[House Report 108-125]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-125
======================================================================
STANDARDS DEVELOPMENT ORGANIZATION ADVANCEMENT ACT OF 2003
_______
May 22, 2003.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 1086]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1086) to encourage the development and promulgation
of voluntary consensus standards by providing relief under the
antitrust laws to standards development organizations with
respect to conduct engaged in for the purpose of developing
voluntary consensus standards, and for other purposes, having
considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 3
Hearings......................................................... 7
Committee Consideration.......................................... 7
Vote of the Committee............................................ 7
Committee Oversight Findings..................................... 7
Performance Goals and Objectives................................. 7
New Budget Authority and Tax Expenditures........................ 8
Congressional Budget Office Cost Estimate........................ 8
Constitutional Authority Statement............................... 9
Section-by-Section Analysis and Discussion....................... 9
Changes in Existing Law Made by the Bill, as Reported............ 11
Markup Transcript................................................ 15
Purpose and Summary
H.R. 1086, the ``National Cooperative Standards Development
Act of 2003,'' amends the National Cooperative Research Act
(NCRA) to extend limited antitrust protection to specified
activities of standard development organizations (``SDOs'')
relating to the development of voluntary consensus standards.
These amendments preserve and promote the ability of SDOs to
issue standards by: (1) codifying the ``rule of reason'' for
antitrust scrutiny of their activities; (2) eliminating the
threat of treble damages for specified standards development
activity if SDOs disclose the scope and nature of this activity
to the Department of Justice and Federal Trade Commission; and
(3) providing for the recovery of attorney fees to
substantially prevailing parties.
As indicated above, H.R. 1086 is an amendment to the
underlying NCRA. The NCRA, as originally enacted in 1984 and
subsequently amended in 1993, has three operative provisions.
The first is a simple codification of the consensus view found
in existing law that properly structured joint venture activity
will be judged under the rule of reason standard--a
reasonableness test--under the antitrust laws. This provision
of the NCRA, as further amended by H.R. 1086, would prohibit
courts from condemning standards development activity without
first considering its potential competitive benefits. The
second provision is a voluntary notification system whereby a
standards development organization may disclose the nature of
its activities to the antitrust enforcement agencies and
thereby receive reduced damages exposure from civil suits based
on the activities disclosed. Compliance with the reporting
procedures would not result in a ``certification'' that the
standards development activity is legal under the antitrust
laws; thus, even with disclosure, standards development
activity later shown to be anticompetitive could still be
challenged through the traditional dual system of private and
public enforcement but would be subject to single damages. The
third provision awards costs, including a reasonable attorney's
fee, to the substantial prevailing parties under certain
conditions.
The notification procedure developed in the NCRA now has
the advantage of 19 years of operational experience on the part
of the antitrust agencies and many private parties.
Notification also imposes fewer resource burdens on both the
enforcement agencies and private parties seeking to utilize the
procedure than would a certification system; unlike
certification, notification would have a limited scope of
initial review and no requirement of continuous monitoring by
the agencies. Additionally, it eliminates the risk of possible
misapplication of legal standards, since the antitrust agencies
merely act as enforcement ``screeners'' (as with other business
review procedures) and not as adjudicators of the legality of
standards development activity.
Finally, the NCRA links the disclosure process to a
limitation on private damages against standards development
organizations acting within the scope of their disclosure.
Because the NCRA merely de-trebles (but does not eliminate)
antitrust damages for injured parties, a private right of
action is preserved.
Background and Need for the Legislation
STANDARD DEVELOPMENT ORGANIZATIONS AND ANTITRUST
Voluntary Consensus Standards and Competition
Standard development organizations play a pivotal role in
promoting free market competition. Technical standards promote
product competition by ensuring a common interface between
products that may be substituted for one another. ``Voluntary
consensus standards'' are technical standards written by
hundreds of non-profit standard developing organizations such
as the American Society of Mechanical Engineers, the American
Society for Testing and Materials, and the National Fire
Protection Association. While in most countries standards are
promulgated by government agencies, the United States has
shifted toward a model whereby standard development
organizations develop voluntary consensus standards for use by
industry and various levels of government. These standards are
then codified in industry and government codes. Technical or
compatibility standards benefit consumers and producers alike.
As economist Professor David Teece has noted:
Compatibility standards are essential if products and
their complements are to be used in a system. Computers
need software, compact disc players need compact discs,
televisions need programs, and bolts need nuts.
Compatibility standards define the format for the
interface between the core and complementary good. . .
