FTC tells ITC that banning iPhones, Xboxes is a bad idea (Updated)

The Federal Trade Commission has requested that the International Trade Commission not consider import bans against Microsoft and Apple products that infringe standards-essential patents owned by Google's Motorola Mobility subsidiary. The FTC sent a memo summarizing its position to the ITC on Thursday, noting that allowing import bans based on FRAND-encumbered patents could "cause substantial harm to US competition, consumers, and innovation."

At the heart of the matter are two ITC complaints levied by Motorola Mobility (prior to the Google acquisition) against Microsoft and Apple. Both Microsoft and Apple filed complaints against Motorola related to its use of the Android operating system. Motorola retaliated by charging that both companies infringe its patents with their use of H.264 and wireless 3G standards, respectively.

The ITC has ruled that Microsoft and Apple do indeed infringe on some of the patents in question. However, Motorola agreed to license those patents on fair, reasonable, and non-discriminatory (FRAND) terms in order to have those patented technologies incorporated into various standards. Seeking exclusionary orders based on such standards-essential patents runs counter to the original FRAND agreement and threatens to dismantle current and future standards-making processes, according to the FTC.

"Simply put, we are concerned that a patentee can make a [F]RAND commitment as part of the standard setting process, and then seek an exclusion order for infringement of the [F]RAND-encumbered standards-essential patent as a way of securing royalties that may be inconsistent with that [F]RAND commitment," the FTC wrote in its memo.

"Hold-up and the threat of hold-up can deter innovation by increasing costs and uncertainty for other industry participants, including those engaged in inventive activity," the FTC said. "The threat of hold-up may reduce the value of standard-setting, leading firms to rely less on the standard setting process and depriving consumers of the substantial pro-competitive benefits of standard setting."

UPDATE: HP, Nokia, the BSA, and other trade groups have also filed letters with the ITC supporting the FTC's position that injunctions and exclusionary orders should not be granted based on FRAND-encombered patents.