FTC divide on SEPs detailed in comments to trade agency

24 July 2015. By Leah Nylen.

Over the past month, commissioners at the US Federal Trade Commission have been sparring in an unusual forum: public comments before another federal agency that is considering whether to block imports of certain Nokia and Microsoft phones.

The split between the FTC’s Democrats and Republicans over whether antitrust law should prevent the holders of patents essential to industry standards from obtaining import bans isn’t new. But the divide emerged in full view after the FTC’s chairwoman submitted a statement to the US International Trade Commission without notifying her colleagues.

On July 10, FTC Chairwoman Edith Ramirez submitted a comment to the ITC in a case involving InterDigital, Nokia and Microsoft (Microsoft purchased Nokia’s handset business in 2014). Ten days later, Republican Commissioners Maureen Ohlhausen and Joshua Wright submitted a comment taking the opposite view of Ramirez.

Ramirez said that before owners of standard-essential patents obtain an exclusion order, the trade agency should require them to prove infringers are unwilling to take a license. That would help minimize the potential for patent hold-up, where the holder of a standard-essential patent tries to abuse its market power and seek higher royalties, she said. Her comment, submitted on the last day the ITC was accepting public comments, didn’t become publicly available until the following Monday. By that time, three of Ramirez’s colleagues were away from Washington, with Commissioners Ohlhausen and Terrell McSweeny on vacation and Wright teaching a class in Hot Springs, Virginia.

The ITC’s public comment process, however, allows anyone to submit “reply comments” that address ideas or issues raised during the initial phase. Under the trade agency’s rules, an individual doesn’t need to have offered a comment in the first round to submit a reply. Ohlhausen and Wright’s reply comment makes no direct mention of Ramirez, but is clearly intended as a counter, urging the ITC not to presume that patent hold-up exists in a particular case. Their submission was filed Monday afternoon, the last day for submitting replies.

The move to issue a comment on her own without her colleagues seemed particularly aggressive for Ramirez, who is considered very deliberative, often taking days or weeks to carefully think through her responses to public statements by her fellow commissioners on various issues confronting the agency.

A spokesman for Ramirez declined to comment on her thinking in submitting a personal comment.

Several factors, though, likely went into her reasoning.

A litigator at Quinn, Emanuel, Urquhart & Sullivan who focused on patent and antitrust cases before coming to the FTC, Ramirez has said publicly that the intersection of antitrust and intellectual property is a particular interest of hers. In July 2012, she appeared on behalf of the agency before the Senate Judiciary Committee on this same issue, expressing concerns about standard-essential patent holders seeking exclusion orders at the ITC.

The FTC also has weighed in at the ITC on this topic. In June 2012, the agency submitted a comment on SEPs and exclusion orders in two cases, voicing concern about patent hold-up.

That comment, however, was submitted on behalf of the entire agency, with a footnote explaining the slightly more nuanced view of then-Commissioner Tom Rosch. At the time of its submission, Ohlhausen had just joined the agency, and she didn’t publicly stake out her position on standard-essential patents until November 2012 when she dissented from the FTC’s settlement with Bosch. Wright wouldn’t join the agency for another six months.

Knowing that her Republican colleagues would likely take a different view, Ramirez seems to have calculated that a comment on her own behalf might draw less consternation than forcing a vote that would likely end up split, 3-2, along party lines.

In interviews this week, both of Ramirez’s Democratic colleagues said they largely agree with her position.

Commissioner Julie Brill, speaking at a conference in Hawaii this week, said Monday that she had now read and agreed with Ramirez’s comments to the ITC.

In an interview with MLex Wednesday, McSweeny said she didn’t plan to submit any comments to the ITC, but expressed views largely in line with those offered by Ramirez.

“Requiring a SEP holder to demonstrate that the implementer is unwilling to license is consistent with the views expressed by the Supreme Court and other courts that the party seeking an injunction bears the burden to prove that the remedy is in the public interest,” she said. “Hold-up can be a real issue. Hold-up in my view is not in the public interest, and the ITC has to determine whether an exclusion order is in the public interest.”

In an interview with MLex on a different issue last week, Ramirez said she strives to seek consensus where possible with her fellow commissioners, but acknowledged that on some issues a party-line split may be unavoidable.

“As an agency, when we speak with one voice we are at our best because I do feel that that deliberative process we engage in internally is a very useful one,” she said. “Inevitably, there will be times when we don’t all end up agreeing so there ends up being a 3-2 decision. That’s a natural outcome of the fact that you have five smart people who really care deeply about the issues that are in front of us.”

She added: “I recognize that sometimes it’s not possible to achieve consensus, and I’m prepared to move forward in those situations where I feel it’s important for us in order to ultimately do our job and fulfill our mission to promote competition and protect consumers.”

While submitting a personal comment to another agency with little notice might seem secretive, FTC commissioners often make comments or speeches without offering notice to their colleages. Because the Sunshine Act, a 1976 transparency law, prevents more than three commissioners from meeting privately without public notice, FTC commissioners frequently use their speeches and public statements to outline their views and critique one another on various issues.

In not alerting her colleagues ahead of time, Ramirez may even have been taking a page from Wright’s book. The Republican commissioner announced in a February speech that he would push the agency to vote on three proposals that seek to define the agency’s authority to challenge unfair methods of competition. Since joining the agency in 2013, Wright has championed issuing written guidance on the agency’s so-called Section 5 authority.

While Wright provided courtesy copies of his speech to his colleagues, he didn’t warn them ahead of time that he planned to call for the vote.

Wright’s gambit is understood to have irritated some of the other commissioners, who viewed it as an effort to force their hands on an issue where the agency hadn’t yet reached a consensus. The FTC still hasn’t issued a policy statement on Section 5’s discussion of unfair methods of competition.

– Additional reporting by Kirstin Downey in Maui.

	Eliot Gao

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