President Trump can stop Big Tech from stifling competition through a 'free' giveaway.
The Justice Department has fired a shot across Big Tech's bow. In a recent speech, Dina Kallay, a deputy assistant attorney general in the department's antitrust division, criticized Big Tech for using supposedly "free" patent-licensing initiatives to poach smaller competitors' technologies.
Her remarks come at a pivotal moment. The Alliance for Open Media -- a consortium led by Amazon, Meta, Google, and other tech giants -- just announced a new video-streaming format called AV2 that could soon be embedded in televisions and tablets. The new format is the successor to its previous video technology, AV1.
The group claims the technology will be "royalty-free." But such promises often come with strings attached.
Kallay didn't mention the Alliance for Open Media by name, but her message was clear. Under the Trump administration, the Justice Department will defend small businesses from Big Tech's anticompetitive depredations and promote genuine competition.
Most Americans don't pay attention to the technologies behind streaming platforms -- from the algorithms that compress data to the networks that bring video content from the cloud to individual devices. They just want their phones, TVs, and tablets to play content seamlessly.
The rapid improvement in streaming quality Americans have enjoyed is no accident. It's the result of a carefully calibrated legal system that enables and encourages companies of all sizes to compete on a level playing field when developing and adopting "standardized" technologies.
Globally standardized technologies for streaming, Wi-Fi, and 5G are protected by numerous patents. Without patent protection, rival companies could simply copy an innovator's designs and updates. Innovators would have little reason to take risks developing new or improved standardized technologies.
But for standardized technologies to be widely useful, they also need to be broadly accessible. Just imagine the chaos and inefficiency that would result if certain Wi-Fi routers only worked with iPhones but not Androids, or if only certain tablets could stream particular video formats.
To promote widespread adoption, innovators promise to license "standard-essential" patents to any willing user on terms that are "fair, reasonable, and non-discriminatory," or FRAND.
Under this model, anyone who wants to use the standardized technology can do so, provided they pay a modest royalty to the companies that helped invent that technology. The FRAND system has long promoted the adoption of technologies while ensuring inventors are fairly compensated.
The Big Tech companies behind the Alliance for Open Media claim to have found a better way. Over the past several years, they've been touting several formats, including their AV1 and AV2 video streaming formats, as "royalty-free." The implication is that they're giving away access to standardized technologies for free -- and that companies can license them at no cost.
But that's not actually the case. The format is free only to those who take a license on the Alliance for Open Media's terms. Those terms stipulate that, in order to use the format, licensees must agree to cross-license their own technologies to other Alliance members without charging royalties.
This coercive requirement harms small firms. If Alliance members like Google, Netflix, and Amazon adopt AOM technologies in their streaming platforms, they can force smaller developers and device makers to either follow suit -- that is, give away their intellectual property and licensing revenue in the process -- or refuse and be effectively shut out of the market.
Further, AOM has a history of licensing technology its members don't fully own. Anyone who licensed AV1 through AOM ended up facing a surprise bill from other patent owners. The same may end up true for AV2.
There's also a strong chance that AOM's members will offer access to their technology for "free" now but later close off or start imposing onerous requirements for access to it after achieving market dominance. Melissa Holyoak, a former commissioner at the Federal Trade Commission, expressed concern about just this sort of strategy -- which is common with Big Tech platforms -- in a speech earlier this summer.
The stakes extend far beyond streaming; standards are present in all areas of life, from telecom and wireless networks to aerospace, power grids, and autonomous vehicles.
In one recent case, a small U.S. company alleged that a consortium of large tech firms pressured it to join its "open" alliance -- on the condition that it offer its patented memory technology for free. When the company refused, the group allegedly incorporated its innovations anyway, effectively cutting the company out of the market.
The Department of Justice and the U.S. Patent and Trademark Office filed a Statement of Interest in this case, which signals just how seriously it's taking these issues.
Preserving America's technological excellence requires strengthening the patent system and FRAND framework that have long promoted risk-taking and invention. The Trump administration's warning shot to Big Tech is good news for small innovators -- and for every American.
Kristen Osenga is the Austin E. Owen Research Scholar and Professor of Law at the University of Richmond School of Law.
