1. Impact of Public Policy on Standards Development Antitrust & IP Impact on SDA Due Process Aspects of SDA Impact on the Standards Life Cycle

2. Public Policy & SDA Institutional Structure of SDAInstitutional Structure of SDA ANSI & NISTANSI & NIST DOJ & FTCDOJ & FTC US PTOUS PTO Copyright Ofc of LOCCopyright Ofc of LOC

3. Competitive Impact of IP in Particular Types of Markets Goods Markets:Goods Markets: –Raw materials or components w/o IP –Intermediate or final goods containing IP Technology Markets:Technology Markets: –Markets for IP technology or substitutes for such components Innovation Markets:Innovation Markets: –Market for R&D investments, technological improvements, unserved markets

4. Antitrust Analysis of IP Markets Per Se ApproachPer Se Approach Rule of ReasonRule of Reason Intellectual property misuseIntellectual property misuse –Tying Essential facilities doctrineEssential facilities doctrine Licensing and antitrustLicensing and antitrust

5. Licensing Cross LicensingCross Licensing GrantbacksGrantbacks PoolingPooling ExclusivityExclusivity RANDRAND

6. Principle No. 1 Antitrust Law Applies to IPAntitrust Law Applies to IP IP is Unique Property due to the Apparent InexhaustibilityIP is Unique Property due to the Apparent Inexhaustibility –IP easily misappropriated –Owner too often unable to prevent infringement, security more challenging problem than with tangibles IP-Antitrust Principles apply to Domestic & International TransactionsIP-Antitrust Principles apply to Domestic & International Transactions

7. Principle No. 2 Antitrust Law Does Not Presume that IP Rights Create Market PowerAntitrust Law Does Not Presume that IP Rights Create Market Power –Market power is ability to hold high prices or low output in a relevant market Quality, service, innovation also relevantQuality, service, innovation also relevant –Existence of substitutes negates monopoly Regulatory enforcement restraint needed Market Power Standing Alone Not IllegalMarket Power Standing Alone Not Illegal IP Owner has No General Duty to LicenseIP Owner has No General Duty to License

8. Principle No. 3 IP Licensing is Generally Pro-CompetitiveIP Licensing is Generally Pro-Competitive IP is Only a Component of Product ValueIP is Only a Component of Product Value Licensing - Contracts for Tech TsfrLicensing - Contracts for Tech Tsfr –Terms: price, fields of use, territory, duration, sub-license, exclusivity There are Many Ways to “Slice the Salami”There are Many Ways to “Slice the Salami” –Numerous contract factors permit limitation or expansion of IP rights granted in different licenses to various licensees

9. Antitrust/IP Aspects of Essential Facilities Bottleneck MonopolyBottleneck Monopoly –Access restricted to cartel members –IP erects entry barriers Related to Public Goods & Natural MonopoliesRelated to Public Goods & Natural Monopolies May Create Antitrust Duty to Deal or Compulsory IP LicensingMay Create Antitrust Duty to Deal or Compulsory IP Licensing

10. IP-Antitrust Aspects of Standards Customers can benefit unless standardization leads to price fixing, stifling innovation, or blocks competitionCustomers can benefit unless standardization leads to price fixing, stifling innovation, or blocks competition –Dominant system excludes interoperability Tying imposedTying imposed Bullying of suppliers or customersBullying of suppliers or customers When proprietary IP underlies the standard, the standards can erect barriers to entryWhen proprietary IP underlies the standard, the standards can erect barriers to entry –Violation may occur when participants in standard setting process prevent the emergence of new technologies based on revised standards –Antitrust Aspects of Network Industries IP-Antitrust Concerns: IP owner uses standard to monopolize related markets (prices, market allocations, discrimination in licensing, exclusion of participants from the process)

11. Dell & UNOCAL Submarine PatentsSubmarine Patents Patent Hold Up ProblemPatent Hold Up Problem Own the StandardOwn the Standard Failure to Disclose IP RightsFailure to Disclose IP Rights SDO Participants sunk costs of participation & designSDO Participants sunk costs of participation & design IP Owner achieves Lock InIP Owner achieves Lock In

