RE: [PP-DIALOG] Definition of Reasonable Rates
1. Does the IEEE need to define reasonable rates, terms and conditions?
Defining reasonable rates, terms and conditions as set forth by Don is
helpful to clarify the intent of IEEE members when they provide a patent
declaration. That said, the definition would take on greater meaning if
adopted in conjunction with the other proposed changes to the IEEE patent
policy.
Don's definition taken together with the other proposed changes to the IEEE
patent policy would effectively promote the broad acceptance and adoption of
IEEE standards by reducing opportunities for abusive patent holdup conduct
after a standard has been adopted.
Adopting a definition of reasonable rates, terms and conditions is one step
towards IEEE adopting a more transparent process that provides critical
information and assurance to prospective adopters of IEEE standards.
However, more is needed because the definition, standing alone, does not
provide specific information about the license terms under which the
patented technology will be offered to implementers of IEEE standards. This
information is critical in developing or implementing an IEEE standard.
As we know from practice, patents and their license terms (including
royalties and other non-financial terms) are frequently not known until
after the standard is adopted and after a prospective licensee signs a
confidentiality agreement.
It is difficult to ascertain whether rates, terms and conditions are
reasonable and how they might impact the acceptability of IEEE standards
when the rates, terms and conditions are not disclosed until after an
implementer has invested substantial R&D, the market locks-in to the
standard, and the rates, terms and conditions are provided only after an
agreement of confidentiality is signed.
Don's proposed definition and the proposed policy changes that would
facilitate early disclosures of actual license terms would advance standards
practice by providing essential information about the costs and other
burdens that are associated with licensing patented technology included in
an IEEE standard.
Don's definition and information related to costs and other license terms
related to patented technology could provide valuable guidance to the
standards development working group in its consideration of whether to find
another like-kind technical solution or to accept the standard burdened by
the patent. Don's definition could also be used in patent litigation as
evidence of how IEEE and its members define reasonable monetary and other
patent license terms.
Therefore, Don's suggestion to define reasonable rates, terms and conditions
is a positive step towards resolving the uncertainty that flows from
undisclosed patents and their license terms.
1a. Is this definition defined in case law?
The definition of reasonable rates, terms and conditions takes into
consideration case law and recent economic analysis (see examples set forth
in Scott Peterson's response dated January 25, 2006).
1b. Should this be defined identically for all US SDOs?
Each SDO is created to provide technical standards for a particular field.
As such, each SDO may require individual and unique rules to satisfy the SDO's
industry needs. The standards field is not a one-size-fits-all field.
Therefore, decisions are best left to the organization.
1c. Is letting each judge in each court in each case define it really a
workable solution?
Courts in deciding cases look at many factors. Courts and juries are not
predictable. Due to the nature of litigation, it begs SDOs to have policies
that are unambiguous, clear and definite. Courts will look to the SDO
policies to understand the behavior required of SDO members when deciding
standards related litigation. If we recall the Rambus case (Rambus v
Infineon, 318 F.3d 1080), the Court faulted JEDEC for having vague and
ambiguous rules. IEEE, through Don's definition and the other proposed
policy changes, is simply trying to provide the clarity and certainty that
the Federal Circuit in Rambus stated was lacking in the JEDEC rules.
2. If the IEEE does define it, what should the definition be?
The proposed definition of reasonable rates, terms and conditions is good.
It supports issues under consideration by courts, the FTC, economists (see
examples set forth in Scott Peterson's response dated January 25, 2006) and
DG Competition.
- Catherine