[Federal Register Volume 76, Number 93 (Friday, May 13, 2011)]
[Pages 28036-28038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11704]



Request for Comments and Announcement of Workshop on Standard-
Setting Issues

AGENCY: Federal Trade Commission.

ACTION: Notice of workshop and request for comments.


SUMMARY: The Federal Trade Commission seeks public comments in 
connection with a project to examine the practical and legal issues 
arising from the incorporation of patented technologies in 
collaborative standards, including the risk of patent ``hold-up'' and 
its effect on competition and consumers. Among the topics to be 
considered are the disclosure of patent rights during the standard-
setting process, the implications of a patent holder's commitment to 
license users of the standard on reasonable and non-discriminatory 
(``RAND'') terms, and the possibility of negotiating license terms 
prior to choosing the standard. The Commission seeks the views of 
consumers and the legal, academic, and business communities on the 
issues to be explored in this project. As part of the project, the 
Commission will conduct a workshop and may prepare a report discussing 
these issues. This notice poses a series of questions relevant to those 
issues for which the Commission seeks comment.

DATES: The workshop will be held June 21, 2011, in the Conference 
Center of the FTC office building at 601 New Jersey Avenue, NW., 
Washington, DC. Prior to the workshop, the Commission will publish an 
agenda and further information on its Web site. Comments in response to 
this notice must be received on or before July 8, 2011.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form by following the instructions in the 
SUPPLEMENTARY INFORMATION section below. Comments in electronic form 
should be submitted by using the following weblink: https://ftcpublic.commentworks.com/ftc/standardsproject (and following the 
instructions on the web-based form). Comments filed in paper form 
should be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-113 (Annex X), 600 
Pennsylvania Avenue, NW., Washington, DC 20580, in the manner detailed 

[email protected], FTC, 600 Pennsylvania Avenue, NW., Rm. NJ-
6264, Washington, DC 20580, 202-326-2793.

SUPPLEMENTARY INFORMATION: This project focuses on practical and legal 
issues that arise from collaborative standard setting when standards 
incorporate technologies that are protected by intellectual property 
rights. Such a situation raises the potential for ``hold-up'' by a 
patent owner--a demand for higher royalties or other more costly 
licensing terms after the standard is implemented than could have been 
obtained before the standard was chosen. Hold-up can subvert the 
competitive process of choosing among technologies and undermine the 
integrity of standard-setting activities. Consumers can be harmed if 
manufacturers are able to pass on higher costs resulting from hold-up.
    Collaborative standard setting plays an important role in the 
modern economy. In areas such as information and communications 
technology, for example, the usefulness of complex products and 
services often depends on the interoperability of components and 
products of different firms. To enhance the value of these complex 
products, private firms--including competing manufacturers, their 
customers and suppliers--frequently participate in standard-setting 
organizations (SSOs) to set technological standards for use in 
designing products or services. While such collaborations are not 
without antitrust risks, antitrust enforcers in the United States and 
Europe have recognized the valuable and pro-competitive character of 
this kind of legitimate standard-setting process.\1\ It can lead to 
innovation, better products and more competition.

    \1\ U.S. Dept of Justice & Fed. Trade Comm'n, Antitrust 
Enforcement and Intellectual Property Rights: Promoting Innovation 
and Competition, at 33-56 (2007); Guidelines on the applicability of 
Article 101 of the Treaty on the functioning of the European Union 
to horizontal co-operation agreements, 2011 OJ C 11/1, Chapter 7 
(2010), available at http://ec.europa.eu/competition/antitrust/legislation/horizontal.html.

    Various technological alternatives may compete to be selected for 
the standard. But once a technology is incorporated into a standard, 
and the standard becomes widely used, a manufacturer may find it 
difficult, or indeed impossible, to switch to what were once 
alternative technologies. A firm with a patent reading on the standard 
often can demand a royalty that reflects not only the ex ante market 
value of the patented invention, but also added value associated with 
changes in the marketplace and investments made to implement the 
standard. This has been called patent ``hold-up.''
    SSOs have sought to prevent hold-up in several ways. First, many 
SSOs have patent disclosure rules that try to ensure that SSO members 
are aware of relevant patents when adopting a standard. Second, they 
commonly require a patent holder to commit that after the standard-
setting process is completed, it will license the patent on terms that 

