George T. Willingmyre, P.E., President, GTW Associates1
The article Standards, Intellectual Property Rights (IPRs) and Standards-Setting Process2 currently on the WIPO website provides a solid foundation for its main conclusion: “Whether your company holds patents (or has filed patent applications) that may potentially become essential or useful for meeting a standards or whether your company intends to manufacture products or deliver services that comply with a given standard it is advisable to become familiar with the IPR or patent policy of the relevant Standards Development Organization (SDO).”
The case studies presented in this article illustrate practical problems that have occurred or describe developments with broad implications for IPR polices in standards setting.
The Rambus- JEDEC-US FTC case is the greatest recent stimulus for standards bodies to review and reconsider the adequacy of their IPR polices and procedures
Rambus Inc. licenses chip designs used to speed up computer memory systems. Rambus first sued Infineon, claiming Infineon infringed on certain Rambus patents in the design of some of its computer memory products. In May 2001, a jury of the U.S. District Court for the Eastern District of Virginia ruled that Rambus committed fraud against Infineon by failing to properly disclose patent information when required by an industry standards body.3 The jury verdict stemmed from a counterclaim Infineon made against Rambus, alleging the company failed to disclose to an industry committee, called JEDEC, that it had applied for patents on certain memory-chip design elements even while it was participating in drafting a standard of JEDEC. 4 On January 29, 2003, a three-judge panel of United States Court of Appeals for the Federal Circuit overturned the Jury's verdict against Rambus and the trial judge's decision upholding the verdict. In a 2-1 decision, the majority of the panel rejected JEDEC's patent disclosure rule as too "amorphous" and "unbounded."
The JEDEC Solid State Technology Association is a standard-setting body (established under the auspices of the Electronic Industries Alliance or “EIA”), which adopts standards and specifications for semiconductor products including DRAM chips and other memory devices. A US Federal Trade Commission Complaint filed in June 2002 charged Rambus with deceiving JEDEC regarding Rambus’ patent rights, in violation of JEDEC goals, policies, rules and procedures, thereby allowing Rambus to obtain monopoly power over technology covered by JEDEC standards.
However, an Administrative Law Judge dismissed the complaint in February 24, 2004. The Judge concluded Rambus’ conduct did not amount to deception or violation of extrinsic duties, that there was no causal link between JEDEC standardization and Rambus’ acquisition of monopoly power, and that the challenged Rambus conduct did not result in anticompetitive effects. The Judge’s dismissal is on appeal to the Commission. As noted below, many standards organizations are currently revising their procedures because of concerns that their current procedures would not protect against actions similar to those of Rambus by participants in the future.
The Unocal case involves IPR in setting mandatory technical regulations
The Unocal case involves a government standard setting entity, the California Air Resources Board (“CARB”)5. In 1988, CARB was directed by the California legislature to adopt low emission fuel standards. A Federal Trade Commission’s (FTC) complaint alleged that Unocal participated in the CARB standard setting process to determine the best technology to lower emissions in gasoline and “engaged in a pattern of bad-faith, deceptive conduct, exclusionary in nature, that enabled it to undermine competition and harm consumers.” The complaint further alleged that “[b]ut for Unocal’s fraud, CARB would not have adopted RFG [reformulated gasoline] regulations that substantially overlapped with Unocal’s concealed patent claims.” The matter remains open at FTC. The Unocal case illustrates that while voluntary standards-setting processes contain procedures for requiring holders of IPR to disclose all relevant information that is deemed essential to implement a standard, this is not the general case with respect to the setting of mandatory technical regulations in the United States.
How may competing standards activities interact with one another?
Two groups, HD/DVD (NEC/Toshiba) and the Blu Ray Group (Sony and Matsushita), are competing to create a standard for the format for high definition video. The DVD Forum, including more than 200 companies, endorsed the HD/DVD specifications. However, Blu-Ray was accused of preventing HD/DVD from becoming the standard. Early in 2004, the US Justice Department began investigating Blu Ray for allegedly acting in concert to impede the forum ’s technical progress. Questions arise: Could agreement on a standard be considered an antitrust violation? What tactics are permissible in standards competition for the marketplace? Can one group act in concert with respect to a standards development process to the advantage of another standards activity?
IPR holders in standards may offer one license to make and sell a compliant product or service and a separate license for the use of the product or service
The AVC Patent Portfolio was recently issued by the MPEGLA. The AVC/H.264 license sets conditions for one of the highly competitive and state of the art video compression systems.6 Multiple patents are required to implement the AVC standard. The AVC/H.264 license provides for sublicenses for encoder and decoder manufacturers granting the right to manufacture and sell the equipment and algorithms used for the compression. There is also included a limited right for personal consumer use by or between end users (such as in connection with a video teleconference or mobile messaging). A separate part of the license provides for sublicenses for video content or service providers, granting them the right to use decoders and encoders for other uses of AVC video.
Thus, there is a different license to make and sell a product meeting the standards, from the license to use the product in certain commercial applications. MPEG-LA established the precedent for use fees with the MPEG-2 license, which requires DVD manufacturers to collect a small royalty on each DVD they manufacture that uses MPEG-2 compression.
The announcement of licensing terms for AVC included a proposal that broadcasters pay use fees based on the number of potential viewers in their market. A second pool covering other AVC patents is administered by a second organization “Via Licensing”. The final license is expected to be circulated shortly. It is expected that the Via pool will not propose usage based royalties.
