|
I beg the list members indulgence and understand
this IP topic may be the responsibility of some other IEEE
committee. I hope it is worth a short report sometime during the
series of IEEE meetings next week.
The IETF IPR WG is currently focused on IP ownership and use
of contributions and workproducts of the IETF process. At the meeting of
the IPR WG http://www3.ietf.org/proceedings/06mar/agenda/ipr.txt
Tuesday was mentioned that certain IP issues arose when some
IETF activity involving "Mibs" was proposed to be handed over to IEEE for
future maintenance. Can someone share the IEEE side of this proposed handoff
from IETF to IEEE and what were the IP concerns of the IEEE?
Below is the relevant section of the IETF working document
concerning "Derivative works"
1.4 Derivative Works
Currently the IETF obtains
from Contributors the right to prepare
derivative works of their
Contributions within the IETF Standards
Process. This is
done in RFC 3978 Section 3.3 (a) (C). The IETF
Trust
should modify that paragraph in Section 3.7 to grant the IETF
Trust the ability to authorize the preparation of derivative
works
without limiting such development to the IETF Standards
Process.
Such a paragraph would not, by itself, grant any
additional
permissions outside of the IETF, but would empower
the IETF Trust to
authorize the development of derivative works
outside of the IETF
Standards Process. One example of
where the IETF Trust might grant
such a right is the case where
another standards development
organization (SDO) wants to update
or extend an IETF technology
(which would normally be done by
the SDO sending their requirements
to the IETF) but the IETF no
longer has a working group focused on
the particular technology
and the IETF does not have the interest to
create a new working
group
----- Original Message -----
Sent: Wednesday, March 22, 2006 10:18
PM
Subject: Re: [PP-DIALOG] Application of
per se rule to ex ante joint conduct
Michelle: I represent the IEEE. As
recently as this month, I have fielded questions from IEEE participants on how
they, as engineers, can make cost-benefit comparisons between competing
technology proposals if they don't know the "cost" side of that equation --
including the likely (or at least the announced maximum) royalty and other Ts
&Cs. That is not to say that they want to debate whether the terms
are fair, or whether (consistent with a RAND commitment) their
company can get better than the announced maximum. It is just to
say, taking the patent-holder at its word, is the perceived comparative
benefit worth the comparative cost.
The
proposal now on the table is intended to facilitate the process by permitting
patentholders to make the unilateral decision to disclose the maximum terms
that they will require, and to do so in a manner that permits those using the
information to know that it is binding and can be relied upon. I
find it difficult to get too excited about the legal risk where the maximum
"agreement" at issue is an "agreement" (if that's what it is) that
participants will hear what people have to say, should they choose to say
anything, and make the same kinds of decisions that they have to make today,
but with better (or at least less imperfect) information.
Gil
and Bob have pointed to the primary sources of antitrust enforcers' views on a
patentholder's unilateral disclosure of terms, and Richard has made the
fair point that the enforcers also spoke about "joint discussion" and joint
negotiation -- topics that are not on the table today. Moreover, as was
stated at the February meeting, the IEEE currently expects to seek a business
review letter from the FTC or DOJ, which would provide very specific
antitrust-enforcement guidance based on the proposal as described.
As
to the point (elsewhere in this discussion thread) that the IEEE should avoid
legal risk for fear that the rules might change again, and to the extent that
the business-review process does not allay that concern, let me put it this
way. Like everyone else in this vale of tears, the IEEE faces all manner
of risk, both business and legal, and yes, we must always be mindful that the
nature and degree of legal risk can change over time. But we can't very
well ignore the real risks of today based on fear that we might
see the return of the "Nine No-Nos" (or, heaven forfend,
disco, leisure suits, and other artifacts
of the 1970s).
Of
course it is important to consider the entirety of Chariman Majoras's
comments, which recognized the continuing potential for
anticompetitive effects arising from ex ante
conduct.
