Patent Experts Urge Kanter to Reject Calls to Scrap Avanci Business Review Letter

“The authors of the November 30 letter argue that the October 17 letter ‘perpetuates long-standing misunderstandings by some academics, policy activists, and companies, who continue to assert that one-sided ‘patent holdup’ is endemic in high-tech industries.’”

business review letterA group of 25 experts in intellectual property law sent a letter to Assistant Attorney General (AAG) Jonathan Kanter today in support of a business review letter that the group said, “represented a legally sound and evidence-based approach in applying antitrust law to innovative commercial institutions.”

The letter is also a response to an earlier letter sent to Kanter on October 17, 2022, by 28 former government enforcement officials, professors, and public interest advocates that urged the AAG to reconsider the business review letter.

The Avanci business review letter was published by the Antitrust Division of the U.S. Department of Justice on July 28, 2020. In the letter, the DOJ said that Avanci’s licensing platform, which plans to license patent claims declared essential to implement 5G in cars, did not harm competition in the industry. Business review letters represent guidance by the DOJ to inform businesses how to best coordinate their practices to ensure they don’t violate antitrust laws.

The authors of the November 30 letter argue that the October 17 letter “perpetuates long-standing misunderstandings by some academics, policy activists, and companies, who continue to assert that one-sided ‘patent holdup’ is endemic in high-tech industries.”

The October 17 letter said the DOJ’s decision created incentives for the patent pool and “patent trolls… to act in lockstep to the detriment of automobile manufacturers, component suppliers, and American consumers.”

November 30 Letter

Twenty-five former judges, government officials, legal academics, and economists signed the November 30 letter in support of the DOJ’s 2020 business review letter.

One of the primary motivations for the letter was to respond to the October 17 letter sent to Kanter. The authors of the November 30 letter argued the October 17 letter invoked the “patent troll epithet to disparage virtually all entities that engage in patent licensing and related monetization transactions.”

They added that the “patent troll” claim is not based on empirical evidence and the authors of the October 17 letter mischaracterized multiple court decisions, suggesting that the outcomes of these cases were the result of “holdup tactics by so-called ‘patent trolls,’” when in fact, “[t]he reality is precisely the opposite.”

Instead, said the November 30 letter, the courts in the cases used as examples in the October 17 letter issued injunctive relief because implementers were found to be unwilling licensees engaging in holdout tactics, “wrongly delaying negotiations or outright refusing to enter into licenses that would authorize their past and continuing use of the SEP owner’s valid patents.”

The November 30 signatories also took issue with the October 17 letter’s use of “decades-old theories and models that falsely predicted stymied innovation, higher prices, and consumer harm in the mobile telecommunications.”

The theories in question are “patent holdup” and “royalty stacking,” in particular. The November 30 letter cites research “that casts great doubt on the factual reliability of these theories.”

Rather than being held back by high royalty rates, the authors of the November 30 letter cite research that “consistently estimated that manufacturers have paid an aggregate royalty in the single digits.”

The November 30 letter instead supports the principle of “good-faith negotiations of licensing terms based on fair, reasonable, and non-discriminatory (FRAND) royalty rates,” which the authors argue supports a “thriving ecosystem in wireless technologies.”

The letter was signed by a number of well-known IP experts, advocates, judges, former government officials, economists, and law professors, including Alden Abbott, Former General Counsel at the U.S. Federal Trade Commission; Paul Michel, Chief Judge (Retired) of the United States Court of Appeals for the Federal Circuit (CAFC); Kathleen M. O’Malley, Circuit Judge (Retired) on the CAFC; Ronald A. Cass, Former Vice-Chairman and Commissioner at the United States International Trade Commission; Douglas H. Ginsburg, Senior Circuit Judge and Former Chief Judge on the United States Court of Appeals for the District of Columbia Circuit; Damon C. Matteo, Former Chairperson of the Patent Public Advisory Committee at the United States Patent & Trademark Office; Richard A. Epstein, Professor of Law at New York University School of Law; Kristen Osenga, Associate Dean of Academic Affairs & Professor of Law at the University of Richmond; Stephen Haber, Professor at Stanford University; and David J. Teece, Professor of Business Administration & Chair in Global Business at the University of California at Berkeley, among others.

October 17 Letter

The 28 signatories to the October 17 letter said that the DOJ’s 2020 letter needs to be reconsidered because it “threatens even more foreboding future harms as 5G is more fully deployed.”

They argued the DOJ letter undermines a bipartisan legal and economic consensus that abusive SEP practices can “harm innovation, competition, and consumers.”

Furthermore, the signatories claimed the DOJ relied on “questionable positions,” including a failure to consider how Avanci’s refusal to license suppliers violates FRAND terms.

Finally, the October 17 letter cited real-world events as corroboration for their concerns about the DOJ’s letter. They argued that Avanci’s existing 2G/3G/4G patent pool “has already resulted in harm to competition and consumers.”

The authors cited multiple lawsuits filed by Avanci members in the United States, Germany, and Japan against car manufacturers. They argued the DOJ’s assumptions have “force[d] companies to take their products off the market—and risk going out of business—long before any invalidity (or infringement) determinations are made.”

The October 17 letter was signed by representatives of a number of public interest and vocally anti-patent organizations, including Alex H. Moss of the Public Interest Patent Law Institute; Professor Michael A. Carrier of Rutgers Law School; John Bergmayer of Public Knowledge; Charles Duan, Senior Policy Fellow at the Program on Information Justice and Intellectual Property & American University Washington College of Law; Mitch Stoltz of the Electronic Frontier Foundation.

Where’s the Evidence?

Adam Mossoff, Professor of Law at George Mason University, who co-authored today’s letter with Jonathan Barnett, Professor of Law at the University of Southern California, told IPWatchdog that the assertions made in the October 17 letter about the harms to competition that have already materialized as a result of the Avanci pool are patently false and unsupported by economic evidence. Mossoff explained:

“The October 17 letter makes bald-faced assertions – backed by quotes from blogs and op-eds calling SEP owners ‘patent trolls’ – that consumers and competition have been harmed from allegedly supra-optimal royalties charged for the new mobile telecommunications services and capabilities that have been added to our connected cars. The letter cites no economic evidence or studies to support these arguments, because it cannot. There aren’t any. These are not evidence-backed arguments, just as there are no empirical or economic studies confirming ‘patent holdup’ or ‘royalty stacking’ theories. The October 17 letter simply restates again these same decades-old theories in a new commercial context – apparently engaging in the old propaganda tactic that dint of repetition will make something true.”

 

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Author: razihusin

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2 comments so far. Add my comment.

  • [Avatar for Anon]
    Anon
    November 30, 2022 05:31 pm

    Alex (and cohorts),

    Please take note and desist from your attacks on the patent system.

  • [Avatar for Wen Xie]
    Wen Xie
    November 30, 2022 04:38 pm

    Great article guys!

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