The Bosch-SPX Merger and a Requirement to License Standard Essential Patents

The Federal Trade Commis­sion (FTC) recently secured a consent decree resolving antitrust concerns in the acquisition by Robert Bosch GmbH (“Bosch”) of SPX Services. The alleged relevant market was the manufacture and sale of equipment used to recharge automobile air conditioning systems (ACRRR devices), where the combined firm was alleged to have a 90% share. Besides terms typical in a merger-related consent decree, particularly a requirement for a divestiture that included a royalty-free license of standard-essential patents needed to produce ACRRR devices, the decree required Bosch to license those same patents on a fair, reasonable and non-discriminatory (FRAND) basis to all comers. The requirement stemmed from the FTC’s discovery, during the merger investigation, of evidence that Bosch had reneged on a commitment to license standard-essential patents. The FTC asserted that this conduct, which was unrelated to the merger, was an unfair method of competition under Section 5 of the FTC Act. Some have questioned the FTC’s inclusion of a provision to alleviate Section 5 concerns in a Section 7-based merger remedy.

The consent decree in this case may seem understandable given the FTC’s long history of concerns with misuse of the standard setting process. Such concerns date back to the 1996 Dell case and also played a role in the 2003 Unocaldecision, the 2006 Rambus case, and the 2008 N-Data case. Moreover, subsequent to the Bosch-SPX consent decree, the FTC in January 2013 proposed a consent agreement with Google-Motorola Mobility that was also based on a Section 5 theory of unfair refusals to license standard-essential patents. The proposed consent required Google to offer a FRAND license to any company that wanted to license Google’s standard-essential patents and compelled Google to withdraw any claims for injunctive relief involving such patents.

Nonetheless, the FTC’s Bosch-SPX consent could be seen as overreaching because a violation of Section 5 with respect to the Bosch patents was never established. The existence of that violation arguably could more properly have been litigated in a separate proceeding. Including the FRAND license in the consent agreement, however, may have had the same ultimate result as a separate proceeding and used fewer FTC (and Bosch) resources. Only the FTC and the merging parties know what the evidence discovered by the FTC indicates concerning whether the FTC could have prevailed in such a proceeding. Bosch’s agreement to the decree indicates either that Bosch believed the FTC likely would have won or that Bosch was not overly concerned with the FRAND commitment.

Principal Robert Stoner has consulted in a number of instances about matters concerning standards-setting organizations and standard-essential patents.