ftc\'s assault on ip: regulatory patent reform?

$: FTC\'s Assault on IP: Regulatory Patent Reform?$
Client MCLE Day 2009

The Federal Trade Commission’s Assault on IP: Regulatory ‘Patent Reform?’

Chris ComptonJan. 22, 2009

WSGR Client MCLE DaySan Francisco, CA

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Battlegrounds for FTC Assault on IP

• Urging legislation to lessen “bad patents,” scope of patentability and shift balance to those opposing IP

• Enforcement efforts against patent settlements in pharmaceutical industry having ‘reverse payments’

• Enforcement against standard-setting abuses, now expanding under section 5 of FTC Act

• Growing hostility to IP rights of Non-Practicing Entities

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FTC’s Concern with IP/Antitrust Imbalance

• 2003 FTC Report, “To Promote Innovation”– Overbroad or invalid patents can harm competition

and innovation– 10 recommendations to redress balance

• Apr 2007Joint FTC/DOJ Report on Antitrust & IP

• General perception that many “bad patents” are issued, and litigation is getting out of hand.

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Sept. 8, 2008 Unilateral Conduct Report by DOJ

• FTC refuses to join, issues stinging “dissent”

• Previous divergence at the Agencies

• --FTC “stands ready to fill any Sherman Act enforcement void that might be created if the Department actually implements the policy decisions expressed in its Report.”

• FTC’s standard setting and reverse payment enforcement cases ignored

“When people agree with me, I always feel I must be wrong.” Oscar Wilde

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FTC’s Battle Against Reverse Payment Patent Settlements

• Takes position that reverse payments with agreed date for entry by generic competitor harms consumers.

• FTC reversed (11th Cir.) in Schering-Plough, 2005

• Other contra decisions:– Geneva v. Valley Drug, 11th Cir 2003– In re Tamoxifen, 2d Cir. 2006

• Latest: In re Ciprofloxacin, Fed. Cir. (Oct. 15, 2008).

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FTC’s History of SSO Enforcement

• (1996)– Alleged intentional failure to disclose patents, violating VESA

rules. (2003)

– Alleged affirmative misrepresentations to California Air Resources Board

• (2002-present)

– Alleged failure to disclose IP to JEDEC.– Rambus appeal to DC Circuit successful, April 2008. FTC

seeking cert.

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N-Data Consent Decree (Jan 2008)

• Predecessor National gave1994 commitment letter to $1000 license; new letter by Vertical in 2002, uncontested by IEEE: intent to seek FRAND terms.

• N-Data bought IP, sought to enforce at higher rates.

• FTC: Violation of Section 5.– Remedy in consent: $1000 license except for those

who refuse. Extends to later improvements, standards.

• Controversy erupts

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N-Data Dissent

• 3-2 majority found liability as both “unfair method of competition” and “unfair act or practice.”

• Commissioner Kovacic dissents, critical of loose analysis, concern about follow-on treble damage litigation in states.

• Chairman Majoras dissents even more broadly:

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Reactions to N-Data

• AAI seeks expansion of Section 5 enforcement to FRAND disputes with Rembrandt petition to FTC

• Majority of Public Comments raise concerns about: SSOs

• Oct. 8, 2008: Zoran sues DTS for FRAND violations.

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FTC Remains Adamant

• Despite defeats in Rambus and Ciprofloxacin, divergence with DOJ, Commissioner Rosch makes his position clear:

– Expand use of Section 5 where IP raises competition issues.

• Particularly hostile to “trolls,” who “lie in wait . . .”

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Risks of Expanded FTC Enforcement

• More lawsuits.

• Discourage participation in SSOs or patent settlements

• Widen substantive antitrust policy gap with DOJ

• Effective devaluation of IP

– With ongoing private and EC actions vs. Qualcomm, Rambus that may further deter SSO abuse (or participation?)

“The business of government is to keep government out of business—that is, unless business needs government aid.” Will Rogers

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Meanwhile, Judicial “Patent Reform” Far Along

• eBay v. MercExchange (2006)

• KSR v. Teleflex (2007)

• Medimmune v. Genentech (2007)

• Quanta v. LG Electronics (2008)

• Microsoft v. AT&T (2007)

• Federal Circuit now falling in line:– In re Seagate Technology (2007)– In re Bilski (2008)

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Will “Obama’s FTC” Pursue its IP Campaign?

• Will new administration move DOJ toward FTC, rein in FTC, or maintain status quo?

– Obama: Will “reinvigorate efforts to identify and take action against illegal monopolies.”

