Proactive or Reactive? An Empirical Assessment of IPR Policy Revisions in the Wake of Antitrust Actions

• Published date: 01 June 2014
• DOI: 10.1177/0003603X1405900206
• Date: 01 June 2014
• Subject Matter: Article

THE ANTITRUST BUL L E T I N :Vol. 59, N o. 2/Summ er 2014 :373

Proactive or reactive? An empirical

assessment of IPR policy revisions

in the wake of antitrust actions

BY ANNE LAYNE-FARRA R*

The debate over potential antitrust concerns for the use of protected

intellectual property within standard setting often centers on the

rules a nd reg ulat ions i n plac e at stan dard s etti ng orga niza tion s

(SSOs). While the typical focus is on whether or not particular rules

should be mandated for SSOs, this debate begs a broader question:

What are SSOs doing , on their members ’ own volition, t o address

appa rent a nti trus t gap s or wea kne sses w ith in th eir in tel lect ual

property rules? This article systematically assesses what SSOs have

actually don e (or failed to do) i n relation to ant itrust concer ns, as

those concerns emerge over time.

KEY WORDS:standards, patents, FRAND, licensing, injunctions, hold-up

© 2014by Federal Legal Publications, Inc.

* Vice President, Charles River Associates.

AUTHOR’S NOTE: I would like to thank Hill Welford for inspiring this empirical

study through a comment he made during an ABA teleconference in early 2013, and

Ray Alderman, Maissa Bashoun, Jorge Contreras, Bob Levinson, Christine Tack, Pat

Treacy, and George Willingmyre for data and helpful suggestions, and Vignesh

Nathan for excellent research assistance. In the interest of full disclosure, I served as

an economic expert in several of the antitrust cases mentioned in this article, though

none of the parties were involved in its preparation. This article reflects my views

alone and not those of Charles River Associates or any of its other officers, affiliates,

or employees. Any errors are mine.

I. INTRODUCTION

Sta nda rd setti ng org aniza tio ns (S SOs ) hav e bee n the s ubjec t of

antitrust scrutiny for many years now. Front and center are the intel-

lectual property rights (IPR) rules in place at these voluntary organiza-

tions, as these rules have been thesubject of spirited debates regarding

the obligations that do (or do not) attach to member commitments to

first disclose and then to license patents that may be “essential” for the

practice of the standard on fair, reasonable, and nondiscriminatory

(FRAND) terms and conditions. In recent years, a common theme has

been when and how competition agencies (most commonly, the U.S.

Federal Trade Commission (FTC) or the European Commission)

should intervene in the standard setting process to correct the per-

ceived problems with patent disclosure and FRAND licensing, such as

the risk of patent hold-up. Among the many reform proposals target-

ing IPR within standard setting contexts are suggestions that competi-

tion agencies either dictate policy rules for SSOs or at least define

guidelines that SSOs would then be(strongly) encouraged to follow.1

While each intervention proposal should be evaluated on its own

merits, the debate begs a broader question: What are SSOs doing, of

their members’ own volition, to address any apparent antitrust gaps

or weaknesses within their IPR rules? While many papers in the liter-

ature have ana lyzed what SSOs, as a group, s hould do to im prove

their IPR rules, and a few have examined SSO rules at specific points

in time,2to th e best o f my kno wled ge no on e has systema tica lly

374 :THE ANT I T R U S T BULLETIN:Vol. 59, No. 2/Summer 2014

1See, e.g. , U.S. FED. TRA DE COMM’N, TH E EVOLVING IP MAR KETPLAC E:

ALIGNING PATENTNOTICE AND REMEDIESWITH COMPETITION (2011); U.S. DEP’T OF

JUSTICE & U.S. PATENT & TRADEMARK OFFICE, POLICY STATEMENT ON REMEDIES

FOR STANDARDS-ESSENTIAL PATENTS SUBJECT TO VOLUNTARY F/RAND COMMIT-

MENTS (2013); Joaquín Almunia, Speech for the International Bar Association

Antitru st Confer ence (Jun e 15, 2012 ), availa ble at http ://euro pa.eu/ rapid

/press-release_SPEECH-12-453_en.htm.

2See, e.g., Mark A. Lemley, Antitrust, Intellectual Property and Standard

Setting Organizations (paper presented at 2nd IEEE Conference, Standardiza-

tion and Innovation in Information Technology, 2001). A more recent assess-

ment is provided by Rudi Bekkers, & Andrew Updegrove, A Study of IPR

Policies and Practices of a Representative Group of Standards Setting Organi-

zations Worldwide (Nat’l Academies of Science Symposium on Management

of IP in Standards-Setting Processes, 2012).

assessed how SSO members have actually revised their IPR policies in

response to antitrust concerns as they emerged over time.

Two specific (and related) SSO IPR rule changes have received

considerable scrutiny. The first is VITA (the body that promulgates

standards for VMEbus architecture.3) VITA changed its IPR rules in

2007, requiring all members disclosing patents as potentially essential

for the practice of a given standard to also disclose the maximum

terms they will seek in licensing fees from firms producing products

compliant with that standard before any member vote occurs for

what technology will be included to define components within the

standard.4The second is Institute for Electrical and Electronics Engi-

neers (IEEE), which added the option of disclosing a not-to-exceed

license fee or rate commitment (a maximum-term disclosure) to its

IPR disclosure form, also in 2007.5Both changes targeted a concern

raised in the global antitrust policy debate: patent hold-up, where a

patent holde r may use the fact that its patented technolo gies have

been incorporated into a standard as a means of leverage to extract

supracompetitive royalty payments from those firms that implement

the standard.

Before either of these two SSOs changed their policies in 2007,

however, each sought a business letter review from the U.S. Depart-

ment of Justice (DOJ).6This fact suggests that SSOs do not make sub-

I P R P O L I C Y RE V I S I O N S :375

3VITA, VITA: Open Standards, Open Markets, http://www.vita.com

/index.php (last visited Apr. 7, 2014).

4VITA , Im pl eme nt at io n Pla n fo r VI TA’s Re vi se d Pat en t Po lic y,

http://www.vita.com/hom e/VSO/Disclosu re/implementati on-ex-ante.pdf

(last visited Apr. 7, 2014).

5Pres s Rele ase , Busi nes s Wire, IE EE St anda rds As soci ati on, IE EE

Enhances Standards Patent Policy to Permit Fuller Disclosure on Licensing

(Apr. 30, 2007), http://www.thefreelibrary.com/IEEE+Enhances+Standards

+Patent+Policy+to+Permit+Fuller+Disclosure+on...-a0162810086.

6See Letter from Thomas O. Barnett, Assistant Attorney General, U.S.

Dep’t of Justice, to Michael A. Lindsay, Esq. (Apr. 30, 2007), availab le at

http://www.justice.gov/atr/public/busreview/222978.pdf; Letter from

Thoma s O. Barn ett, Assi stant At torne y Gener al, U.S. D ep’t of J ustic e, to

Robert A. Skitol, Esq. (Oct. 30, 2006), available at http://www.justice.gov

/atr/public/busreview/219380.pdf.