[i]f products from different manufacturers are
compatible, this may intensify rivalry among
competitors and make it easier for buyers to compare
product attributes. Compatibility standards also ease
entry for new and complementary technologies and reduce
the risk that a consumer will be ``stranded'' with a
product which is incompatible with others [m]oreover,
price competition is enhanced when competing
manufacturers can supply substitutable products.\1\
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\1\ David J. Teece, ``Information Sharing, Innovation and
Antitrust,'' 62 Antitrust L.J. 465, 475 (1994).
While standards are widely viewed to enhance competition,
standard-setting activities might give rise to legitimate
antitrust concerns if anti-competitive conduct like output
restrictions, market divisions, vertical restraints, or other
forms of exclusionary conduct occur.\2\ As the Supreme Court
has recognized: ``[] agreement on a product standard is, after
all, implicitly an agreement not to manufacture, distribute or
purchase certain types of products Accordingly, private
standard-setting organizations have traditionally been objects
of antitrust scrutiny.'' \3\
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\2\ Samuel Miller, Antitrust and Standard-Setting, Prac.L. Inst.,
July 21, 2001.
\3\ Allied Tube and Conduit Corp. v. Indian Head, Inc. 486 U.S.
492, 500 (1988).
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Antitrust challenges to standard-setting activities are
currently evaluated under the ``rule of reason''--a judicially-
created doctrine that seeks to balance the pro-competitive and
anti-competitive market effects of a challenged practice before
determining whether a violation of the antitrust laws has
occurred.\4\ The rationale for this antitrust standard is that
SDOs, as non-profits serving a cross-section of an industry,
are unlikely to engage in anti-competitive conduct creating
market dominance. Potential anti-competitive conduct is also
mitigated by the manner in which voluntary consensus standards
are developed and implemented. In order to be used by Federal
agencies, the process of developing voluntary standards must
adhere to principles of openness, voluntariness, balance,
cooperation, transparency, consensus, and due process. These
requirements were most recently articulated in OMB Circular A-
119 (February 19, 1998).\5\
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\4\ See Northwest Wholesale Stationers, Inc. v. Pacific Stationery
and Printing Company, 472 U.S. 284 (1985).
\5\ Federal Participation in the Development and Use of Voluntary
Consensus Standards and in Conformity Assessment Activities, 63 Fed.
Reg. 8545 (February 19, 1998); available at:
.
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Notwithstanding these safeguards, treble damages may still
be awarded against SDOs if their conduct is determined to be
anti-competitive under the rule of reason. Until recently,
standard-setting activities were largely directed and managed
by government entities that were immune from antitrust
scrutiny. Beginning in the 1990's, Congress concluded that
government could no longer keep pace with rapid technological
and market change, and that government-directed standard-
setting activity was often cumbersome, duplicative, and
inefficient. To address this concern, Congress passed the
National Technology Transfer and Advancement Act of 1995
(``NTTAA''). \6\ NTTAA's express goal was to encourage
government agencies to assist in the development of voluntary
consensus standards and to adopt such standards in favor of
often outmoded government standards whenever possible.\7\ While
the NTTAA succeeded by almost every measure, SDOs continue to
be vulnerable to litigation even after its passage.
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\6\ Pub. L. No. 104-113, 110 Stat. 775 (1995).
\7\ H.R. Rept. No. 104-390 (1995).
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Principal Cases
While SDOs have been subject to various civil claims, the
experiences of the American Society of Mechanical Engineers
(``ASME''), the American Society for Testing and Materials
(``ASTM'') and the National Fire Protection Association
(``NFPA'') are particularly instructive.
ASME v. Hydrolevel
ASME sets standards for a variety of mechanical devices. In
ASME v. Hydrolevel,\8\ a divided Supreme Court held an SDO
liable under the treble damages provisions of the Sherman
Antitrust Act.\9\ Hydrolevel, a water boiler manufacturer,
alleged that the Chair and Vice Chair of the Subcommittee
overseeing a section of ASME's Boiler and Pressure Vessel Code
Committee manipulated an interpretation of ASME's Code in
furtherance of a conspiracy in restraint of trade. Hydrolevel
contended that this interpretation prevented it from achieving
market penetration with a technologically superior low-water-
cut-off device. The interpretation was solicited by McDonnell
and Miller, long the dominant manufacturer of low-water-cut-off
devices used on heating boilers. This interpretation was then
rendered by the Subcommittee Vice Chair, who was also a
McDonnell and Miller employee, and subsequently transmitted
over the signature of his employer before being approved by the
Subcommittee Chair. Approval by the Subcommittee Chair and Vice
Chair allegedly occurred after a meeting between these two
individuals and representatives from McDonnell and Miller.
