Federal Trade Commission (FTC) Recommends Privacy Practices for Mobile Apps

The National Law Review recently published an article, Federal Trade Commission (FTC) Recommends Privacy Practices for Mobile Apps, written by Daniel F. GottliebRandall J. Ortman, and Heather Egan Sussman with McDermott Will & Emery:

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On February 1, 2013, the Federal Trade Commission (FTC) released a report entitled “Mobile Privacy Disclosures: Building Trust Through Transparency” (Report), which urges mobile device application (app) platforms and developers to improve the privacy policies for their apps to better inform consumers about their privacy practices.  This report follows other recent publications from the FTC concerning mobile apps—including “Mobile Apps for Kids: Disclosures Still Not Making the Grade,” released December 2012 (December 2012 Report), and “Mobile Apps for Kids: Current Privacy Disclosures are Disappointing,” released February 2012 (February 2012 Report)—and the adoption of the amended Children’s Online Privacy Protection Act (COPPA) Rule on December 19, 2012.  (See “FTC Updates Rule for Children’s Online Privacy Protection” for more information regarding the recent COPPA amendments.

Among other things, the Report offers recommendations to key stakeholders in the mobile device application marketplace, particularly operating system providers (e.g., Apple and Microsoft), application developers, advertising networks and related trade associations.  Such recommendations reflect the FTC’s enforcement and policy experience with mobile applications and public comment on the matter; however, where the Report goes beyond existing legal requirements, “it is not intended to serve as a template for law enforcement actions or regulations under laws currently enforced by the FTC.”  Nevertheless, such key stakeholders should take the FTC’s recommendations into account when determining how they will collect, use and transfer personal information about consumers and preparing privacy policies to describe their information practices because they reflect the FTC’s expectations under its consumer protection authorities.

At a minimum, operating system providers and application developers should review their existing privacy policies and make revisions, as necessary, to comply with the recommendations included within the Report.  However, all key stakeholders should consider the implications of recommendations specific to their industry segment, as summarized below.

Operating System Providers

Characterized within the Report as “gatekeepers to the app marketplace,” the FTC states that operating system providers have the “greatest ability to effectuate change with respect to improving mobile privacy disclosures.”  Operating system providers, which create and maintain the platform upon which mobile apps run, promulgate rules that app developers must follow in order to access the platform and facilitate interactions between developers and consumers.  Given their prominent role within the app marketplace, it is not surprising that the FTC directs numerous recommendations toward operating system providers, including:

  • Just-In-Time Disclosures.  The Report urges operating system providers to display just-in-time disclosures to consumers and obtain express, opt-in (rather than implied) consent before allowing apps to access sensitive information like geolocation (i.e., the real world physical location of a mobile device), and other information that consumers may find sensitive, such as contacts, photos, calendar entries or recorded audio or video.  Thus, operating system providers and mobile app developers should carefully consider the types of personal information practices that require an opt-in rather than mere use of the app to evidence consent.
  • Privacy Dashboard.  The Report suggests that operating system providers should consider developing a privacy “dashboard” that would centralize privacy settings for various apps to allow consumers to easily review the types of information accessed by the apps they have downloaded.  The “dashboard” model would enable consumers to determine which apps have access to different types of information about the consumer or the consumer’s device and to revisit the choices they initially made about the apps.
  • Icons.  The Report notes that operating system providers currently use status icons for a variety of purposes, such as indicating when an app is accessing geolocation information.  The FTC suggests expansion of this practice to provide an icon that would indicate the transmission of personal information or other information more broadly.
  • Best Practices.  The Report recommends that operating system providers establish best practices for app developers.  For example, operating system providers can compel app developers to make privacy disclosures to consumers by restricting access to their platforms.
  • Review of Apps.  The Report suggests that operating system providers should also make clear disclosures to consumers about the extent to which they review apps developed for their platforms.  Such disclosures may include conditions for making apps available within the platform’s app marketplace and efforts to ensure continued compliance.
  • Do Not Track Mechanism.  The Report directs operating system providers to consider offering a “Do Not Track” (DNT) mechanism, which would provide consumers with the option to prevent tracking by advertising networks or other third parties as they use apps on their mobile devices.  This approach allows consumers to make a single election, rather than case-by-case decisions for each app.

App Developers

Although some practices may be imposed upon app developers by operating system providers, as discussed above, app developers can take several steps to adopt the FTC’s recommendations, including:

  • Privacy Policies.  The FTC encourages all app developers to have a privacy policy, and to include reference to such policy when submitting apps to an operating system provider.
  • Just-In-Time Disclosures.  As with the recommendations for operating system providers, the Report suggests that app developers provide just-in-time disclosures and obtain affirmative express consent before collecting and sharing sensitive information.
  • Coordination with Advertising Networks.  The FTC argues for improved coordination and communication between app developers and advertising networks and other third parties that provide certain functions, such as data analytics, to ensure app developers have an adequate understanding of the software they are incorporating into their apps and can accurately describe such software to consumers.
  • Participation in Trade Associations.  The Report urges app developers to participate in trade associations and other industry organizations, particularly in the development of self-regulatory programs addressing privacy in mobile apps.

Advertising Networks and Other Third Parties

By specifically including advertising networks and other third parties in the Report, the FTC recognizes that cooperation with such networks and parties is necessary to achieve the recommendations outlined for operating system providers and app developers.  The recommendations for advertising networks and other third parties include:

  • Coordination with App Developers.  The Report calls upon advertising networks and other third parties to communicate with app developers to enable such developers to provide accurate disclosures to consumers.
  • DNT Mechanism.  Consistent with its recommendations for operating system providers, the FTC suggests that advertising networks and other third parties work with operating system providers to implement a DNT mechanism.

Trade Associations

The FTC states that trade associations can facilitate standardized privacy disclosures.  The Report makes the following recommendations for trade associations:

  • Icons.  Trade associations can work with operating system providers to develop standardized icons to indicate the transmission of personal information and other data.
  • Badges.  Similar to icons, the Report suggests that trade associations consider developing “badges” or other visual cues used to convey information about a particular app’s data practices.
  • Privacy Policies.  Finally, the FTC suggests that trade associations are uniquely positioned to explore other opportunities to standardize privacy policies across the mobile app industry.

Children and Mobile Apps

Commenting on progress between the February 2012 Report and December 2012 Report, both of which relied on a survey of 400 mobile apps targeted at children, the FTC stated that “little or no progress has been made” in increasing transparency in the mobile app industry with regard to privacy practices specific to children.  The December 2012 Report suggests that very few mobile apps targeted to children include basic information about the app’s privacy practices and interactive features, including the type of data collected, the purpose of the collection and whether third parties have access to such data:

  • Privacy Disclosures.  According to the December 2012 Report, approximately 20 percent of the mobile apps reviewed disclosed any privacy-related information prior to the download process and the same proportion provided access to a privacy disclosure after downloading the app.  Among those mobile apps, the December 2012 Report characterizes their disclosures as lengthy, difficult to read or lacking basic detail, such as the specific types of information collected.
  • Information Collection and Sharing Practices.  The December 2012 Report notes that 59 percent of the mobile apps transmitted some information to the app developer or to a third party.  Unique device identifiers were the most frequently transmitted data point, which the December 2012 Report cites as problematic, suggesting that such identifiers are routinely used to create user “profiles,” which may track consumers across multiple mobile apps.
  • Disclosure Practices Regarding Interactive App Features.  The FTC reports that nearly half of the apps that stated they did not include advertising actually contained advertising, including ads targeted to a mature audience.  Similarly, the December 2012 Report notes that approximately 9 percent of the mobile apps reviewed disclosed that they linked with social media applications; however, this number represented only half of the mobile apps that actually linked to social media applications.  Mobile app developers using a template privacy policy as a starting point for an app’s privacy policy should carefully tailor the template to reflect the developer’s actual privacy practices for the app.

Increased Enforcement

In addition to the reports discussed above and the revisions to the COPPA Rule, effective July 1, 2013, the FTC has also increased enforcement efforts relating to mobile app privacy.  On February 1, 2013, the FTC announced an agreement with Path Inc., operator of the Path social networking mobile app, to settle allegations that it deceived consumers by collecting personal information from their mobile device address books without their knowledge or consent.  Under the terms of the agreement, Path Inc. must establish a comprehensive privacy program, obtain independent privacy assessments every other year for the next 20 years and pay $800,000 in civil penalties specifically relating to alleged violations of the COPPA Rule.  In announcing the agreement, the FTC commented on its commitment to continued scrutiny of privacy practices within the mobile app industry, adding that “no matter what new technologies emerge, the [FTC] will continue to safeguard the privacy of Americans.”

Key Takeaways

App developers and other key stakeholders should consider the following next steps:

  • Review existing privacy policies to confirm they accurately describe current privacy practices for the particular app rather than merely following the developer’s preferred template privacy policy
  • Where practical, update actual privacy practices and privacy policies to be more in line with the FTC’s expectations for transparency and consumer choice, including use of opt-in rather than opt-out consent models
  • Revisit privacy practices in light of heightened FTC enforcement under COPPA and its other consumer protection authorities

© 2013 McDermott Will & Emery

The IP Strategy Summit (TIPSS): Monetization – Harvesting Your IP

The National Law Review is pleased to bring you information about the upcoming Monetization:  Harvesting Your IP conference:

Monetization IP - April 23-24 2013

April 23-24, 2013

New York

KEY TOPICS THAT WILL BE COVERED:

  • Evaluation of your IP
  • Monetization Models
  • Building a Monetization Strategy
  • Managing and communication across your organization
  • Selling your IP
  • Running a licensing program
  • Discover the Best Enforcement Strategies
  • Multi-National Litigation
  • Financial reporting of revenues

Supreme Court Clarifies Antitrust Immunity For State-Sanctioned Conduct

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On February 19, 2013, the U.S. Supreme Court, in a unanimous decision, found that a merger of two Georgia hospitals was not immune from federal antitrust laws under the “state-action” exemption, reversing a decision of the Eleventh Circuit Court of Appeals. The Supreme Court’s ruling has implications for activities of local governmental entities, such as counties and municipalities, as well as private actors exercising authority delegated by a state.

In this case, Federal Trade Commission v. Phoebe Putney Health System, Inc.,1 the Hospital Authority of Albany-Dougherty County (Authority), a non-profit entity formed by the city of Albany and Dougherty County pursuant to Georgia law, owned and operated Phoebe Putney Memorial Hospital.  In 2010, the Authority authorized the purchase of the only other hospital in Dougherty County, Palmyra Medical Center. The Federal Trade Commission (FTC) sought to block the merger on the grounds that it would create a virtual monopoly and would substantially lessen competition in the market for acute-care hospital services, in violation of Section 5 of the Federal Trade Commission Act and Section 7 of the Clayton Act. Both the federal district court and the Eleventh Circuit denied the FTC’s request for an injunction, finding that the state-action doctrine immunized the merger from antitrust liability.

The state-action doctrine, which was first recognized by the U.S. Supreme Court in Parker v. Brown,2 exempts from the federal antitrust laws actions by a state acting in its sovereign capacity. The doctrine was subsequently expanded to cover subdivisions of a state, such as municipalities and other local governmental entities which, although not sovereign, are immune from federal antitrust scrutiny if their activities are undertaken pursuant to a “clearly articulated and affirmatively expressed” state policy to displace competition. Even anticompetitive actions of private parties implementing state policy may be entitled to immunity if the “clear articulation” requirement is met and the policy is “actively supervised” by the state itself.3

To pass the “clear articulation” test, a state legislature need not expressly state an intention for a delegated action to have anticompetitive effects. Rather, state-action immunity applies if the anticompetitive effect was the “foreseeable result” of what the state authorized.  The Eleventh Circuit found that, because the Authority was granted broad corporate powers, including power to acquire and lease hospitals, anticompetitive conduct by the Authority must have been reasonably anticipated by the Georgia Legislature and therefore was foreseeable.

The Supreme Court disagreed.  Writing for the Court, Justice Sonia Sotomayor noted at the outset that “state-action immunity is disfavored.” The Court held that the Eleventh Circuit applied the concept of foreseeability too loosely and that the “clear articulation” standard is met only where anticompetitive effects are the “inherent, logical, or ordinary result of the exercise of authority delegated by the state legislature.” More specifically, the Supreme Court said that grants of general corporate power to substate governmental entities, such as the Authority, do not meet the “clear articulation” requirement for state-action immunity. The acquisition and leasing powers exercised by the Authority mirror general powers routinely conferred by state law upon private corporations and are typically used in ways that raise no antitrust concerns. As a result, a state that has delegated such general powers cannot be said to have contemplated that they will be used to displace competition, for example, by consolidating ownership of hospitals.

The Supreme Court did acknowledge that public, non-profit entities like the Authority differ materially from private corporations that offer hospital services. However, neither the Georgia Legislature’s objective of improving access to affordable health care, nor the Authority’s non-profit status, logically suggested that the State intended hospital authorities to pursue their goals through anticompetitive mergers. Even the authorization of discrete forms of anticompetitive conduct pursuant to a regulatory structure, such as the Legislature’s certificate of need requirement, did not mean the State affirmatively contemplated other forms of anticompetitive conduct that are only tangentially related.

The Supreme Court’s decision narrows the scope of state-action immunity and has implications for conduct of local governmental entities as well as private actors, not only involving mergers and acquisitions in the health care sector, but also in other contexts and other industries. This was noted by the FTC, which issued astatement praising the Court’s opinion and stating that it “will ensure competition in a variety of other industries, as well.” Entities acting under existing state legislation may need to re-evaluate whether the statutes that empower them offer immunity from federal antitrust scrutiny. Even legislation that explicitly allows some activities that might be anticompetitive may now need to be read more carefully. Parties seeking to get new legislation passed to protect certain conduct that may displace competition now have a clearer roadmap for the degree of specificity required in the statutory language.


1 568 U.S. ___ (2013).

2 317 U.S. 341 (1943).

3 Local governmental entities are not subject to the “active state supervision” requirement because they have less of an incentive to pursue their own self-interest under the guise of implementing state policies.

© 2013 Bracewell & Giuliani LLP

2013 National Law Review Law Student Writing Competition

The National Law Review is pleased to announce their 2013 Law Student Writing Competition

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The National Law Review (NLR) consolidates practice-oriented legal analysis from a variety of sources for easy access by lawyers, paralegals, law students, business executives, insurance professionals, accountants, compliance officers, human resource managers, and other professionals who wish to better understand specific legal issues relevant to their work.

The NLR Law Student Writing Competition offers law students the opportunity to submit articles for publication consideration on the NLR Web site.  No entry fee is required. Applicants can submit an unlimited number of entries each month.

  • Winning submissions will be published according to specified dates.
  • Entries will be judged and the top two to four articles chosen will be featured on the NLR homepage for a month.  Up to 5 runner-up entries will also be posted in the NLR searchable database each month.
  • Each winning article will be displayed accompanied by the student’s photo, biography, contact information, law school logo, and any copyright disclosure.
  • All winning articles will remain in the NLR database for two years (subject to earlier removal upon request of the law school).

In addition, the NLR sends links to targeted articles to specific professional groups via e-mail. The NLR also posts links to selected articles on the “Legal Issues” or “Research” sections of various professional organizations’ Web sites. (NLR, at its sole discretion, maydistribute any winning entry in such a manner, but does not make any such guarantees nor does NLR represent that this is part of the prize package.)

Congratulations to our 2012 and 2011 Law Student Writing Contest Winners

Fall 2012: October Contest

Spring 2012:

Winter 2012:

Fall 2011:

Why Students Should Submit Articles:

  • Students have the opportunity to publicly display their legal knowledge and skills.
  • The student’s photo, biography, and contact information will be posted with each article, allowing for professional recognition and exposure.
  • Winning articles are published alongside those written by respected attorneys from Am Law 200 and other prominent firms as well as from other respected professional associations.
  • Now more than ever, business development skills are expected from law firm associates earlier in their careers. NLR wants to give law students valuable experience generating consumer-friendly legal content of the sort which is included for publication in law firm client newsletters, law firm blogs, bar association journals and trade association publications.
  • Student postings will remain in the NLR online database for up to two years, easily accessed by potential employers.
  • For an example of  a contest winning student written article from Northwestern University, please click here or please review the winning submissions from Spring 2011.

