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Wednesday, December 05, 2012, 04:25 pm PT (07:25 pm ET)

FTC: Motorola bid for Apple product injunction 'inappropriate'

In an amicus curiae brief filed on Wednesday in the Federal Circuit Court of Appeals, the U.S. Federal Trade Commission offered its take on the proper use of so-called standard-essential patents (SEPs) in litigation, saying that a previous district court decision to deny a Motorola injunction of certain Apple products was correct.

The amicus brief made special note that a court-ordered injunction is "ordinarily inappropriate" when a patent holder has already licensed the leveraged properties under fair, reasonable and nondiscriminatory (FRAND) terms. In particular, the FTC's most recent brief pertains to the claims Motorola asserted against Apple's iPhone and iPad, which allegedly infringe on certain wireless patents.

From an FTC statement regarding the brief:
It concludes that a district court correctly applied the governing legal principles when it dismissed Motorola’s request for an injunction that could have blocked Apple from selling iPhones and iPads in the United States.
According to the body, companies can use the specter of an injunction to manipulate competition in a practice called "patent hold-up." Once a patent becomes an SEP, its owner can threaten legal action and sales bans to net unusually high royalty rates and licensing terms that would previously have been impossible if the IP was not considered essential.

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At issue is how companies take advantage of the standard setting process, which is overseen by organizations that most times require FRAND practices be instituted in return for receiving SEP status. The FTC concedes that some patent holders may not always find agreeable licensing terms, however instead of seeking an outright injunction, the Commission believes the correct way for a court to deal with such a snag is to allow only monetary damages.

"This is generally the proper approach, because allowing a patent holder to seek an injunction on a SEP can facilitate patent-holdup, which can raise prices to consumers, while undermining the standard-setting process," the FTC said.

Going further, if an injunction were to be instated, it would do more harm to the party accused than not winning an injunction would harm the plaintiff. Besides the obvious negative impact on consumers who would no longer be able to purchase devices like the iPhone, injunctions involving SEPs would be detrimental to standards setting, as well as industry growth from companies that innovate on a given standard.

Out of the five member of the Commission, four agreed with the amicus brief, with Commissioner Maureen Ohlhausen being the lone holdout.

Google-owned Motorola has been the target of other FTC actions recently, including a staff recommendation to the organization's five-member Commission to sue the company over alleged SEP-related antitrust practices. It was also announced in June that the FTC was formally investigating whether the internet search giant was illegally using standard-essential patents acquired from its $12.5 billion takeover of Motorola against smartphone competitors.