Antitrust Risks in Standard-Setting Organizations FINAL

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As a result, companies participating in SSOs must not discuss or agree on topics outside the legitimate standard-setting activity, such as the prices or output of downstream standardized products. In addition, companies should evaluate whether the SSO is developing standards that cover more than what is necessary to achieve the benefi ts of standardization. If the standard is not narrowly tailored, it may signal anticompetitive intentions to either exclude competitors or fi x downstream prices.

Companies also must be careful not to implement the standards set by the SSO in an exclusionary way. For example, in American Society of Mechanical Engineers v. Hydrolevel Corp., the US Supreme Court upheld the lower courts’ imposition of liability against a company and an SSO for conspiring to issue an “unoffi cial” fi nding that a competitor of the company failed to meet certain safety codes established by the SSO. The courts held that the company had used the fi nding to maintain its dominant position in the marketplace, excluding competition. (456 U.S. 556 (1982).)

Compliance ProgramsCompanies should implement compliance programs and ensure that all employees participating in the SSO are aware of and understand the kinds of activities in the standard-setting process that could give rise to an antitrust violation. For example, employees should avoid discussing or sharing information with competitors regarding:

�� Current product pricing.

�� Future product pricing.

�� Cash discounts.

�� Credit terms.

�� Market allocation.

�� Appropriate levels of output of downstream products.

Technological standards have become omnipresent in our society. During your commute to work today, you likely benefi tted from numerous standards such as:

�� Interoperability standards that enable communications between mobile devices and networks.

�� Performance standards that enhance safety.

�� Technical standards lead to more effi cient resource allocation and production.

While the US antitrust agencies and courts recognize the potential procompetitive benefi ts of standards and the organizations that set them, the standard-selection process is not without antitrust risk. Because standard selection often involves communication and coordination among competitors, companies that participate in a standard-setting process should be aware of the risk of potential litigation and be proactive about compliance with antitrust laws and standard-setting organization (SSO) policies.

This Note highlights the potential antitrust risks raised by SSO participation and discusses factors that a company should consider before, during, and after the standard-selection process.

JoInt Standard SEttInGAlthough there are procompetitive benefi ts to joint standard setting, SSOs may involve agreements among competitors and, as a result, raise traditional antitrust concerns regarding collusion. Evidence that the standard-setting process is being used as a cover to fi x prices or to exclude or disadvantage competitors of downstream products may subject the company to per se liability under the antitrust laws (see Practice Note, US Antitrust Laws: Overview: Per Se Illegality (http://us.practicallaw.com/9-204-0472)). Even the hint of collusive action regarding downstream products could subject the company to costly litigation and potentially severe criminal and civil penalties.

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Antitrust Risks in Standard-Setting OrganizationsPLCAntitrust

This Practice Note provides an overview of the key antitrust issues raised by participation in an SSO and licensing of standard-essential patents (SEPs).

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Antitrust Risks in Standard-Setting Organizations

Similarly, employees should be aware that companies should not jointly refuse to deal with competitors or other companies in the supply chain, for example by:

�� Attempting to collectively exclude them from the standard-setting process.

�� Collectively prohibiting them from practicing the standard.

For more information on creating and implementing an antitrust compliance program, see Practice Note, Antitrust Compliance Programs (http://us.practicallaw.com/9-500-4178) and Standard Document, Antitrust Compliance Manual (http://us.practicallaw.com/8-500-4094).

Ensuring a Competitive Standard-Selection ProcessThe SSO and the companies participating in the standard-selection process may risk liability under the antitrust laws if the SSO does not have policies or procedures to ensure a competitive selection process. If the standard-selection process does not include adequate industry representation, or particularly if the SSO restricts certain companies from participating in the selection process, the SSO and its standard may be seen as tools for excluding competitors. Conversely, if there is industry-wide participation in the selection process, there may be a presumption that the marketplace selected an appropriate standard.

