Cooperative Standard Setting
| Pages | 25-74 |
25
CHAPTER II
COOPERATIVE STANDARD SETTING
Many standards are created through the formal collaboration of
industry participants and include a variety of different types of
standards
—e.g., quality, informational, uniformity, interoperability, and
professional standards. Such collaboration may take place in the context
of traditional standard-setting organizations (SSOs), through trade and
professional associations, or between private firms. How a cooperatively
set standard is developed and by whom, as well as the substance of the
standard itself, may play a significant role in the antitrust analysis of the
standard.
Chal
lenges relating to cooperative standard-setting activities
typically fall into one or both of the following categories: (1) “collusion”
claims
—claims that the standards amount to or facilitate improper
coordination among competitors; and (2) “exclusion” cl
aims
—
claims
that standards improperly exclude or disadvantage a firm or firms and
thereby harm the competitive process.1 Challenges to cooperative
standard
-setting practices are most often brought under Section 1 of the
Sherman Act,2 which prohibits agreements in restraint of trade, or
Section 2 of the Sherman Act,3 which prohibits monopolization,
attempted monopolization, and conspiracy to monopolize. Although
most challenges brought against participants in an SSO are for alleged
violations of Section 1,4 participants can also be held liable under
Section
2 when other requirements for monopolization or attempted
monopolization are present.5 For instance, SSOs may be held liable
1. A plaintiff may assert either one or both of these claims in any individual
case. See, e.g., Addamax Corp. v. Open Software Found., 152 F.3d 48,
50, 55 (1st Cir. 1998); Nat’l Ass’n of Review Appraisers & Mortgage
Underwriters v. Appraisal Found., 64 F.3d 1130, 1133 (8th Cir. 1995)
;
Jessup v. Am. Kennel Club, 61 F. Supp. 2d 5, 10 (S.D.N.Y. 1999)
.
2.
15 U.S.C.
§ 1.
3.
15 U.S.C. § 2.
(1988)
(member of SSO sued another member for violation of §
1).
2004)
(finding that, if proven, Rambus’s conduct relating to prosecution
of its patents after a standard was decided on by an SSO to which it
belonge
d could violate § 1 of the Sherman Act).
26
Handbook on the Antitrust Aspects of Standard Setting
under Section 1 when a voluntary product standard issued by an SSO is
used to restrain competition by limiting entry into the market, thereby
effecting an anticompetitive boycott.6 An SSO may also be held liable
for violations of Section 2 as a principal for acts of its participants, under
an apparent authority theory of agency la
w.
7
Challenges involving cooperative standard
-
setting activities may also
be brought by the Federal Trade Commission (FTC) under Section 5 of
the Federal Trade Commission Act8, which prohibits unfair methods of
competition and deceptive trade practices. The FTC has accepted
consent decrees based on complaints invoking Section 5 as a basis of
liability, alleging both unfair methods of competition and unfair acts or
practices.
9 Antitrust challenges to standard-setting activities—
for
example, a refusal to license or a “patent ambush”—may also be raised
in the context of an equitable defense to a patent infringement claim.10
(1982)
(holding SSO liable for violations of the antitrust laws for acts of
its agents performed with apparent authori
ty).
7.
Id.
8.
15 U.S.C. § 45
.
9.
See
Statement of the Federal Trade Commission, Negotiated Data
Solutions, LLC, Dkt. No. C-4234 (F.T.C. Jan 23, 2008), available at
http://www.ftc.gov/os/caselist/0510094/080122statement.pdf; D
issenti
ng
Statement of Commissioner William E . Kovacic, Nego tiated Data
Solutions, LLC, D kt. No. C-4234 (F.T.C. Jan. 23, 2008), available at
http://www.ftc.gov/os/caselist/0510094/080122kovacic.pdf;
Dissenting
Statement of Chairman Majoras, Negotiated Data Solutions, LLC, Dkt.
No. C-4234 (F.T.C. Jan. 23, 2008), available at
http://www.ftc.gov/
os/caselist/0510094/080122majoras.pdf;
Dell Co mputer Corp., 121
F.T.C. 616 (1996); Am. Soc’y of Sanitary Engineering, 106 F.T.C. 324
(1985);
see also
U.S.
D
EP
’T OF J
USTICE
& F
EDERAL
T
RADE
C
OMM
’N
,
A
NTITRUST
ENFORCEMENT AND I
NTELLECTUAL
P
ROPERTY
R
IGHTS
:
P
ROMOTING
INNOVATION AND C
OMPETITION
(2007), available at
http://www.usdoj.gov/atr/public/hearings/ip/222655.pdf
(discussing
antitrust concerns arising when patents are incorpor
ated into collaborative
standard
-
setting activity).
