F. Supp. 2d 993, 999-1001 (W.D. Wash. 2012); see also
`Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 884 (9th Cir. 2012) (holding that the “district court’s
`conclusions that Motorola’s RAND declarations to the ITU created a contract enforceable by Microsoft as a
`third-party beneficiary (which Motorola concedes), and that this contract governs in some way what actions
`Motorola may take to enforce its ITU standard-essential patents (including the patents at issue in the
`German suit), were not legally erroneous”); Apple, Inc. v. Motorola Mobility, Inc., --- F. Supp. 2d ---, No.
`11-cv-178bbc, 2012 WL 3289835, at *21-22 (W.D. Wis. Aug. 10, 2012); Apple, Inc. v. Motorola Mobility,
`Inc., No. 11-cv-178bbc, 2011 WL 7324582, at *7-11 (W.D. Wis. June 10, 2011).
`
`15 We recognize that the risk of a refusal to license decreases where the putative licensee perceives a cost
`associated with delay and increases where the putative licensee believes its worst-case outcome after
`litigation is to pay the same amount it would have paid earlier for a license.
`
`
`
`
`7
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 9 of 11 PageID #: 2192
`
`
`
`based on infringement of a F/RAND-encumbered, standards-essential patent or when
`
`shaping such a remedy.
`
`Voluntary consensus standards-setting activities benefit consumers and are in the
`
`public interest. Although we recommend caution in granting injunctions or exclusion
`
`orders based on infringement of voluntarily F/RAND-encumbered patents essential to a
`
`standard, DOJ and USPTO strongly support the protection of intellectual property rights
`
`and believe that a patent holder who makes such a F/RAND commitment should receive
`
`appropriate compensation that reflects the value of the technology contributed to the
`
`standard. It is important for innovators to continue to have incentives to participate in
`
`standards-setting activities and for technological breakthroughs in standardized
`
`technologies to be fairly rewarded. By providing these views on ways in which
`
`opportunistic conduct by patent holders and putative licensees may be mitigated, the DOJ
`
`and USPTO seek to ensure that there is greater certainty concerning the meaning of a
`
`F/RAND commitment so that incentives to participate in voluntary consensus standards-
`
`setting activities continue to be strong.
`
`The DOJ is the executive-branch agency charged with protecting U.S. consumers
`
`by promoting and protecting competition. The USPTO, an agency of the Department of
`
`Commerce, is the executive-branch agency charged with responsibility for examining
`
`patent applications, issuing patents, and—through the Secretary of Commerce—advising
`
`the President on domestic and certain international issues of intellectual property
`
`policy.16
`
` The DOJ and USPTO are concerned about the potential impact of exclusion
`
`
`
`16 See 35 U.S.C. §§ 1, 2 (2006).
`
`
`
`
`
`8
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 10 of 11 PageID #: 2193
`
`
`
`orders on “competitive conditions in the United States” and “United States consumers” in
`
`some cases involving F/RAND-encumbered patents that are essential to a standard, and
`
`the conditions under which they may be denied.17
`
` Although, as described above, an
`
`exclusion order for infringement of F/RAND-encumbered patents essential to a standard
`
`may be appropriate in some circumstances, we believe that, depending on the facts of
`
`individual cases, the public interest may preclude the issuance of an exclusion order in
`
`cases where the infringer is acting within the scope of the patent holder’s F/RAND
`
`commitment and is able, and has not refused, to license on F/RAND terms.
`
`The approach the U.S. International Trade Commission (USITC) adopts in cases
`
`involving voluntarily F/RAND-encumbered patents that are essential to a standard will be
`
`important to the continued vitality of the voluntary consensus standards-setting process
`
`and thus to competitive conditions and consumers in the United States. In an era where
`
`competition and consumer welfare thrive on interconnected, interoperable network
`
`platforms, the DOJ and USPTO
`
`18
`
` urge the USITC to consider whether a patent holder
`
`has acknowledged voluntarily through a commitment to license its patents on F/RAND
`
`terms that money damages, rather than injunctive or exclusionary relief, is the appropriate
`
`remedy for infringement.
`
` The USITC has a mandate to consider the “effect of such exclusion upon the
`
`public health and welfare, competitive conditions in the United States economy, the
`
`
`
`
`17 19 U.S.C. § 1337(d)(1) (2006).
`
`18 See 19 U.S.C. § 1337(b)(2) (2006) (directing the USITC to consult with the Department of Justice and
`“other departments and agencies as it considers appropriate”).
`
`
`
`
`
`9
`
`

`

`Case 6:14-cv-00982-KNM Document 178-5 Filed 12/24/15 Page 11 of 11 PageID #: 2194
`
`
`
`production of like or directly competitive articles in the United States, and United States
`
`consumers.”19 As the USITC has observed, these public interest factors ‘“are not meant
`
`to be given mere lip service,” but rather “‘public health and welfare and the assurance of
`
`competitive conditions in the United States economy must be the overriding
`
`considerations in the administration of this statute.’”20
`
`
`
`The USITC may conclude, after applying its public interest factors, that exclusion
`
`orders are inappropriate in the circumstances described in more detail above.
`
`Alternatively, it may be appropriate for the USITC, as it has done for other reasons in the
`
`past, to delay the effective date of an exclusion order for a limited period of time to
`
`provide parties the opportunity to conclude a F/RAND license.
`
`Finally, determinations on the appropriate remedy in cases involving F/RAND-
`
`encumbered, standards-essential patents should be made against the backdrop of
`
`promoting both appropriate compensation to patent holders and strong incentives for
`
`innovators to participate in standards-setting activities.
`
`
`
`19 19 U.S.C. § 1337(d)(1).
`
`20 Certain Inclined Field Acceleration Tubes & Components Thereof, Inv. No. 337-TA-67, USITC Pub.
`1119, Comm’n Op., at 22 (Dec. 1980) (emphasis in original) (quoting S. REP. 93-1298, at 197 (1974),
`reprinted in 1974 U.S.C.C.A.N. 7186, 7330).
`
`
`
`
`
`10
`
`