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\8\ ASME v. Hyrdolevel, 456 U.S. 556 (1982).
\9\ 15 USC Sec. Sec. 1-7 (2002).
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This seemingly innocuous interpretation of ASME's Code
addressed the use of a time delay feature which was similar to
that being offered by Hydrolevel. It was then aggressively used
by McDonnell and Miller's sales force to assert that
Hydrolevel's device did not meet Boiler Code requirements.
These representations were alleged to have thwarted an
anticipated market breakthrough from Hydrolevel's purportedly
superior device. Hydrolevel's low-water cut-off device was met
with stiff market resistance because of the perception that its
device did not comply with ASME's Boiler Code, which had been
adopted as a regulatory requirement and given the force of law
by most States. As a result, Hydrolevel subsequently was forced
out of the market.
The initial target of Hyrdolevel's antitrust suit was
McDonnell and Miller, the purported beneficiary of the alleged
conspiracy. ASME was perceived as a relevant, but not
necessary, defendant. However, before trial, McDonnell and
Miller settled with Hydrolevel, leaving ASME as the sole
defendant. The trial judge instructed the jury that ASME could
be found liable only if had ratified or adopted the actions of
its Subcommittee officers in order to advance ASME's market
interests. Notwithstanding these instructions, the jury
returned a verdict against ASME for $3.3 million, prior to
trebling.\10\
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\10\ Supra, note 8.
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The appeals court enunciated a novel legal theory to
support ASME's liability under the antitrust laws by concluding
that liability could attach if ASME's agents had acted within
the scope of their ``apparent authority.'' \11\ On appeal, a
sharply divided Supreme Court affirmed and amplified this view.
In a strongly written dissent joined by Justices Rehnquist and
White, Justice Powell stated:
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\11\ Id.
The Court today adopts an unprecedented theory of
antitrust liability, one applied specifically to a
nonprofit standards-setting association but a theory
that could encompass a broad spectrum of our country's
nonprofit associations. The theory, based on the agency
concept of ``apparent authority,'' would impose the
potentially crippling burden of treble damages. In this
case, the Court specifically holds that standards-
setting organizations may be held liable for the acts
of their agents even though the organization never
ratified, authorized, or derived any benefit whatsoever
from the fraudulent activity of the agency. [S]uch an
expansive rule of strict liability, at least as applied
to nonprofit organizations, is inconsistent with the
weight of precedent and the intent of Congress,
unsupported by the rules of agency law that the Court
purports to apply, and irrelevant to the achievement of
the antitrust laws.\12\
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\12\ See id. at 597.
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ASTM Litigation
ASTM's recent litigation experience points to the need to
clarify existing standards of liability for SDOs. The
litigation, initiated by an ASTM member against ASTM and other
members, arose after consensus standards were developed in an
open and balanced process initiated upon the request of the
Environmental Protection Agency (``EPA''). In particular, the
EPA requested that ASTM develop alternative assessment
standards to supplement its own internal inspection process for
assessing underground storage tanks (``USTs'') more than 10
years old. This request was issued to help implement an EPA
regulation mandating that all USTs be upgraded, replaced, or
eliminated by 1998.\13\ Following transparent voluntary
standards development procedures, ASTM produced a document
which incorporated alternative methods of assessment.
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\13\ 40 C.F.R. Part 280 (1994).
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This process was vigorously opposed by proponents of the
existing method, tank inspectors, and tank liners. ASTM
subsequently approved a standard--which received the full
backing of the EPA--that enhanced competition by expanding the
number of EPA-approved UST assessment methods from one to four.
After 6 years of participation in the ASTM process, opponents
of the standards filed an antitrust suit naming Corrpro
Companies, WRA/Rogers, and ASTM as defendants. While all
parties to this suit agreed to a sealed settlement early in
2002, proponents of H.R. 1086 point to the chilling effect of
this litigation on standard-setting activities by SDOs.
Allied Tube & Conduit Corp. v. Indian Head, Inc.