Content Guidelines and Deadlines

Content Guidelines must be followed by all entrants to qualify. It is recommended that articles address the following monthly topic areas:

March 2013 Suggested Topic:

  1. Labor Law
  • Submission Deadline:  Monday, March 4, 2013

Articles covering current issues related to other areas of the law may also be submitted. Entries must be submitted via email to lawschools@natlawreview.com by 5:00 pm Central Standard Time on the dates indicated above.

Articles will be judged by NLR staff members on the basis of readability, clarity, organization, and timeliness. Tone should be authoritative, but not overly formal. Ideally, articles should be straightforward and practical, containing useful information of interest to legal and business professionals. Judges reserve the right not to award any prizes if it is determined that no entries merit selection for publication by NLR. All judges’ decisions are final. All submissions are subject to the NLR’s Terms of Use.

Students are not required to transfer copyright ownership of their winning articles to the NLR. However, all articles submitted must be clearly identified with any applicable copyright or other proprietary notices. The NLR will accept articles previously published by another publication, provided the author has the authority to grant the right to publish it on the NLR site. Do not submit any material that infringes upon the intellectual property or privacy rights of any third party, including a third party’s unlicensed copyrighted work.

Manuscript Requirements

  • Format – HTML (preferred) or Microsoft® Word
  • Length  Articles should be no more than 5,500 words, including endnotes.
  • Endnotes and citations – Any citations should be in endnote form and listed at the end of the article. Unreported cases should include docket number and court. Authors are responsible for the accuracy and proper format of related cites. In general, follow the Bluebook. Limit the number of endnotes to only those most essential. Authors are responsible for accuracy of all quoted material.
  • Author Biography/Law School Information – Please submit the following:
    1. Full name of author (First Middle Last)
    2. Contact information for author, including e-mail address and phone number
    3. Author photo (recommended but optional) in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 150 x 200 pixels.
    4. A brief professional biography of the author, running approximately 100 words or 1,200 characters including spaces.
    5. The law school’s logo in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 300 pixels high or 300 pixels wide.
    6. The law school mailing address, main phone number, contact e-mail address, school Web site address, and a brief description of the law school, running no more than 125 words or 2,100 characters including spaces.

To enter, an applicant and any co-authors must be enrolled in an accredited law school within the fifty United States. Employees of The National Law Review are not eligible. Entries must include ALL information listed above to be considered and must be submitted to the National Law Review at lawschools@natlawreview.com. 

Any entry which does not meet the requirements and deadlines outlined herein will be disqualified from the competition. Winners will be notified via e-mail and/or telephone call at least one day prior to publication. Winners will be publicly announced on the NLR home page and via other media.  All prizes are contingent on recipient signing an Affidavit of Eligibility, Publicity Release and Liability Waiver. The National Law Review 2011 Law Student Writing Competition is sponsored by The National Law Forum, LLC, d/b/a The National Law Review, 4700 Gilbert, Suite 47 (#230), Western Springs, IL 60558, 708-357-3317. This contest is void where prohibited by law. All entries must be submitted in accordance with The National Law Review Contributor Guidelines per the terms of the contest rules. A list of winners may be obtained by writing to the address listed above. There is no fee to enter this contest.

SEC Approves NYSE, NYSE MKT and NASDAQ Compensation Committee Listing Standards

The National Law Review recently published an article by Jeff C. Dodd and Scott L. Olson with Andrews Kurth LLP regarding, SEC regulations:

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The Securities and Exchange Commission (SEC) recently approved amendments to the compensation committee listing standards of the New York Stock Exchange (NYSE),1 the NYSE MKT2 and the NASDAQ Stock Market (NASDAQ)3 that were initially proposed in September 2012 to comply with Rule 10C-1 of the Securities Exchange Act of 1934.4 In approving the listing standards, the SEC did not require any changes to the exchanges’ proposals, as amended.

The new listing standards will impact the authority and responsibilities of compensation committees with respect to their advisers and the independence analysis for compensation committee members. Although the SEC has approved the new compensation committee listing standards, issuers with listed equity securities subject to the new standards will have time to comply as follows.

NYSE- and NYSE MKT-listed issuers have until:

  • the earlier of their first annual meeting after January 15, 2014, or October 31, 2014, to comply with the enhanced compensation committee independence standards; and
  • July 1, 2013 to comply with the remaining standards (e.g., the authority to retain and fund advisers to the committee and the responsibility to consider specified independence factors before selecting or receiving advice from advisers).

NASDAQ-listed issuers have until:

  • July 1, 2013 to establish in the compensation committee charter, board resolutions or other board action the compensation committee’s new responsibilities and authority (i.e., the authority to retain and fund advisers to the committee and the responsibility to consider specified independence factors before selecting or receiving advice from advisers); and
  • the earlier of their first annual meeting after January 15, 2014, or October 31, 2014, to comply with the remaining standards (e.g., have a formal compensation committee of at least two independent directors, have a compensation committee charter and satisfy the enhanced compensation committee independence standards).

Current compensation committee listing standards will apply pending the transition to the new standards.

Click here to read about key aspects of the NYSE’s new compensation committee listing standards.

Click here to read about key aspects of the NYSE MKT’s new compensation committee listing standards.

Click here to read about key aspects of NASDAQ’s new compensation committee listing standards.

Click here to read about practical considerations for NYSE-, NYSE MKT- and NASDAQ-listed issuers to consider in response to the new compensation committee listing standards.

NYSE Compensation Committee Listing Standards

Committee charter requirements for compensation committee authority and responsibilities regarding its advisers. In addition to current NYSE charter requirements, compensation committee charters must specify the following:

  • the committee’s authority, in its sole discretion, to retain or obtain the advice of a compensation consultant, legal counsel or other adviser (collectively referred to throughout the discussion of the NYSE’s new listing standards as advisers);
  • the committee’s direct responsibility for the appointment, compensation and oversight of the work of any adviser retained by the committee;
  • the issuer’s responsibility to provide for appropriate funding (as determined by the committee) for the payment of reasonable compensation to any adviser retained by the committee; and
  • the committee’s responsibility to conduct an independence assessment before selecting or receiving advice from an adviser to the committee (as discussed in more detail below under “Assessment of adviser independence”).

The new authority and responsibilities regarding advisers do not:

  • require the compensation committee to implement or follow its advisers’ advice or recommendations; or
  • affect the ability or obligation of the compensation committee to exercise its own judgment in fulfilling its duties.

Assessment of adviser independence. As noted above and subject to limited exceptions discussed below, before selecting or receiving advice from an adviser (for compensation or non-compensation matters and regardless of who retained the adviser), the compensation committee must consider all factors relevant to that adviser’s independence from management, including:

  • the provision of other services to the issuer by the adviser’s employer;
  • the amount of fees received from the issuer by the adviser’s employer, as a percentage of the employer’s total revenue;
  • the policies and procedures of the adviser’s employer that are designed to prevent conflicts of interest;
  • any business or personal relationship between the adviser and a compensation committee member;
  • any issuer stock owned by the adviser (as the SEC noted in its adopting release for Rule 10C-1, it interprets this to include stock owned by the adviser’s immediate family members); and
  • any business or personal relationship between either the adviser or the adviser’s employer and an issuer’s executive officer (as the SEC noted in its adopting release for Rule 10C-1, this would include, for example, situations where an issuer’s CEO and the adviser have a familial relationship or where the CEO and the adviser or the adviser’s employer are business partners).

These factors are considerations for the compensation committee rather than bright-line standards. Although compensation committees must consider the specified factors, they are also responsible for identifying and considering all additional factors relevant to an adviser’s independence from management. After conducting the required independence assessment, compensation committees may select or receive advice from any adviser they prefer, even those that are not independent.5 In response to comments that compensation committees should be specifically required to also consider whether an adviser requires a contractual agreement to indemnify the adviser or limit the adviser’s liability, the NYSE noted that it is not apparent that the existence of such indemnification agreements or contractual limitations on liability is relevant to an independence analysis.6

Compensation committees must conduct the independence assessment for any adviser that the committee selects or receives advice from, other than:

  • in-house legal counsel; and
  • any adviser whose role is limited to:
    • consulting on any broad-based plan that does not discriminate in scope, terms, or operation, in favor of executive officers or directors of the issuer, and that is available generally to all salaried employees; or
    • providing information that either is not customized for a particular issuer or that is customized based on parameters that are not developed by the adviser and about which the adviser does not provide advice.

In response to comments, the NYSE made it clear that the independence assessment requirement applies to any outside legal counsel consulted by the compensation committee, including any regular outside counsel to the issuer consulted on matters such as SEC filing requirements or federal tax issues associated with equity compensation plans.

In response to a comment expressing concern about the possible need to conduct a new independence assessment before every compensation committee meeting for those advisers that regularly provide advice to the compensation committee, the NYSE indicated that the frequency of the assessment will be a facts and circumstances determination. Specifically, the NYSE noted that “[w]hile an annual assessment may be sufficient in some cases, in other circumstances a more frequent review may be warranted.” In approving the new standards, the SEC noted its expectation that the assessment would be conducted at least annually.

Compensation committee independence. Current listing standards require that a compensation committee be comprised solely of independent directors, and the board must affirmatively determine that a compensation committee member is independent under the general board independence standards set forth in Section 303A.02 of the Manual.

Under the new standards, in making an affirmative independence determination regarding a compensation committee member the board must also consider all factors specifically relevant to determining whether a director has a relationship to the issuer that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including:

  • the source of compensation of the director, including any consulting, advisory or other compensatory fee paid by the issuer to the director; and
  • whether the director is affiliated with the issuer, a subsidiary of the issuer or an affiliate of a subsidiary of the issuer.

These factors do not include any specific numerical or materiality tests, and are considerations for the board rather than bright-line standards. For example, the NYSE did not adopt an absolute prohibition on a board making an affirmative independence finding for a compensation committee member solely because the member or any of his or her affiliates are significant stockholders. Although the board must consider the specified factors, it must also identify and consider all additional factors that would be relevant to a compensation committee member’s independence from management. In response to comments, the NYSE confirmed that a single factor or relationship considered in the independence analysis may be sufficiently material to render a director non-independent.

When considering the source of a director’s compensation, the board should consider whether the director receives compensation from any person or entity that would impair his or her ability to make independent judgments about the issuer’s executive compensation. Likewise, when considering any affiliate relationship, the board should consider whether the relationship places the director under the direct or indirect control of the issuer or its senior management, or creates a direct relationship between the director and senior management, in each case of a nature that would impair the director’s ability to make independent judgments about the issuer’s executive compensation.

In response to comments that director fees should be an explicit factor to be considered in compensation committee independence determinations, the NYSE noted that it does not believe that it is likely that director fees would be a relevant consideration for the independence analysis. However, if “excessive” board compensation might affect a director’s independence, the NYSE noted that the listing standards would require the board to consider that factor in its independence determination, as the standards require the board to consider all relevant factors. The NYSE did not indicate what constitutes “excessive” board compensation.

If a compensation committee member ceases to be independent for reasons outside that member’s reasonable control, the member may, with prompt notice by the issuer to the NYSE, remain a compensation committee member until the earlier of (1) the next annual stockholder meeting or (2) one year from the event that caused the member to cease to be independent. This cure provision is limited to situations where the compensation committee continues to have a majority of independent directors.

Exemptions. The new compensation committee listing standards will not apply to the following issuers that are exempt from the NYSE’s current compensation committee listing standards:

  • controlled companies (i.e., issuers where more than 50% of the voting power for the election of directors is held by an individual, a group or another company);
  • limited partnerships (for example, master limited partnerships (MLPs));
  • companies in bankruptcy;
  • closed-end and open-end funds registered under the Investment Company Act of 1940 (1940 Act);
  • passive business organizations in the form of trusts (for example, royalty trusts);
  • derivatives and special purpose securities; and
  • issuers whose only listed equity security is preferred stock.

Smaller reporting companies (generally issuers with less than $75 million of public equity float) are exempt from the new enhanced compensation committee independence and consideration of adviser independence standards. As a result, their compensation committee charters will not have to reflect these matters. However, these issuers are subject to the other new standards. An issuer that ceases to qualify as a smaller reporting company will have:

  • six months from the date it ceases to be a smaller reporting company to comply with the consideration of adviser independence standard;
  • six months from the date it ceases to be a smaller reporting company to have one member of its compensation committee satisfy the enhanced compensation committee independence standard;
  • nine months from the date it ceases to be a smaller reporting company to have a majority of its compensation committee members satisfy the enhanced compensation committee independence standard; and
  • 12 months from the date it ceases to be a smaller reporting company to have a compensation committee consisting entirely of members that satisfy the enhanced compensation committee independence standard.7

Foreign private issuers that elect to follow home country practice are exempt from the new compensation committee listing standards provided that they comply with the disclosure requirements of Section 303A.11 of the Manual.

Transition periods for newly-listed and other issuers. The current transition periods available to newly-listed issuers and certain other categories of issuers (e.g., issuers listing in connection with a carve-out or spin-off transaction) apply to the new compensation committee listing standards. For example, an issuer listing in connection with its initial public offering (IPO) must have one independent compensation committee member by the earlier of the IPO closing date or five business days from the listing date, a majority of independent members within 90 days of the listing date, and a fully independent committee within one year of the listing date.

Click here to read about practical considerations to consider in response to the new compensation committee listing standards.

NYSE MKT Compensation Committee Listing Standards

Compensation committee authority and responsibilities regarding its advisers. A compensation committee8 must have the following authority and responsibilities:

  • the authority, in its sole discretion, to retain or obtain the advice of a compensation consultant, legal counsel or other adviser (collectively referred to throughout the discussion of the NYSE MKT’s new listing standards as advisers);
  • the direct responsibility for the appointment, compensation and oversight of the work of any adviser retained by the committee;
  • the issuer must provide for appropriate funding (as determined by the committee) for the payment of reasonable compensation to any adviser retained by the committee; and
  • the responsibility to conduct an independence assessment before selecting or receiving advice from an adviser to the committee (as discussed in more detail below under “Assessment of adviser independence”).

The new authority and responsibilities regarding advisers do not:

  • require the compensation committee to implement or follow its advisers’ advice or recommendations; or
  • affect the ability or obligation of the compensation committee to exercise its own judgment in fulfilling its duties.

Assessment of adviser independence. As noted above and subject to limited exceptions discussed below, before selecting or receiving advice from an adviser (for compensation or non-compensation matters and regardless of who retained the adviser), the compensation committee must consider all factors relevant to that adviser’s independence from management, including:

  • the provision of other services to the issuer by the adviser’s employer;
  • the amount of fees received from the issuer by the adviser’s employer, as a percentage of the employer’s total revenue;
  • the policies and procedures of the adviser’s employer that are designed to prevent conflicts of interest;
  • any business or personal relationship between the adviser and a compensation committee member;
  • any issuer stock owned by the adviser (as the SEC noted in its adopting release for Rule 10C-1, it interprets this to include stock owned by the adviser’s immediate family members); and
  • any business or personal relationship between either the adviser or the adviser’s employer and an issuer’s executive officer (as the SEC noted in its adopting release for Rule 10C-1, this would include, for example, situations where an issuer’s CEO and the adviser have a familial relationship or where the CEO and the adviser or the adviser’s employer are business partners).

