Standards, Patent Policies, and Antitrust: A Critique of IEEE-II

SDOs and Patent Policies Standards developed through a consensus process deliver substantial consumer benefits by allowing components produced by many suppliers to work together, encouraging investment and competition in standard-compliant products. Collaborative standards also may eliminate the uncertainty and delays associated with a marketplace standards war. More over, consensus standards are often technically superior to de facto standards because the multiparty development process combines expertise across an industry, generating synergies that cannot be replicated by a single firm. Patented technologies, which often represent best-in-breed solutions to technical problems, add critical value; as a practical matter, it may be impossible to construct the robust technical standards we see in the ICT sector today without patented technologies. But while patented technologies provide crucial building blocks for standards, patents also introduce tension. For standards to succeed, implementers must have access to patented technologies on terms that make investment in product development attractive. Similarly, firms that contribute patented technology must earn a market reward or they are unlikely to invest and contribute proprietary technology to standards in the future. To manage this tension, SDOs typically strive to establish patent policies that balance the needs of technology contributors and implementers. Though there is wide variation in the form of the disclosure and licensing commitments, most large organizations require members to disclose patents they are aware may read on a developing standard and to state whether they will permit access to essential patents on RAND terms.2 SDOs with disclosure and RAND licensing policies usually leave it to standard-essential patent (SEP) owners and implementers to determine royalty rates and other terms and conditions of a RAND license through bilateral negotiations that take place either before or after a standard is formally adopted. These negotiations occur in the shadow of the law (and potential litigation), which will provide a remedy if negotiations fail.