[[Page 28037]]

reasonable and non-discriminatory (``RAND''). Third, they may require 
or allow ex ante disclosure of specific licensing terms as part of the 
standard-setting process, before users of the standard are locked in to 
using the patented technology.
    However, the ability of disclosure rules to protect consumers from 
patent hold-up is unclear. Such rules cannot bind patent holders that 
are not members of the SSO. Moreover, not all SSOs have disclosure 
rules. Even when SSOs do have disclosure rules, the terms will not 
necessarily lead to disclosure of all relevant patents. For instance, 
disclosure is sometimes required only of issued patents, and not 
pending applications that later may ripen into patents reading on a 
standard. Further, to alleviate the burden on SSO members, disclosure 
usually is required only of patents known to a firm's representatives 
in the standards process, and does not require a full search of the 
firm's patent portfolio.
    Many rules encourage disclosure of the existence of relevant 
patents, but are vague as to what should be disclosed and when. This 
lack of clarity may undermine the ability of standards users to enforce 
the rules through allegations based on fraud, patent law estoppel or 
antitrust. In some situations, it may be possible for a patent holder 
to deceive SSO members concerning its patent rights--subverting the 
competitive process of choosing among technologies--without violating 
the particular disclosure rules. For these and other reasons, 
disclosure rules often may not provide full transparency about possible 
patent interests implicated by a standard, or effective relief of the 
problem of potential patent hold-up.
    The most common mechanism used by SSOs to attempt to prevent patent 
hold-up is the RAND commitment. Many SSOs seek RAND commitments only on 
disclosed patents. Some SSOs require a RAND commitment for all patents 
owned by firms participating in the standard-setting process, and 
dispense with a patent disclosure requirement. Setting specific terms 
of the patent license generally occurs in bilateral negotiations 
between the patent holder and individual standards users after the 
standard-setting process is completed, sometimes long after the 
standard has been implemented.
    Proponents of this practice argue that the use of RAND commitments 
often simplifies the standard-setting process by allowing participants 
to focus on technical issues. Others criticize the RAND commitment as 
vague. They worry that leaving the negotiation of licensing terms until 
after the standard has been implemented gives the patent holder 
excessive leverage that can lead to patent hold-up. Whether a RAND 
commitment is sufficient protection against hold-up depends on numerous 
questions concerning its enforcement B whether it can be enforced under 
contract law, patent law, or antitrust law, and what principles the 
courts should look to in deciding disputes over RAND licensing terms.
    To limit the patent holder's leverage after the standard is 
implemented, some SSOs allow or require disclosure of specific royalty 
and licensing terms ex ante B during the standard setting process. The 
Department of Justice and the Commission have stated that unilateral 
announcements of price or licensing terms by patent holders as part of 
the standards process present little anticompetitive risk. The agencies 
also have stated that they will apply the rule of reason when 
evaluating joint activities that allow potential licensees, before the 
standard is adopted, to negotiate licensing terms with patent 
holders.\2\ Despite this assurance by the enforcement agencies, 
however, it does not appear that there has been wide use of ex ante 

    \2\ U.S. Dep't of Justice & Fed. Trade Comm'n, Antitrust 
Enforcement and Intellectual Property Rights: Promoting Innovation 
and Competition, at 6-7, 33-56 (2007).

    In this project, the Commission seeks to examine these and other 
issues pertaining to potential patent hold-up of collaborative 
standards. It intends to consider antitrust issues, as well as examine 
how other legal doctrines (such as contract, patent, and consumer 
protection law), and economic and practical considerations affect the 
analysis of the issues. The Commission invites public comment on 
questions relevant to these topics, including:

Disclosure of Patent Rights in an SSO

     How do patent disclosure policies vary among SSOs? How do 
disclosure policies vary in their effectiveness of making SSO members 
aware of relevant patent rights?
     What considerations drive variation in disclosure 
policies? Why do SSOs adopt policies that may lead to incomplete 
disclosure of relevant patents, for instance by excluding patent 
applications from disclosure or by not requiring members to search 
their patent portfolios?
     When SSO policies create a potential for incomplete 
disclosure of members' patent rights, how else can members protect 
themselves against hold-up?
     When have SSO patent disclosure policies been reviewed or 
amended? What prompted those reviews? What were the results of the 
     Are there mechanisms for an SSO to encourage disclosure of 
relevant patents or patent applications held by nonmembers?
     What ambiguities concerning the scope of a disclosure 
requirement exist in SSO disclosure policies? Why do they persist? 
Would more clarity be beneficial in preventing patent hold-up?
     What principles apply in judging whether a patent holder's 
conduct before an SSO is deceptive? What is the role of the SSO's 
patent disclosure policy in judging whether conduct is deceptive or 
     Does non-disclosure or lack of information about relevant 
patent rights subvert the competitive process of selecting technologies 
for standards or undermine the integrity of standard-setting 
activities? How?

