It was just last week that FTC Chairman Jon Leibowitz said he was "enormously concerned" about technology firms abusing standards-related patents in the global smartphone patent wars, and today his agency is asking the US International Trade Commission to carefully reconsider banning products like the Xbox 360 that allegedly infringe upon patents that are required to be fairly licensed as part of standards agreements. It's a major milestone in what has become a serious international dispute about rights and responsibilities of standards-patent holders — companies like Motorola and Samsung have relied heavily on their standards-related patents in various lawsuits, and the FTC is expressing deep concern about the validity of that approach to block products from market.
Specifically, the FTC issued a statement to the ITC in both the Apple vs. Motorola and Motorola vs. Microsoft cases now pending, saying that it's concerned a company might make a promise to license a standard-related patent under fair, reasonable, and non-discriminatory (FRAND) terms, and then fight to ban products using those patents as a way to negotiate higher, unfair rates. That's exactly what Apple and Microsoft claim Motorola is trying to do, but so far they haven't been successful — Moto won ITC rulings saying the Xbox 360 infringed several FRAND patents on H.264 video encoding and that the iPhone and iPad infringe a FRAND patent on wireless communications.
Why agree to use a standard when your product can get blocked anyway?
The next step would be an import ban, but the FTC doesn't like that idea, saying it "has the potential to cause substantial harm to U.S. competition, consumers and innovation." Since Motorola has already promised to license those patents at fair rates, there's no reason to ban products when Apple and Microsoft can just negotiate an appropriate rate — blocking the products would give Motorola an unfair negotiating advantage, and generally discourage companies from working with standards groups. Why agree to use a standard when your product can get blocked anyway?
Of course, we'll have to see how the ITC decides to interpret and act upon this guidance, but it appears for now like the battle over FRAND patents is about to get even messier — while the value of non-FRAND patents is about to get even higher. We'll also have to see how this affects Google, which spent billions on Motorola primarily for its huge stash of patents — many of which are FRAND patents that now may become far less formidable.