February 6, 2013

Limiting the abuse of market dominance by standards-essential patents

By Antoine Dore

Standards serve the public interest in a variety of ways by increasing product quality and consumer choice, offering products an entrance to global markets, bringing costs down for vendors and consumers, and acting as fundamental tools to enable the interoperability of ICT networks and devices.

Licensing of standards-essential patents (SEPs) on reasonable and non-discriminatory (RAND) terms is a cornerstone of the standards development process.

The reasoning behind RAND is that it incentivizes the inclusion of cutting-edge patented technology in technical standards, while also ensuring that the holder of a standard-essential patent cannot abuse the dominant market position it gains from widespread adoption of a voluntary technical standard.

In recent months, competition authorities – particularly in the US and Europe – have raised serious concerns regarding the increase in standards-related patent litigation in the mobile and video industry as well as the possible use of SEPs to exclude competitors from a market.

Regulators have also expressed concerns regarding the possible use of SEPs to pressure standards implementers into accepting higher royalties in bi-lateral licensing negotiations – also referred to as patent hold-ups – an act which undermines the aims of RAND to the disadvantage of standards implementers, hurting the consumers ultimately shouldering these higher costs.

Policy Statement on Remedies for Standards-essential Patents Subject to Voluntary F/RAND Commitments from the United States Department of Justice (DoJ) and the United States Patent and Trademark Office (USPTO), provides a lucid explanation of the relationship between patents and voluntary consensus standards.

The statement outlines the risks associated with collaborative standards setting and RAND licensing commitments, seeking to answer the question of whether injunctive relief in judicial proceedings or exclusion orders is properly issued when a patent holder seeking such a remedy asserts standards-essential patents that are encumbered by a RAND or FRAND licensing commitment.

The DoJ and USPTO conclude that the issuance of an exclusion order in the case of RAND-encumbered patents may harm competition and consumers by degrading one of the tools SDOs employ to mitigate the threat of such opportunistic actions by the holders of F/RAND-encumbered patents that are essential to their standards.

It qualifies this statement by saying that public interest factors would not always counsel against the issuance of an exclusion order to address infringement of a RAND-encumbered SEP but urges that in the case of SEPs, money damages, rather than injunctive or exclusionary relief, are most often the appropriate remedy for infringement.

It is worth recalling the context of these so-called “patent wars”.

Some ICT industry players have argued that exclusion orders or product bans are not compatible with promises made by SEP holders to grant licenses to all implementers under RAND conditions.

Conversely, other companies have argued that imposing limitations on the right of these SEP holders to enforce their intellectual property rights would deter them from participating in the standardization process and limit access to new technology.

It is also being argued that such a limitation would be highly detrimental to the standards ecosystem as it would tilt the balance in favour of implementers.

ITU’s approach

ITU’s Telecommunication Standardization Sector (ITU-T) is the world’s only truly global standards body.

From its inception in 1865, ITU-T has driven a contribution-led, consensus-based approach to standards development in which all countries and companies – no matter how large or small – are afforded equal rights to influence the development of ITU-T Recommendations.

ITU’s Patent Policy and related Guidelines is our main tool to manage the challenges associated with the incorporation of patents in standards.

These instruments ensure that no IPR holder is placed in a position to stop others from complying with ITU standards, and mitigate patent hold-ups and other similar behaviour.

Standards development does an immense service to the public interest, protecting the standardization ecosystem, clarifying its patent policy, and limiting abuse of the system is a key priority to ITU.

In this spirit ITU organized a high-level Patent Roundtable, on 10 October 2012, to examine the effectiveness of RAND-based patent policies and to explore possible solutions to the challenges posed by the interplay between the standards and IPR systems.

The outcome of the Patent Roundtable saw a group of experts, the TSB Director’s Ad Hoc IPR Group, mandated to begin work on a recommendation aimed at providing high-level principles clarifying the meaning of “reasonable” and the issue of injunctive relief in the RAND context.

The group has met twice since the roundtable;  11-12 October 2012 and 24-25 January 2013. The Group will meet again 21-22 March and 25-26 April 2013.

A video message from the TSB Director to the Ad-Hoc Group on IPR can be viewed here.

Antoine Dore is a telecom lawyer and Senior Legal Officer at the ITU. Antoine is frequently called on to provide legal advice on policy questions involving IPR issues, notably in the context of ITU’s standardization activities. Prior to joining ITU, Antoine worked in a large Canadian law firm specializing in commercial and corporate law.
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Limiting the abuse of market dominance by standards-essential patents

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