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FTC patent ruling might hint at how it will treat Google case

A neon Google logo is seen as employees work at the new Google office in Toronto, November 13, 2012. REUTERS/Mark Blinch
A neon Google logo is seen as employees work at the new Google office in Toronto, November 13, 2012. REUTERS/Mark Blinch

By Diane Bartz

WASHINGTON (Reuters) - Federal regulators investigating Google for a range of accusations of antitrust violations took a stand this week on how to handle a type of patent similar to ones in the Google case, but also exposed a rift between regulators on how to proceed.

The disagreement focuses on whether the Federal Trade Commission can use its power to enforce rules against unfair competition in pursuing companies which ask for sales injunctions against rivals because of allegations that their so-called standard essential patents (SEP) have been infringed.

SEPs ensure interoperability, and are normally expected to be licensed on fair, reasonable and non-discriminatory terms, also known as FRAND terms.

Those following the antitrust probe into Google have been searching for any hint on how the commissioners might rule regarding the search engine giant. Some think Monday's settlement with companies that make equipment to repair auto air conditioners contained some interesting clues.

The FTC, in a majority statement by three Democratic commissioners, warned against asking for sales bans as a punishment for infringement of essential patents. Google has two such cases pending.

"Patent holders that seek injunctive relief against willing licensees of their FRAND-encumbered SEPs should understand that in appropriate cases the commission can and will challenge this conduct as an unfair method of competition," the commission majority said in statement Monday about the merger, which is unrelated to the Google probe.

But the agency, whose Chairman Jon Leibowitz prizes bipartisanship, faced opposition to the settlement from its two Republican commissioners.

One, Thomas Rosch, did not say publicly why he opposed it. The newest commissioner, Maureen Ohlhausen, dissented specifically on the patent issue, saying it was "creative yet questionable" and did not give industry meaningful guidance on the use of standard essential patents.

Ohlhausen also argued that it was unclear that the FTC had jurisdiction to issue policy statements on patent litigation between companies that are also being argued in district courts and at the International Trade Commission.

This opposition means that Ohlhausen will likely oppose any effort to go after Google on its pursuit of patent infringement cases based on standard essential patents if Google also asks for sales of products to be stopped.

"The lines are drawn here. There are three votes and probably four to go after Google on the patent part. The question is can they (the FTC) get a settlement (from Google) they can live with?" said an antitrust expert who is knowledgeable about the FTC. "Leibowitz would rather be the guy who settled with Google than the guy who litigated and lost."

The patent track of the FTC investigation of Google is just one of several.

The search giant has been accused of using its dominance to squash competitors in areas such as shopping and travel and blocking rivals' access to its Android wireless phone operating system. Google has also been criticized for asking courts to stop sales of products that it says infringe essential patents.

Complaints about Google to the FTC over standard essential patents arise from a raft of litigation between Apple Inc, Google and Microsoft Corp, which have sued each other numerous times in various countries, each alleging that their patents are being infringed upon by rivals in the highly competitive smartphone market.

Google, which declined to discuss its talks with the FTC, has settled with U.S. law enforcement agencies in the past.

For example, it settled with the FTC following privacy gaffes during the botched roll-out of its social network, Buzz. And Google paid a $500 million settlement in 2011 to the Justice Department for knowingly accepting illegal advertisements from Canadian pharmacies selling in the United States.

(Reporting By Diane Bartz)

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