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Mar 1, 2009 (Vol. 29, No. 5)

Standard Setting Increasingly Under Siege

Before Joining an SSO, Firms Need to Be Fully Cognizant of the Established Policies

  • Contemplating Participation in an SSO

    Before deciding to participate in an SSO, a company should make sure the SSO policy adequately addresses the intellectual property concerns of its participating members. Among the provisions to look for are the following:

    A Provision that Unambiguously Ties Standard-Setting Power to Disclosure Obligations
    The ability to participate in the standards-selection process should be tied to the disclosure requirements. Full disclosure should be the quid pro quo for standard selection and voting rights. Such an arrangement will create a set of obligations that is more likely to be recognized by the courts. Although the Qualcomm court found a duty of disclosure despite a lack of explicit language in the SSO policy, because the court found that the SSO participants understood there to be a duty of disclosure, an explicit and detailed duty of disclosure provision in the SSO policy obviates the need for a court to determine what members of the SSO understand the policy to mean.

    Clearly Defined Scope of Disclosure Covering Patent Applications
    The disclosure requirement should explicitly cover patents and patent applications filed during the period in which the standard-setting process takes place. A patent application is less visible to the industry, and thus, less likely to be noticed by members of the SSO, making explicit disclosure all the more essential. In addition, the capture via a patent application is possibly more costly because its impact remains hidden until it matures into a patent—possibly several years after the standard has been set. In the interim, the adoption of the standard spreads the hidden licensing cost across the unsuspecting industry. 

    For example, the patent applications for the intellectual property that was at issue in the Rambus case were filed when the standard was being debated. Unfortunately, the SSO policy did not explicitly require the disclosure of applications. The court noted that if the SSO wanted its members to disclose their application portfolio, it could have explicitly required them to do so.

    A Requirement to Disclose the Most Restrictive Licensing Terms
    The SSO policy also should require members to disclose the most restrictive licensing terms they would seek if their intellectual property were incorporated into the standard. To help avoid disagreements, and the potential for litigation, an SSO policy should require the disclosure of the maximum royalty and most restrictive licensing terms that the member intends to impose. This enables the SSO members to factor in the intellectual property cost when adopting the standard. 

    A Provision Imposing a Royalty-Free License on Relevant Patents if a Member Fails to Disclose Its Relevant Intellectual Property
    Finally, as a fail-safe, the intellectual property provisions of an SSO should require members that fail to disclose essential patents to give a royalty-free license to those that adopt, or intend to adopt, the standard. In Qualcomm, Broadcom prevailed on its argument that Qualcomm had waived its patent rights because it had failed to disclose its relevant patents during its SSO participation.

    The Department of Justice has explicitly approved an SSO policy employing this procedure, noting the pro-competition effect of such a policy as long as it does not become a pretext for price fixing. An explicit, enforceable waiver provision gives manufacturers a contractual defense to fend off patent abusers—a less costly and more predictable alternative to patent or fraud defenses.

  • Conclusion

    The enterprise of setting ground rules for an entire industry requires collaboration among market competitors and technology leaders. Companies that participate in SSOs should monitor the signals from the judiciary and review the SSO policy from time to time to ensure that it delivers the protection it promises to manufacturers and users who adopt the standard.


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