If an SSO policy is questioned, the SSO may seek a business review letter from the Antitrust Division of the US Department of Justice (DOJ) to provide guidance on whether the agency would consider the policy anticompetitive. For more information, see DOJ Antitrust Division: Business Reviews. Or, the SSO may take advantage of a provision in the Standards Development Organization Advancement Act of 2004 which enables SSOs to limit their exposure to treble damages in antitrust suits by filing notification with the DOJ and the Federal Trade Commission (FTC) (see Justice Department Implements the Standards Development Organization Advancement Act of 2004: New Law Extends Limited Liability Limitation to Standards Development Organizations that File for Protection (June 24, 2004)).

PatEnt HolduPSIt can be difficult or even impossible to change a standard once it has been adopted industry-wide. Therefore, a company that owns intellectual property (IP) rights in technology incorporated in a standard may possess significant market power, potentially fostering anticompetitive conduct such as demanding unreasonable royalties or exorbitant licensing terms from industry participants that adhere to the standard. These situations are called patent holdups.

To avoid patent holdups, SSOs may adopt disclosure and licensing policies requiring companies participating in the standard-setting process to:

�� Disclose their relevant IP rights to the members of the SSO prior to the adoption of technologies necessary to practice a particular standard.

�� Commit to license those rights on reasonable and non-discriminatory (RAND) or fair, reasonable and non-discriminatory (FRAND) terms (collectively, F/RAND).

agency GuidanceThrough speeches, policy statements, reports, workshops and business review letters, the US antitrust agencies (the DOJ and the FTC) have sought to provide greater clarity to SSOs regarding the procompetitive benefits, and anticompetitive risks, associated with disclosure and licensing policies.

Promoting Competition through Clarity in Standard-SettingThe DOJ, in numerous speeches and testimony, has noted that SSOs can promote competition if they implement well-defined patent policy rules (see Statement of Joseph F. Wayland, DOJ Acting Assistant Attorney General, before the United States Senate Judiciary Committee, regarding “Oversight of the Impact on Competition of Exclusion Orders to Enforce Standards-Essential Patents” (July 11, 2012)). According to the DOJ, clear rules allow for better implementation of the standard and can help prevent patent holdup (see Christine Varney, DOJ Assistant Attorney General, Remarks as Prepared for the Joint Workshop of the U.S. Patent and Trademark Office, the Federal Trade Commission, and the Department of Justice on the Intersection of Patent Policy and Competition Policy: Implications for Promoting Innovation (May 26, 2010)).

In 2006, the DOJ analyzed a proposed SSO policy submitted by the trade association VITA requiring companies that participate in the standard-setting process to:

�� Disclose to the SSO all patents and patent applications that may become essential to the implementation of the future standard.

�� Identify the maximum royalty rates and the most restrictive licensing terms that they will seek for those patents.

The DOJ found that the proposed policy would allow SSO members to make a more informed decision when selecting a standard because members could analyze differences in cost as well as technical merit (see Letter from Thomas O. Barnett, DOJ Assistant Attorney General, to Robert A. Skitol, Esq. (Oct. 30, 2006)).

One year later, the DOJ assented to a similar SSO policy proposal by the Institute of Electrical and Electronics Engineers, Inc. (IEEE) and the IEEE Standards Association. The proposed policy allowed (but did not require) patent owners to commit to their most restrictive licensing terms during the standard-setting process. The DOJ noted that more predictable licensing terms could lead to faster creation of a standard and fewer lawsuits after a standard is set (see Letter from Thomas O. Barnett, DOJ Assistant Attorney General, to Michael A. Lindsay, Esq. (Apr. 30, 2007)).

Following on the VITA and IEEE business review letters, the DOJ has made several specific recommendations as to how SSOs can ensure a competitive standard-setting process, including:

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�� Identifying proposed technology that involves patents which the patent holder has not agreed to license on F/RAND terms in advance.

�� Clarifying that licensing commitments transfer to subsequent purchasers of IP declared essential to practicing the standard.

�� Allowing licensees to request cash-only licensing terms; prohibit the mandatory cross-licensing of patents that are not essential to the standard or a related family of standards; permit voluntary cross-licensing of all patents.