The US Federal Communications Commission action on digital broadcasting in the US offers an example of the treatment of intellectual property rights in regulation setting as well as an example of separate licenses for using the technology
On October 10, 2002, the Federal Communications Commission selected the proprietary iBiquity digital radio In-Band On-Channel (IBOC) technology, which enables digital broadcasting in the AM and FM bands. Following extensive review, the FCC’s decision allows radio stations to begin broadcasting digitally using the iBiquity-developed HD Radio technology. HD Radio technology represents the most significant enhancement to radio broadcasting since the advent of the medium nearly a century ago. The FCC action essentially chose IBOC technology as the approved digital broadcast AM/FM system for the US market.
iBiquity’s HD Radio technology has been designed to work within the current AM and FM spectrum allocations, ensuring consumers will be able to enjoy continued use of their existing analog receivers as well as benefit from the higher quality and additional services offered by the new generation of HD Radio-equipped receivers. iBiquity agreed in having its proprietary technology selected and has stated it will abide by the FCC’s patent policy to license its proprietary technology on reasonable and non-discriminatory terms. The FCC policy states:7
To assure that the availability of broadcast equipment and radio apparatus meeting performance standards established by the Commission’s rules and regulations will not be prejudiced by unreasonable royalty or licensing policies of patent holders. Office publications and records and technical journals will be studied and information of interest will be compiled in the Commission's files. Copies of relevant patents as issued will be secured. The Commission’s staff will ascertain the assignment or licensing arrangements for significant patents either by examination of the Patent Office records or by direct inquiry to the patentee, licensees, or assignees. Whenever it appears that the patent structure is or may be such as to indicate obstruction of the service to be provided under the technical standards promulgated by the Commission, this fact will be brought to the Commission's attention for early consideration and appropriate action.
iBiquity is working with the National Radio Systems Committee to develop a formal industry standard for the technology. iBiquity has offered licenses to broadcasters offering incentives to convert their broadcasting from conventional to digital contact. There is a license fee charged to the broadcaster associated with the IBOC technology.
IPR procedures in standards setting can become matters of global trade concern
In June, 2004, the American National Standards Institute (ANSI) patent group submitted a report to the US government on “Intellectual Property Rights Policies in Standards Development Organizations and the Impact on Trade Issues with the People’s Republic of China.8” The report focused on a proposed Chinese policy requiring adherence to a national standard for WLAN Authentication and Privacy Infrastructure (WAPI). China’s proposed wireless communications policy would have mandated a specific encryption standard that may have locked many U.S. manufacturers out of the expansive Chinese market.
In a positive development following the ANSI white paper and a number of other organizations meeting with officials from China, the Standardization Administration of China recently issued a notice seeking comments on "Regulations on Patent Issues in National Standards”. The notice states: “With the fast growth of the high-tech industry, patents in standards are becoming a serious issue. In order properly to handle patent issues relevant to standards, to regulate the establishment of national standards, to promote the adoption of new technology in national standards, to protect patent owners and the public interest, and to ensure the effective implementation of national standards, the SAC has drafted "Regulations on Patent Issues in National Standards version for comment.” (Unofficial English tanslation by USITO)"
IPR policies around the world are in flux. A one-size-fits-all global IPR policy is not the answer, but companies must be vigilant in understanding the implications of the IPR policies of the standards organizations in which they participate
Returning to the conclusion of the paper onStandards, Intellectual Property Rights (IPRs) and Standards-setting Process9, that “whether your company intends to manufacture products or deliver services that comply with a given standard it is advisable to become familiar with the IPR or patent policy of the relevant SDO,” the very practical challenge becomes trying to do so in a logical and consistent manner. The IPR policies of various organizations are different one from another and, more importantly, are now in considerable flux as the policies are adapting to the new governmental and legal attention created by the court cases and government attention described above. One helpful reference for the IPR policies of a number organizations isIntellectual Property Rights Policies of selected standards developers10 Another helpful reference of a similar nature is Criteria for the Evaluation of a patent policy for a Standards Setting Organization.11
The Technical Standardization and Infrastructure Committee of the Science and Technology Section of the American Bar Association held a meeting in August 2004 that could well make a strategic contribution to the problem within the next year.12 The Committee seeks to improve the development of solutions to policy issues having a mixture of legal and technical factors. The Committee will develop principles and practical guides towards better solutions generally. These may include policy approaches to finding the right balance or changes in the law applicable to standards development and use with a view to supporting the creation of more effective solutions. During a recent meeting the committee reached consensus upon: 1) a need for clearer SDO disclosure policies; 2) that significant disputes arise with increasing frequency within SDOs concerning policy language, and 3) that ambiguous policy language increases litigation costs. The committee is a promising “neutral” body identify and catalog "policy-neutral" clauses that can be used by SDOs when implementing their own policy choices.
2 Standards, Intellectual Property Rights (IPRs) and Standards-setting Process at: http://www.wipo.int/sme/en/documents/pdf/ip_standards.pdf
8 ANSI White Paper “Intellectual Property Rights Policies in Standards Development Organizations and the Impact on Trade Issues with the People’s Republic of China, at http://public.ansi.org/ansionline/Documents/News%20and%20Publications/White%20Papers/China%20IPR%20PaperFinal.pdf
10 Intellectual Property Rights Policies of selected standards developers at: http://www.gtwassociates.com/answers/IPRpolicies.html.
11 Criteria for the Evaluation of a patent policy for a Standards Setting Organization at http://www.gtwassociates.com/answers/draftIPRcriteria.htm