Standards-Development Organizations

• Pages: 141-163

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CHAPTER VIII

STANDARDS-DEVELOPMENT

ORGANIZATIONS

Standard setting by an association—often termed a standard-setting

organization (SSO) or standards-development organization (SDO)

1

—

may bring substantial procompetitive benefits to the market. The

benefits may include lower information costs, increased compatibility

and interoperability of complementary technologies, expanded use of

technologies to the advantage of consumers, and enhanced entry by new

participants in relevant markets.

2

The Antitrust Division of the U.S.

Department of Justice (DOJ or the Division) and the Feder al Trade

Commission (FTC or the Commission) have noted the procompetitive

potential of standards development:

1. The terms “standard-setting organization” and “standards-development

organization” as used herein are synonymous.

2. See Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 49 2, 500

(1988); see a lso Golden Bridge Tech. v. Motorola Inc., 547 F.3d 266,

273 (5th Cir. 2008) (“Potential procompetitive benefits of standards

promoting technological compatibility include facilitating economies of

scale in the market for complementary goods, reducing consumer search

costs, and increasing economic efficiency.”); Broadcom Corp. v.

Qualcomm I nc., 501 F.3d 297, 30 8-09 (3d Cir. 2007) (private standard

setting maximizes consumer welfare); Clamp-All Corp. v. Cast Iron Soil

Pipe Inst., 851 F.2d 478, 487 (1st Cir. 19 88) (trade association’s

promulgation of a standard lowers information costs and creates a better

product); XIII PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST

LAW ¶ 2230b (2d ed. 2005) (discussing consumer benefits flowing from

standard setting); see generally Ge rald F. Masoudi, Dep’y Ass’t Att’y

Gen., Antitrust Div., U.S. D ep’t of Justice, Efficiency in Analysis of

Antitrust, Standard Setting, and Intellectual Property, Address at the

High-Level Workshop on Standardization, IP Licensing and Antitrust,

Tilburg University, Brussels, Belgium (Jan. 18, 2007), available at

http://www.usdoj.gov/atr/public/speeches/220972.htm; Hill B. Wellford,

Counsel to the Ass’t Att’y Gen., Antitrust Div., U.S. D ep’t of Justice,

Antitrust Issues in Standard Setting, Remarks at the Second Annual

Seminar on IT Standardization and Intellectual Property, China

Electronics Standardization Institute, Beijing, China (Mar. 29, 2007),

available at http://www.usdoj.gov/atr/public/speeches/222236.htm.

142

Antitrust and Associations Handbook

Industry standards are widely acknowledged to be one of the engines

driving the moder n economy. Standards can make products less costly

for firms to produce and more valuable to consumers. T hey can

increase innovation, efficiency, and consumer choice; foster public

health and safety; and serve as a “fundamental building block for

international trade.” Standar ds make networks, such as the Internet and

wireless telecommunications, more valuab le by allowing products to

interoperate. The most successful standards are often those that provide

timely, widely adopted, and effective solutions to technical problems.3

Nonetheless, standard-setting activities often have drawn antitrust

scrutiny. Standard s and the standard-setting process may impair

competition by, among other things, excluding or substantially

disadvantaging rivals, restricting quality competition, limiting

consumers’ choices , or facilitating collusion by competitors on price or

output.

4

The antitrust concerns implicated by private standard setting

fall under two general headings: anticompetitive effects stemming from

concerted action ( arising primarily under Section 1 of the Sherman Act);

and anticompetitive unilateral conduct (raising issues under Section 2 of

the Sherman Act). This chapter provides a framework for the analysis of

both sources of potential concern. Particular att ention is given to issues

surrounding the inclusion of patented technology in standards, because

these issues recentl y have come under increased scrutiny by the FTC,

DOJ, and the courts.

5

Also discussed are issues relating to standards

that are mandated or endorsed by government action, which implicate

the Noerr-Pennington immunity doctrine;

6

however, the Noerr doctrine

is treated in greater depth in Chapter VI.

3. U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, ANTITRUST

ENFORCEMENT AND INTELLECTUAL PROPERTY RIGHTS: PROMOTING

INNOVATION AND COMPETITION 33 (2007) [hereinafter IP2 REPORT],

available at http://www.usdoj.gov/atr/public/hearings/ip/222655.pdf.

4. See Allied Tube, 486 U.S. at 500 n.5; Am. Soc’y of Mech. Eng’rs v.

Hydrolevel Corp., 4 56 U.S. 556, 571 (1 982) (“a standard-setting

organization . . . can be rife with opportunities for anticompetitive

activity”).

5. For a more extended exposition of the applicability of the antitrust laws to

standard setting, see ABA SECTION OF ANTITRUST LAW, HANDBOOK ON

THE ANTITRUST ASPECTS OF STANDARD SETTING (2004) [herei nafter

HANDBOOK ON STANDARD SETTING].

6. The Noerr-Pennington doctrine confers antitrust immunity on p rivate

entities, individuals, and organizations for petitioning activities directed to