�� Limiting the right of the patent holder to seek injunctions relating to F/RAND-encumbered SEPs.

�� Finding ways to lower the transaction cost of determining F/RAND licensing terms.

�� Increasing certainty that patents declared essential are essential to the standard after the standard is set.

(See Presentation by Renata B. Hesse, DOJ Deputy Assistant Attorney General for Criminal and Civil Operations, at the ANSI Intellectual Property Rights Policy Committee Meeting, “The Antitrust Division and SSOs: Continuing the Dialogue” (Nov. 8, 2012).)

In making these recommendations, the DOJ emphasized that merely discussing a proposed rule change within an SSO would not violate the US antitrust laws.

Impact of Injunctions and Exclusion ordersIn addition to highlighting practices that lead to procompetitive standard-setting, both US antitrust agencies have issued guidance regarding practices they view as anticompetitive. More specifically, the FTC and DOJ have expressed concern that owners of F/RAND encumbered patents may use the threat of injunctive relief or an International Trade Commission (ITC) exclusion order to engage in patent holdup and circumvent their obligations to F/RAND licensees.

The FTC, in a 2012 statement to Congress, expressed concern that the threat of injunctive relief in matters involving F/RAND-encumbered patents could cause substantial harm to competition (see Statement of Joseph F. Wayland, DOJ Acting Assistant Attorney General, before the United States Senate Judiciary Committee, regarding “Oversight of the Impact on Competition of Exclusion Orders to Enforce Standards-Essential Patents” (July 11, 2012)). According to the FTC, the owner of the F/RAND-encumbered patent could use the threat of an injunction or an ITC exclusion order to holdup potential licensees and secure higher royalties than the owner would otherwise have been able to demand before its IP was included in the standard (see Brief for Federal Trade Commission as Amicus Curiae Supporting Neither Party, Apple, Inc. v. Motorola, Inc. No. 12-1548 (Fed. Cir. Dec. 14, 2012)).

Also, in early 2013, the DOJ issued a joint policy statement with the US Patent & Trademark Office (USPTO) on remedies for SEPs subject to voluntary F/RAND commitments (see United States Department of Justice and United States Patent & Trademark Office, Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND commitments (Jan. 8,

2013)). In the statement, the DOJ and USPTO caution that traditional remedies, such as injunctions or exclusion orders, may not be appropriate remedies for infringing a F/RAND encumbered patent. Thus, when determining an appropriate remedy for infringement, courts should consider the patent holder’s F/RAND commitments. In particular, courts should consider whether an exclusion order is compatible with the patent holder’s existing F/RAND licensing commitment, or whether it imposes more onerous licensing terms than the patent holder would be entitled to under its F/RAND commitments.

additional GuidanceIn 2007, the US antitrust agencies issued a joint report addressing IP rights generally, including a discussion regarding patent holdup scenarios and guidance on SSO disclosure/licensing policies (see US Department of Justice and Federal Trade Commission, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition (2007), at 33-56 (IP Rights Report)). Following the IP Rights Report, the DOJ and FTC held joint workshops with the USPTO in 2010 on the relationship between patent policy and competition policy and its implications for promoting innovation (see FTC Press Release, Federal Trade Commission, Department of Justice, and U.S. Patent and Trademark Office to Hold Workshop on Promoting Innovation (May 10, 2010)), which resulted in the FTC’s 2011 report recommending improvements to patent notice and patent infringement policies (see Federal Trade Commission, The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition (Mar. 7, 2011)).

Federal EnforcementPerhaps not surprising given the amount of guidance the agencies have issued regarding SEPs and the risk of patent holdup, the US antitrust agencies have launched a number of investigations and enforcement actions focusing on potential violations of SSO disclosure and licensing policies.

Wireless device IndustryIn 2011–2012, the DOJ investigated two different patent portfolio acquisitions:

�� Rockstar Bidco’s (a partnership including Apple, Microsoft, Research in Motion, Sony and Ericsson) acquisition of approximately 6,000 patents and patent applications from Nortel at a bankruptcy auction.