The NFPA sets and publishes fire protection standards
through a member voting process. Standards approved by a
majority of NFPA members are generally adopted as State law and
codified in the National Electric Code. In 1980, this Code
permitted the use of steel, but not plastic electrical
conduits. The defendant was the nation's largest steel conduit
manufacturer and a NFPA member. Allied Tube, a plastic
electrical conduit manufacturer, had proposed the inclusion of
plastic electrical conduits in the 1981 Code and received
preliminary approval by an NFPA panel. Prior to the 1980
meeting at which the final NFPA vote occurred, however, the
defendant and other steel industry and NFPA members agreed to
``pack'' the NFPA with new members in order to defeat the
proposal. The proposal was rejected by a membership that
included 230 such ``new'' members. Allied Tube successfully
sued in Federal district court, alleging unreasonable
restraints on trade, in violation of the Sherman Act.
After that decision was overturned on appeal, the Supreme
Court held for Allied Tube, rejecting defendant's argument that
it was immune from the antitrust laws under what is commonly
referred to as the Noerr-Pennington doctrine (which
effectively, makes ``concerted efforts to restrain or
monopolize trade by petitioning government officials'' immune
from the antitrust laws). In doing so, the Court held that
while standards development activities, by their nature, may
provide an opportunity for anti-competitive behaviors,
``private standard-setting programs can be pro-competitive when
they are based on the merits of objective expert judgments and
through procedures that prevent the standard-setting process
from being biased by members with economic interests in
stifling competition.'' \14\ Responding to the defendant's
asserted defense, the Court held that the statutory adoption of
a private standard does not determine whether that private
entity's conduct is immune from the antitrust laws. Rather, the
scope of protection afforded by Noerr-Pennington ``depends on
the source, context, and nature of the anti-competitive
restraint at issue.'' \15\
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\14\ Supra, note 10, at 509.
\15\ Id. at 511.
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H.R. 1086, THE ``NATIONAL COOPERATIVE STANDARDS
DEVELOPMENT ACT OF 2003''
H.R. 1086 clarifies the antitrust status of qualifying
standards developers to facilitate the development and
promulgation of voluntary consensus standards. H.R. 1086
eliminates the threat of treble damages, codifies the rule of
reason for antitrust claims against these organizations, and
provides for the recovery of attorney fees for substantially
prevailing parties.
Hearings
The Committee's Task Force on Antitrust held a hearing on
H.R. 1086 on April 9, 2003. The following witnesses testified:
James M. Shannon, President, National Fire Protection
Association; David Karmol, Vice President, Public Affairs,
American National Standards Institute; Earl Everett, Director,
Division of Safety Engineering, Department of Labor, State of
Georgia. Each witness affirmed the important role played by
standards developers and expressed strong support for the bill.
Committee Consideration
On May 7, 2003, the Committee met in open session and
ordered favorably reported the bill H.R. 1086, without
amendment by voice vote, a quorum being present.
Vote of the Committee
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee notes that during
the full Committee consideration of H.R. 1086 the Committee
took no rollcall votes.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Performance Goals and Objectives
H.R. 1086 does not authorize funding. Therefore, clause
3(c)(4) of rule XIII of the Rules of the House of
Representatives is inapplicable.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to H.R. 1086, the following estimate and comparison
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 19, 2003.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1086, the
Standards Development Organization Advancement Act of 2003.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Lanette J.
Walker (for Federal costs), who can be reached at 226-2860, and
Victoria Heid Hall (for the state and local government impact),
who can be reached at 225-3220.
Sincerely,
Douglas Holtz-Eakin.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 1086--Standards Development Organization Advancement Act of 2003.
H.R. 1086 would provide certain protections from antitrust
laws to standards development organizations (SDOs) if they
disclose the scope and nature of the organization's activity to
the Department of Justice and the Federal Trade Commission.
(SDOs are nonprofit organizations that plan, develop,
establish, or coordinate voluntary consensus standards for use
by industry and Government.) Under antitrust laws, the
Department of Justice and the Federal Trade Commission are
required to publish notices of SDO activities in the Federal
Register. CBO estimates, however, that the cost of publishing
such routine notifications would not be significant in any year
over the 2004-2008 period because of the small number of
notices that are likely to be filed.
H.R. 1086 would expand the scope of an existing preemption
of state antitrust laws to apply to SDOs. Such a preemption is
an intergovernmental mandate as defined in the Unfunded
Mandates Reform Act (UMRA). However, CBO estimates that this
mandate would impose no costs on state, local, or tribal
governments and would not, therefore, exceed the threshold in
UMRA ($59 million in 2003, adjusted for inflation). This bill
contains no new private-sector mandates as defined in UMRA.
The CBO staff contacts for this estimate are Lanette J.
