Role Reversal: A Step Toward Resolving IP Disclosure Problems By Establishing an SSO Search Policy

Article by Therese A. Hendricks and M. Lawrence Oliverio

This paper was presented at the LawTech 2002 Conference on November 7, 2002

Standards-setting organizations (SSOs) play a key role in developing and advancing technology in today's high-tech industries. However, potential SSO participants face a legal morass of uncertain liability and threats to intellectual property rightshurdles that inhibit participation and slow overall innovation. While many innovative companies want to join SSOs to advance technology through industry cooperation, they often hesitate because joining imposes unclear patent-disclosure obligations and risks.

Although the disclosure policies of individual SSOs vary in detail among organizations, most require mandatory or voluntary disclosure of any patents essential to a proposed standard and the agreement to license the patent on either a reasonable and nondiscriminatory (RAND) or royalty-free (RF) basis.1 When participants have failed to follow the disclosure policy, competitors have looked to the courts for redress because the SSOs have no enforcement power.2 A spate of private lawsuits and Federal Trade Commission (FTC) charges have applied legal theories such as equitable estoppel, implied licensing, monopolization, unfair competition, and fraud to these disclosure deficiencies.3 The courts and FTC have imposed remedies from compulsory licensing to the refusal to enforce a patent.4 No case, however, has clearly established a rule for when and how participation in an SSO leads to potential loss of intellectual property rights. Critics of vague SSO disclosure policies have called for government action,5 FTC guidelines,6 or stricter policies7 to eliminate doubt.

This paper proposes a new policy based on an apparent role reversal: SSOs should themselves take responsibility for performing patent searches, eliminating their reliance on the willing disclosure by participants. The SSOs should then review the results and, as in the past, resolve any patent conflicts by requiring a patent holder to agree to RAND or RF licensing of the patent. Such a clear-cut approach will increase the scope and timeliness of discovered patents and eliminate the risk and ambiguity for potential SSO participants. As a result, companies will increase their participation and SSO's will return their focus to the creation and recommendation of standards.

There are currently hundreds of SSOs operating in the United States, as well as many international organizations.8 On average, at least one new consortium is formed every two weeks in the IT industry.9 Part of the confusion surrounding the liability associated with participation in these groups arises from differences among their disclosure policies. For example, ANSI-approved organizations follow ANSI's patent policy, which encourages, but does not mandate, early and voluntary disclosure of potentially essential patents to a developing standard.10 Only if ANSI receives notice from a patent holder or a third party that a standard might be subject to a patent does it then require the patent owner to make a statement disclaiming that it owns any essential patents or, alternatively, agreeing to license the patent on RAND or RF terms.11 Less formal consortia like JEDEC, on the other hand, are far stricter regarding disclosure and generally have policies that impose a mandatory duty to disclose essential patents and to license these patents on a RAND or RF basis.12 The World Wide Web Consortium (W3C), for example, has a mandatory disclosure policy for anyone with knowledge of likely essential claims. Further, its licensing "goal" is that it will not approve a recommendation if it knows of essential claims not available on RF terms.13 This spectrum from RAND to RF and mandatory to voluntary confuses courts and participants alike.

Proponents of the ANSI approach argue that the current system functions well and imposes no legal obligation as a result of participation.14 However, recent decisions seem to contradict this notion and heighten the blurring between policies.15 In addition, more companies are joining the informal consortia instead of ANSI organizations because of perceived quicker results and less need for procedural navigation, supporting the impression that their mandatory approach may become the norm.16 Finally, the wording of these policies is often vague and leaves many questions unanswered. For example, at what stage of the standards-development process must a patent owner disclose the patent? How does a patent owner determine what is essential and what is merely valuable to a standard?17 Should patent applications as well as patents be disclosed? And is disclosure limited to an individual's knowledge, or is there an expectation that each participant will perform a search of his company's patent portfolio?18 Some industry observers suggest that drafting tighter, more specific policies that address these gray areas will backfire and create a legal net that will trap SSO members or chill participation in these organizations.19 To avoid this result, a better approach entails eliminating the questions altogether.

Under the proposed SSO search model, SSOs would conduct searches of issued patents and published applications as soon as the need...