�� Google’s acquisition of Motorola Mobility, including Motorola’s approximately 17,000 issued patents and 6,800 patent applications.

The DOJ investigations analyzed whether the acquiring firms would have the incentive and ability to use the acquired patents to foreclose, raise the costs of, or otherwise harm rivals in the downstream sale of smartphones, tablets and other mobile devices. Specifically, the DOJ focused on patents declared essential to practicing wireless standards and expressed concern regarding purported ambiguities and uncertainty in F/RAND commitments



made by the selling firms and the potential for holding up competitors attempting to practice the standard. The DOJ ultimately determined that neither acquisition was likely to substantially lessen competition for wireless devices. In closing its investigation of the Rockstar acquisition, the DOJ cited evidence that:

�� It would not be profitable for Research in Motion or Microsoft to use declared-essential patents to exclude their rivals.

�� Existing cross-license agreements would limit Microsoft’s ability to use the declared-essential patents to exclude its rivals.

�� Apple and Microsoft had made public statements explaining their respective declared-essential patent licensing practices and making clear that they would not use F/RAND-encumbered SEPs to seek injunctive relief.

In closing its investigation of the Google acquisition, the DOJ suggested that Google was no more likely than Motorola Mobility to engage in disputes with rivals over F/RAND-encumbered declared-essential patents and also cited Google’s public license policy (see DOJ, Statement of the Department of Justice’s Antitrust Division on its Decision to Close its Investigation of Google Inc’s Acquisition of Motorola Mobility Holdings Inc. and the Acquisitions of Certain Patents by Apple Inc., Microsoft Corp. and Research In Motion Ltd. (Feb. 13, 2012)).

The DOJ made clear that its investigation focused only on the transfer of ownership rights associated with F/RAND-encumbered SEPs, not on the exercise of those transferred rights. Both US antitrust agencies have continued to investigate the use of SEPs in the wireless device industry. In testimony before the Senate, the then-acting head of the DOJ noted that the agency continued to closely monitor licensing practices in the wireless device industry with a focus on smartphones and computer tablets (see Statement of Joseph F. Wayland, DOJ Acting Assistant Attorney General, before the United States Senate Judiciary Committee, regarding “Oversight of the Impact on Competition of Exclusion Orders to Enforce Standards-Essential Patents” (July 11, 2012)). In addition, the FTC has indicated that, even if the conduct may not be reached through Section 2 of the Sherman Act (Section 2), it will pursue enforcement actions under the broader unfair method of competition and unfair act or practice standards under Section 5 of the FTC Act. For more information on the differences between Section 5 and the Sherman Act, see Practice Note, US Antitrust Laws: Overview: FTC Act (http://us.practicallaw.com/9-204-0472).

Therefore, following the closing of the DOJ’s investigation of Google’s acquisition of Motorola’s declared-essential patents, the FTC opened an investigation into Motorola’s practice, and Google’s subsequent practice, of engaging in disputes with rivals over F/RAND-encumbered declared-essential patents. In particular, the FTC focused on the practice of pursuing injunctions and exclusion orders against willing F/RAND licensees that needed to use Motorola’s patents in their devices. The FTC alleged that this conduct violated Section 5 of the FTC Act. Google agreed to a consent order with the FTC that prohibits Google from seeking injunctions or exclusion orders against willing licensees of its

F/RAND-encumbered declared-essential patents (see In re Motorola Mobility LLC and Google Inc., FTC File No. 121 0120).

other FtC Section 5 Enforcement actionsThe FTC’s use of Section 5 in the standard-setting context is not limited to the wireless device industry.

In 2012, in reaching a proposed settlement with Robert Bosch GmbH regarding its acquisition of SPX Service Solutions U.S. LLC, the FTC required Bosch to resolve allegations that, prior to the acquisition, SPX reneged on a commitment to license key SEPs on FRAND terms. According to the FTC, SPX harmed competition by seeking injunctions against willing licensees of its SEPs and essentially engaging in patent holdup. Bosch agreed to abandon these claims for injunctive relief. In a separate statement, the Commission warned that it plans to continue to use Section 5 to challenge patent holders who violate their F/RAND commitments by seeking injunctive relief against willing licensees (see In re Robert Bosch GmbH, FTC Docket. No. C-4377).

