Companies Seeking to Block Rivals’ Patent Use Face U.S. Review

The U.S. Federal Trade Commission is examining the legality of companies seeking to prevent rivals from using patents that cover industry-standard technology, the agency’s chairman said.

The trade commission is “looking at” the issue, said Chairman Jon Leibowitz, who declined to comment on whether the agency has begun a formal investigation. Leibowitz, who spoke today at a Washington antitrust conference, didn’t specify which industry’s technology is under review.

The Justice Department previously disclosed a similar review related to the smartphone market, saying it is examining whether companies including Google Inc. (GOOG) will try to improperly use patents to seek court orders to block competitors from using technology that has become standard in an industry. The Justice Department and FTC both enforce antitrust laws.

The FTC wants “to make sure that companies can’t engage in licensing that is supposed to be worked out and then hold up that innovation” from being used by others, Leibowitz said at an American Bar Association’s panel discussion.

Industry-standard technology helps ensure that products -- such as mobile phone antennas and global-positioning system software -- work together. Companies that develop such standards pledge to license inventions covering them on reasonable terms.

Some companies in previous cases have initially agreed to license a patent at a reasonable fee only to pressure rivals later for higher royalties when the technology becomes part of a sought-after feature on a product, Leibowitz said.

Justice Department Concerns

The FTC shares the concern of the European Commission and the Justice Department that companies may be inappropriately seeking court orders to block rivals’ use of patents for common technology, he said. The EC also has said it’s monitoring whether smartphone companies are improperly using patents to seek court orders.

Last month, the Justice Department and EC announced their concern about patent practices after both approved Mountain View, California-based Google’s $12.5 billion purchase of Motorola Mobility Holdings Inc. (MMI) Google’s Android software is the most popular platform for mobile phones, while Motorola Mobility, which made the first commercially available wireless phone in the 1980s, now makes devices that run on Android.

Apple Inc. (AAPL), maker of the iPhone, and Microsoft Corp. (MSFT), which has struggled to win consumer acceptance of its Windows Phone mobile operating system, have pledged not to seek court bans on the use of industry-standard technology.

Motorola Mobility has said that Microsoft and Apple are raising the issue with antitrust agencies because the companies, with their history in computers, are new to the phone market and have fewer patents that cover industry standards.

Mixed Record

Patents give their owner the right to exclude others from using the invention. Regulators have few powers in limiting those rights unless there are allegations of fraud or improper behavior.

Leibowitz said that the FTC has the power to act against companies that seek to deceive rivals over licensing industry- standard patents.

The agency has a mixed record on challenging key patents.

In 2005, it forced Unocal Corp. (UCL) to stop asserting patents on a gasoline blend as a condition of approval for getting bought by Chevron Corp. (CVX) The agency had accused Unocal of misleading California regulators into adopting a formula they thought was in the public domain.

The FTC lost a case in 2008 against Rambus Inc. (RMBS), a designer of computer-memory chips, after an appeals court rejected antitrust claims related to how the company obtained its patents.

To contact the reporters on this story: Jeff Bliss in Washington at jbliss@bloomberg.net; Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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