Standard Setting and Competition

November 8, 2012

In remarks presented today at a meeting of the Intellectual Property Rights Patent Committee of the American National Standards Institute in Washington, D.C., Deputy Assistant Attorney General Renata Hesse of the Department of Justice’s Antitrust Division said:

“Standards are an important engine driving our modern economy and the Antitrust Division is working to promote the adoption of procompetitive patent policies by organizations that set standards (SSOs).”

These policies often include a commitment to license patents essential to a standard on RAND (reasonable and non-discriminatory) or FRAND (fair, reasonable and non-discriminatory) terms.  F/RAND commitments however, are often ambiguous.  The Antitrust Division has proposed several ways in which SSOs could revise their patent policies to make them less ambiguous, changes which would promote competition.

The proposals range from placing some limitations on the right of the patent holder who has made a F/RAND commitment to seek an injunction to making improvements to lower the transactions cost of determining F/RAND licensing terms.  See Six “Small” Proposals for SSOs before Lunch (Oct. 2012) (PDF) for more information.

Reaction to the division’s proposals has been positive.  The division is aware that it takes time for many SSOs and their members to change intellectual property policies, particularly those that are governed by a consensus process.   Some participating in the standard-setting process have been concerned that discussing changes to SSO policies regarding the meaning of a F/RAND commitment could violate antitrust laws.

In her remarks, Hesse provided guidance on how SSOs and their members may avoid antitrust liability when discussing intellectual property policies designed to reduce the threat of hold up after a standard is set. Merely discussing a proposed rule change, she said, would not violate U.S. antitrust laws.  Moreover, the division evaluates SSO rules designed to mitigate hold up after a standard is set under the rule of reason, taking into account both the procompetitive efficiencies such rules engender as well as any harms to competition.  Hesse said that the division would condemn sham SSO rules and sham implementation of SSO rules as per se naked restraints of trade.

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