In 2008, the FTC announced it had reached a settlement with Negotiated Data Solutions (N-Data) to resolve charges that N-Data violated Section 5 of the FTC Act by failing to honor a licensing commitment made by a predecessor company. N-Data acquired patents from National Semiconductor that had been incorporated into a widely adopted standard. National Semiconductor had committed to the SSO adopting the standard that the patents would be licensed at reasonable and known royalty rates. According to the FTC’s complaint, even though N-Data was aware of National Semiconductor’s agreement with the SSO when N-Data acquired the patents, N-Data refused to honor the licensing commitment. Under the settlement, N-Data agreed not to enforce its patents without first offering to license its technology according to National Semiconductor’s initial commitment. (See In re Negotiated Data Solutions LLC, FTC File No. 051 0094.)

Earlier FtC Enforcement actionsIn earlier enforcement actions, the FTC pursued claims under more traditional theories. In 2003, the FTC alleged that the Union Oil Company of California (Unocal) monopolized the market for the manufacture of a specific type of gasoline and subverted California’s regulatory standard-setting process by misrepresenting that certain research was non-proprietary while pursuing patents on the same technology. Once the state adopted the technology in a standard and the patents were issued, Unocal sought royalties from industry participants that used the mandated technology. After several years of administrative litigation, the case eventually settled as part of the FTC’s review of Chevron Corporation’s acquisition of Unocal. Under the settlement, the company agreed to stop enforcing the patents at issue and to release them to the public domain (see In re Union Oil Co. of Cal., FTC Docket No. 9305).

In 2002, the FTC filed a complaint alleging that Rambus had unlawfully obtained monopoly power by participating in an SSO process for several years and knowingly failing to disclose that it was actively seeking patents for technologies that were ultimately

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adopted as the relevant standards. The FTC determined that Rambus’ deceptive conduct constituted exclusionary conduct that contributed to the company’s acquisition of monopoly power. The FTC analyzed the conduct using the traditional standard for monopolization prohibited under Section 2 of the Sherman Act, which the FTC enforces indirectly through Section 5 of the FTC Act. The FTC required Rambus to license its technology, setting a maximum royalty rate (see In re Rambus Inc., FTC Docket No. 9302). For more information on Section 2 of the Sherman Act, see Practice Note, Section 2 of the Sherman Act: Overview (http://us.practicallaw.com/6-521-8034).

Rambus appealed, and the US Court of Appeals for the District of Columbia (DC Circuit) overturned the FTC’s decision. The DC Circuit held that the FTC did not establish that Rambus’ conduct created or reinforced its market power because there was insufficient evidence that the SSO would have selected an alternative standard or demanded a favorable licensing commitment but for Rambus’ allegedly deceptive conduct. Therefore, according to the DC Circuit, the FTC failed to satisfy the exclusionary conduct element of a Section 2 monopolization claim. (Rambus Inc. v. Federal Trade Commission, 522 F.3d 456 (D.C. Cir. 2008), cert. denied 129 S.Ct. 1318 (2009).)

Private EnforcementPrivate litigants also may bring cases alleging that companies manipulated or abused the standard-setting process to achieve anticompetitive goals. Private cases often arise out of the same circumstances as government investigations. As an example, the FTC’s complaint against Rambus generated private litigation (see Hynix Semiconductor v. Rambus Inc., 250 F.R.D. 452 (N.D. Cal. 2008)). In addition, private litigants may allege antitrust claims even where the conduct has not been challenged by the government. In a case brought by Broadcom Corp. against Qualcomm Inc., the US Court of Appeals for the Third Circuit held that when a company participating in a standard-setting process intentionally makes a false commitment to license its technology on certain terms and then backs out on that commitment, it may be actionable anticompetitive conduct if an SSO relied on the commitment when incorporating the company’s technology into a standard (Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 314 (3d Cir. 2007)).