• Coming to FTC: New chairman and fifth commissioner to join Kovacic, Rosch (Republicans), Harbour & Leibowitz

– Chairman appoints 3 Bureau Directors, Gen Counsel

• Net: Little reason to expect FTC will lighten foot on enforcement pedal, especially re IP, under Sec. 5


Questions & Discussion?


Thank you

Copyright Chris Compton, WSGR 2009WSGR Client MCLE Day

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CONTACT:650 Page Mill RoadPalo Alto, CA 94304Phone | 650-493-9300Fax | [email protected]

Charles T. (Chris) Compton plays a leadership role in the firm's antitrust practice, focusing on merger regulatory and intellectual property issues.

Since joining Wilson Sonsini Goodrich & Rosati in 1980, Chris has overseen the antitrust regulatory work in more than 900 mergers, acquisitions, and joint ventures—many of which involved formal investigations by the Federal Trade Commission, the Department of Justice, the European Commission, and other international competition agencies. The firm's record of success, including Hewlett Packard's $18.7 billion acquisition of Compaq Computer in 2002, has been unparalleled: No Wilson Sonsini Goodrich & Rosati transaction since 1980 has ever been blocked or abandoned due to an antitrust challenge by a U.S. or foreign competition agency. Early in his career, Chris served as a litigator on the watershed IBM antitrust cases in the late 1970s at O'Melveny & Myers.

In addition to a wide range of intellectual property litigation, including Lotus v. Borland, Chris has handled antitrust suits involving alleged price discrimination, refusals to deal, distributor terminations, group boycotts, monopolies, state law Cartwright Act claims, grand jury investigations, and price fixing. Chris wrote the firm's Antitrust & Trade Regulation Primer for attorneys and clients, and regularly counsels many of its private and public clients on antitrust and intellectual property issues arising in the course of marketing, distribution, pricing, and standard-setting activities.

Named a Northern California "Super Lawyer" in 2004-2008 by Law & Politics magazine, Chris also was cited in the 2003-2008 editions of Chambers USA: America's Leading Lawyers for Business , commended as "a great lawyer" and for his ability to "establish an immediate rapport, trust, and confidence, in a nonadversarial way." He also was listed as one of the "Top-Ranking Competition Lawyers in Europe and Northern America" in the Practical Law Company's Global Competition Handbook (2004-2005), and earned a "highly recommended" listing in the PLC Which Lawyer? Yearbook (2007). Additionally, Chris is listed in the 2006 edition of Best Lawyers in America and Legal Media Group's Euromoney Guide to World's Leading Competition and Antitrust Lawyers .

Chris has written extensively over the years for publications such as the Antitrust Law Journal, the Antitrust Report, Corporate Counsel Outlook, and the International Business Lawyer. He teaches an antitrust/intellectual property course for the Santa Clara University School of Law LL.M. program, and has lectured at the University of California, Berkeley, Boalt Hall School of Law. He is a regular speaker at American Bar Association and International Bar Association events, as well as other conferences in the United States and Europe. Chris also served in the Air Force JAG Corps as a military judge.

EDUCATION:

J.D., New York University School of Law, 1968Root-Tilden Scholar; Managing Editor, New York University Law Review

B.S, United States Air Force Academy, 1965 With Honors

ASSOCIATIONS AND MEMBERSHIPS:

Member, Advisory Board, Santa Clara University, High Technology Law Institute Board Member and Past President, Law Foundation of Silicon Valley

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Charles T. (Chris) Compton

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HONORS:

Selected for inclusion in The International Who's Who of Competition Lawyers & Economists 2008 Named in the 2007 and 2008 editions of Chambers USA: America's Leading Lawyers for Business Selected for inclusion in the 2007 and 2008 editions of Best Lawyers in America and Who's Who Legal: California 2007 AV Peer Review Rating, Martindale-Hubbell

SELECT PUBLICATIONS:

"IP Issues in the Antitrust Treatment of Mergers," The Berkeley Conference on Antitrust in the Technology Economy, June 9, 2005 "Lessons from Trinko for a Consolidating Telecom Industry," 16th Annual Communications and Competition Law Conference,

Madrid, Spain, May 24-25, 2005 "What United States v. Oracle Says about High-Tech Merger Review in the U.S.," corporatefinancemag.com, May 2005 Please see wsgr.com for a complete list of publications.

ADMISSIONS:

Bar of the District of Columbia State Bar of California Several U.S. District Courts U.S. Court of Appeals for the Ninth Circuit U.S. Court of Military Appeals U.S. Supreme Court

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Charles T. Compton

ftc\'s assault on ip: regulatory patent reform?

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