Patent Law

A reader alerted me to the "Request for Investigation of Rembrandt, Inc. for Anticompetitive Conduct that Threatens Digital Television Conversion" in a March 26, 2008 Petition to the Federal Trade Commission by the American Antitrust Institute.  Some excerpts include:

The American Antitrust Institute (?AAI?) petitions the Federal Trade Commission to investigate patent holdup conduct by Rembrandt, Inc., a patent licensing company (also known as a non-practicing entity, or ?NPE?), under Section 2 of the Sherman Act and Section 5 of the FTC Act with respect to a government-mandated private standard for digital television broadcasting developed by the Advanced Television Systems Committee (ATSC).

In particular, Rembrandt has failed to abide by an obligation established by the ATSC to license on reasonable and nondiscriminatory (RAND) terms certain technology critical to the delivery of digital systems of terrestrial broadcast television. This RAND commitment was central to the Federal Communications Commission?s (?FCC?) adoption of the ATSC standard in establishing the process for the conversion to digital television. Because the entire U.S. television marketplace will convert to digital systems in the next year, the potential consumer harm from this conduct is enormous. Enforcement action is necessary to protect tens of millions of users of digital television devices, device manufacturers and broadcast networks and cable companies from paying excessive equipment prices and licensing fees due to Rembrandt?s exercise or attempted exercise of monopoly power.

Numerous government agencies are acting to assist and subsidize millions of consumers with the conversion to digital television. Yet the success and cost of this conversion is being threatened by Rembrandt, which is engaging in patent holdup by explicitly repudiating its RAND licensing obligation. Rembrandt brought 14 patent infringement suits against the four major television networks, the five major cable systems, and television and equipment manufacturers seeking licensing royalties that will increase the costs of digital television by tens of millions of dollars. Rembrandt is demanding royalties of 0.5% of ?all revenues derived from the use of the ATSC standard? ? an amount that would dramatically increase the cost of digital television equipment and the cost of digital television generally. All consumers will pay substantially more for digital and terrestrial television services unless this conduct is enjoined.

RELIEF

We request that the Commission commence an investigation of Rembrandt?s conduct and seek an order pursuant to Section 5(b) of the FTC Act requiring that Rembrandt cease and desist from its illegal conduct. In particular, the Commission should prohibit Rembrandt from enforcing the ?627 patent unless it has first offered to license the ?627 on terms consistent with the RAND commitment.

A failure to enjoin Rembrandt?s conduct could result in owners (or subsequent owners) of ATSC patents engaging in similar patent-hold-up conduct that could cripple the DTV industry. Private remedies through patchwork litigation in different fora are inadequate substitutes for FTC enforcement in this matter: First, ?private litigation may not vindicate the same set of public interests that are addressed by the Sherman Act or Section 5 of the FTC Act.?81 Second, by the time any resolution of such private suits has been achieved ? and even assuming Rembrandt?s claims were ultimately defeated ? the February 2009 date for the transition to digital television will have long since passed and the mere threat of the harm described above will itself have caused irreparable harm to competition and to consumers alike.

Read the full petition here.