Walker (for Federal costs), who can be reached at 226-2860, and
Victoria Heid Hall (for the state and local government impact),
who can be reached at 225-3220. This estimate was approved by
Peter H. Fontaine, Deputy Assistant Director for Budget
Analysis.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8 of the Constitution.
Section-by-Section Analysis and Discussion
Section 1. Short Title.
Section 1 titles the bill the ``National Cooperative
Standards Development Act of 2003.''
Section 2. Findings.
Section 2 sets forth the findings and purposes of the bill
as they relate to standard-developing activities and SDOs. The
findings explain why the NCRA was originally enacted and
amended. This section also discusses how passage of the NTTAA
(which replaced many government-written standards with
voluntary consensus standards) inadvertently increased the
vulnerability of these organizations to antitrust litigation.
This section concludes by affirming the critical importance of
SDOs to the competitiveness of the national economy.
Section 3. Definitions.
Section 3 amends the definitions section of the NCRA to
include the terms: ``standards developments activity;''
``standard development organization;'' ``technical standard;''
and ``voluntary consensus standard'' (as defined in OMB
Circular Number A-119).
In addition, this section specifically excludes antitrust
protections for standards development activity that involves:
(1) the exchange of cost, sales, or pricing information not
reasonably required for the purpose of developing a voluntary
consensus standard, or (2) any anti-competitive activity for a
for-profit entity that stands to financially benefit from
participating in any standards development activity.
The definition of ``standards development activity,'' as
set forth in section 3(7), is broad enough to encompass any
action taken by an SDO in ``developing, promulgating--or
otherwise maintaining a voluntary consensus standard--including
actions related to the intellectual property policies'' of the
SDO. The Standards Development Organization Advancement Act is
not intended to change or influence existing intellectual
property policies currently utilized by various SDOs
(including, but not limited to, patent searches), nor to affect
or influence new intellectual property policies that may be
developed in the future. Such policies are vitally important to
ensuring a level playing field among all users of a standard
that incorporates patented technology. In addition, the
legislation is not intended to change or alter the application
of existing antitrust laws with respect to intellectual
property.
The Act seeks to encourage disclosure by owners of
intellectual property owners of relevant intellectual property
owners and proposed licensing terms. It further encourages
discussion among intellectual property owners and other
interested standards participants regarding the terms under
which relevant intellectual property owners would be made
available for use in conjunction with the standard or proposed
standard.
Section 4. Rule of Reason Standard.
Section 4 amends the NCRA to extend application of the rule
of reason to specified standards development activity. Under
existing antitrust law, the rule of reason standard requires a
balancing of the pro-competitive effects of alleged misconduct
against the anti-competitive effects of particular conduct in
determining whether a violation of the antitrust laws has
occurred.
Section 5. Limitation of Recovery.
Section 5 amends the NCRA to limit recovery of antitrust
damages against SDOs if such organizations pre-disclose the
nature and scope of the standards development activity to
antitrust authorities. SDOs remain liable for treble damages
under the antitrust laws if they fail to pre-disclose the
nature and scope of standards setting activity.
Section 6. Attorneys' Fees.
Section 6 amends the NCRA to include SDOs within the
existing NCRA framework for awarding reasonable attorneys' fees
to the substantially prevailing party.
Section 7. Disclosure of Standards Developments Activity.
Section 7 amends the NCRA to require SDOs to adhere to the
pre-disclosure framework set out in the NCRA. The pre-
disclosure model embraced by the NCRA permits defined joint
venture activity to be disclosed to the Department of Justice
and the Federal Trade Commission in exchange for limited
antitrust protections. To be within the ambit of these
protections, SDOs must disclose the scope and nature of
standards setting activity within 90 days of the commencement
of this activity or 90 days of enactment of this legislation,
whichever is later. Additional disclosures of new collaborative
activities can be submitted to the antitrust agencies to extend
the liability protections--but such disclosures will not
protect activity that encompasses per se violations of the
antitrust laws. This section also states that an SDO's decision
not to avail itself of pre-disclosure requirements will not
create a negative inference that the SDO is engaged in anti-
competitive conduct.
Section 8. Rule of Construction.
Section 8 states that this legislation shall not be
construed to alter or modify the antitrust treatment of parties
participating in standards development activity of SDOs within
the scope of the legislation or other organizations and parties
engaged in standard-setting processes not within the scope of
this legislation.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
NATIONAL COOPERATIVE RESEARCH AND PRODUCTION ACT OF 1993
* * * * * * *
DEFINITIONS
Sec. 2. (a) For purposes of this Act:
(1) * * *
* * * * * * *
(7) The term ``standards development activity''
means any action taken by a standards development
organization for the purpose of developing,
promulgating, revising, amending, reissuing,
interpreting, or otherwise maintaining a voluntary
consensus standard, or using such standard in
conformity assessment activities, including actions
relating to the intellectual property policies of the
standards development organization.