Thus, she stated that "joint ex ante royalty discussion that are
reasonably necessary to avoid hold up do not warrant per se
condemnation. Rather, they merit the balancing undertaken in a rule of
reason review." (at page 7) Accordingly, "[i]t may . .
. be appropraite to consider whether joint ex ante royalty discussions
are reasonably necessary to mitigate hold up." (at page 9) This
remains important because "joint ex ante royalty discussions, of
course, can offer an opportnity for SSO members to reach side price-fixing
agreements that are per se illegal." (at
10)
Moreover, as Chairman Majoras stated, "'[h]old up' by no means is
invevitable. For example, if the chosen standard has to compete with
rival standards, the owner of the SSO's chosen technology may end up with
little market power. If users can respond to a supra-competitive
royalty rate by defecting to a rival standard, the patent holder will find
itself unable to obtain anything more than the competitive price. . .
. Moreover, even if an intellectual property owner can obtain a
royalty rate higher than those of other technology owners, members of the
organization that chose the standard are not necessarily being held
up. The higher royalty rate may be explained by the superiority of its
technology. That is, its peerless technology - developed through
'superior skill, foresight, and inudstry' - may explain the ability to
charge a premium." (at 3) Accordingly, policies
that require joint royalty determinations may find no support for
antitrust purposes based upon a hold up
theory.
Further, Chairman Majoras recognized that "even absent antitrust
concerns, SSO members may refrain from such discussions for business reasons
alone." (at 11) "Thus," she made clear, "by pointing out the
potential for joint ex ante royalty discussions to mitigate or eliminate the
hold-up problem, I don nto mean to suggest that such discussions in SSOs are
required. I simply offer my view that conducting legitimate joint ex
ante discussions does not warrant per se condemnation." (at
12.)
Then Assistant Attorney General Pate also identified the balance
that is needed in this area. He commented that "[t]here is a
possiblity of anticompetitive effects from ex ante license fee negotiations,
but its seems only reasonable to balance that concern against the
inefficiencies of ex post negotiations and licensing hold up. . .
. . Barriers to discussing licensing rates may not be enitrely
law-related. Some standard setting participants do not want the
distraction of considering licensing terms. Engineers and other
tecnical contriubtors may prefer to leave the lawyers at home and limit
idscussions to technical issues alone. So there may be powerful
incentives to keep the status quo." (at 9-10)
So, it may just be a truism that more information early in the
process is good, and as Bob suggests I don't think either the FTC or DOJ
would object to that. Once you go past that point, however, the issues
become a lot more complicated and both Chairman Majoras and then Assistant
Attorney General Pate were careful to acknowledge the balance and
consideration of issues that needs to be undertaken even if the discussion
is focused solely on antitrust issues and avoids all of the other practical
issues
entirely.
Richard S. Taffet, Esq.
Bingham McCutchen LLP
399 Park Avenue
New York, New York
10022-4689
T: (212) 705-7729
F: (212) 702-3603
email: richard.taffet@bingham.com
cell: (914) 582-2477
Michelle, Gil's reference to FTC
Chairman Majoras's Sept. 2005 speech is also responsive to your inquiry in
a subsequent Saturday email asking for "specifics where enforcement
agencies support more material information in standards-setting" including
"upfront material license terms . . . ." As Chairman Majoras observed in
that same speech, "if owners stated their royalty rates upfront, then
price could become part of the competition among technologies for
incorporation into the standard." She more generally sought in that speech
to knock down unwarranted antitrust concerns that have "unduly prevented
announcements of pricing intentions . . . that may, in fact, provide
procompetitive benefits."
Three months earlier,
then-Assistant Attorney General Hew Pare, Chief of DOJ's Antitrust
Division, gave his own speech along the same lines. He noted, for example,
that "a difficulty with RAND . . . is that the parties tend to disagree
later about what level of royalty rate is reasonable"; he recognized how
ex ante disclosures and indeed even ex ante negotiations over royalty
rates could address that problem; and, in response to some expressed
antitrust concerns over such steps, he observed that "[i]t would be a
strange result if antitrust policy is being used to prevent price
competition."