10
. See, e.g., Stambler v. Diebold, Inc., No. 85 CV 3014, 1988 U.S. Dist.
LEXIS 10132, at *21 (E.D.N.Y. 1988) (granting summary judgment to
defendants on grounds of laches and equitable estoppel in a patent
infringement case where patent owner sat on standard-
setting
subcommittee, did not disclose his patent, and eleven years later br
ought
suit against manufacturer practicing the standard); Potter Instrument Co.
v. Storage Tech. Corp., No. 79-
579
-A, 1980 U.S. Dist. LEXIS 14348, at
*18
-19 (E.D. Va. 1980) (granting defendant’s summary judgment motion
in infringement case where plaintiff intentionally violated SSO’s policy
of disclosing relevant patents); see also Joseph Kattan,
Disclosur
es and
Commitments to Standard-Setting Organizations
,
A
NTITRUST
,
Summer
2002, at 22, 24
-
25 (discussing the implications of various disclosure rules
Cooperative Standard Setting
27
Depending on the circumstances, antitrust challenges to standard
setting may be asserted by private litigants,11 the DOJ, the FTC, or sta
te
Attorneys General. In evaluating standard setting among competitors,
the DOJ and the FTC typically apply principles outlined in the
Antitrust
Guidelines for Collaborations Among Competitors (the
Competitor
Collaboration Guidelines)12 and the Antitrust Guidelines for the
Licensing of Intellectual Property (the Intellectual Property
Guidelines
).13
Although standard-setting activities are most often
examined in the litigation context, government antitrust review of
proposed standard-setting activities may also be sought on a voluntary
basis through the DOJ business review or FTC advisory opinion
processes.14
Courts and the enforcement agencies typically review challenges to
collaborative standard-setting efforts under the rule of reason. However,
a standard-setting effort that amounts to a “naked restraint of trade” may
and other commitments made by firms participating in standard-
setting
activities).
11
.
Private litigants may
also assert state law and common law claims against
SSOs and/or their participants. See, e.g., Found. for Interior Design
Educ. Research v. Savannah Coll. of Art & Design, 244 F.3d 521, 524
(6th Cir. 2001) ( asserting breach of contract, fraud, and breach of
fiduciary duty counterclaims against accrediting body for denying
accreditation to interior design program); Micron Tech. v. Rambus Inc.,
189 F. Supp. 2d 201 (D. Del. 2002) (asserting state law fraud claim
against Rambus for failure to disclose patent rights and patent
applications during its participation in standard
-
setting efforts of JEDEC);
ESS Tech. v. PC-Tel, Inc., No. C-
99
-20292 RMW, 1999 U.S. Dist.
LEXIS 23227, at *4 (N.D. Cal. 1999) (plaintiff asserted state law claims
for specific performance and unfair competition, alleging that royalties
demanded by defendant for technology included in standard adopted by
ITU were excessive and that defendant breached agreement w ith ITU to
license technology on reasonable terms and on a nondiscriminatory
basis).
12
.
U.S.
D
EP
’T OF J
USTICE
& F
EDERAL
T
RADE
C
OMM
’N
,
A
NTITRUST
GUIDELINES FOR C
OLLABORATIONS
A
MONG
C
OMPETITORS
(2000)
[hereinafter
C
OMPETITOR
C
OLLABORATION
G
UIDELINES
]
,
reprinted in 4
Trade Reg. Rep. (CCH) ¶ 13,161.
13
.
U.S.
D
EP
’T OF J
USTICE
& F
EDERAL
T
RADE
CO
MM
’N
,
A
NTITRUST
GUIDELINES FOR THE LICENSING OF I
NTELLECTUAL
P
ROPERTY
(1995)
[hereinafter
I
NTELLECTUAL
P
ROPERTY
G
UIDELINES
]
,
reprinted in 4 Trade
Reg. Rep. (CCH) ¶ 13,132.
14
. See generally Antitrust Division Business Review Procedure,
C.F.R.
§ 50.6 (2000); Federal Trade Commission Advisory Opinion
Procedure, 16 C.F.R. § 1.1. While not binding on the courts, nor even
technically binding upon the issuing agency, a favorable DOJ business
review letter or FTC advisory opinion provides the requesting parties
with considerable practical comfort.
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