DOJ, FTC Split on Antitrust in Patent Licensing Looms Over Trial

Posted by Bloomberg

DOJ, FTC Split on Antitrust in Patent Licensing Looms Over Trial

By Eleanor Tyler

The chiefs of the U.S. Department of Justice and the Federal Trade Commission usually present a united front about enforcing the antitrust laws, something both agencies are empowered to do. But the agencies currently vocally disagree over whether specific conduct should violate the antitrust laws.

In fact, the FTC is trying to prove in a bench trial that chip giant Qualcomm Inc. abused its monopoly in modem chipsets through conduct that DOJ antitrust chief Makan Delrahim has repeatedly said the Sherman Act should permit.

Patent law and antitrust law are in tension: one grants a monopoly as a reward to innovation, the other worries about monopolies that reduce competition, including abuses of the patent system. The tension is particularly acute where industry standardization enthrones a single technology, a standard essential patent (SEP), as the linchpin in a market.

The agencies disagree about the line between a deserved monopoly and one that damages the marketplace. They also disagree about the proper balance of power between patent holder and licensee and when antitrust law should apply.

The agencies are operating under different law, but the disagreement is fundamental. The FTC brought its case against Qualcomm under FTC Act Section 5, 15 U.S.C. §45, as an alleged unfair method of competition—but under a theory that Qualcomm’s conduct is monopolization that would violate Sherman Act Section 2, 15 U.S.C. §2.

Section 5 cases rarely result in court trials. Since the FTC first issued a statement on its standalone FTC Act powers in 2015, it’s unclear to what extent their authority extends past the margins of the Sherman Act. That makes it hard to know whether a violation of Section 5 also would be a violation of the Sherman Act.

Courts are poised to clarify the patent-holder issue this year. U.S. District Court for the Northern District of California Judge Lucy H. Koh must decide whether to enjoin Qualcomm’s conduct after the bench trial concludes this month, and a private civil case under a related theory is scheduled for jury trial in May 2019.

But the agencies have an important role in developing the law. Fundamental policy differences could lead to divergent enforcement outcomes and a greater relative role for FTC Act Section 5 and state law enforcement. If the two agencies continue to disagree, more frictions between patent and antitrust law may be adjudicated in the nebulous world of “unfair” conduct rather than under the Sherman Act.

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