Gil's note provides the
website for Chairman Majoras's speech. The website for Assistant Attorney
General Pate's speech is as follows:
Hi Michelle,
Thank you for your thoughtful questions. I
have tried to respond in-line below.
Gil
Ohana
Director,
Antitrust and Competition
Cisco
Systems, Inc.
300 E.
Tasman Drive
MS
10/2
San Jose,
CA 95134
United
States of America
Phone: +1
408 525 2853
Mobile: +1
408 203 5301
E-mail:
gilohana@cisco.com
I've seen conflicting positions in this
dialog about the voluntariness of disclosure of terms. It leaves
me confused what is expected policy. The package of proposals
appear designed to not only provide licensing position options under an
LOA, but an assurance of guaranteed commercial prices and licensing
terms in advance of the standard being available to the general public.
If these proposals move IEEE to a regime that requires licenses or
mandates an assurance of a license or blanket license as a condition of
participation or contribution, IEEE may want to have outside counsel
advise it further about imposing that type of policy agreement.
I believe that the rules changes being proposed
for consideration by PatCom only provide for the assurance of commercial
prices and licensing terms as one option that a participant that
contributes what it believes are essential patents may provide. As
a supporter of the changes, the way I see them working is that the other
participants will draw their own conclusions from the choice that their
fellow participant makes. Some of them may be more inclined to
vote in favor of the inclusion of a particular technical contribution in
a final IEEE standard if they are assured in advance that the technology
will be available to them on set terms. For others the existence
of a detailed licensing commitment may matter less.
I will let IEEE comment on
the legal advice it may have received from IEEE counsel. As you
may be aware, there have been a number of recent statements from US and
European competition authorities that have expressed the view that, to
quote FTC Chairman Deborah Majoras, “a
patent holder’s voluntary and unilateral disclosure of its maximum
royalty rate … is highly unlikely to raise antitrust scrutiny."
(Chairman Majoras' speech is available at http://www.ftc.gov/speeches/majoras/050923stanford).
I assume that this and other pronouncements by the Justice Department
Antitrust Division, the Federal Trade Commission, and the European Union
have given IEEE's antitrust counsel comfort with the proposed rules
changes, but again, they can speak for
themselves.
I would also like to know how voluntary
disclosure will work in practice:
> Will IEEE expect
and request or call for public disclosure of confidential rates/terms
from members?
> Will IEEE allow its work groups to take any
negative presumptions without disclosed terms? How is that voluntary?
> Can IEEE PatCom reject the terms if they don't satisfy some
criteria it determines appropriate?
> Rates are much more
complicated than fixed lumpsum fees. How will maximum rates be
useful to IEEE process? Will they mislead rather than clarify?
On the first question, it is not at all unsual for
patentholders to disclose a licensing program including detailed
terms. Once disclosed, of course, those terms become
non-confidential. Also, to go back to an earlier point, the
disclosure of terms is only one option that a patentholder may
choose. If it wishes to keep its detailed tersm confidential, it
is free to check the RAND box and invite questions from licensees
regarding its terms.
As to "negative
presumptions" that working groups may draw from a failure of a
patentholder to disclose terms, my view is that individual participants
may well draw a negative presumption. In the situation in which
there are two substitute technologies competing for inclusion in a
standard, the fact that one of the submitters has disclosed concrete
licensing terms may be seen by other participants as a reason, all other
things being equal, to favor that technology. In my view, that's a
good thing.
On your question regarding IEEE PatCom
rejecting terms, I will let the PatCom members speak to this point, but
my understanding is that there is no expectation that the adoption of
the proposed rules changes would change the role of PatCom in reviewing
LoAs, which will remain focused on compliance with the formal
requirements of the IEEE rules, not the substance of particular
LoAs.
As to your last point, I agree that licensing
terms are more complicated than fixed lumpsum fees. My own view,
however, is that more information about licensing intentions, made
available earlier in the standards development process, is better than
less information made available later. We can trust participants
(and the counsel that represent them) to assist in untangling detailed
disclosures.