(8) The term ``standards development organization''
means a domestic or international organization that
plans, develops, establishes, or coordinates voluntary
consensus standards using procedures that incorporate
the attributes of openness, balance of interests, due
process, an appeals process, and consensus in a manner
consistent with the Office of Management and Budget
Circular Number A-119, as revised February 10, 1998.
(9) The term ``technical standard'' has the meaning
given such term in section 12(d)(4) of the National
Technology Transfer and Advancement Act of 1995.
(10) The term ``voluntary consensus standard'' has
the meaning given such term in Office of Management and
Budget Circular Number A-119, as revised February 10,
1998.
* * * * * * *
(c) The term ``standards development activity'' excludes
the following activities:
(1) Exchanging information among competitors
relating to cost, sales, profitability, prices,
marketing, or distribution of any product, process, or
service that is not reasonably required for the purpose
of developing or promulgating a voluntary consensus
standard, or using such standard in conformity
assessment activities.
(2) Entering into any agreement or engaging in any
other conduct that would allocate a market with a
competitor.
(3) Entering into any agreement or conspiracy that
would set or restrain prices of any good or service.
RULE OF REASON STANDARD
Sec. 3. In any action under the antitrust laws, or under
any State law similar to the antitrust laws, the conduct [of
any person in making or performing a contract to carry out a
joint venture shall] of--
(1) any person in making or performing a contract
to carry out a joint venture, or
(2) a standards development organization while
engaged in a standards development activity,
shall not be deemed illegal per se; such conduct shall be
judged on the basis of its reasonableness, taking into account
all relevant factors affecting competition, including, but not
limited to, effects on competition in properly defined,
relevant research, development, product, process, and service
markets. For the purpose of determining a properly defined,
relevant market, worldwide capacity shall be considered to the
extent that it may be appropriate in the circumstances.
LIMITATION ON RECOVERY
Sec. 4. (a) Notwithstanding section 4 of the Clayton Act
(15 U.S.C. 15) and in lieu of the relief specified in such
section, any person who is entitled to recovery on a claim
under such section shall recover the actual damages sustained
by such person, interest calculated at the rate specified in
section 1961 of title 28, United States Code, on such actual
damages as specified in subsection (d) of this section, and the
cost of suit attributable to such claim, including a reasonable
attorney's fee pursuant to section 5 of this Act if such
claim--
(1) results from conduct that is within the scope
of a notification that has been filed under section
6(a) of this Act for a joint venture, for a standards
development activity engaged in by a standards
development organization against which such claim is
made, and
* * * * * * *
(b) Notwithstanding section 4C of the Clayton Act (15
U.S.C. 15c), and in lieu of the relief specified in such
section, any State that is entitled to monetary relief on a
claim under such section shall recover the total damage
sustained as described in subsection (a)(1) of such section,
interest calculated at the rate specified in section 1961 of
title 28, United States Code, on such total damage as specified
in subsection (d) of this section, and the cost of suit
attributable to such claim, including a reasonable attorney's
fee pursuant to section 4C of the Clayton Act if such claim--
(1) results from conduct that is within the scope
of a notification that has been filed under section
6(a) of this Act for a joint venture, for a standards
development activity engaged in by a standards
development organization against which such claim is
made, and
* * * * * * *
(c) Notwithstanding any provision of any State law
providing damages for conduct similar to that forbidden by the
antitrust laws, any person who is entitled to recovery on a
claim under such provision shall not recover in excess of the
actual damages sustained by such person, interest calculated at
the rate specified in section 1961 of title 28, United States
Code, on such actual damages as specified in subsection (d) of
this section, and the cost of suit attributable to such claim,
including a reasonable attorney's fee pursuant to section 5 of
this Act if such claim--
(1) results from conduct that is within the scope
of a notification that has been filed under section
6(a) of this Act for a joint venture, for a standards
development activity engaged in by a standards
development organization against which such claim is
made, and
* * * * * * *
(e) Subsections (a), (b), and (c) shall not be construed to
modify the liability under the antitrust laws of any person
(other than a standards development organization) who--
(1) directly (or through an employee or agent)
participates in a standards development activity with
respect to which a violation of any of the antitrust
laws is found,
(2) is not a fulltime employee of the standards
development organization that engaged in such activity,
and
(3) is, or is an employee or agent of a person who
is, engaged in a line of commerce that is likely to
benefit directly from the operation of the standards
development activity with respect to which such
violation is found.
