Late last week, the American Antitrust Institute submitted a very interesting petition to the U.S. Dept. of Justice and the Federal Trade Commission. In the petition, which is titled “Request for Joint Enforcement Guidelines on the Patent Policies of Standard Setting Organizations,” the AAI urges these agencies to step up their enforcement of the antitrust laws with respect to SSOs themselves — not merely the participants in the standard-setting process. To that end, the AAI requests that the FTC/DOJ (1) issue specific guidelines for what should be included in SSO patent policies, and (2) hold SSOs liable for not adopting procedural safeguards to prevent patent hold-up behavior.
Specific AAI suggestions for provisions to include in SSO patent policies include the following (many of which are actually already implemented in some form in most SSO patent policies):
- Mandatory disclosure of relevant patents (and anticipated and pending patent applications), supported by good faith reasonable inquiry (in contrast to the policies of most SSOs today, which do not impose a duty to search for relevant patents);
- Royalty-free licensing of patents that are not disclosed in violation of disclosure obligations and consequently incorporated into a standard;
- Commitment to license SEPs on RAND terms, with a RAND royalty reflecting “a patent’s incremental value to the standard before adoption and commercialization” — the so-called “ex ante” value of the patent;
- A prohibition on SEP owners seeking injunctions and exclusion orders against any willing licensee (again, a provision not expressly included in most SSOs policies today, but one that is the subject of much debate in various courts);
- Stipulations that licensing commitments run with the SEP;
- Cash-only license options for individual SEPs (meaning SEP owners cannot condition a license on a cross-license to the licensee’s non-SEPs); and
- Requiring efficient, cost-effective processes to resolve disputes over RAND royalty and non-royalty terms (such as baseball-style arbitration).
But it’s the AAI’s contention that SSOs themselves should be held liable for failing to prevent patent hold-up behavior by their participants that is most noteworthy thing about the AAI’s petition. AAI claims that SSOs facilitate hold-up by: (1) failing to require upfront disclosure of essential patents; (2) failed to define RAND terms (or methodologies for calculating RAND), including whether injunctions are permissible; (3) failing to establish efficient processes for determining RAND terms in the event of a dispute; and (4) failing to require RAND commitments to “run with the patent” to subsequent owners. AAI argues that it’s proper for SSOs to be held accountable for their members’ unlawful conduct, nothing that in October 2012, a district court judge denied an SSO’s (3GPP) motion to dismiss a lawsuit that accused the SSO of being liable under the antitrust laws for its members’ exclusionary conduct.
The FTC and DOJ have certainly been active in looking into potential patent hold-up by SSO participants, and Renata Hesse of the DOJ in particular has been vocal about SSOs and their role in prevent patent hold-up. It will be interesting to see how the AAI’s petition is received.