> Is IEEE promoting licensing terms
through its LOA process by accepting and collecting license rates and
T&Cs?
> If IEEE accepts
by signing the conditional terms under a LOA contract, has it agreed the
terms are acceptable or that it accepts the commercial conditions
offered?
Here too, I will let IEEE speak for itself, but from the
perspective of an observer of IEEE-SA and PatCom, I don't believe IEEE
sees its role as "promoting" particular license terms or Ts
and Cs. Likewise, I don't believe IEEE sees its role as
validating the acceptability (or, for that matter, the
"reasonableness") of proposed terms when it accepts an
LoA.
> It's a simple example Don provides
below, but why do Working Groups want/need to get into the level of the
type of discussion alluded beyond the LOA?
Working groups, and individual members of working groups,
may feel that more information regarding the terms under which
particular essential patents will be provided assists them in making
decisions regarding which technologies to support for inclusion in
a standard. In a world where the only disclosure
permitted is RAND, participants in a working group may feel that they
are being asked to make those decisions without much
information on which to compare alternative technology proposals or
decide whether a marginal feature should be included as
a mandatory part of a standard. This problem is compounded by
the lack of consensus as to what either "reasonable" or
"non-discriminatory" means, and specifically whether a commitment
to license patents on "reasonable" terms in any way constrains a
patentee from charging what the market will
bear.
I agree
that rules against discussion in meetings or development of the standard
must be tight and strongly enforced by IEEE over its participants.
Practically speaking, if terms are being requested to provide
information to IEEE process, how will IEEE/engineer participants avoid
the temptation of discussing them?
We agree that legal risks should be
minimized in IEEE development process to the greatest extent possible.
Participants should be able to expect that more certain, less risk
environment and efficient process. I assume that this is a universal
principal we all share and is not controversial. I don't see that it is
in IEEE interests to discourage participation in development in any way
due to uncertain process or risks of legal exposure.
Recent agency statements regarding the antitrust risks
associated with disclosure of licensing terms may give a more
realistic picture of the antitrust risks that IEEE and participants in
IEEE working groups face from rules that permit disclosure of
licensing terms. As to the desire for mitigation of legal
risk, mitigation of legal risk is certainly one value that is
important in the process of creating standards and commercializing
standards-compliant products. Another value that Cisco and
other companies that participate regularly in standard-setting believe
is important is transparency in standard-setting, so that participants
and other implementers of standards-compliant products know as early as
possible what terms they will need to accept to implement
standards-compliant products. The proposed rules changes
regarding the definition of "reasonable" and the option to
disclose at least a not-to-exceed royalty rate support that
goal.
Thanks,
Michelle
From:
Don Wright [mailto:don@LEXMARK.COM]
Sent: Tuesday, March 14, 2006
5:32 PM
To: PP-DIALOG@listserv.ieee.org
Subject: Re:
[PP-DIALOG] Application of per se rule to ex ante joint
conduct
Amy:
The NEED for the change in
what is now clause 5.3.8 of the SASB Ops Manual will be a part of the
discussion in agenda item 6.2.6. I want PatCom to first decide whether
to recommend allowing for the voluntary disclosure of not-to-exceed
rates before we propose any specific language changes to 5.3.8. I don't
want to waste everyone's time arguing about the word changes there
unless and until PatCom decides to recommend allowing the
disclosure.
I tend to agree with you that the language needs a
little "tightening" especially to insure group negotiation of pricing
does not happen in standards development meetings. On the other hand, I
don't know how we can forbid "discussion" in the meetings because that
might preclude the following:
Party 1: "We've committed to charge
$10,000 to use our patent"
Party 2: "Is that a one time fee, an
annual fee or something else?"
Party 1: "That's a one time
fee."
Is the above a discussion? Many would answer yes. Should it
be forbidden? Personally, I don't think so.
The question then
becomes how to draw the line to allow for the above and other similar
interchanges while not allowing overt negotiation in standards
development meetings.