[(e)] (f) This section shall be applicable only if the
challenged conduct of a person defending against a claim is not
in violation of any decree or order, entered or issued after
October 11, 1984,, in any case or proceeding under the
antitrust laws or any State law similar to the antitrust laws
challenging such conduct as part of a joint venture, or of a
standards development activity engaged in by a standards
development organization.
ATTORNEY'S FEES
Sec. 5. (a) Notwithstanding sections 4 and 16 of the
Clayton Act, in any claim under the antitrust laws, or any
State law similar to the antitrust laws, based on the
conducting of a joint venture, or of a standards development
activity engaged in by a standards development organization,
the court shall, at the conclusion of the action--
(1) * * *
* * * * * * *
(c) Subsections (a) and (b) shall not apply with respect to
any person who--
(1) directly participates in a standards
development activity with respect to which a violation
of any of the antitrust laws is found,
(2) is not a fulltime employee of a standards
development organization that engaged in such activity,
and
(3) is, or is an employee or agent of a person who
is, engaged in a line of commerce that is likely to
benefit directly from the operation of the standards
development activity with respect to which such
violation is found.
DISCLOSURE OF JOINT VENTURE
Sec. 6. (a)(1) Any party to a joint venture, acting on such
venture's behalf, may, not later than 90 days after entering
into a written agreement to form such venture or not later than
90 days after October 11, 1984, whichever is later, file
simultaneously with the Attorney General and the Commission a
written notification disclosing--
[(1)] (A) the identities of the parties to such
venture,
[(2)] (B) the nature and objectives of such
venture, and
[(3)] (C) if a purpose of such venture is the
production of a product, process, or service, as
referred to in section 2(a)(6)(D), the identity and
nationality of any person who is a party to such
venture, or who controls any party to such venture
whether separately or with one or more other persons
acting as a group for the purpose of controlling such
party.
Any party to such venture, acting on such venture's behalf, may
file additional disclosure notifications pursuant to this
section as are appropriate to extend the protections of section
4. In order to maintain the protections of section 4, such
venture shall, not later than 90 days after a change in its
membership, file simultaneously with the Attorney General and
the Commission a written notification disclosing such change.
(2) A standards development organization may, not later
than 90 days after commencing a standards development activity
engaged in for the purpose of developing or promulgating a
voluntary consensus standards or not later than 90 days after
the date of the enactment of the Standards Development
Organization Advancement Act of 2003, whichever is later, file
simultaneously with the Attorney General and the Commission, a
written notification disclosing--
(A) the name and principal place of business of the
standards development organization, and
(B) documents showing the nature and scope of such
activity.
Any standards development organization may file additional
disclosure notifications pursuant to this section as are
appropriate to extend the protections of section 4 to standards
development activities that are not covered by the initial
filing or that have changed significantly since the initial
filing.
(b) Except as provided in subsection (e), not later than 30
days after receiving a notification filed under subsection (a),
the Attorney General or the Commission shall publish in the
Federal Register a notice with respect to such venture that
identifies the parties to such venture and that describes in
general terms the area of planned activity of such venture, or
a notice with respect to such standards development activity
that identifies the standards development organization engaged
in such activity and that describes such activity in general
terms. Prior to its publication, the contents of such notice
shall be made available to the parties to such venture or
available to such organization, as the case may be.
* * * * * * *
(d) Except with respect to the information published
pursuant to subsection (b)--
(1) * * *
(2) all other information obtained by the Attorney
General or the Commission in the course of any
investigation, administrative proceeding, or case, with
respect to a potential violation of the antitrust laws
by the joint venture, or the standards development
activity, with respect to which such notification was
filed,
shall be exempt from disclosure under section 552 of title 5,
United States Code, and shall not be made publicly available by
any agency of the United States to which such section applies
except in a judicial or administrative proceeding in which such
information and material is subject to any protective order.
(e) Any [person who] person or standards development
organization that files a notification pursuant to this section
may withdraw such notification before notice of the joint
venture involved is published under subsection (b). Any
notification so withdrawn shall not be subject to subsection
(b) and shall not confer the protections of section 4 on any
person or any standards development organization with respect
to whom such notification was filed.