These factors are considerations for the compensation committee rather than bright-line standards. Although compensation committees must consider the specified factors, they are also responsible for identifying and considering all additional factors relevant to an adviser’s independence from management. After conducting the required independence assessment, compensation committees may select or receive advice from any adviser they prefer, even those that are not independent.9 In response to comments that compensation committees should be specifically required to also consider whether an adviser requires a contractual agreement to indemnify the adviser or limit the adviser’s liability, the NYSE MKT noted that it is not apparent that the existence of such indemnification agreements or contractual limitations on liability is relevant to an independence analysis.10

Compensation committees must conduct the independence assessment for any adviser that the committee selects or receives advice from, other than:

  • in-house legal counsel; and
  • any adviser whose role is limited to:
    • consulting on any broad-based plan that does not discriminate in scope, terms, or operation, in favor of executive officers or directors of the issuer, and that is available generally to all salaried employees; or
    • providing information that either is not customized for a particular issuer or that is customized based on parameters that are not developed by the adviser and about which the adviser does not provide advice.

In response to comments, the NYSE MKT made it clear that the independence assessment requirement applies to any outside legal counsel consulted by the compensation committee, including any regular outside counsel to the issuer consulted on matters such as SEC filing requirements or federal tax issues associated with equity compensation plans.

In response to a comment expressing concern about the possible need to conduct a new independence assessment before every compensation committee meeting for those advisers that regularly provide advice to the compensation committee, the NYSE MKT indicated that the frequency of the assessment will be a facts and circumstances determination. Specifically, the NYSE MKT noted that “[w]hile an annual assessment may be sufficient in some cases, in other circumstances a more frequent review may be warranted.” In approving the new standards, the SEC noted its expectation that the assessment would be conducted at least annually.

Compensation committee independence. Current listing standards require that executive officer compensation be determined, or recommended to the board for determination, either by a compensation committee comprised solely of independent directors or by a majority of the independent directors. Moreover, the board must affirmatively determine that a compensation committee member is independent under the general board independence standards set forth in Section 803A(2) of the Guide.

Under the new standards, the board must also affirmatively determine that all of the compensation committee members (or all of the independent directors if an issuer does not have a compensation committee) are independent for compensation committee purposes. To make this determination, the board must consider all factors specifically relevant to determining whether a director has a relationship to the issuer that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including:

  • the source of compensation of the director, including any consulting, advisory or other compensatory fee paid by the issuer to the director; and
  • whether the director is affiliated with the issuer, a subsidiary of the issuer or an affiliate of a subsidiary of the issuer.

These factors do not include any specific numerical or materiality tests, and are considerations for the board rather than bright-line standards. For example, the NYSE MKT did not adopt an absolute prohibition on a board making an affirmative independence finding for a compensation committee member solely because the member or any of his or her affiliates are significant stockholders. Although the board must consider the specified factors, it must also identify and consider all additional factors that would be relevant to a compensation committee member’s independence from management. In response to comments, the NYSE MKT confirmed that a single factor or relationship considered in the independence analysis may be sufficiently material to render a director non-independent.

When considering the source of a director’s compensation, the board should consider whether the director receives compensation from any person or entity that would impair his or her ability to make independent judgments about the issuer’s executive compensation. Likewise, when considering any affiliate relationship, the board should consider whether the relationship places the director under the direct or indirect control of the issuer or its senior management, or creates a direct relationship between the director and senior management, in each case of a nature that would impair the director’s ability to make independent judgments about the issuer’s executive compensation.

In response to comments that director fees should be an explicit factor to be considered in compensation committee independence determinations, the NYSE MKT noted that it does not believe that it is likely that director fees would be a relevant consideration for the independence analysis. However, if “excessive” board compensation might affect a director’s independence, the NYSE MKT noted that the listing standards would require the board to consider that factor in its independence determination, as the standards require the board to consider all relevant factors. The NYSE MKT did not indicate what constitutes “excessive” board compensation.

If a compensation committee member ceases to be independent for reasons outside that member’s reasonable control, the member may, with prompt notice by the issuer to the NYSE MKT, remain a compensation committee member until the earlier of (1) the next annual stockholders meeting or (2) one year from the event that caused the member to cease to be independent. This cure provision is limited to situations where the compensation committee continues to have a majority of independent directors.

The NYSE MKT amended its listing standards so that only smaller reporting companies (generally issuers with less than $75 million of public equity float) may rely on the current exception that allows one non-independent director to serve on the compensation committee under exceptional and limited circumstances, even for a director who fails the enhanced compensation committee independence standards. Under the exception, one non-independent director may be appointed to the compensation committee if:

  • the committee consists of at least three members;
  • the non-independent director is not currently an executive officer, employee, or an immediate family member of an executive officer or employee;
  • the board, under exceptional and limited circumstances, determines that the individual’s membership is required by the best interests of the issuer and its stockholders; and
  • the non-independent director serves for no longer than two years.

A smaller reporting company relying on the exception must provide certain disclosures required by NYSE MKT listing standards in the proxy statement for the next annual meeting following the determination (or annual report on Form 10-K if a proxy statement is not required), and any disclosure required by Instruction 1 to Item 407(a) of Regulation S-K regarding reliance on the exception.

Exemptions. The new compensation committee listing standards will not apply to the following issuers that are exempt from the NYSE MKT’s current compensation committee listing standards:

  • controlled companies (i.e., issuers where more than 50% of the voting power is held by an individual, a group or another issuer);
  • limited partnerships (for example, MLPs);
  • companies in bankruptcy;
  • closed-end and open-end funds registered under the 1940 Act;
  • asset-backed issuers and other passive business organizations (for example, royalty trusts);
  • derivatives and special purpose securities; and
  • issuers whose only listed equity security is preferred stock.

Smaller reporting companies are exempt from the new enhanced compensation committee independence and consideration of adviser independence standards. However, these issuers are subject to the other new standards. An issuer that ceases to qualify as a smaller reporting company will have:

  • six months from the date it ceases to be a smaller reporting company to comply with the consideration of adviser independence standard;
  • six months from the date it ceases to be a smaller reporting company to have one member of its compensation committee satisfy the enhanced compensation committee independence standard;
  • nine months from the date it ceases to be a smaller reporting company to have a majority of its compensation committee members satisfy the enhanced compensation committee independence standard; and
  • 12 months from the date it ceases to be a smaller reporting company to have a compensation committee consisting entirely of members that satisfy the enhanced compensation committee independence standard.11

Foreign private issuers may seek an exemption on the basis that they follow home country practice if they comply with the requirements of Section 110 of the Guide.

Transition periods for newly-listed issuers. The current transition periods available to newly-listed issuers apply to the new compensation committee listing standards. Thus, an issuer listing in connection with its IPO must have one independent compensation committee member at the time of listing, a majority of independent members within 90 days of listing, and a fully independent compensation committee within one year of listing.

Click here to read about practical considerations to consider in response to the new compensation committee listing standards.

NASDAQ Compensation Committee Listing Rules

Compensation committee authority and responsibilities regarding its advisers. A compensation committee must have the following authority and responsibilities:

  • the authority, in its sole discretion, to retain or obtain the advice of a compensation consultant, legal counsel or other adviser (collectively referred to throughout the discussion of NASDAQ’s new listing standards as advisers);
  • the direct responsibility for the appointment, compensation and oversight of the work of any adviser retained by the committee;
  • the issuer must provide for appropriate funding (as determined by the committee) for the payment of reasonable compensation to any adviser retained by the committee; and
  • the responsibility to conduct an independence assessment before selecting or receiving advice from an adviser to the committee (as discussed in more detail below under “Assessment of adviser independence”).

For those issuers without a standing compensation committee, until the requirement to have a standing compensation committee is effective (as discussed in more detail below under “Compensation committee composition and independence”) these requirements will apply to the independent directors who determine, or recommend to the board to determine, the compensation of executive officers.

Issuers will need to consider under the corporate law of the state of their incorporation whether to grant by July 1, 2013 the authority and responsibilities discussed above through a charter, board resolution or other board action.

The new authority and responsibilities regarding advisers do not:

  • require the compensation committee to implement or follow its advisers’ advice or recommendations; or
  • affect the ability or obligation of the compensation committee to exercise its own judgment in fulfilling its duties.

Assessment of adviser independence. As noted above and subject to limited exceptions discussed below, before selecting or receiving advice from an adviser (for compensation or non-compensation matters and regardless of who retained the adviser), the compensation committee must consider the following six independence factors:

  • the provision of other services to the issuer by the adviser’s employer;
  • the amount of fees received from the issuer by the adviser’s employer, as a percentage of the employer’s total revenue;
  • the policies and procedures of the adviser’s employer that are designed to prevent conflicts of interest;
  • any business or personal relationship between the adviser and a compensation committee member;
  • any issuer stock owned by the adviser (as the SEC noted in its adopting release for Rule 10C-1, it interprets this to include stock owned by the adviser’s immediate family members); and
  • any business or personal relationship between either the adviser or the adviser’s employer and an issuer’s executive officer (as the SEC noted in its adopting release for Rule 10C-1, this would include, for example, situations where an issuer’s CEO and the adviser have a familial relationship or where the CEO and the adviser or the adviser’s employer are business partners).

These factors are considerations for the compensation committee rather than bright-line standards. After considering the six independence factors, compensation committees may select or receive advice from any adviser they prefer, even those that are not independent.12

Compensation committees must conduct the independence assessment for any adviser (including outside legal counsel) that the committee selects or receives advice from, other than:

  • in-house legal counsel; and
  • any adviser whose role is limited to:
    • consulting on any broad-based plan that does not discriminate in scope, terms, or operation, in favor of executive officers or directors of the issuer, and that is available generally to all salaried employees; or
    • providing information that either is not customized for a particular issuer or that is customized based on parameters that are not developed by the adviser and about which the adviser does not provide advice.

In approving the new listing rules, the SEC noted its expectation that the independence assessment would be conducted at least annually.

Compensation committee composition and independence. NASDAQ’s current listing rules require that an issuer’s executive officer compensation must be determined, or recommended to the board for determination, either by:

  • a compensation committee comprised solely of independent directors; or
  • independent directors constituting a majority of the board’s independent directors in a vote in which only independent directors participate.

NASDAQ eliminated the second alternative and by the relevant 2014 compliance date issuers, including smaller reporting companies (generally issuers with less than $75 million of public equity float), must have a standing compensation committee comprised of at least two members. Each compensation committee member must be an independent director (as defined in current Listing Rule 5605(a)(2)), and boards are required to make an affirmative determination that no independent director has a relationship that, in the board’s opinion, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

In addition to satisfying the requirement that each compensation committee member be an independent director, the new rules provide that:

  • each member is prohibited from accepting directly or indirectly any consulting, advisory or other compensatory fee from the issuer or any of its subsidiaries; and
  • the board must consider whether a compensation committee member is affiliated with the issuer, a subsidiary of the issuer or an affiliate of a subsidiary of the issuer to determine whether any affiliation would impair the member’s judgment as a member of the compensation committee.

These independence factors do not include any specific numerical or materiality tests. In approving the listing rules, the SEC confirmed that, despite any explicit statement by NASDAQ on the matter, a single factor could disqualify a director from being independent under the enhanced compensation committee independence rules.

Although director fees are not an explicit factor to be considered in compensation committee independence determinations, NASDAQ noted that as boards must make an affirmative independence determination that each independent director has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director the board could, if appropriate, consider director fees in that context.13

The enhanced independence rules adopt the same bright-line prohibition against compensatory fees applicable to audit committees. The prohibition does not include a “look-back” period and, therefore, would apply only during a director’s service on the compensation committee. “Compensatory fees” do not include:

  • fees received for board or board committee service; or
  • the receipt of fixed amounts of compensation under a retirement plan, including deferred compensation, for prior service with the issuer (provided that the compensation is not contingent in any way on continued service).

Unlike the prohibition regarding compensatory fees, the rules do not impose a bright-line prohibition on affiliation, but rather impose a requirement to consider such affiliations when making a compensation committee independence determination. Although a board may conclude differently based on the specific facts and circumstances, NASDAQ does not believe ownership of issuer stock by itself, or possession of a controlling interest through ownership of issuer stock by itself, precludes a board from finding that it is appropriate for a director (for example, as a representative of a significant stockholder) to serve on the compensation committee. The board will not be required to apply a “look-back” period and, therefore, need consider affiliation only with respect to relationships that occur during a director’s service on the compensation committee.

Issuers, including smaller reporting companies, may rely on the current exception that allows one non-independent director to serve on the compensation committee under exceptional and limited circumstances, even for a director who fails the new enhanced compensation committee independence rules. Under this exception, one non-independent director may be appointed to the compensation committee if:

  • the committee consists of at least three members;
  • the non-independent director is not currently an executive officer, employee, or a family member of an executive officer;
  • the board, under exceptional and limited circumstances, determines that the individual’s membership is required by the best interests of the issuer and its stockholders;
  • the non-independent director serves for no longer than two years; and
  • the issuer provides certain disclosures required by the listing rules either on its website or in the proxy statement for the next annual meeting following the determination (or annual report if a proxy statement is not required), and the disclosures required by Instruction 1 to Item 407(a) of Regulation S-K regarding reliance on the exception.

If an issuer, including a smaller reporting company, fails to comply with the compensation committee composition requirements due to one vacancy, or one compensation committee member ceases to be independent for reasons beyond that member’s reasonable control, the issuer must regain compliance by the earlier of (1) its next annual stockholder meeting or (2) one year from the event that caused the non-compliance. If the annual stockholder meeting occurs within 180 days after the event causing the non-compliance, the issuer would instead have 180 days from the event to regain compliance. An issuer relying on the cure period must provide notice to NASDAQ immediately upon learning of the event or circumstances that caused the non-compliance.

Committee charter requirements. Issuers must certify that they have adopted a formal written compensation committee charter and that the compensation committee will review and reassess the adequacy of the charter on an annual basis.14 The charter must specify:

  • the scope of the committee’s responsibilities and how it carries out those responsibilities, including structure, processes and membership requirements;
  • the committee’s responsibility for determining, or recommending to the board for determination, the compensation of the issuer’s executive officers;
  • that the CEO may not be present during voting or deliberations by the committee on his or her compensation; and
  • the specific committee authority and responsibilities discussed above under “Compensation committee authority and responsibilities regarding its advisers.

Smaller reporting companies must adopt either a formal written compensation committee charter or a board resolution that specifies only the matters in the first three bullets above. These issuers are not required to specify the compensation committee authority and responsibilities set forth in the fourth bullet above or to certify that they will review and reassess the adequacy of the charter or board resolution on an annual basis.

Exemptions. The new listing rules do not apply to the following issuers that are exempt from NASDAQ’s current compensation-related listing rules:

  • asset-backed issuers and other passive issuers;
  • cooperatives;
  • limited partnerships (for example, MLPs);
  • management investment companies registered under the 1940 Act; and
  • controlled companies (i.e., issuers where more than 50% of the voting power for the election of directors is held by an individual, a group or another company).

Smaller reporting companies are exempt from the new compensation committee listing rules, except as follows:

  • they must have (and certify that they have and will continue to have) a formal compensation committee comprised of at least two independent members based on the current independent director definition in Listing Rule 5605(a)(2), but not the enhanced compensation committee independence standards; and
  • they must certify that they have adopted a formal written compensation committee charter or board resolution as discussed above under “Committee charter requirements.”

An issuer that ceases to qualify as a smaller reporting company will have six months from the date it ceases to be a smaller reporting company to:

  • comply with the committee authority and responsibilities standards; and
  • certify to NASDAQ that it (1) has adopted a formal written compensation committee charter, including all of the matters specified above under “Committee charter requirements,” and (2) has, or will within the required phase-in schedule,15 comply with the enhanced compensation committee independence standards.

Foreign private issuers that follow their home country practice are exempt from the new listing rules provided that they comply with the disclosure requirements in current Listing Rule 5615(a)(3). In addition, foreign private issuers that follow their home country practice in lieu of having an independent compensation committee as required by NASDAQ listing rules must disclose in their annual reports filed with the SEC the reasons why they do not have an independent compensation committee.