Should PatCom decide to recommend allowing
disclosure, I will welcome your suggestions for
wording!
***************************************************************************
Don
Wright don@lexmark.com
f.wright@ieee.org / f.wright@computer.org
Director of Standards
Lexmark International Past Chair, IEEE SA Standards
Board
740 New Circle Rd Chair, Patent Committee IEEE
SASB
Lexington, Ky 40550 Member-at-large, IEEE CS
SAB
859-825-4808 (phone) Member, IEEE-ISTO Board
of Directors
603-963-8352 (fax) Member, W3C Advisory
Committee
***************************************************************************
"Amy Marasco (LCA)"
<amarasco@microsoft.com>
Sent by:
PP-DIALOG@ieee.org
03/14/2006 07:43 PM
To: <don@LEXMARK.COM>,
<PP-DIALOG@listserv.ieee.org>
cc:
Subject: RE:
[PP-DIALOG] Application of per se rule to ex ante joint
conduct
Don, will this clause be discussed at the upcoming
PatCom meeting? With all due respect, I am concerned that the wording in
what was ops-manual-clause 5-3-9-v3.doc does not sufficiently delineate
what activity is permitted when and under what rules or parameters. For
example, can proposed licensing terms be discussed at a technical
committee meeting and, if so, what are the procedures governing that
activity?
Many
thanks,
Amy
From:
Don Wright [mailto:don@LEXMARK.COM]
Sent: Tuesday, March 14, 2006
1:44 PM
To: PP-DIALOG@listserv.ieee.org
Subject: Re:
[PP-DIALOG] Application of per se rule to ex ante joint
conduct
Amy, et
al:
If you examine the agenda for the December 5th PatCom Meeting
(http://standards.ieee.org/board/pat/1205patagen.html) and look at the attachment to agenda item 5.3,
you'll find a ZIP file containing a document named
ops-manual-clause-5-3-9-v3.doc. This was proposed to address the issue
of allowing the disclosure of licensing rates but not allowing group
negotiation of those rates at a standards development meeting. PatCom
could decide otherwise at any time but the committee has been heading
toward your (a) item below and not your (b) item.
(BTW: Due to
recent changes made in the Standards Board Operations Manual (http://standards.ieee.org/guides/opman/index.html), that clause is now
5.3.8)
"Amy Marasco (LCA)"
<amarasco@microsoft.com>
Sent by:
PP-DIALOG@ieee.org
03/12/2006 01:24 PM
To: "Skitol, Robert A."
<Robert.Skitol@DBR.COM>,
<PP-DIALOG@listserv.ieee.org>
cc:
Subject: RE: [PP-DIALOG] Application of per se rule to ex
ante joint conduct
I guess I am a little confused by the exchange
of e-mails in this
string. I am wondering if there is any degree of
consensus around the
notion that there is a difference
between:
(a) the disclosure of possible licensing terms (I say
"possible" because
it is likely that not all licensees will end up
with the exact same
license), and
(b) the discussion or
negotiation of such terms as a group under the
auspices of a
standards body or as part of a standards-setting activity.
In
other words, is there any consensus that the PatComm should
continue
to debate the former, but that IEEE should expressly
prohibit the
latter?
My reading of the Hydrolevel case is that
ASME was held liable because
it permitted arguably anti-competitive
conduct under its roof and under
its "apparent authority". Doesn't it
seem that, based on the Hydrolevel
and Golden Bridges decisions, IEEE
as a standards-setting organization
would better protect itself and
its members from possible antitrust
claims by prohibiting group
discussions or negotiations of commercial
licensing terms under its
auspices than by facilitating such activity?
Whatever IEEE
determines are the appropriate parameters, I think that
they should
be spelled out very clearly so that everyone understands
exactly what
activity is permitted under IEEE's rules and what is not.
I suspect
that we can all agree that any ambiguity in this regard would
be
problematic.