* * * * * * *
(g)(1) Except as provided in paragraph (2), for the sole
purpose of establishing that a person or standards development
organization is entitled to the protections of section 4, the
fact of disclosure of conduct under section 6(a) and the fact
of publication of a notice under section 6(b) shall be
admissible into evidence in any judicial or administrative
proceeding.
* * * * * * *
Markup Transcript
BUSINESS MEETING
WEDNESDAY, MAY 7, 2003
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:00 a.m., in
Room 2141, Rayburn House Office Building, Hon. F. James
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
Chairman Sensenbrenner. The Committee will be in order. A
quorum is present. Pursuant to notice, I now call up the bill,
H.R. 1086, the ``Standards Development Organization Advancement
Act of 2003'' for purposes of markup and move its favorable
recommendation to the full House. Without objection, the bill
will be considered as read and open for amendment at any point.
[The bill, H.R. 1086, follows:]
Chairman Sensenbrenner. The Chair recognizes himself for
purposes of an explanation. This bill fosters the critical role
of standards development while strongly reaffirming the central
role of our Nation's antitrust statutes and preserving and
promoting free market competition. Standards development
organizations play a pivotal role in promoting this
competition. Seven years ago, the Congress passed legislation
requiring the use of voluntary consensus standards in Federal
procurement and regulatory activities.
While this legislation has encouraged Government use of
private development standards, it also has increased the
vulnerability of private standard developers of the antitrust
litigation.
This bill addresses this problem, and it simply limits
recovery against standard developments organizations, the
actual economic damages, while codifying the rule of reason for
antitrust scrutiny of their activities.
I am pleased that the legislation has attracted the
cosponsorship of the Ranking Member, Mr. Conyers, as well as 12
Members of the Committee.
I yield the balance of my time now to Mr. Forbes, who
chaired the Antitrust Task Force hearing on this legislation
for any comments he wishes to make.
Mr. Forbes. Thank you, Mr. Chairman, and I am pleased also
to lend my support to H.R. 1086, the ``National Cooperative
Standards Development Act of 2003.'' Standards developing
organizations play critical but sometimes overlooked roles in
promoting market-based competition. Without technical product
standards, there would be no compatibility or substitutability
among competing consumer products and public health and safety
would be severely compromised.
Until recently, standards were often developed by the
Federal Government; however, the rapid pace of technological
innovation makes nongovernment standard setting activity more
efficient and more effective. It is important to stress that
this legislation does not create an antitrust exemption for
standards developers.
The bill is a narrowly tailored commonsense approach to
promoting activity that enhances product choice and consumer
welfare.
Mr. Chairman, I commend you for your leadership on this
issue, and I urge my colleagues to support this bipartisan
legislation.
I yield back the balance of my time.
Chairman Sensenbrenner. The Chair yields back the balance
of his time.
Without objection, all Members may include opening
statements in the record at this point.
The gentleman from Virginia has an opening statement?
Mr. Scott. Mr. Chairman, apparently I didn't get the word
about attendance. I had a question, Mr. Chairman. If someone
would respond, it seems to me that if you have got a group
setting standards, that there would be much less likelihood for
antitrust behavior than if they didn't form standards that
everybody could comply with. I guess my question is: How, if
this group is actually doing its job, how would there be any
liability?
Chairman Sensenbrenner. Well, people who don't like the
standards that the group comes up with, I guess, would possibly
have a cause of action, and what this bill does is simply limit
the plaintiffs to the actual economic damages that they could
prove, rather than all of the punitive measures for antitrust
violations.
Mr. Scott. Reclaiming my time. That is, if they can prove
anything?
Chairman Sensenbrenner. Yes.
Are there amendments? Are there amendments? If there are no
amendments, without objection, the previous question is
ordered. A reporting quorum not being present, we will vote on
reporting this bill when a reporting quorum appears.
[Intervening business.]
Because we now have a reporting quorum present, the Chair
will put the questions on the bills that have been marked up
previously on which the previous question has been ordered
relative to a motion to report.
The first motion is on reporting favorably H.R. 1086, the
``Standards Development Organization Advancement Act of 2003.''
The Chair notes the presence of a reporting quorum. The
question occurs on the motion to report the bill favorably.
Those in favor will say aye.
Opposed, no.
The ayes appear to have it. The ayes have it. The motion to
report favorably is adopted.
Without objection, the Chairman is authorized to move to go
to conference pursuant to House rules. Without objection, the
staff is directed to make any technical and conforming changes,
and all Members will be given 2 days, as provided by the rules,
in which to submit additional dissenting, supplemental or
minority views.