Should all patent-infringing products be banned?

The Congress is considering whether companies that hold patents essential to a standard, such as a digital movie format, should be forbidden from asking that infringing products be banned from the U.S. market.

Companies that hold patents essential to building devices to comply with these standards are expected to license them on fair terms to everyone, even competitors. The expectation is they will make less on each license, but will license the technology so broadly that the patent will still be extremely lucrative.

But in an all-out patent war between smartphone makers, Motorola Mobility, recently acquired by Google Inc, has raised hackles by asking for sales bans on products that infringe essential patents.

Microsoft Corp, Google’s main critic, is leading the fight against the Google unit, but Apple Inc and Qualcomm Inc have also lobbied lawmakers on the issue, according to a congressional source.

The Senate Judiciary Committee is holding a hearing on Wednesday to discuss the antitrust impact of sales bans if the manufacturer infringes on a standard essential patent.

The Federal Trade Commission and Justice Department are weighing, which is unusual in a patent infringement battle.

FTC Commissioner Edith Ramirez is expected to testify, as will Joseph Wayland, the Justice Department’s top antitrust enforcer.

The FTC, in recent comments to the International Trade Commission which can ban infringing products from the U.S. market, warned that the owners of standard essential patents can sometimes demand too much for licensing fees and use the considerable threat of an injunction to win unreasonable rates.

It urged the ITC to refrain from barring infringing products from the U.S. market if the patent in question is essential to an industry standard.

Wayland, the acting assistant attorney general for antitrust, is also expected to urge caution in using sales bans if the patent infringed is essential to a standard.

In 2006, the Supreme Court made it harder for a company whose patents were infringed to get a sales ban in a ruling called eBay v. MercExchange. This means that courts rarely issue injunctions currently but opt for damages payments.

The ITC, on the other hand, does still issue them. At the ITC currently, Microsoft faces a potential injunction banning the sale of its Xbox because of accusations that it infringes patented Motorola Mobility technology essential to a video standard.

But Motorola Mobility argues that these bans are a necessary tool to prevent rivals from refusing to pay licensing fees, says Kirk Daily, the company’s vice president of intellectual property.

The ITC could cite the public interest as a reason for declining to ban products that infringe essential patents, but only rarely does so, said Mark Lemley, a patent expert who teaches at Stanford Law School.

But since licensing negotiations take place behind closed doors, it is nearly impossible to know which party is being unreasonable in any given fight, he said.

The single thing that every side in the various patents fights agree on is that the money spent on these legal battles could be better spent elsewhere.

“If they (smartphone makers) had taken the conservatively $15 to $20 billion dollars they’ve spent on this fight, imagine how much better a place the world would be,” said Lemley.

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Should all patent-infringing products be banned?