The RAND Licensing Commitment

     Is a RAND commitment part of an enforceable contract 
between the SSO and the patent holder? Between the SSO members and the 
patent holder? Should non-members of the SSO who wish to use the 
standard be able to enforce the commitment?
     Do RAND licensing commitments without accompanying 
disclosure commitments provide adequate protection against patent hold-
     Has any SSO provided guidance on how ``reasonable'' and 
``non-discriminatory'' licensing terms should be judged for a RAND 
commitment? What is that guidance? Why do SSOs not provide more 
definition of RAND?
     Absent an SSO's definition or express limitations given by 
the patent holder in its commitment, by what standards should 
``reasonable'' and ``non-discriminatory'' be determined? What 
principles should a court or tribunal look to in resolving a dispute 
between a potential licensor and licensee concerning whether proffered 
terms are RAND?
     What evidence may be relevant in determining whether a 
proffered license is reasonable and non-discriminatory?
     Should a RAND commitment preclude a patent holder from 
demanding from users of the standard a cross-license for patents that 
are essential to practice of the standard? A license of nonessential 
     If a patent holder that has given a RAND commitment enters 
into cross-licenses with some standards users, how should these be 
evaluated for purposes of determining whether terms it offers others 
are non-discriminatory?
     Should a RAND commitment preclude a patent owner from 
seeking in

[[Page 28038]]

patent litigation a preliminary injunction against practice of the 
standard? A permanent injunction? An exclusion order in the 
International Trade Commission? How should courts and the ITC take a 
RAND commitment into account in these contexts?
     Under what circumstances should a RAND commitment given by 
a patent holder bind later owners of the patent? What steps can or 
should SSOs take to ensure that a transferred patent remains subject to 
a prior RAND commitment?
     Does reneging on a RAND commitment subvert the competitive 
process of selecting technologies for standards or undermine the 
integrity of standard-setting activities? How?

Ex Ante Disclosure and/or Negotiation of Licensing Terms

     What has been the experience of those SSOs that require or 
allow ex ante disclosure of licensing terms? How frequently do ex ante 
disclosures of licensing terms occur? Why are ex ante disclosures of 
licensing terms not required or made?
     How frequently do ex ante bilateral negotiations of 
licensing terms occur?
     How frequently do ex ante multilateral negotiations of 
licensing terms occur? How are such negotiations conducted?
     What factors affect a firm's decision to engage in, or not 
engage in, ex ante discussions or negotiations?
     How does a patent owner's ex ante disclosure of licensing 
terms affect the process of choosing technologies for incorporation 
into the standard?
     How do ex ante discussions or negotiations of licensing 
terms affect the process of choosing technologies for incorporation 
into the standard?
     Has experience shown a difference between terms negotiated 
ex ante and terms negotiated ex post?
     To what extent do concerns about antitrust liability deter 
ex ante disclosure or negotiation of licensing terms?
     What considerations should shape a rule of reason analysis 
of joint ex ante license discussions or negotiations?

Instructions for Filing Public Comments

    Interested parties are invited to submit written comments 
electronically or in paper form. We must receive your comment by July 
8, 2011. Because paper mail addressed to the FTC is subject to delay 
due to heightened security screening, please consider submitting your 
comments in electronic form. Comments filed in electronic form should 
be submitted using the following Web link: https://ftcpublic.commentworks.com/ftc/standardsproject (and following the 
instructions on the Web-based form). To ensure that the Commission 
considers an electronic comment, you must file it on the Web-based form 
at the Web link: https://ftcpublic.commentworks.com/ftc/standardsproject. If this notice appears at http://www.regulations.gov/#!home, you may also file an electronic comment through that Web site. 
The Commission will consider all comments that regulations.gov forwards 
to it. You may also visit the FTC Web site at http://www.ftc.gov to 
read the notice and the news release describing it.
    Comments should refer to ``Patent Standards Workshop, Project No. 
P11-1204'' to facilitate the organization of comments. Please note that 
your comment--including your name and your State--will be placed on the 
public record of this proceeding, including on the publicly accessible 
FTC Web site, at http://www.ftc.gov/os/publiccomments.shtm. Because 
comments will be made public, they should not include any sensitive 
personal information, such as any individual's Social Security Number; 
date of birth; driver's license number or other State identification 
number, or foreign country equivalent; passport number; financial 
account number; or credit or debit card number. Comments also should 
not include any sensitive health information, such as medical records 
or other individually identifiable health information. In addition, 
comments should not include ``trade secret or any commercial or 
financial information which is obtained from any person and which is 
privileged or confidential'' as provided in Section 6(f) of the Federal 
Trade Commission Act (FTC Act), 15 U.S.C. 46(f), and FTC Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 

    \3\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 

    A comment filed in paper form should include the ``Patent Standards 
Workshop, Project No. P11 1204'' reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission, Office of the Secretary, Room HB113 (Annex 
X), 600 Pennsylvania Avenue, NW., Washington, DC 20580. The FTC is 
requesting that any comment filed in paper form be sent by courier or 
overnight service, if possible, because U.S. postal mail in the 
Washington area and at the Commission is subject to delay due to 
heightened security precautions. The FTC Act and other laws that the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC Web site, to the extent practicable, 
at http://www.ftc.gov/os/publiccomments.shtm. As a matter of 
discretion, the FTC makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC Web site. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

    By direction of the Commission.
Donald S. Clark,
[FR Doc. 2011-11704 Filed 5-12-11; 8:45 am]