Certification. Issuers must certify to NASDAQ within 30 days after the final implementation deadline applicable to them, on a form to be provided by NASDAQ, that they have complied with the new compensation committee listing rules. Although smaller reporting companies, foreign private issuers and controlled companies are exempt from some or all of the compensation committee listing standards, based on a sample certification form provided by NASDAQ in one of its rule filings these issuers would need to complete and file the required certification form.16

Transition periods for IPO issuers. Although issuers listing in connection with their IPO are subject to the new rules, they can phase-in compliance with the compensation committee composition requirements in accordance with current phase-in schedules. Thus, these issuers must have one independent compensation committee member at listing, a majority of independent members within 90 days of listing and a fully independent committee within one year of listing.

Practical Considerations

NYSE-, NYSE MKT- and NASDAQ-listed issuers and their boards and compensation committees that are subject to the listing standards should consider the following matters. In addition to the following, issuers should not forget to conduct a review of “conflicts of interest” with compensation consultants who had any role in determining or recommending the amount or form of executive and director compensation (subject to certain exceptions). A new SEC rule requires any such conflicts of interest to be disclosed in proxy statements for meetings involving the election of directors held on or after January 1, 2013.17 As part of this process, issuers should update their director and officer questionnaire to solicit information about the existence of business or personal relationships with compensation consultants and the consultants’ employers and establish policies and procedures for collecting and analyzing information about compensation consultants to determine whether a conflict of interest exists.

By July 1, 2013:

  • Grant required compensation committee authority and responsibilities regarding advisers.
    • NASDAQ- and NYSE MKT-listed issuers should consider under the corporate law of the state of their incorporation whether to grant the new authority and responsibilities to the compensation committee (or, in lieu of such a committee, the independent directors who determine or recommend executive compensation) through a committee charter amendment, board resolution or other board action. Although the authority and responsibilities must be granted by July 1, 2013, NASDAQ-listed issuers are not required to include these matters in their compensation committee charter until 2014 (as discussed below). NYSE MKT-listed issuers are not required to have a compensation committee charter, but must determine how best to grant the required authority and responsibilities by July 1, 2013. Although not required until 2014, NASDAQ-listed issuers with existing compensation committee charters may determine it is best to amend their charters by July 1, 2013 to grant the required authority and responsibilities instead of relying on a board resolution or other board action.
    • NYSE-listed issuers should review their compensation committee charters and amend as necessary to grant the new authority and responsibilities.
  • Conduct adviser independence assessment.
    • Discuss the new listing standards with each existing and potential adviser to the compensation committee, even those advisers retained by management or the issuer, to determine whether an independence assessment is required.
    • As specifically noted by the SEC in its adopting release for Rule 10C-1, establish policies and procedures for collecting and analyzing information about advisers before the compensation committee can select or receive advice from those advisers. Steps issuers could take include (1) collecting information internally on the services provided by advisers, including identifying the individual advisers that perform services for the issuer and such advisers’ employers, and the fees paid for such services, (2) having the advisers complete a questionnaire or requesting specific representations and covenants in the adviser engagement letter to solicit the information necessary for the compensation committee to consider the enumerated factors set forth in the listing standards and any other factors deemed relevant to the compensation committee, and (3) updating the director and officer questionnaire to determine the existence of any business or personal relationship with any adviser to the compensation committee or such adviser’s employer. Ensure that any policies and procedures developed are consistent with the compensation committee charter and other issuer procedures, and that they provide that the required independence assessment is conducted prior to selecting or receiving advice from new advisers and at least annually for existing advisers.
    • For existing advisers to the compensation committee where an independence assessment is required, assess their independence and then schedule the next assessment for that adviser at least annually thereafter. As part of this exercise, boards of NYSE- and NYSE MKT-listed issuers should identify and consider any factors in addition to the six specified factors that would be relevant to an adviser’s independence from management. The listing standards are clear that advisers are not required to be independent if the independence assessment is conducted before selecting or receiving advice from an adviser. However, compensation committees may want to consider whether to adopt a policy that guides their actions if an adviser is not independent.

By the earlier of the first annual meeting after January 15, 2014, or October 31, 2014:

  • Evaluate compliance with enhanced compensation committee independence standards.
    • Update the director and officer questionnaire to address the enhanced compensation committee independence standards.
    • Evaluate the independence of compensation committee members to ensure they satisfy the enhanced compensation committee independence standards. Except for NASDAQ’s absolute prohibition on compensatory fees from the issuer or its subsidiaries, the enhanced independence standards do not impose a prohibition on committee membership if the enumerated independence factors are not satisfied. However, as stockholders and proxy advisory firms may be concerned if any factor is not satisfied boards should carefully consider how they will respond if a member does not satisfy the enumerated independence factors. Issuers may choose to conduct such an evaluation in 2013, and develop contingency plans in the event one or more of the existing compensation committee members would not be deemed independent under the enhanced independence standards (for example, in the case of a NASDAQ-listed issuer if a member receives any compensatory fees from the issuer or its subsidiaries). In such case, issuers should consider updating their 2013 director and officer questionnaire to include, for compensation committee members, questions that solicit the information that will enable the board to conduct an evaluation under the enhanced independence standards.
  • Establish a compensation committee. For NASDAQ-listed issuers without a formal compensation committee, establish a committee in accordance with the new listing rules.
  • Adopt a compensation committee charter. For NASDAQ-listed issuers, adopt a compensation committee charter that complies with the new charter standards or ensure that the existing compensation committee charter complies with the new charter standards.

Provide compliance certification. NASDAQ-listed issuers must certify to NASDAQ within 30 days after the final implementation deadline applicable to them, on a form to be provided by NASDAQ, that they have complied with the new compensation committee listing rules.


1. New York Stock Exchange LLC, Notice of Filing of Amendment No. 3, and Order Granting Accelerated Approval for Proposed Rule Change, as Modified by Amendment Nos. 1 and 3, to Amend the Listing Rules for Compensation Committees to Comply with Securities Exchange Act Rule 10C-1 and Make Other Related Changes, Release No. 34-68639 (Jan. 11, 2013), 78 Fed. Reg. 4570 (Jan. 22, 2013), available at http://www.gpo.gov/fdsys/pkg/FR-2013-01-22/pdf/2013-01106.pdf. The amendments impact Sections 303A.00, 303A.02(a) and 303A.05 of the NYSE Listed Company Manual (Manual). The text of the amended listing standards is included in Exhibit 5 to this NYSE rule filing.

2. NYSE MKT LLC, Notice of Filing of Amendment No. 3, and Order Granting Accelerated Approval for Proposed Rule Change, as Modified by Amendment Nos. 1 and 3, to Amend the Listing Rules for Compensation Committees to Comply with Securities Exchange Act Rule 10C-1 and Make Other Related Changes, Release No. 34-68637 (Jan. 11, 2013), 78 Fed. Reg. 4537 (Jan. 22, 2013), available at http://www.gpo.gov/fdsys/pkg/FR-2013-01-22/pdf/2013-01104.pdf. The amendments impact Sections 110, 801(h), 803A and 805 of the NYSE MKT Company Guide (Guide). The text of the amended listing standards is included in Exhibit 5 to this NYSE MKT rule filing.

3. The NASDAQ Stock Market LLC, Notice of Filing of Amendment Nos. 1 and 2, and Order Granting Accelerated Approval of Proposed Rule Change as Modified by Amendment Nos. 1 and 2 to Amend the Listing Rules for Compensation Committees to Comply with Rule 10C-1 under the Act and Make Other Related Changes, Release No. 34-68640 (Jan. 11, 2013), 78 Fed. Reg. 4554 (Jan. 22, 2013), available at http://www.gpo.gov/fdsys/pkg/FR-2013-01-22/pdf/2013-01107.pdf. The amendments impact compensation committee- and corporate governance-related Listing Rules 5605(d) and 5615, and add new Listing Rule 5605A. The amendments also include conforming amendments to audit and nominations committee-related Listing Rules 5605(c) and 5605(e)(3) and corrections of typographical errors in other listing rules. The text of the amended listing rules is included in Exhibit 5 to this NASDAQ rule filing.

4. Please see our client alert dated October 22, 2012 for a discussion of the listing standard amendments as originally proposed, NYSE, NYSE MKT and NASDAQ Propose Amendments to Compensation Committee Listing Standards.

5. Issuers should remember that pursuant to new Item 407(e)(3)(iv) of Regulation S-K their proxy statements for meetings involving the election of directors held on or after January 1, 2013 must include disclosure of any “conflict of interest” involving compensation consultants (but not other advisers such as lawyers) who had any role in determining or recommending the amount or form of executive and director compensation (subject to certain exceptions). “Conflict of interest” is not defined, but to determine whether a conflict of interest exists, issuers should use the factors set out in Exchange Act Rule 10C-1(b)(4) relating to adviser independence, which are the same six factors identified in the new NYSE standards.

6. See Letter from Janet McGinness, Exec. Vice Pres., Corp. Sec’y & Gen. Counsel, NYSE Markets, to Elizabeth M. Murphy, Sec’y, SEC (Jan. 10, 2013), availableat http://www.sec.gov/comments/sr-nyse-2012-49/nyse201249-8.pdf.

7. These issuers would also need to update their compensation committee charters to reflect these matters.

8. For the remainder of the discussion of the NYSE MKT’s new listing standards, references to compensation committee are meant to refer to an issuer’s independent directors as a group where the issuer does not have a compensation committee, but instead relies on its independent directors to determine, or recommend to the board for determination, executive officer compensation.

9. Issuers should remember that pursuant to new Item 407(e)(3)(iv) of Regulation S-K their proxy statements for meetings involving the election of directors held on or after January 1, 2013 must include disclosure of any “conflict of interest” involving compensation consultants (but not other advisers such as lawyers) who had any role in determining or recommending the amount or form of executive and director compensation (subject to certain exceptions). “Conflict of interest” is not defined, but to determine whether a conflict of interest exists, issuers should use the factors set out in Exchange Act Rule 10C-1(b)(4) relating to adviser independence, which are the same six factors identified in the new NYSE MKT standards.

10. See Letter from Janet McGinness, Exec. Vice Pres., Corp. Sec’y & Gen. Counsel, NYSE Markets, to Elizabeth M. Murphy, Sec’y, SEC (Jan. 10, 2013), availableat http://sec.gov/comments/sr-nyse-2012-49/nyse201249-8.pdf. Although no comments were submitted on the NYSE MKT’s proposed listing standards, comments were submitted on the NYSE’s and NYSE Arca’s proposed listing standards. In response to these comments, NYSE Euronext (the parent company of NYSE, NYSE MKT and NYSE Arca) issued one response letter that addressed the comments on behalf of all NYSE exchanges, including NYSE MKT, as the comments raised are in substance applicable to all three proposals. 

11. Any such issuer that does not have a compensation committee must comply with this transition requirement with respect to all of its independent directors as a group.

12. Issuers should remember that pursuant to new Item 407(e)(3)(iv) of Regulation S-K their proxy statements for meetings involving the election of directors held on or after January 1, 2013 must include disclosure of any “conflict of interest” involving compensation consultants (but not other advisers such as lawyers) who had any role in determining or recommending the amount or form of executive and director compensation (subject to certain exceptions). “Conflict of interest” is not defined, but to determine whether a conflict of interest exists, issuers should use the factors set out in Exchange Act Rule 10C-1(b)(4) relating to adviser independence, which are the same six factors identified in the new NASDAQ rules.

13. See Letter from Erika J. Moore, Assoc. Gen. Counsel., NASDAQ Stock Market LLC, to Elizabeth M. Murphy, Sec’y, SEC (Dec. 12, 2012), available at http://www.sec.gov/comments/sr-NASDAQ-2012-109/NASDAQ2012109-9.pdf.

14. NASDAQ also proposed, and the SEC approved, amendments to NASDAQ’s audit committee listing rules that require listed issuers to proactively certify that the audit committee “will review and reassess” the adequacy of the audit committee charter on an annual basis. Current listing rules require the certification to provide that the audit committee “has reviewed and reassessed” the adequacy of the audit committee’s charter on an annual basis. NASDAQ noted that this change is consistent with its current interpretation of the audit committee charter requirements and will harmonize the audit committee charter requirements with the new compensation committee charter requirements.

15. A smaller reporting company that loses that status must comply with the enhanced compensation committee independence requirements as follows: (1) one member in compliance within six months from the date smaller reporting company status is lost, (2) a majority in compliance within nine months from the date smaller reporting company status is lost and (3) all members in compliance within one year from the date smaller reporting company status is lost.

16. See Exhibit 3 to this NASDAQ rule filing for the form of compensation committee certification NASDAQ intends to use.

17. For more information on this SEC disclosure requirement, please see our client alert dated July 9, 2012, SEC Adopts Rules Implementing Dodd-Frank Requirements for Compensation Committees and Compensation Advisers.

© 2013 Andrews Kurth LLP

Inside Counsel 13th Annual Super Conference – May 6-8, 2013

The National Law Review is pleased to bring you information about the upcoming Inside Counsel Super Conference:

Super Conference May 6-8 2013

SuperConference

No longer just providing legal counsel, in-house attorneys have become strategic business partners within their companies.They not only need to be influential in the boardroom, but must demonstrate the ability to make strategic decisions on both commercial and legal analysis.

  • Elevate your legal knowledge 
  • Create innovation within your legal department 
  • Change and evolve to become a better strategic partner 

InsideCounsel’s 13th Annual SuperConference is designed to provide senior-level legal professionals insights, ideas and solutions to help them meet their growing responsibilities and evolving needs.Developed by in-house counsel, for in-house counsel,SuperConference will provide you innovative resolutions essential to addressing your department’s business and legal needs.

The 2013 SuperConference will be held May 6th-8th, in Chicago, IL

Why Can’t They Be FRANDs? Concerns About The International Trade Commission (ITC’s) Approach to Standard-Essential Patent Cases Are Unwarranted

The National Law Review recently featured an article by Tom M. Schaumberg and Emi Ito Ortiz with Adduci, Mastriani, & Schaumberg LLP titled Why Can’t They Be FRANDs? Concerns About The International Trade Commission (ITC’s) Approach to Standard-Essential Patent Cases Are Unwarranted:

Adduci, Mastriani, & Schaumberg LLP

The recent increase in Section 337 complaints filed before the U.S. International Trade Commission (“ITC” or “Commission”), in particular the number of complaints involving wireless technology, has brought with it a number of disputes involving patents related to technological standards.

INTRODUCTION

The recent increase in Section 337 complaints filed before the U.S. International Trade Commission (“ITC” or “Commission”), in particular the number of complaints involving wireless technology, has brought with it a number of disputes involving patents related to technological standards.[1]  These standards often are determined by standard-setting organizations (“SSOs”), entities created to establish and implement industry-wide standards, in order to allow interoperability among products and their components, reduced costs for producers and consumers and faster advancements in the technologies and products incorporating the standards.[2]  Particular patents may be essential to practicing a standard, thereby giving the owners of those patents unique leverage in licensing negotiations, as anyone wishing to practice the standard is obligated to practice that standard-essential patent (“SEP”).  This leverage can cause a “patent hold-up” if the patent owner demands an unreasonably high royalty or threatens to exclude a competitor from the market.  This, in turn, has caused some government agencies, notably the U.S. Federal Trade Commission (“FTC”), to view these arrangements from an antitrust viewpoint.

SSOs often have rules to avoid patent hold-up, including disclosure rules, which obligate an SSO member to disclose patent rights that may be relevant to a proposed standard, and licensing rules, which control the amount and structure of royalties, most frequently requiring that patent holders license SEPs on “fair, reasonable, and non-discriminatory” (“FRAND”) terms or “reasonable and non-discriminatory” (“RAND”) terms.[3]  These FRAND commitments are intended to facilitate success for the standard and assure potential implementers that the relevant patents will be available to those willing to license them.[4]  After a patent has become part of an industry standard, it is often technologically or commercially impossible for a company to avoid using that patented technology in its products.  While requiring SEP owners to make licenses available on FRAND terms, many FRAND commitments are vague regarding what would be considered “fair, reasonable, and non-discriminatory” license terms and what remedies are available to the patent owner and potential licensee if the parties do not reach agreement.[5]  This vagueness, in part, leads to more frequent and complex lawsuits where unlicensed parties practice industry standard patents.

