CORRECT: Lawmakers Concerned That Some Patent Holders Stifle Competition

Date : 07/11/2012 @ 7:48PM
Source : Dow Jones News
Stock : Apple Inc. (MM) (AAPL)
Quote : 153.61  -0.26 (-0.17%) @ 12:35PM

CORRECT: Lawmakers Concerned That Some Patent Holders Stifle Competition

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"Lawmakers Concerned That Some Patent Holders Stifle Competition," at 3:21 p.m. EDT, incorrectly suggested in the third paragraph that Apple and Microsoft were among the companies that have come under scrutiny for trying to prevent rivals from using standard-essential patents. The correct version follows:

By Andrew Seidman

WASHINGTON--U.S. lawmakers Wednesday expressed concern that companies holding patents important to an entire industry are stifling competition and innovation by using courts and government agencies to limit use of the technologies.

So-called standard-essential patents, such as 3G wireless technology in telecommunications, are crucial for entire industries. Companies with those patents typically license them to competitors, but at times companies limit the ability of others to use an important technological development.

Google Inc. (GOOG) recently come under scrutiny for trying to prevent rivals from selling products using standard-essential patent technologies. Patent ligitation practices of other companies, including Apple Inc. (AAPL) and Microsoft Corp. (MSFT) efforts to protect proprietary technologies, have also been reviewed by government officials.

Instead of filing patent-infringement cases in U.S. federal courts, some companies are increasingly seeking relief from the International Trade Commission, an independent federal agency that can block the sale or import of infringing products. The ITC can issue exclusion orders even if the company that holds a standard-essential patent already agreed to license it.

"When inventors and developers are willing to license their technologies to one another at reasonable rates, the cross-fertilization of ideas benefits us all," Senate Judiciary Chairman Patrick Leahy (D., Vt.) said Wednesday. "But I am concerned that the recent trend of seeking exclusion orders from the International Trade Commission, rather than negotiating and seeking license fees, may have the opposite effect."

Sen. Michael Lee (R., Utah) also voiced skepticism, suggesting that an agreement to license a standard-essential patent is a commitment to nonexclusivity.

"If so, doesn't that arguably make an exclusion order inappropriate in this circumstance? In other words, once somebody has agreed to nonexclusivity, is an exclusion order an appropriate remedy?" he said.

Edith Ramirez, a commissioner for the Federal Trade Commission, said that patent holders might use such orders to "hold up or demand higher royalties" from competitors. Ms. Ramirez told the committee that the ITC has the authority to prevent hold-ups through its public interest obligations.

"If the ITC finds that its public interest authority is not flexible enough to prevent hold-up, then Congress should consider whether legislative remedies are necessary," she wrote in prepared testimony.

Such practices also could harm consumers, said Joseph Wayland, acting assistant attorney general in the Justice Department's antitrust division.

"Blocking a particular cellphone application could cause consumer harm across millions and millions of people," he said.

Write to Andrew Seidman at andrew.seidman@dowjones.com

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