-----Original Message-----
From: Skitol,
Robert A. [mailto:Robert.Skitol@DBR.COM]
Sent: Friday, March 10, 2006 9:36
PM
To: PP-DIALOG@listserv.ieee.org
Subject: Re: [PP-DIALOG]
Application of per se rule to ex ante joint
conduct
Richard
conflates the idea of encouraging unilateral disclosure
of material
license information -- the main proposal now before the
IEEE's PatCom
-- with "collective negotiation" and "collusive" conduct
of the kind
alleged in the Golden Bridges case, which nobody is now
advocating
for the IEEE. There is no credible basis whatsoever for
any
suggestion that the unilateral disclosure policy idea now before
PatCom
would increase antitrust risk or any other litigation exposure
to IEEE
or participants therein. To the extent the proposal would
result in
participants' disclosures of more license information
during standard
setting, it would do precisely what (a) Congress
expressly encouraged
SDOs to do in its enactment of the SDOAA two
years ago (see House
Report) and (b) both Assistant Attorney General
Pate and FTC Chairman
Majoras expressly encouraged SDOs to do in
their speeches within the
past year. Numerous published in-depth
analyses (many cited in Chairman
Majoras's speech) confirm the
complete antitrust legality as well as
affirmative desirability of
more meaningful information disclosures
along these lines. I am
unaware of even a single contrary analysis,
published or otherwise,
that even begins to refute the supportive
literature on this subject.
As already noted, both enforcement agencies
endorse the idea of an
unqualifiedly "good" result from more rather than
less material
information being available during a
standard-setting
proceeding.
Richard's suggestion of an
antitrust problem with IEEE's adoption
of a definition of
"reasonable" is equally vacuous. IEEE already
encourages patent
owners to make RAND commitments. How can it suddenly
become
an antitrust problem to explain or clarify what RAND is intended
to
mean for this purpose? Is the world better off with controvery
and
confusion over what RAND means? That is a formula for more
litigation of
the sort that is already burdening IEEE and other SDOs'
standards.
The irony is that, while policy changes of the kind
now under
consideration would entail no new legal risk of any kind,
failure to act
on them would leave unaddressed the all-too-real
existing risk of
abusive patent holdup conduct in connection with
IEEE standards. This is
a reality of the status quo that has already
generated litigation
messes, past and present. No need to get more
specific about them unless
Richard wants to do so. Suffice it to say
that failure to address in any
manner existing conditions enabling
those disputes to have evolved and
enabling more such disputes to arise in the future is nothing
less than
irresponsible.
Instead of chasing antitrust ghosts
boo-hooing about any move
forward, we should worry more about
exposure from (a) continued
collective suppression of highly material
license information during
standard setting; and (b) continued
collective refusal to adopt measures
to prevent anticompetitive
manipulations of IEEE processes. Grounds for
real concern on those
fronts can be found in (a) United States v.
National Society of
Professional Engineers, 435 U.S. 679 (1978); and (b)
American Society
of Mechanical Engineers v. Hydrolevel Corp., 456 U.S.
556
(1982).
-----Original Message-----
From: Taffet, Richard S.
[mailto:richard.taffet@BINGHAM.COM]
Sent: Friday, March 10, 2006 3:32
PM
To: PP-DIALOG@LISTSERV.IEEE.ORG
Subject: Re: [PP-DIALOG]
Application of per se rule to ex ante
joint
conduct
Gil
Thank you for your
comments.
First, it may be that your perspective is focused
narrowly on the agenda
posted for the March 27 meeting. If so, I can
see how you are having
trouble in understanding how the Golden
Bridges decision may have an
impact on discussions at the IEEE
PatCom, and how the decision may cause
some concern even with the
issues that have been teed up for the next
meeting.