This paper discusses the concerns of certain government agencies and members of the patent community with how the ITC may approach FRAND-encumbered SEPS, explains how the ITC’s increased focus on the statutorily mandated public interest[6]reflects its awareness of the issues raised by an exclusion order as a remedy for FRAND-encumbered SEPs and reviews ITC precedent to demonstrate how it has approached similar situations.  The paper suggests that the ITC will resolve FRAND-encumbered SEP issues as those who are concerned recommend: on a case-by-case basis taking into account the posture of each of the parties, possibly creating tailored remedies to protect both the public interest and the rights of patent holders.

CONCERNS ABOUT THE ITC’S APPROACH TO FRAND-ENCUMBERED SEP CASES

FRAND-encumbered SEPs have become a topic of significant interest to the patent community and government agencies involved in the regulation of patents and competition, both in the United States and internationally.[7]  The FTC, U.S. Department of Justice (“DOJ”), and U.S. Patent and Trademark Office (“USPTO”) have been vocal about how they believe the ITC should approach FRAND-encumbered SEPs in light of the risk of patent hold-up caused by the threat of injunctions regarding those patents.

The FTC has been the most active government agency in its efforts to limit injunctions regarding FRAND-encumbered SEPs.  As long ago as 2005, former FTC Chairman Deborah Majoras stated that the “most dangerous” of anticompetitive concerns regarding standard-setting activities “is the potential that a standard-setting effort will be used as a mechanism for competitors to fix prices, allocate markets, or boycott a competing firm or technology.”[8]

In 2011, the FTC issued a report, “The Evolving IP Marketplace: Aligning Patent Notice & Remedies with Competition,” in which it noted that the “[a]ssertion of a patent against a standard, especially a patent subject to a RAND commitment, creates a particularly important scenario for considering the public interest in deciding whether to grant an exclusion order,” and recommended that the ITC “incorporate concerns about patent hold-up, especially of standards, into the decision of whether to grant an exclusion order in accordance with the public interest elements of Section 337.”[9]

Soon thereafter, the FTC established a policy project “to examine the legal and policy issues surrounding the problem of potential patent ‘hold-up’ when patented technologies are included in collaborative standards,” specifically including an examination of FRAND commitments by patent holders.[10]  In conjunction with the project, the FTC hosted a public roundtable on standard-setting issues, in preparation for which it requested comments on the relevant issues, including injunctions in district courts and exclusion orders from the ITC.[11]  It received numerous comments from interested companies and associations and posted them on its website.[12]  While the roundtable did not make any decisions regarding injunctions for FRAND-encumbered SEPs, it highlighted various viewpoints on the issue.[13]

When the House Judiciary Committee held a hearing to examine the “Oversight of the Antitrust Enforcement Agencies,” FTC Chairman Jon Leibowitz testified on behalf of the FTC, stating that it “made a number of . . . contributions to the analysis of high-tech issues through [its] policy efforts addressing innovation, standard-setting, and patents,” including “several cases involving anticompetitive conduct by technology companies for undermining the standard-setting process,” its “Evolving IP Marketplace” report, and its standard-setting workshop.[14]  He noted that the “Commission w[ould] continue to foster an on-going dialogue with stakeholders in this important area.”[15]

Similarly, when the Senate Judiciary Committee held a hearing to examine the use of SEPs in claims before the ITC, the FTC testified on the potential negative impact of exclusion orders due to the infringement of FRAND-encumbered SEPs.[16]  It emphasized the importance of the ITC’s public interest factors in determining whether to issue an exclusion order on a FRAND-encumbered SEP, warning that “an exclusion order [in this situation] can cause hold-up, distort ‘competitive conditions’ by forcing negotiation under the shadow of switching costs, impair innovation, and harm ‘United States consumers.’”[17]  It urged the ITC to incorporate those considerations into its remedy analysis to align the ITC with the district courts’ required analysis undereBay[18] and stated that these considerations affect the public interest more than normally because the situation presents different issues from patents that are not encumbered by a commitment to license.[19]  While it acknowledged that the ITC has the authority under its public interest obligations to address the FTC’s concern and limit the potential for hold-up, it openly suggested that “[i]f the ITC finds that its public interest authority is not flexible enough to prevent hold-up, then Congress should consider whether legislative remedies are necessary.”[20]

In the summer of 2012, FTC Chairman Jon Leibowitz stated that, while injunctions for SEPs would be appropriate when “a company acts in bad faith using a patent or where a company…doesn’t make a good faith…RAND offer,” generally such injunctions should be rare.[21]  The Chairman noted the FTC’s focus on the ITC, describing his agency’s efforts to “educate” the ITC on the issues and to urge the ITC to strongly consider its public interest responsibilities in this situation.[22]  He stayed on the FTC’s earlier tack when he stated, “we think they have the flexibility because of the patent hold-up problems to use the public interest authority here, but if not I think Congress will probably want to think about acting on this issue.”[23]

This past year, the FTC filed complaints against and reached settlements with two companies, Robert Bosch and Motorola Mobility[24], regarding those companies’ allegedly anticompetitive dealings with FRAND-encumbered SEPs.[25]  Both settlements included requirements to negotiate on FRAND terms and prohibited the companies from seeking injunctions regarding FRAND-encumbered SEPs both from any district court and from the ITC, where exclusionary relief is tantamount to an injunction.[26]

The FTC also has submitted statements in cases involving potential injunctions regarding FRAND-encumbered SEPs.  The FTC filed an amicus brief in the Apple v. Motorola case before the U.S. Court of Appeals for the Federal Circuit “to ensure that any ruling in th[e] case takes into account the competition policy issues associated with injunctions as a remedy for infringement of a standard-essential patent.”[27]  In the underlying case, the district court dismissed several patent claims on the merits on partial summary judgment and dismissed the remaining claims, including one Motorola SEP, on the ground that neither party provided sufficient evidence to prove damages or an entitlement to an injunction or other relief.[28]  The FTC supported the district court’s application of eBay v. MercExchange[29]to find that an injunction was not appropriate and emphasized the threat of patent hold-up and its potentially damaging effect on innovation, competition and consumers.[30]

The FTC has also submitted statements to the ITC in two recent cases involving FRAND-encumbered SEPs, describing its concerns about entry of an exclusion order in such a context and providing suggestions for how to approach the issue.[31]  In particular, it suggested the ITC find that the public interest factors support the denial of an exclusion order if the SEP holder did not comply with its FRAND commitment.[32]  In the alternative, it suggested that the ITC delay the effective date of its remedies “until the parties mediate in good faith for damages for past infringement and/or an ongoing royalty for future licensed use,” with the parties facing the risk that the exclusion order will either eventually go into effect or be vacated if they do not resolve the issue.[33]

The DOJ has also provided its perspectives on the FRAND-encumbered SEP issue.   The DOJ’s Acting Assistant Attorney General for the Antitrust Division, Joseph F. Wayland, testified on its behalf to the Senate Judiciary Committee, explaining that it has been closely watching cases involving FRAND-encumbered SEPs because of the importance of standards to innovation and their effect on competition and the threat of hold-up if SEPs are used improperly.[34]  It suggested that the ITC find exclusion inappropriate under the public interest factors when infringement of an industry standard patent is found but the patent’s value is small in light of the overall product and exclusion would cause the public to be deprived of the product(s) during the period of exclusion.[35]  The DOJ was particularly concerned about exclusion orders where a product implementing a standard is found to infringe a SEP.[36]  It suggested that, if the ITC determines that an immediate exclusion order is inappropriate in such a scenario, “it may be appropriate for it to determine whether it has the authority to stay the imposition of an exclusion order contingent on the infringing party’s commitment to abide by an arbitrator’s determination of the fair value of a license.”[37]

In January of this year, perhaps to balance the impact of the FTC’s settlement with Motorola Mobility and Google a week earlier[38], the DOJ and USPTO jointly sent a policy statement to the ITC commenting on injunctions based on SEPs.[39]  In this statement, these Departments noted that “[t]he approach the USITC adopts in cases involving voluntarily F/RAND-encumbered patents that are essential to a standard will be important to the continued vitality of the voluntary consensus standards-setting process and thus to competitive conditions and consumers in the United States.”[40] They acknowledged the need for IP protection and appropriate compensation for the value of that IP, as well as the maintenance of incentives for participation in SSOs,[41]but “recommend[ed] caution” in granting injunctions based on infringement of FRAND-encumbered SEPs,[42] explaining that seeking an injunction based on a FRAND-encumbered SEP is inconsistent with the patent-holder’s FRAND commitment when the purpose of such efforts is to obtain higher-than-FRAND royalty rates.[43]  They emphasized that if such an injunction were to be issued, it would “degrad[e] one of the tools S[S]Os employ to mitigate the threat of such opportunistic actions by the [patent] holders.”[44]  They also suggested, as an alternative to outright denial of an exclusion order, “it may be appropriate for the USITC, as it has done for other reasons in the past, to delay the effective date of an exclusion order for a limited period of time to provide parties the opportunity to conclude a F/RAND license.”[45]

Ultimately, they took a balanced approach and explained that the issue must be evaluated on a case-by-case basis: “[a]n exclusion order may still be an appropriate remedy in some circumstances, such as where the putative licensee is unable or refuses to make a F/RAND license and is acting outside the scope of the patent holder’s commitment to license on F/RAND terms” or “if a putative licensee is not subject to the jurisdiction of a court that could award damages.”[46]

Members of the patent community have also been proactive in stating their positions on the FRAND-encumbered patent issue.  For example, in response to the ITC’s request for comments in light of its determinations to review two cases involving FRAND-encumbered SEPs,[47] many companies and standard-setting organizations submitted their positions on the issue.[48]  Similarly, the FTC received a large number of responses from the patent community in its request for comments in preparation for its workshop on standard-setting issues.[49]  Most agree that the ITC should consider whether an injunction is appropriate on a case-by-case basis,[50] and only a small number believe that exclusion orders are never appropriate in connection with FRAND-encumbered SEPs.[51]

THE ITC’S INCREASED FOCUS ON PUBLIC INTEREST CONSIDERATIONS AND FUTURE OPPORTUNITIES TO WEIGH IN ON FRAND ISSUES

The ITC may soon have to address the issue of entry of an exclusion order for FRAND-encumbered SEPs.  If it does, the ITC will likely, based on public interest considerations, create a tailored remedy to address the particular case’s circumstances, consistent with the recommendations of the concerned government agencies and members of the patent community.  Over the past few years, the Commission has increased its focus on the public interest and has requested and considered commentary from the public on public interest and SSO-related issues.  Furthermore, ITC precedent on public interest considerations, SSOs, and FRAND obligations, while limited, suggests that the ITC will continue to approach the issue on a case-by-case basis and act consistently with controlling case law.[52]

 The ITC’s Heightened Focus on Public Interest Considerations

As part of its consideration of whether to issue an exclusion order, the Commission is required to consider its effect on “the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers.”  19 U.S.C. § 1337(d)(1).  Although there are only a small number of ITC cases where the public interest has been determinative, this does not mean that the Commission has disregarded this element of the statute.[53]  The Commission considers the public interest factors each time it determines there is a violation of Section 337.[54]    Furthermore, the Commission has sharpened its focus on and actions related to the public interest in connection with recent high-stakes cases.  On its website, it notes that “[t]he Commission’s section 337 caseload has grown dramatically in recent years, and many investigations have involved products of great interest to the general public, such as cellphones, computers, and other electronic consumer devices.  As a result, there has been increased attention on the Commission’s ‘public interest analysis’ – that is, the requirement that the Commission take into account public interest factors in determining whether to issue a remedy after a finding of violation.”[55]

The ITC has taken a proactive role in creating a stronger focus on the public interest.  It revamped its procedure for considering the public interest in preparing its five-year strategic plan in 2009, reflecting the interest of the United States Trade Representative in having more public interest information to consider[56] during the Presidential review period.[57]  To update this procedure, the Commission instituted a public interest pilot program in 2010, proposed updated and supplemental public interest rules, requested and considered public comment and issued final rules, effective November 18, 2011.[58]  These additional procedures reflect Commission awareness of the increased importance of public interest considerations in recent cases and its willingness to create and adjust the remedy where one is warranted.  In fact, in two recent cases, the Commission tailored the exclusion orders based on public interest concerns.  This suggests that the Commission would be open to an adjusted remedy in an appropriate case involving FRAND-encumbered SEPs.

In Certain Baseband Processor Chips, Inv. No. 337-TA-543, the Commission developed a tailored exclusion order after carefully evaluating the facts of the case in light of the public interest factors.[59]  In that case, Broadcom had sued Qualcomm for selling infringing chips and chipsets, which were incorporated into mobile communication devices that used newly established 3G telephone networks and services.  In its evaluation, the Commission noted that the investigation’s public interest concerns with regard to the appropriate remedy were heighted because of the limited availability of alternatives due to the newness of the technology at issue.[60]

In determining whether and to what extent an exclusion order should be issued, the Commission considered the arguments of the parties, the Commission’s staff and a variety of third parties.[61]  This private and public input highlighted the need for public safety personnel to transmit important information in emergency situations and the likely negative effect an exclusion order would have on the economy and on consumers.[62]

With respect to the factor of public health and welfare, there was evidence of increased reliance of public safety officials on 3G telecommunications networks in carrying out their duties.[63]  As a result, if certain 3G handsets were excluded from the U.S. market, the public would lose some of the health and safety benefits that stemmed from that enhanced data transmission.[64]  Regarding competitive conditions in the U.S. economy, the Commission found that exclusion would likely slow the development of telecommunications technology and the expansion of broadband internet access, which not only were important intrinsically, but also had an effect on the U.S. economy as a whole.[65]  Furthermore, because 3G technology was still developing, an exclusion order’s effect on consumer and business access to related products and, in turn, on overall interest and usage, could make it more difficult for network service providers and telecommunication companies to expand or maintain relevant networks and telephone and broadband internet services.[66]  With respect to consumers’ potentially limited access to related services, while the complainant argued that consumer use of such networks was simply for entertainment purposes, the Commission found that there were a variety of existing and potential services that the networks could offer and that it was “not the role of the Commission to make a value judgment regarding consumers’ interests.”[67]

The Commission concluded that an exclusion order extending to devices incorporating the infringing chips and chipsets would have some adverse impact on the public interest and “balance[d] the negative impact against the important public interest of protecting intellectual property rights,” settling on a tailored exclusion order that allowed for the continued importation into the U.S. market of those models of the devices that had been imported into the United States for sale to the general public on or before the date of the order.[68]

In Certain Personal Data and Mobile Communications Devices, Inv. No. 337-TA-710, the Commission, after finding a violation of Section 337 by HTC smartphones, created a tailored exclusion order due to the likely negative effect of immediate and complete exclusion on the public interest.[69]

In evaluating the public interest, the Commission first made clear that its order would cover only HTC smartphones, explaining that “[i]t is either premature or erroneous to assume that an exclusion order in this investigation is tantamount to excluding from the United States all Android smartphones.”[70]  The Commission also assured that, if its chosen remedy ultimately needed to be altered, it had the power to make such a change: “[s]hould the Commission exclude the smartphones of other manufacturers in future investigations, or should the district courts limit the availability of other manufacturers’ Android smartphones to U.S. consumers, the Commission has established procedures that permit modification or rescission of an exclusion order, as appropriate based on a reassessment of the changed facts or public interest at such time.”[71]

The Commission’s main concern regarding the public interest was the effect on competitive conditions in the U.S. economy.  It noted that the President and DOJ had recently highlighted the importance of high-speed wireless technology to the U.S. economy.[72]  In particular, the DOJ’s complaint to block the AT&T and T-Mobile merger “demonstrate[d] the importance of competitive conditions in wireless telecommunications services in the United States generally and T-Mobile’s role within it.”[73]  T-Mobile was particularly concerned with the exclusion order on HTC products because it was the only national carrier that did not offer the iPhone and thus was “particularly vulnerable to the effects of an exclusion order because of its reliance on Android smartphones,” and specifically HTC smartphones.[74]

Due to the importance of high-speed wireless technology to the United States and the likely detrimental effect on T-Mobile, the Commission found that an exclusion order would not be in the public interest “to the extent an immediate exclusion of HTC Android smartphones would have a substantial impact on T-Mobile’s competitiveness.”[75]  It emphasized, however, that it had flexibility in its remedy options, explaining that “the Commission does not need to choose between an immediate exclusion order and no exclusion order at all.”[76]  Because T-Mobile had informed the Commission that a four-month transition period would be sufficient to replace its infringing HTC smartphones with smartphones of other manufacturers, thus allowing consumers to have the same range of product and price options, the Commission opted to implement a four-month delay in its exclusion order.[77]  It believed that the transition period was both reasonable and within the Commission’s power to implement and noted that it would apply to all wireless carriers, not just to T-Mobile.[78]

Regarding an exclusion order’s impact on consumers, the Commission found that HTC’s ultimate argument that “a limited exclusion order w[ould] reduce consumer choice among smartphone models or features,” was not a sufficient basis for denying issuance of an exclusion order.[79]  In particular, HTC had not shown that its phones had unique features that had no reasonable non-infringing substitutes.  Although it found that all of HTC’s arguments of uniqueness were either outdated or unsubstantiated, the Commission did agree with HTC that there would be a negative effect on consumers who needed to replace or repair a broken device under a normal two-year service contract during the time the exclusion order was in effect.[80]  The Commission, therefore, determined to allow HTC to import refurbished handsets solely as replacements under warranty or an insurance contract, for approximately one and a half years after the exclusion order became effective, to assist where a consumer would need a replacement in the middle of a contract term.[81]

The Commission also considered the other public interest factors of public health and welfare[82] and the production of like or directly competitive articles in the United States[83] and generally found HTC’s arguments unsubstantiated.  This case demonstrates the Commission’s ability and willingness to tailor a remedy to accommodate public interest concerns.

