An Update for an Update: DOJ’s Supplement to its 2015 IEEE Business Review Letter
On September 10, 2020, the Antitrust Division of the U.S. Department of Justice (DOJ) issued a supplement to its 2015 Business Review Letter (BRL) to the Institute of Electrical and Electronics Engineers (IEEE). This update comes in times of growing use of BRLs, through which the Antitrust Division aims to incentivize innovation, particularly to address the current challenges of the COVID pandemic. But it also comes at a time when the Antitrust Division is increasingly exercising its prerogative to intervene in antitrust litigation (per 28 C.F.R. § 0.40), and after the Antitrust Division took a 180-degree turn in its approach to Standard-Essential Patents (SEP) licensing. Most importantly, this supplement was issued amid the escalation of SEP-related litigation on both sides of the Atlantic and the Pacific¹ and thus cannot be viewed in isolation from these developments.
The issue is as follows. IEEE is a professional association whose Standards Association develops standards in various industries, including information communication technology (ICT), such as Wi-Fi network protocols. Since such standards are often running on proprietary technologies, and because they are ubiquitous for many businesses, governments, and citizens, the issue of SEP licensing is one of the most contested topics at the crossroads of IP and antitrust. Put (very) simply, the discussion revolves around the concerns of patent hold-up from one side, and returns on investment from the other. To mitigate the potential conflicts, standards bodies maintain policies, in which patent-holders commit to license their essential technology on fair, reasonable, and non-discriminatory (FRAND) terms. It is the terms of this policy that IEEE sought to clarify with its 2015 Update.
Among other things, the policy revisions related to the determination of the “reasonable rate,” reciprocity licensing requirements, and the ability to seek and enforce injunctions against implementers and, as such, were favorable for standards-implementers. In its 2015 BRL, the DOJ found the Update not problematic from the perspective of antitrust law, provoking a wave of criticism.2 With the Supplement issued in September 2020, the DOJ appears not only to renounce its previous statements regarding the 2015 IEEE patent policy and to reaffirm its current position towards patent hold-up, but also to clarify the meaning and the purpose of the DOJ’s business review process in a broader sense.
The Supplement asserts that the BRLs issued by the Antitrust Division are in no way an endorsement of the business action under review. Indeed, BRLs are requested by businesses concerned with the legality of their conduct under antitrust law, and the issued responses merely state the DOJ’s non-binding enforcement intentions for particular conduct of a particular party at that particular moment of time.3 As confirmed in earlier jurisprudence, BRLs do not purport to express the Division’s opinion in the lawfulness of the proposed conduct,4 nor do they guarantee any immunity or offer antitrust protection.5 The DOJ is not obliged to issue a BRL.6
Yet, the interpretation and analysis presented by the Division in its BRLs, even if they only concern particular conduct of a particular party at a particular moment of time, offer guidance to businesses and help avoiding litigation--after all, what are the chances that IEEE would have proceeded with its policy revision had the 2015 BRL been negative? The fact that the BRLs are publicly available (which has not always been the case) indicates that they are also purposed to provide transparency on DOJ’s reasoning. While BRLs are non-binding, it is not uncommon for them to be cited by parties in litigations or otherwise relied on by businesses. For instance, BRLs marked a new approach towards compatibility of patent pools with antitrust law7 and were instrumental for a number of standards development bodies.8 The important role of BRLs is also evidenced by the surge in BRL requests during the pandemics, as well as the expedited review procedure adopted by the DOJ, for that matter, discussed here by Eleanor Tyler.
The 2015 IEEE BRL not only noted the pro-competitive benefits of the policy revisions; it also clearly stated the Division had “no present intentions” to challenge it.9 To contrast, the 2013 BRL to the Intellectual Property Exchange International also noted the potential competitive benefits of the proposed conduct, but it declined to state enforcement intentions. And even though the DOJ is still entitled to enforce antitrust violations against conduct that was previously “cleared” by the BRL (under 28 C.F.R. § 50.6, subsection 9) – which has not occurred to this day – organizations cannot be expected to simply disregard the BRLs’ reasoning. Intentionally or not, the 2015 IEEE BRL created a sort of precedent and was arguably taken up by commentators, foreign courts and other SDOs, who considered revising their policies following the IEEE’s example.
I hence cannot agree with the Division’s “downplay” of its business review process. If the BRLs truly had as little interpretative value as the DOJ suggests, neither businesses nor the DOJ itself would engage in this voluntary activity; business review processes are costly for the Division, which needs to spend its resources on investigations, and for companies, which need to provide evidence and information. Ironically, the Supplement recommends that IEEE and other standards development bodies review their patent policies in the light of the DOJ’s changed approach to patent hold-up, which leads me to wonder what value these recommendations and statements put forward in the BRL Supplement have according to the Antitrust Division.
While the Supplement is welcomed by patent-holders, it arguably creates even more uncertainties with regard to antitrust enforcement in standardization processes, above all by devaluing BRLs. Similar to the 2015 BRLs, the Supplement may become a precedent for other standards bodies to modify their patent policies in anticipation of a potential enforcement action, creating a resonance in the industry. Given existing jurisprudence and the Division’s mandate, it is highly unlikely that IEEE will seek judicial review of the Supplement, nor is it probable that the DOJ will prosecute IEEE for an antitrust breach. But the possible effects that the Supplement may have on standards development organizations, as well as businesses seeking BRL reviews, should not be understated.
1. See, e.g., Landgericht [LG] [Mannheim Regional Court] Aug. 18, 2020, 2 O 34/19; Federal Trade Commission v. Qualcomm Inc, 969 F.3d 974 (9th Cir. 2020); Huawei v. Samsung, 2018 WL 1784065 (N.D. Cal. 2018) (discussing SEP litigation between Huawei and Samsung in China). Return
2. See, e.g., The Antitrust Division’s Devaluation of Standard-Essential Patents, by J. Gregory Sidak. Return
3. See 28 C.F.R. § 50.6. Return
4. See, e.g., Blue Cross v. Commonwealth, 176 S.E.2d 439, 446 (Va. 1970). Return
5. See, e.g., United States v. Grinnell Corp., 30 F.R.D. 358 (D. R.I. 1962). Return
6. See Antitrust Division Manual, III.H.1.c. Return
7. See Antitrust for Patent Pools: A Century of Policy Evolution, by Richard J. Gilbert. Return
8. See, e.g., Taking It to the Limit: Shifting U.S. Antitrust Policy Toward Standards Development, by Jorge L. Contreras. Return
9. Department of Justice, Business Review Letter to IEEE 16 (2015). Return