Proposed Consent Agreement In the Matter of Motorola Mobility LLC, a limited liability company, and Google Inc., a corporation; FTC File No. 121 0120
The FTC settlement with Google/ Motorola Mobility, FTC File No. 1210120 (“the Settlement”), has importance beyond merely the specific activities of Google. The Settlement will resonate with the entire standards community in a like manner to a DOJ Business Review Letter. The Settlement can provide a helpful foundation for an ADR mechanism to be used by other SEP owners to resolve FRAND issues. However, to provide more clarity to the standards community, the proposed arbitration steps of the Settlement should be further refined. A primary issue is whether the arbitrator/panel may engage experts to resolve many of the issues including setting of FRAND rates, essentiality issues and licensing terms such as non-assertion, defensive termination, grant backs and reach through royalty clauses. In its 2007 IP report, the FTC raised concern over such licensing clauses, especially where there is potential for “an illegitimate duoply.” U.S. Dept of Justice & FTC, Antitrust Enforcement & IP Rights, p. 90 (April 2007) The ADR procedures of the Settlement should outline a proper role for the AAA or JAMS, along with the assigned arbitrator (and the experts engaged by the arbitrator) to help further the goal of efficiently resolving FRAND disputes without raising additional antitrust issues. For example, the Settlement could suggest that the arbitral body or the arbitrator, where appropriate, may engage i) a neutral attorney (with significant licensing and antitrust experience) to review the proposed license agreement for suspect terms to insure consumers will not be harmed by such a license and ii) a neutral damage expert to determine an appropriate FRAND rate. As well, the issue of unenforceability should be addressed in the Settlement. The settlement states that “validity, Essentiality, Infringement or value” may be addressed through the proposed ADR process (IV, E, 6), yet is silent with respect to challenges involving unenforceability (e.g., inequitable conduct). Unenforceability is a standard defense in patent litigation and should be included in the items to be handled by an arbitrator or district court under the Settlement. Finally, further clarification as to the appropriateness of bifurcated procedures would be helpful. For example, the Settlement could allow for a FRAND term to be set via the arbitration and for a subsequent action to be instituted by either party in a district court to litigate invalidity, infringement and unenforceability issues. While the Settlement includes some helpful guidance, further details with respect to the points raised above could provide greatly needed clarity for third parties who may use such a process when resolving thier own SEP issues.