Most recently, in Certain Microprocessors, Inv. No. 337-TA-781, an administrative law judge (“ALJ”) issued a recommended determination that the ITC tailor its relief if it finds a violation of Section 337 by delaying an exclusion order by at least nine months “so that [the respondents] would have time to adjust their manufacturing operations to incorporate non-infringing microprocessors.”[84]  The recommendation was based upon the ALJ’s determination that an immediate exclusion order would cause a ripple effect of job losses in the respondents’ companies and elsewhere in the economy, a loss of manufacturing work in the United States, a negative impact on government initiatives that are dependent on technological advancements, such as “healthcare reform, the Advanced Manufacturing Partnership, [and] Strategy for American Innovation . . . ,” reduced competition in certain product markets, and a negative effect on consumers due to shortages of computers, workstations, and servers, as well as increased prices for products.[85]

Opportunities for the ITC to Consider FRAND Issues

The ITC’s Increased Focus

In addition to its general public interest focus, the Commission has shown increased interest in FRAND and SEP issues through its notices of review of ALJ initial determinations.[86]  With the rise in cases involving SEPs, the Commission has requested comments from the parties and the public on a number of questions regarding FRAND issues and the public interest impact that ITC relief may have when SEPs are in dispute.  The number and specificity of these questions reveal the Commission’s awareness and familiarity with the topic.[87]  For example, in Certain Wireless Communication Devices, Inv. No. 337-TA-745, the ITC determined to review in part an initial determination finding a violation of Section 337, and eight of its thirteen questions for briefing related to FRAND issues.[88]  The first FRAND-related question asked whether the respondent waived its right to assert that the complainant failed to offer a license on FRAND terms.[89]  Other questions related to whether a patent holder could be barred from seeking an injunction under a FRAND-encumbered patent.[90]  The Commission also asked two broader questions regarding the importance of the patents to the standard: whether there would be “substantial costs and delays associated with switching away from the standardized technology in question” and whether the patents at issue “cover relatively minor components of the accused products.”[91]

Similarly, in Certain Electronic Devices, Inv. No. 337-TA-794, when the Commission determined to review the ALJ’s initial determination, it specifically requested briefing on the FRAND issues.[92]  The scope of the Commission’s intent to view those issues is reflected in the fact that it sought input from “interested government agencies, OUII [the ITC’s Office of Unfair Import Investigations], and any other interested parties,” while on other questions it sought briefing only from the parties in the case.  Three of the FRAND questions were very similar to those raised in Certain Wireless Communication Devices, but there was a “new” question asking “what framework should be used for determining whether the offer complies with a FRAND undertaking.”[93]

Furthermore, in connection with these FRAND-related investigations, the ITC has accepted and acknowledged numerous submissions filed separately by stakeholders and regulators regarding the public interest effects of an exclusion order related to SEP infringements.  For example, in Certain Wireless Communication Devices, the Commission’s notice of review acknowledged submissions from several non-parties, including the FTC, Business Software Alliance, Association for Competitive Technology, Retail Industry Leaders Association, Verizon, Hewlett-Packard, Microsoft and Qualcomm.[94]  Similarly, in Certain Gaming and Entertainment Consoles, Inv. No. 337-TA-752, discussed in more detail below, numerous statements were filed on the FRAND/SEP issue by non-parties, including Cisco, Apple, IBM, the FTC, and a number of Congressmen.[95]

 ITC Precedent on SSOs and FRAND Issues

While there have not been many ITC cases where the Commission has dealt with SSOs and FRAND issues, the few cases that have come to the ITC reveal that the Commission has made an assessment on a case-by-case basis, acted consistently with controlling precedent and avoided making decisions on matters when it would be inappropriate or premature to do so.

For example, in Certain Optoelectronic Devices, Inv. No. 337-TA-669, Avago filed a Section 337 complaint against Emcore.[96]  Emcore argued that it had an implied license to import and sell its accused products due to, among other reasons, both parties’ participation in multi-source agreements (“MSAs”) to create industry standards; in the alternative, Emcore argued that Avago was obligated to grant Emcore an express license on FRAND terms as stated in the MSAs.[97]

The ALJ followed Federal Circuit case law finding that Emcore’s argument of an implied license was insufficient.[98]  He found there was no implied license based on the language of the MSAs because the agreements Emcore relied upon explicitly stated that “nothing in th[e] [a]greement [was] intended to grant any rights or licenses to either party under any patent . . . or any other intellectual property right of the other party. . . .”[99]  In addition, the ALJ found no implied license because the evidence did not establish that Avago had a duty to disclose the patent at issue.  In particular, the language of the MSAs, at most, required disclosure of essential patent claims.

Moreover, the ALJ found that the patent at issue was not essential or necessary for compliance with the MSAs by comparing the patent’s requirements and the standard’s requirements and because the patent did not meet the definition of an “Essential Patent Claim” in the bylaws of an SSO, which both parties agreed was an informative authority on when patent disclosure was required among that SSO’s members.[100] For the same reason, the ALJ rejected Emcore’s alternative argument that it was entitled to an express license on FRAND terms due to the MSAs’ requirements that the parties to the agreement license essential intellectual property on a FRAND basis.[101]  Thus, after the ALJ carefully determined that the patent was not a SEP, he could proceed to find that there was a Section 337 violation in the investigation due to infringement of the patent.

The ALJ ultimately recommended a limited exclusion order under the patent at issue, and the Commission determined not to review the ALJ’s initial determination, thereby affirming the decision.[102]  The ALJ’s detailed analysis and the Commission’s adoption of the ALJ’s determination is consistent with the perspective of those concerned with the FRAND-encumbered SEP issue, which is focused on SEPs and not on non-essential patents, for which there are alternatives.

In Certain Mobile Telephone Handsets, Inv. No. 337-TA-578, Qualcomm filed a Section 337 complaint against Nokia regarding patents that were part of a standard.[103]  Nokia responded with a number of affirmative defenses, including unclean hands and patent misuse related to Qualcomm’s dealings in the relevant SSO.

The ALJ found that Nokia did not meet the unclean hands affirmative defense because it did not present specific evidence why Qualcomm’s alleged conduct was material and because the facts that it did present were the same as those underlying its breach of contract defense and not appropriate under unclean hands.

The ALJ also rejected Nokia’s patent misuse defense on two grounds.  First, Qualcomm’s offers to license were not an impermissible broadening of the scope of its patent because it was not, as a patent owner, statutorily obligated to license the patent to Nokia.  Furthermore, even if Qualcomm had acted to broaden the scope of its patent right impermissibly, the ALJ found that Nokia had not proven that Qualcomm’s actions created an anticompetitive effect.  This interpretation is consistent with precedent rejecting the patent misuse defense in SSO cases, where patent owners typically conceal the patents rather than use them in an overly-broad manner.[104]

Nokia petitioned for review of the ALJ’s grant of summary determination, and the Commission determined not to review the decision, thereby adopting the ALJ’s decision.[105]

In Certain Wireless Communication Devices, Inv. No. 337-TA-745, Motorola Mobility filed a Section 337 complaint against Apple for the alleged infringement of six patents, two of which were allegedly SEPs.[106]  Apple asserted an affirmative defense of estoppel/unclean hands based on Motorola’s alleged failure to comply with the intellectual property right policies of the relevant SSOs, in particular, Motorola’s failure to timely disclose those patents to the SSOs.[107]  In his initial determination, the ALJ found a violation of Section 337 for one of Motorola’s SEPs, but not for the other.  The ITC determined to review the decision in part, raising a number of questions related to FRAND.[108]

On review, the Commission found no violation of either of the SEPs and remanded the investigation to the ALJ with respect to a non-SEP, choosing not to address the FRAND issue when it was not necessary.

 Pending ITC Cases on FRAND Issues

Two pending cases may provide the ITC an opportunity to rule on the FRAND-encumbered SEP issue.  In Certain Electronic Devices, Inv. No. 337-TA-794, Samsung filed a Section 337 complaint against Apple on four patents, two of which are SEPs.[109]  The ALJ determined there was no violation of Section 337 because he found three of the patents valid but not infringed and one patent both invalid and not infringed.  The Commission determined to review the ALJ’s initial determination in its entirety and requested comments on what form of remedy, if any, it should order in light of the public interest factors and based on the FRAND issues.[110]  The Commission received a large number of submissions in response to the notice and determined to extend the target date for completing the investigation from January 14, 2013 to February 6, 2013, and then to March 7.[111]  If the Commission reverses the ALJ’s finding of no violation with regard to any SEP, it necessarily will determine whether a remedy for the infringement of the FRAND-encumbered SEP(s) is appropriate.

In Certain Gaming & Entertainment Consoles, Inv. No. 337-TA-752, Motorola Mobility sued Microsoft regarding five patents for its Xbox, four of which had been declared essential by an SSO.[112]  Microsoft argued that an exclusion order would be inconsistent with Motorola’s commitment to license the asserted patents on FRAND terms and that an exclusion order should be unavailable for patents subject to FRAND licensing obligations.[113]  The ALJ rejected this position, stating that there was insufficient legal authority supporting that argument.[114]  Microsoft and Motorola filed petitions for review of the initial determination, and Microsoft and several non-parties filed statements on the public interest.  The Commission determined to review the decision after “having examined the record of th[e] investigation, including the ALJ’s final I[nitial] D[etermination], the petitions for review, and the responses thereto,” and remanded the case to the ALJ.[115]  Motorola withdrew two of its asserted SEPs four months later, leaving two SEPs in the case.[116]  Motorola eventually withdrew those remaining SEPs after executing a consent order with the FTC in early January that required it “to withdraw its claims for injunctive relief on FRAND-encumbered SEPs around the world,” thereby leaving only one of the originally-asserted patents in the case, a non-SEP.[117]

CONCLUSION

The ITC has before it high-profile cases regarding the alleged infringement of FRAND-encumbered SEPs.  Certain government agencies and members of the patent community have raised concerns regarding the negative effect of injunctions relating to FRAND-encumbered SEPs and, as a result, have paid particular attention to these ITC cases and vocalized these concerns to the ITC.  Some have argued that exclusion orders should never be permitted with regard to FRAND-encumbered patents and others have argued that the issue should be determined based on the particular facts of a case.  Based on the Commission’s past actions and recently increased focus on the public interest and FRAND obligations, the ITC will likely consider the issues on a case-by-case basis and may also use the opportunity to create a tailored remedy to accommodate public interest concerns while also protecting the rights of the patent owner, which is consistent with recommendations both from the government and members of the patent community.  While the ITC has yet to make a decision on the propriety and scope of an exclusion order as a remedy for the infringement of FRAND-encumbered SEPs, the ITC’s requests for information in pending cases demonstrate that it is quite aware of the importance of this issue and will address it in the near future.

The authors are attorneys at Adduci, Mastriani & Schaumberg, LLP, an international trade law firm in Washington, D.C. that specializes in Section 337 litigation.  Mr. Schaumberg is the editor of the firm’s ABA book entitled “A Lawyer’s Guide to Section 337 Investigations Before the U.S. International Trade Commission,” the second edition of which was published in October 2012.


[1]  See, e.g., Section 337: Building the Record on the Public Interest, Int’l Trade Comm’n,http://www.usitc.gov/press_room/documents/featured_news/publicinterest_article.htm (last visited Dec. 17, 2012) [hereinafter ITC Public Interest Statement]; Certain Elec. Devices, Including Wireless Commc’n Devices, Portable Music & Data Processing Devices, & Tablet Computers (“Electronic Devices”), Inv. No. 337-TA-794, Complaint under Section 337 of the Tariff Act of 1930, as Amended (June 23, 2011); Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof (“Gaming & Entertainment Consoles”), Inv. No. 337-TA-752, Verified Complaint under Section 337 of the Tariff Act of 1930, as Amended (Nov. 22, 2010).

[2]  Christopher R. Byrnes, Unanswered Questions Regarding FRAND and Essential Patents in Section 337 Investigations, 34 ITCTLA 337 Reporter 47, 47 (Summer 2011); Antitrust Enforcement & Intellectual Property Rights: Promoting Innovation and Competition, U.S. Dep’t of Justice & Fed. Trade Comm’n, at 6-7 (April 2007), available athttp://www.ftc.gov/reports/innovation/P040101PromotingInnovationandCompetitionrpt0704.pdf.

[3]  Joseph Farrell, John Hayes, Carl Shapiro & Theresa Sullivan, Standard Setting, Patents, and Hold-Up, 74 ANTITRUST L.J. 603, 609 (2007).  The terms “FRAND” and “RAND” are used essentially synonymously.  For purposes of consistency, this paper will refer to both as “FRAND” terms.

[4] Oversight of the Impact on Competition of Exclusion Orders to Enforce Standard-Essential Patents, Hearing Before the S. Comm. on the Judiciary, 112th Cong. 5 (2012) (statement of Joseph F. Wayland, Acting Assistant Att’y Gen., Antitrust Division, Department of Justice) [hereinafter Wayland DOJ Statement].

[5]  Few SSOs define the term “reasonable and nondiscriminatory” or have mechanisms to resolve disputes about its interpretation.  Mark A. Lemley, Intellectual Property Rights & Standard-Setting Organizations, 90 Cal. L. Rev. 1889, at 1964–65 (2002).  Lemley observed that: “It is all well and good to propose that SSOs require licensing on reasonable and nondiscriminatory terms. But without some idea of what those terms are, reasonable and nondiscriminatory licensing loses much of its meaning.” Id. at 1964.  The Assistant Attorney General of the DOJ noted, “Increasingly, standards development organizations are requiring ‘reasonable and non-discriminatory’ (RAND) licensing, which is a partial solution. A difficulty of RAND, however, is that the parties tend to disagree later about what level of royalty rate is ‘reasonable.'”  R. Hewitt Pate, Ass’t Att’y Gen., Antitrust Division, U.S. Dep’t of Justice, Competition and Intellectual Property in the U.S.: Licensing Freedom and the Limits of Antitrust, EU Competition Workshop, at 9 (June 3, 2005), available athttp://usdoj.gov/atr/public/speeches/209359.pdf (last visited Dec. 17, 2012).