A private party successfully suing a company in federal court for antitrust violations concerning the standard-setting process may win triple its actual damages. As a result, the potential for liability (or at least expensive litigation) is a real threat that companies participating in an SSO should consider. A company that chooses to participate in a standard-setting process should ensure it complies with SSO policies as well as applicable law.

FaCtorS to ConSIdEr In WEIGHInG SSo dISCloSurE and lICEnSInG PolICIESAfter considering the SSO’s general policies concerning the standard-selection process (see Ensuring a Competitive Standard-Selection Process), a company should consider the disclosure

and licensing policies imposed by the SSO. These policies should be reviewed:

�� Before deciding to participate in a standard-setting process.

�� On an ongoing basis while involved with an SSO.

Given the multiple and potentially conflicting obligations that companies participating in SSOs face, general counsel or outside counsel should be involved in the SSO process at an early stage. In addition, recent DOJ and FTC investigations underscore the importance of having antitrust counsel involved before acquiring any declared-essential patents or licensing/asserting such patents after their acquisition.

Before Joining an SSoBefore joining an SSO, a company should determine what, if any, disclosure and licensing obligations the SSO imposes on its participants.

disclosure obligationsAn SSO may have rules requiring members to disclose relevant IP rights. These rules are designed to ensure that members do not manipulate the process by steering the standard-selection process to a patented (or soon to be patented) technology to later extract exorbitant licensing fees. While SSO disclosure policies share a common goal, they can vary significantly.

For example, some SSOs require full disclosure of all IP rights associated with the standard at issue (including both issued patents and pending patent applications). Others only require full disclosure of issued patents. Still other SSOs implement an entirely optional disclosure regime. These obligations may be imposed on all SSO members regardless of whether they submit a formal proposal to the SSO regarding the relevant standard.

Due to this variation, management and legal counsel must review each of the SSO’s policies in detail. Here are several preliminary questions a company should ask:

�� Does the disclosure policy apply to specific types of IP rights (for example, patent, trademark or copyright) or all IP rights?

�� Does the disclosure policy apply to issued patents or pending patent applications, or both?

�� If the disclosure policy applies to pending patent applications, is a distinction made between published and unpublished pending patent applications?

In addition to the variation among disclosure policies, some SSOs have policies with ambitious requirements. For example, an SSO may require participants to use their best efforts to investigate and disclose their IP rights associated with the relevant standard. While these “best efforts” requirements may be vague, the FTC has assessed the actions and understanding of other SSO members to determine whether the SSO intended to impose a disclosure obligation (see Opinion of the Commission, In re Rambus Inc., Dkt. No. 9302 (FTC Aug. 2, 2006)). Therefore, employees should be instructed to inform counsel about any general understanding



among the SSO members, particularly where the language of a written provision is subject to interpretation.

licensing obligationsSSOs may not consider disclosure obligations sufficient to protect against potential patent holdup scenarios. Some SSOs require an open licensing scheme, in which companies must agree not to enforce their IP rights if their technology is adopted in a standard (that is, technology in the standard is “open” for all companies to use). Other SSOs opt for a hybrid licensing scheme, in which the company retains the IP rights to its technology, but agrees in advance to license the technology on specified terms if the technology is adopted in a standard.

Therefore, the extent of the licensing obligation varies among SSOs. Similar to disclosure policies, some SSO licensing policies cover all IP rights while other SSO licensing policies only cover existing patents (and in some cases, patent applications).

Another variable is the breadth of the required licensing terms. As the federal antitrust agencies have recognized, RAND and FRAND are somewhat vague terms that are subject to fact-specific interpretation (see IP Rights Report at 45-47). Therefore, even if a company is willing to make a licensing commitment, the company may be subject to a contract dispute or antitrust lawsuit by a potential licensee that does not agree with the company’s interpretation of what is fair, reasonable or non-discriminatory.

Once the standard is adopted, it may be difficult for the industry to change to a new standard if the IP owner seeks to hold up industry participants with demands for excessive licensing fees or onerous terms. Unless otherwise explicitly stated, a company involved in an SSO that has licensing obligations should assume it (and any successor company) will be bound by those licensing commitments forever.