12. FTC Complaint Against Rambus Allegedly Rambus deliberately engaged in a pattern of anticompetitive acts and practices that served to deceive SDOAllegedly Rambus deliberately engaged in a pattern of anticompetitive acts and practices that served to deceive SDO –Rambus participated in JEDEC's SDRAM-related work for more than four years without ever making it known to JEDEC or its members that Rambus was actively working to develop, and did in fact possess, a patent and several pending patent applications that involved specific technologies proposed for, and ultimately adopted in, the relevant standards –(JEDEC- Joint Electron Device Engineering Council) –JEDEC developed & issued widely adopted technical standards for SDRAM (synchronous dynamic random access memory) JEDEC promotes free competition - "JEDEC also has maintained a commitment to avoid, where possible, the incorporation of patented technologies into its published standards, or at a minimum to ensure that such technologies, if incorporated, will be available to be licensed on royalty-free or otherwise reasonable and non-discriminatory terms."JEDEC promotes free competition - "JEDEC also has maintained a commitment to avoid, where possible, the incorporation of patented technologies into its published standards, or at a minimum to ensure that such technologies, if incorporated, will be available to be licensed on royalty-free or otherwise reasonable and non-discriminatory terms."

13. FTC Complaint Against Rambus Rambus Submarine patents enabled Hold-UpRambus Submarine patents enabled Hold-Up –substantial royalties from SDRAM mfgs compliance with JEDEC standards –"extract royalty payments well in excess of a billion dollars" Rambus filed & settled suits for $billions against largest SDRAM mfgs memory chip makersRambus filed & settled suits for $billions against largest SDRAM mfgs memory chip makers –Hynix, Micron Technology, Infineon Technologies, Siemens

14. Due Process Constraints on SDA Processes OMB Circular No. A-119OMB Circular No. A-119 –Federal agency SDO participation encouraged –Congress stds developed by SDOs better serve public & private needs Standards Development Organization Advancement Act (SDOAA)Standards Development Organization Advancement Act (SDOAA) ANSI “Essential” Due Process RequirementsANSI “Essential” Due Process Requirements –Openness, Lack of Dominance, Balance, Notification, Consideration, Vote, Appeals, Written Procedures

15. SDO Under Copyright Law Standards are copyrightable as workStandards are copyrightable as work –Authorship? SDO/SSO? Contributor? Law not copyrightableLaw not copyrightable –All citizens have due process rights to reasonably access law –Must permit compliance –Laws arguably product of citizen authors Veeck v. Southern Bldg. Code Congress Int’l., IncVeeck v. Southern Bldg. Code Congress Int’l., Inc –SDOs with expansive rights under copyright may pursue business models inconsistent with the necessary due process elements of notice and participation.

16. SDO Liability Under Tort & Product Liability SDOs are targeted in a few casesSDOs are targeted in a few cases Claim that defective standards contributed to injuriesClaim that defective standards contributed to injuries EX: swimming pool diving boards, blood banks, cellphone RF radiation, welding rod compositionEX: swimming pool diving boards, blood banks, cellphone RF radiation, welding rod composition

17. Strategic Aspects of SDA SDOs impose stronger ex ante IP disclosure rulescould attenuate exhaustive patent search costsSDOs impose stronger ex ante IP disclosure rulescould attenuate exhaustive patent search costs –Most SDO rules concerning the ex ante disclosure of IP rights are weak, require disclosure of only issued patents; do not require disclosure of appls, R&D, T/S –Classic Race to the Bottom Various Patent rules undercut SDO rulesVarious Patent rules undercut SDO rules –1 yr grace, 1 st to invent, infring. proc, IP search costs Fair use model IP rights holder failing to ex ante disclose arguably engage in unfair methods competitionFair use model IP rights holder failing to ex ante disclose arguably engage in unfair methods competition