[6]  In determining whether to issue an exclusion order, the Commission is required to consider the order’s effect on “the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers.” 19 U.S.C. § 1337(d)(1).  These considerations are often referred to as the ITC’s “public interest factors.”  See, e.g., ITC Public Interest Statement, supra note 1.

[7] See, e.g., The European Commission accused Samsung Electronics Co. Ltd. of abusing its market dominance by its pursuit of injunctions regarding its SEPs.  See Antitrust Commission Sends Statement of Objections to Samsung on Potential Misuse of Mobile Phone Standard-Essential Patents, European Commission Press Release (Dec. 21, 2012), available athttp://europa.eu/rapid/press-release_IP-12-1448_en.htm (last visited Jan. 29, 2013).

[8] Deborah Platt Majoras, Chairman, U. S. Fed. Trade Comm’n, Recognizing the Procompetitive Potential of Royalty Discussions in Standard Setting, Remarks Preparedfor Standardization and the Law: Developing the Golden Mean for Global Trade 2 (Sept. 23, 2005), available athttp://www.ftc.gov/speeches/majoras/050923stanford.pdf (last visited Jan. 29, 2013).

[9] See The Evolving IP Marketplace: Aligning Patent Notice & Remedies with Competition, U.S. Fed. Trade Comm’n, at 242-243 (Mar. 2011).  Deanna Tanner Okun, Chairman of the ITC at that time, submitted a response to this report, providing greater context of the ITC’s position in the situation and noting that it would not provide a policy response to the FTC’s report, but would continue to apply the statute.  See Letter from Deanna Tanner Okun to Jon Leibowitz (Jan. 24, 2012) (“[T]he USITC is, by legislative design, a quasi-judicial independent agency, not a policy-making body of the Executive Branch.  The Commission is bound by law to investigate allegations of Section 337 violations. . . . Section 337 provides that the Commission ‘shall’ impose the remedies specified under the statute unless the public interest factors set forth therein counsel otherwise.  We necessarily apply the statute to the record evidence on a case-by-case basis, and, unlike the Congress, we do not promulgate substantive policies to be applied in adjudicating Section 337 cases.  The only substantive policies we strive to implement are those enacted into law by Congress.”).

[10] Tools to Prevent Patent “Hold-Up”: IP Rights in Standard Setting, U.S. Fed. Trade Comm’n,http://www.ftc.gov/opp/workshops/standards/index.shtml.

[11] See Fed. Trade Comm’n Request for Comments & Announcement of Workshop on Standard-Setting Issues, 76 Fed. Reg. 28036-28038 (May 13, 2011); Transcript of Tools to Prevent Patent ‘Hold-Up,’ U.S. Fed. Trade Comm’n Workshop (June 21, 2011), available atwww.ftc.gov/opp/workshops/standards/transcript.pdf; Fed. Trade Comm’n Request for Comments and Announcement of Workshop on Standard-Setting Issues, 76 Fed. Reg. 28036-28038 (May 13, 2011) (“Should a RAND commitment preclude a patent owner from seeking in patent litigation a preliminary injunction against practice of the standard? A permanent injunction? An exclusion order in the International Trade Commission? How should courts and the ITC take a RAND commitment into account in these contexts?”).  The various responses to the FTC’s request can be found at www.ftv.gov/os/comments/patentstandardworkshop/.

[12] All public comments available at http://www.ftc.gov/os/comments/patentstandardsworkshop/.

[13] Transcript of Tools to Prevent Patent ‘Hold-Up, supra note 11, at 219-225.

[14] See Oversight of the Antitrust Enforcement Agencies, Hearing Before the H. Comm. on the Judiciary, 112 Cong. 98,at 11-12 (2011) (prepared statement of the Federal Trade Commission, presented by Jon Leibowitz, Chairman, Federal Trade Commission), available athttp://judiciary.house.gov/hearings/pdf/Leibowitz12072011.pdf.

[15] Id. at 12.

[16] See Oversight of the Impact on Competition of Exclusion Orders to Enforce Standard-Essential Patents, Hearing Before the S. Comm. on the Judiciary, 112th Cong. 13, at 14 (2012) (prepared statement of the Federal Trade Commission, presented by Edith Ramirez, Commissioner, Federal Trade Commission) [hereinafter Ramirez FTC Statement], available athttp://www.judiciary.senate.gov/pdf/12-7-11RamirezTestimony.pdf.  The FTC noted that “this approach may leave the patent holder without a remedy in the ITC, [but] a remedy in district court would remain available.”  Id. at 13.

[17] Ramirez FTC Statement, supra note 16, at 10.

[18] eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006); see also infra note 29.

[19] Ramirez FTC Statement, supra note 16, at 10.

[20] Ramirez FTC Statement, supra note 16, at 14.

[21] Melissa Lipman, Essential Patent Import Bans Should Be Rare, FTC Head Says, Law360 (July 10, 2012), available at http://www.law360.com/ip/articles/358376?nl_pk=35606bb5-4498-4f9f-8419-7f9ff97977d4&utm_source=newsletter&utm_medium=email&utm_campaign=ip.

[22] Id.

[23] Id.

[24] Google acquired Motorola Mobility on May 22, 2012.  Larry Page, We’ve Acquired Motorola Mobility, Google Official Blog (May 22, 2012), http://googleblog.blogspot.com/2012/05/weve-acquired-motorola-mobility.html (last visited Jan. 23, 2013).  This acquisition included a large patent portfolio.  See, e.g., Facts about Google’s Acquisition of Motorola, Google,http://www.google.com/press/motorola/ (last visited Jan. 23, 2013).

[25] See In the Matter of Robert Bosch GmbH, Docket No. C-4377, FTC File No. 121-0081, Complaint (Nov. 26, 2012), available athttp://www.ftc.gov/os/caselist/1210081/121126boschcmpt.pdf; In the Matter of Robert Bosch GmbH, Docket No. C-4377, FTC File No. 121-0081, Decision and Order (Nov. 26, 2012), available athttp://www.ftc.gov/os/caselist/1210081/121126boschdo.pdf; Robert Bosch GmbH, FTC File No. 121-0081, Analysis of Agreement Containing Consent Orders To Aid Public Comment, 77 Fed. Reg. 71593-71599 (Dec. 3, 2012), available athttp://www.ftc.gov/os/fedreg/2012/12/121203robertboschfrn.pdf; In the Matter of Motorola Mobility LLC and Google Inc., FTC File No. 121-0120, Complaint (Jan. 3, 2013), available athttp://www.ftc.gov/os/caselist/1210120/130103googlemotorolacmpt.pdf; In the Matter of Motorola Mobility LLC and Google Inc., FTC File No. 121-0120, Decision and Order (Jan. 3, 2013), available athttp://www.ftc.gov/os/caselist/1210120/130103googlemotorolado.pdf; Motorola Mobility LLC and Google Inc.; Analysis of Proposed Consent Order to Aid Public Comment, 78 Fed. Reg. 2398-2406 (Jan. 11, 2013), available at http://www.gpo.gov/fdsys/pkg/FR-2013-01-11/pdf/2013-00465.pdf.

[26] The FTC-Bosch and FTC-Motorola settlements both included exceptions to the provision prohibiting injunctions regarding SEPs.  In the FTC-Bosch settlement, Bosch is permitted to seek injunctive relief regarding a SEP if a court determines the SEP is being used for a purpose other than as required to comply with the relevant standards or if a third party refuses to license one or more of the SEPs on FRAND terms agreed upon by both parties or a court.  See In the Matter of Robert Bosch GmbH, FTC File No. 121-0081, Decision and Order, Section IV.E (Nov. 25, 2012).  The FTC-Motorola settlement included one exception to the prohibition of injunctions over FRAND-encumbered SEPS, allowing Google to seek injunctive relief against a firm when that firm files for injunctive relief against Google based on its FRAND-encumbered SEPs.  See In the Matter of Motorola Mobility LLC and Google Inc., FTC File No. 121-0120, Decision and Order, Section IV.F (Jan. 3, 2013) (“Notwithstanding any other provision of the Order, Respondents shall be permitted to file a claim seeking, or otherwise obtain and enforce, Covered Injunctive Relief against a Potential Licensee, if the Potential Licensee is seeking or has sought on or after the date of this Order, Covered Injunctive Relief against a product (including software), device or service that is made, marketed, distributed or sold by Respondents based on Infringement of the Potential Licensee’s FRAND Patent . . . “).  The FTC’s Complaint and Decision and Order are drafts open for public comment for thirty days and are subject to final approval.

[27] Brief of Amicus Curiae Federal Trade Commission Supporting Neither Party at 2, Apple Inc. v. Motorola, Inc., (Nos. 2012-1548, 2012-1549) (Fed. Cir. Dec. 4, 2012), 2012 WL 6655899 at *2.

[28] Apple Inc. v. Motorola, Inc., 869 F. Supp. 2d 901 (N.D. Ill. 2012).

[29] eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).  The eBay case established that courts must look to “traditional equitable principles” in determining whether to grant a permanent injunction after finding patent infringement and put forth four factors that a patentee must satisfy to obtain such an injunction.  Id. at 391.  In Spansion, Inc. v. Int’l Trade Comm’n, 629 F.3d 1331, 1359 (Fed. Cir. 2010), the Federal Circuit affirmed the ITC’s finding that eBay’s equitable test does not apply in its forum, as the ITC’s remedies are governed by statute and not by equitable principles.

[30]  See generally Brief of Amicus Curiae Federal Trade Commission, supra note 27.

[31] See Certain Wireless Commc’n Devices, Portable Music & Data Processing Devices, Computers & Components Thereof (“Wireless Commc’n Devices”), Inv. No. 337-TA-745, Third Party United States Federal Trade Comm’n’s Statement on the Public Interest (June 6, 2012); Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof (“Gaming & Entertainment Consoles”), Inv. No. 337-TA-752, Third Party United States Federal Trade Comm’n’s Statement on the Public Interest (June 6, 2012).

[32] Wireless Commc’n Devices, Inv. No. 337-TA-745, Third Party United States Federal Trade Comm’n’s Statement on the Public Interest (June 6, 2012); Gaming & Entertainment Consoles, Inv. No. 337-TA-752, Third Party United States Federal Trade Comm’n’s Statement on the Public Interest (June 6, 2012).  FTC Commissioner Rosch separately indicated that he believes “the issuance of injunctive relief, including an ITC exclusion order, is inappropriate where the patent holder has made a RAND commitment for a standard essential patent, even if the patentee has met its RAND obligation,” as the RAND terms are a “commitment to license.”  Gaming & Entertainment Consoles,Inv. No. 337-TA-752, Third Party United States Federal Trade Commission’s Statement on the Public Interest, at 1 n.3 (June 6, 2012); Wireless Commc’n Devices, Inv. No. 337-TA-745, Third Party United States Federal Trade Commission’s Statement on the Public Interest, at 1 n.3 (June 6, 2012).

[33] Wireless Commc’n Devices, Inv. No. 337-TA-745, Third Party United States Federal Trade Comm’n’s Statement on the Public Interest; Gaming & Entertainment Consoles, Inv. No. 337-TA-752, Third Party United States Federal Trade Comm’n’s Statement on the Public Interest.

[34] Wayland DOJ Statement, supra note 4, at 10; see also Tom Risen, Patent Infringement and Antitrust Roles Analyzed By Enforcement Officials, ABA Antitrust Fall Forum: Special Report, Policy and Regulatory Report, at 5 (Nov. 8, 2012) (explaining that the DOJ Antitrust Division Senior Counsel stated that “[t]he threat of an injunction should not be used by a patent holder that has committed to a license with FRAND…terms to obtain greater compensation for the licensing of its patents…” at the ABA’s 2012 Antitrust Fall Forum), available athttp://www.debtwire.com/pdf/rosneft.pdf; Melissa Lipman, DOJ Official Pushes ITC on Standards Patent Import Bans, Law360(Nov. 8, 2012), available at http://www.law360.com/ip/articles/393031?nl_pk=35606bb5-4498-4f9f-8419-7f9ff97977d4&utm_source=newsletter&utm_medium=email&utm_campaign=ip. In 2007, the DOJ and FTC issued a publication, “Antitrust Enforcement and Intellectual Property Rights,” in which it devoted a chapter to “Competition Concerns When Patents Are Incorporated into Collaboratively Set Standards.”  Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition, U.S. Fed. Trade Comm’n (Apr. 2007), available athttp://www.ftc.gov/reports/innovation/P040101PromotingInnovationandCompetitionrpt0704.pdf. In that publication, it did not discuss in detail the issue of injunctions regarding FRAND-encumbered SEPs.  See id.

[35] Wayland DOJ Statement, supra note 4, at 10.

[36] Wayland DOJ Statement, supra note 4, at 11.

[37] Wayland DOJ Statement, supra note 4, at 11.

[38] See supra p. 8 and accompanying notes (describing FTC settlement with Motorola Mobility and Google).

[39] See Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments, U.S. Dep’t of Justice & U.S. Patent & Trademark Office (Jan. 8, 2013).

[40] Id. at 9.

[41] Id. at 8.

[42] Id. at 8.

[43] Id. at 6.

[44] Id. at 6.

[45] Id. at 10.

[46] Id. at 7, 9.

[47] Certain Wireless Commc’n Devices, Portable Music & Data Processing Devices, Computers & Components Thereof (“Wireless Commc’n Devices”), Inv. No 337-TA-745, Notice of Comm’n Decision to Review in Part a Final Initial Determination Finding a Violation of Section 337; Request for Written Submissions (June 25, 2012); Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof (“Gaming & Entertainment Consoles”), Inv. No. 337-TA-752, Notice of Comm’n Determination to Review a Final Initial Determination Finding a Violation of Section 337; Remand of the Investigation to the Administrative Law Judge, at 2-3 (June 29, 2012).

[48] See, e.g., Wireless Commc’n Devices, Inv. No. 337-TA-745, Statement of Qualcomm Incorporated on Public Interest Issues (July 9, 2012);Wireless Commc’n Devices, Inv. No. 337-TA-745, Statement of Ericsson Inc. and Its Related Companies on Public Interest Issues (July 9, 2012);Gaming & Entertainment Consoles, Inv. No. 337-TA-752, Statement of Apple Inc. on Public Interest Issues (June 8, 2012); Gaming & Entertainment Consoles, Inv. No. 337-TA-752, Statement of Nokia Corporation on Public Interest Issues (June 8, 2012).

[49]See Fed. Trade Comm’n Request for Comments & Announcement of Workshop on Standard-Setting Issues, 76 Fed. Reg. 28036-28038 (May 13, 2011); see also supra pp. 5-6.  All public comments available at http://www.ftc.gov/os/comments/patentstandardsworkshop/.

[50] See, e.g., Wireless Commc’n Devices, Inv. No. 337-TA-745, Statement of Research In Motion Corporation on Public Interest Issues, at 7 (July 9, 2012) (“The appropriateness of an exclusion order depends upon the facts and circumstances of each case, and whether a patent covers a standard is just one of many considerations relevant to deciding whether an exclusion order should issue.”);Wireless Commc’n Devices, Inv. No. 337-TA-745, Statement of Interdigital Communications, at 4 (July 9, 2012) (“Each case will raise unique factual circumstances that should be considered by the Commission on a case-by-case basis.  It would not be appropriate…to adopt a per se rule that the Commission lacks jurisdiction to enter exclusion orders in all cases where a standards-essential patent is asserted.”).

[51] Wireless Commc’n Devices, Inv. No. 337-TA-745, Statement of Microsoft Corporation on Public Interest Issues, at 2-3 (July 9, 2012) (“Microsoft submits that the RAND obligation by itself precludes exclusionary relief”) (emphasis in original); Wireless Commc’n Devices, Inv. No. 337-TA-745, Comments of Verizon Communications Inc., Cisco Systems, and Hewlett-Packard Company on Public Interest Issues, at 1-2 (July 9, 2012) (“[I]n our view, issuing an exclusion order in a case involving a standard-essential patent subject to a RAND commitment will always be contrary to the public interest.”); Wireless Commc’n Devices, Inv. No. 337-TA-745, Comments of AT&T, at 2-3 (June 8, 2012) (“AT&T respectfully submits that the public interest precludes issuance of an exclusion order for a FRAND-committed standards-essential patent.”).