Requiring companies participating in standard setting to commit to licensing their technology on specified terms may limit the benefits a company could have gained from more freely asserting its IP rights against third parties. However, the licensing mechanism is designed to compensate the company for its contribution and, without the licensing concession, the SSO and the industry may not have adopted the technology. Not adopting a standard could result in lost efficiencies and increased costs to all industry participants and society.

ongoing Participation in an SSoOnce a company elects to become an SSO member, it must be mindful of its disclosure and licensing obligations and keep apprised of recent developments in the laws affecting its role as an SSO member.

Conflicts in the Company’s Existing SSo disclosure and licensing obligationsAs standard setting is largely a technical process, most companies are represented in SSOs not by counsel or senior-level executives

but by engineers specializing in the relevant technology. Because these employees are not necessarily aware of the company’s overall business strategy, they potentially could commit the company to conflicting disclosure or licensing policies.

For example, an employee may commit to make certain broad disclosures regarding the company’s technology without having a complete understanding of the company’s development pipeline or patent strategy. In SSOs with a disclosure requirement, if the employee represents that the company has no technology affecting a certain standard, but the company actually has plans to file a patent application for a technology directly incorporated in the standard, the company may violate the SSO disclosure policy. By failing to make the disclosure, the company may be:

�� Contractually prohibited from licensing the technology on its preferred terms.

�� Subject to liability under the antitrust laws for manipulating the standard-setting process to obtain market power.

Similarly, an employee may commit to certain licensing obligations with one SSO that are inconsistent with the company’s obligations to another SSO.

To minimize the potential for conflicting SSO policies, the company should keep updated accounts of:

�� SSO memberships.

�� Major policies and obligations the company has agreed to abide by for each standard-setting process.

�� Its ongoing patent applications and its development pipeline, considering the impact that each patent application could have on any standard-setting process and vice versa.

Counsel should review these lists regularly to ensure that the company is in compliance with all of its disclosure and licensing policies.

Changes to the Company’s disclosure and licensing obligationsIn addition to keeping track of existing licensing and disclosure policies, each company should be aware of changes in SSO policies. Not only do policies vary significantly from one SSO to another, but individual SSO policies are subject to change. Given the scrutiny by the antitrust agencies as well as private litigation involving the standard-setting process, some SSOs are implementing stricter disclosure and licensing policies to discourage patent holdups. This is illustrated by the recent series of Business Review Letters issued by the DOJ, in which it appears that SSOs are modifying their policies to increase member obligations (see Agency Guidance).

otHEr laWS ImPlICatEd By PartICIPatIon In SSoSWhile this Note focuses on liability under the US federal antitrust laws, companies should be aware that, even where their conduct is not challenged under the federal antitrust laws, they may be liable under other laws, including:

7

�� State antitrust statutes.

�� State unfair practices and consumer protection statutes.

�� If applicable, competition statutes in other countries.

In addition to liability under antitrust and similar laws, participation in SSOs can raise questions under contract law, IP law, and various common law doctrines. Even if federal or state antitrust agencies determine that a case cannot be brought or if an agency pursues a case and loses, a private litigant may bring suit under a variety of other laws. For example, in 2008 the US Court of Appeals for the Federal Circuit applied the common law doctrine of implied waiver (where a patent holder’s conduct is so inconsistent with an intent to enforce a patent that it induces a reasonable belief that it has waived its right to do so) against an SSO participant that failed to disclose essential patents to the SSO (Qualcomm Inc. v. Broadcom Corp., 548 F.3d 1004, 1019-22 (Fed. Cir. 2008)). The court found that those patents were unenforceable against an alleged infringer regarding products complying with the relevant standard.

Laura A. Wilkinson and Brianne L. Kucerik, Weil, Gotshal & Manges LLP, with PLC Antitrust. Based on an article originally published in the February 2010 issue of ALI-ABA, The Practical Lawyer. Used with permission.

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