WASHINGTON (Reuters) - Companies that hold the most important patents needed to build smartphones, tablets and other devices should only rarely be granted sales bans on rivals as a punishment for infringement, U.S. government officials told lawmakers on Wednesday.
Since a 2006 Supreme Court decision known as eBay v. MercExchange, it has been unusual for U.S. district courts to issue injunctions banning sales of an infringing product.
But the U.S. International Trade Commission is not subject to that legal precedent, and still orders sales bans.
The result has been a flood of infringement cases at the ITC, some of it based on patents essential to a standard, such as a digital movie format.
"It really is creating a lot of concern here on Capitol Hill and is creating greater concern in industry in this country," said Senator Patrick Leahy, chairman of the Senate Judiciary Committee, at a hearing on the issue.
One solution under discussion would require the ITC to consider whether there has been fair licensing negotiations between the companies before issuing an exclusion order based on a standard essential patent, said Edith Ramirez, a member of the Federal Trade Commission.
While rules vary among standard-setting bodies, the usual expectation is that essential patents be licensed on reasonable terms and to everyone.
Both Ramirez and Joseph Wayland, the acting assistant attorney general for antitrust at the Justice Department, said they would be reluctant to see exclusion orders forbidden entirely on essential patents.
"There may be circumstances where a company refuses to negotiate in good faith," Wayland told lawmakers.
Recent attention on the issue has focused on a case where Motorola Mobility, which recently became a Google Inc unit, accused Microsoft Corp of infringing patents to make its Xbox game console, including patents that standard setting bodies declared to be essential to a video standard.
If Microsoft loses, the Xbox could be banned from the U.S. market because of a licensing dispute over an essential patent.
Microsoft is leading the fight against the ITC exclusion orders.
Major smartphone players such as Apple Inc and Qualcomm Inc have also lobbied lawmakers on the issue, according to a congressional source.
Mark Lemley, a patent expert who teaches at Stanford Law School, estimated the cost to the companies of the smartphone patent wars at "conservatively $15 to $20 billion dollars."
Reporting By Diane Bartz; Editing by Tim Dobbyn