[52] The Commission also encourages the resolution of ITC cases by its recently developed mediation program to facilitate the settlement of disputes.  See, e.g., Mediation Program for Investigations Under Section 337 of the Tariff Act of 1930, U.S. Int’l Trade Comm’n,http://www.usitc.gov/intellectual_property/mediation.htm; Section 337 Mediation Program, 3d Update, USITC Pub. No. 4329, U.S. Int’l Trade Comm’n (Aug. 2012), available athttp://www.usitc.gov/intellectual_property/documents/MediationBrochure_August_2012_UpdatePub4329.pdf.

[53]  The ITC has stated in the past that it “has consistently held that the benefit of lower prices to consumers does not outweigh the benefit of providing complainants with an effective remedy for an intellectual property-based Section 337 violation.”  Certain Digital Television Prods. & Certain Prods. Containing Same & Methods of Using Same, Inv. No. 337-TA-617, Comm’n Op. (Pub. Version), at 16 (Apr. 23, 2009).

[54] See, e.g., Certain Baseband Processor Chips & Chipsets, Transmitter & Receiver (Radio) Chips, Power Control Chips, & Prods. Containing Same, Including Cellular Tel. Handsets, Inv. No. 337-TA-543, Comm’n Op. on Remedy, the Public Interest, & Bonding (Pub. Version), at 136 (June 19, 2007) (“Having formulated a remedy . . . we must now examine whether that remedy would have an adverse impact with respect to the statutory public interest factors and, if so, we must balance the patent holder’s rights and the public interest in enforcing intellectual property rights against the impact on these other enumerated public interests.”)

[55]  ITC Public Interest Statement, supra note 1.

[56]  If the Commission affirms an ALJ’s finding of a violation of Section 337 and issues an exclusion order and/or a cease and desist order, this decision is effective on the date of its publication in the Federal Register, but is not final until after the U.S. Trade Representative has had 60 days to notify the Commission of his or her disapproval.  19 U.S.C. § 1337(j).  This 60-day period is often referred to as the “Presidential review period.”  In 2005, the President delegated the authority to disapprove Commission determinations regarding exclusion orders and CDOs to the U.S. Trade Representative.  70 Fed. Reg. 43,251 (July 26, 2005).

[57]  See ITC Public Interest Statement, supra note 1.

[58]  ITC Public Interest Statement, supra note 1; Rules of Adjudication and Enforcement, 76 Fed. Reg. 64,803-64,810 (Oct. 19, 2011).  Under the new public interest rules, the Commission receives information regarding potential public interest issues from the parties and possibly the public before initiating an investigation, which helps it to determine whether earlier examination of public interest information would be helpful to the case.  19 C.F.R. §§ 210.8(b), 210.8(c)(1).  Many third parties, since the time of the notice of proposed rulemaking, have taken advantage of the opportunity to file comments on the public interest.  See, e.g., Certain Auto. Navigation Sys., Components Thereof, & Prods. Containing Same, Inv. No. 337-TA-817, Letter from European-American Business Council in Response to the ITC’s Invitation to File Comments on Public Interest Issues Raised by the Complaint (Nov. 2, 2011); Certain Hydroxyprogesterone Caproate & Prods. Containing the Same, Docket No. 2919, Letter from The March of Dimes in Response to the ITC’s Invitation to File Comments on Public Interest Issues Raised by the Complaint (Nov. 8, 2011).  If it finds that the information would be helpful to the case, the Commission can direct the ALJ to conduct discovery on the public interest factors, and the respondents are required to submit a statement on the public interest factors and participate in discovery on the issue.  19 C.F.R. § 210.14(f).  Furthermore, once an ALJ’s recommended determination on remedy and bonding is issued, the public is encouraged to comment on how the proposed remedy may affect the public interest.  19 C.F.R. § 210.50(a)(4).  In addition, the Commission continues its earlier practice of encouraging briefing from the parties, government agencies, and the public on the public interest when it decides to review an ALJ’s initial determination on violation.  19 C.F.R. § 210.50(a)(4).

[59]  Certain Baseband Processor Chips & Chipsets, Transmitter & Receiver (Radio) Chips, Power Control Chips, & Prods. Containing Same, Including Cellular Tel. Handsets, Inv. No. 337-TA-543, Comm’n Op. (Pub. Version), at 136-154 (June 19, 2007).

[60]  Id. at 150.

[61]  Id. at 146-147.  These third parties included intervenors, other federal agencies (Federal Communications Commission and Federal Emergency Management Agency), and other public interest witnesses, such as a representative from the District of Columbia, representatives of emergency response associations, a representative of a public safety communications officials association and a member of the academic community.  Id.

[62]  Id. at 150-151.

[63]  Id. at 148.

[64]  Id. at 148.

[65]  Id. at 149.

[66]  Id. at 149.

[67]  Id. at 149.

[68]  Id. at 150. The Commission order in Baseband Processor Chips was vacated in partby the Federal Circuit in Kyocera Wireless Corp. v. Int’l Trade Comm’n, 545 F.3d 1340, 1359 (Fed. Cir. 2008).  That decision, however, dealt with the scope of limited exclusion orders and not with the application of the public interest factors in Section 337.

[69]  Certain Personal Data & Mobile Commc’ns Devices & Related Software (“Personal Data & Mobile Commc’ns Devices”), Inv. No. 337-TA-710, Notice of the Comm’n’s Final Determination Finding a Violation of Section 337, at 3 (Dec. 19, 2011).

[70]  Personal Data & Mobile Commc’ns Devices, Inv. No. 337-TA-710, Comm’n Op., at 68 (Dec. 29, 2011).

[71]  Id. at 68 (citing 19 C.F.R. § 210.76(a)(1)).

[72]  Id. at 80-81.

[73]  Id. at 80-81.

[74]  Id. at 78.

[75]  Id. at 81.

[76]  Id. at 81.

[77]  Id. at 81.

[78]  Id. at 81.

[79]  Id. at 69.

[80]  Id. at 72.

[81]  Id. at 72-73.

[82]  The Commission rejected HTC’s argument that the exclusion of its devices would affect the public health and welfare, as there was no evidence that HTC devices played a distinct role in that respect compared to other Android devices.  Id. at 73.  It clarified that, while “‘mobile phones’ may play a critical role in public health and safety[, it] does not mean that HTC Android smartphones play a critical role in public health and safety that other smartphones cannot.”  Id. at 74. (emphasis in original).  The Commission further rejected HTC’s and T-Mobile’s comparisons of the situation toBaseband Processor Chips, explaining that it developed a tailored exclusion order in that case because it was unable to exclude the infringing articles completely, as the 3G network was still developing and there were insufficient alternative products.  Id. at 75-76.  T-Mobile had submitted a statement regarding the public interest in response to the Commission’s notice of its determination to review in part the ALJ’s initial determination.  Personal Data & Mobile Commc’ns Devices, Inv. No. 337-TA-710, Third-Party T-Mobile USA, Inc.’s Statement Regarding the Public Interest (Oct. 6, 2011).

[83]  The Commission found that issuance of an exclusion order would not result in a deficiency in the production of like or directly competitive articles in the United States as there was no evidence of domestic infringing HTC smartphone production.   Personal Data & Mobile Commc’ns Devices, Inv. No. 337-TA-710, Comm’n Op. at 77.  Furthermore, in response to third-party Google’s argument that an exclusion order against technologies resulting from Android, “the only open and generative mobile computing platform developed and distributed in the U.S.,” could leave U.S. consumers without access to those technologies, the Commission reiterated that the exclusion order was only against infringing HTC devices.  Id.  In addition, the Commission “d[id] not believe that open-source projects should be conferred special status or immunity from infringement allegations” and noted that other smartphone operating systems are developed in the United States.  Id.

[84] Certain Microprocessors, Components Thereof, & Prods. Containing Same, Inv. No. 337-TA-781, Initial Determination (Pub. Version), at 374 (Jan. 15, 201

[85] Id. at 366-372.  This recommendation is currently subject to Commission review.

[86] The Commission may determine to review an ALJ’s initial determination sua sponte or based on a party’s petition for review.  See 19 C.F.R. § 210.43(a).  If the Commission does not determine to review an initial determination, it becomes the determination of the Commission 45 days after the date of service.  19 C.F.R. § 210.42(h).

[87]  The questions do not necessarily suggest what the outcome will be, but it is worth noting the Commission’s  increased attention to public interest and to SSO-related theories that could result in denial of an exclusion order in spite of a finding of violation.  The Commission’s awareness can even be seen in the commentary of individual Commissioners.  For example, in Personal Data & Mobile Commc’ns Devices, Commissioner Pinkert made it a point to “emphasize that the existence of substitutes for the infringing devices does not obviate consideration of the likely impact of exclusion on the range of choices available to consumers in the smartphone marketplace. Such impact may warrant more searching inquiry in other investigations.”  Inv. No. 337-TA-710, Additional Views of Comm’r Pinkert on Remedy and the Public Interest, at 1 (Dec. 29, 2011).

[88]  Certain Wireless Commc’n Devices, Portable Music & Data Processing Devices, Computers & Components Thereof (“Wireless Commc’n Devices”), Inv. No 337-TA-745, Notice of Comm’n Decision to Review in Part a Final Initial Determination Finding a Violation of Section 337; Request for Written Submissions (June 25, 2012).

[89]  Id. at 4 (Question 6).

[90]  Id. at 4-5 (Questions 7-13).

[91]  Id. at 4 (Questions 4-5).

[92]  Certain Elec. Devices, Including Wireless Commc’n Devices, Portable Music & Data Processing Devices, & Tablet Computers, Inv. No. 337-TA-794, Notice of Comm’n Determination to Review the Final Initial Determination; Schedule for Filing Written Submissions on the Issues Under Review & on Remedy, Public Interest, and Bonding (Nov. 20, 2012).

[93]  Id. at 3 (Question 2).

[94]  See Wireless Commc’n Devices, Inv. No 337-TA-745, Notice of Comm’n Decision to Review in Part a Final Initial Determination Finding a Violation of Section 337; Request for Written Submissions, at 2-3 (June 25, 2012); see alsoe.g., Wireless Commc’n Devices, Inv. No. 337-TA-745, Statement of Qualcomm Incorporated on Public Interest Issues (July 9, 2012).

[95]  See, e.g., Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof, Inv. No. 337-TA-752, Letter from Cisco (June 7, 2012); Letter from Apple (June 8, 2012); Letter from IBM (June 13, 2012); Letter from the Fed. Trade Comm’n (June 6, 2012); Letter from the Judiciary Committee of the U.S. House of Representatives (June 7, 2012); Letter from Congressmen Reichert, Dicks, McDermott, Hastings, Smith, Larsen, Rodgers, and Beutler; Letter from the Illinois delegation (June 8, 2012); Letter from Congressman Issa (June 8, 2012); Letter from Senators Cantwell and Murray (June 28, 2012); Letter from Senators Lee, Kyl, Risch, Kohl, Cornyn, and Hoever (July 19, 2011).

[96]  Certain Optoelectronic Devices, Components Thereof, & Prods. Containing Same (“Optoelectronic Devices”), Inv. No. 337-TA-669, Initial Determination (Pub. Version) (Mar. 29, 2010).

[97]  Id. at 74-86.

[98]  Id. at 83-84.

[99]  Id. at 84.

[100]  Id. at 84-85.

[101]  Id. at 86-88.

[102]  Optoelectronic Devices, Inv. No. 337-TA-669, Notice of Comm’n Decision Not to Review a Final Initial Determination Finding a Violation of Section 337 (May 13, 2010).

[103]  Certain Mobile Tel. Handsets, Wireless Commc’n Devices, & Components Thereof (“Mobile Telephone Handsets”), Inv. No. 337-TA-578, Order No. 34 (Initial Determination) (Pub. Version) (Mar. 8, 2007).

[104]  See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 136-38 (1969); Princo Corp. v. Int’l Trade Comm’n, 616 F.3d 1318, 1331-32 (Fed. Cir. 2010).

[105]  Mobile Telephone Handsets, Inv. No. 337-TA-578, Notice of Comm’n Decision Not to Review an Initial Determination Granting Complainant’s Motion for Summary Determination as to Respondents’ Twelfth and Thirteenth Affirmative Defenses (Mar. 22, 2007).

[106]  Certain Wireless Commc’n Devices, Portable Music & Data Processing Devices, Computers & Components Thereof (“Wireless Commc’n Devices”), Inv. No. 337-TA-745, Corrected Verified Complaint under Section 337 of the Tariff Act of 1930, as Amended (Oct. 14, 2010).

[107]  Wireless Commc’n Devices, Inv. No. 337-TA-745, Apple Inc.’s Response to Motorola’s Corrected Verified Complaint and Notice of Investigation, at 34-50 (Dec. 1, 2010).

[108]  See Wireless Commc’n Devices, Inv. No. 337-TA-745, Notice of Comm’n Decision to Review in Part a Final Initial Determination Finding a Violation of Section 337; Request for Written Submissions (June 25, 2012); see also supra p. 10.

[109]  Certain Elec. Devices, Including Wireless Commc’n Devices, Portable Music & Data Processing Devices, & Tablet Computers (“Electronic Devices”), Inv. No. 337-TA-794, Complaint under Section 337 of the Tariff Act of 1930, as Amended (June 23, 2011).

[110]  Electronic Devices, Inv. No. 337-TA-794, Notice of Comm’n Determination to Review the Final Initial Determination; Schedule for Filing Written Submissions on the Issues Under Review & on Remedy, Public Interest, & Bonding (Nov. 20, 2012).

[111] Electronic Devices, Inv. No. 337-TA-794, Notice of Comm’n Determination to Extend the Target Date for Completion of the Investigation (Dec. 28, 2012); Electronic Devices, Inv. No. 337-TA-794, Notice of Comm’n Determination to Extend the Target Date for Completion of the Investigation (Jan. 17, 2012).

[112]  Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof (“Gaming & Entertainment Consoles”), Inv. No. 337-TA-752, Verified Complaint under Section 337 of the Tariff Act of 1930, as Amended (Nov. 22, 2010).

[113]  Gaming & Entertainment Consoles, Inv. No. 337-TA-752, Initial Determination, at 282-83.

[114]  Id. at 289-292.

[115]  Gaming & Entertainment Consoles, Inv. No. 337-TA-752, Notice of Comm’n Determination to Review a Final Initial Determination Finding a Violation of Section 337; Remand of the Investigation to the Administrative Law Judge, at 2-3 (June 29, 2012).

[116] Gaming & Entertainment Consoles, Inv. No. 337-TA-752 (Remand Proceeding), Motorola’s Motion to Terminate this Investigation in Part with Respect to U.S. Patents No. 5,319,712 and No. 5,357,571 (Oct. 24, 2012).

[117] Gaming & Entertainment Consoles, Inv. No. 337-TA-752 (Remand Proceeding), Motorola Mobility’s Motion to Terminate this Investigation In Part With Respect to U.S. Patent Nos. 6,980,596 and 7,162,094 (Jan. 8, 2013); In the Matter of Google Inc., FTC File No. 121-0120, Statement of the Federal Trade Commission, at 1 (Jan. 3, 2013); see also the Matter of Google Inc., FTC File No. 121-0120, Opening Remarks of Federal Trade Commission Chairman Jon Leibowitz, at 2 (Jan. 3, 2013) (“Google’s settlement with the Commission requires Google to abandon its claims for injunctive relief on any of its standard essential patents with a FRAND commitment.”); In the Matter of Motorola Mobility LLC, FTC File No. 121-0120, Agreement Containing Consent Order (Jan. 3, 2013); supra p. 8.

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