However,
we certainly have no control over how the agenda is set, or how
the
PatCom is going to tackle all of the issues that have been
raised
over the past 9 to 10 months. As you commented yesterday,
neither you
nor I have any vote in what the PatCom does, and the
Chair has made it
clear that he is not bound to abide by any
consensus of interested
parties. Accordingly, I think it is very
important for all interested
parties and the IEEE organization to be
sensitive to how specific issues
that might be on the instant agenda
will lead to the discussion of
future issues that have already been
identified and proposed for
discussion. Included in this group of
issues that may be discussed in
the future is a policy that would
have license terms decided by "[a]
group of licensees negotiating
collectively with owners of competiting
technologies." (source: June
2005 submission to DOJ and FTC). As you
pointed out in connection
with that possibility there may be competitive
justifications for
that type of arrangements, but whether there are or
not would not
change the fact that a per se antitrust claim could be
asserted in
connection with such conduct, and depending on the pleading
such a
claim could very easily survive a motion to dismiss, or
applying
the Golden Bridges' type of reasoning a motion
for summary judgment.
So, I think it is reasonable to consider
specific proposals that may be
discussed early in the process for
some reason in the context of the
broader proposals that have been
made and which underlie this effort. I
do not think it is too far of
a stretch to think that there is some plan
to establish positions,
for example in connection with the LoA, that
will then compel policy
changes that might not otherwise be supported if
addressed in the
first instance from a full policy position. Indeed,
the email from
the PatCom chair to Larry Bassuk yesterday, as I
understand it, says
exactly this -- that the LoA is not intended to be
amended to reflect
current policy, but is to be used to drive future
changes in the
policy. I am not sure why it is not a legitimate
comment, as I
believe Larry made, to suggest that this is not a proper
approach,
but the Chair has indicated that he will not entertain
such
discussion. Putting aside whether this procedural step itself,
coupled
with the indication that decisions will not be made based on
a consensus
of interested parties, raises some issues, including as
might be
asserted under an Allied Tube analysis, it does suggest that
there may
be some strategy that is being pursued to progress the IEEE
policy to
include matters not identified on the March 27
agenda.
Included in such later to be addressed issues may be your
proposal for
collective negotiation of license terms. Whether such
collective
negotiations occur ex ante (as I assume you would prefer)
or ex post, it
would seem not to matter for the Golden Bridges'
decision apply.
Similarly, mandatory rate caps, which have also
been proposed and is on
the agenda for the March 27 meeting, may
foster a far greater likelihood
of claims such as is the subject of
the Golden Bridges case. Here, too,
I think you would agree from the
perspective of antitrust counselling
that while justifications may be
offered, the practical fact that even a
rule providing for voluntary
rate caps could lead to uncontrolled
discussions (outside the meeting
room as alleged in Golden Bridges) that
then are implemented in the
meeting to set rates collectively. Again,
the fact that
justifications may exist and that a rule of reason
analysis should be
applied, or that the rule is nominally voluntary, is
not going to
stop a claim from being asserted or the possibility of a
court
rejecting the justifications and application of the rule of
reason.
That risk, which as illustrated by Golden Bridges (as well as
the
Conexant case in which TI prevailed but was still required
to
litigate) is not fanciful or remote.
When viewed in context
the issue of whether to include the definition of
"reasonable rates,
terms and conditions" as proposed, or any definition
of
what reasonable rates and license terms will be, in an LoA also
could
give rise to what may be alleged as a garden variety per se
unlawful
antitrust violation. The proposed definition is particularly
problematic
because it would impose a standard upon patent owners
that is not
supported by law. Notwithstanding that some commentators,
as identified
by Scott Peterson, have discussed that from economists
perspective it is
possible to identify value attributable to a patent
itself and an
additional amount to the fact that the patented
technology is
standardized, this assessment is not universally
accepted, and it is the
very rare commentator that has suggested that
patent owners should be
stripped of the value of their IP based upon
such an analysis. Nor
would this theory apply in each case, as you
have acknowledged, for
example where there is only a single patented
alternative under
consideration for standardization. Such a step,
even in the standards
context, also would be fundamentally contrary to patent
law.
Accordingly, it is certainly conceivable that one could allege
that an
SDOs adoption of such a rule constitutes concerted action
(especially
where consensus is not the basis for the decision).
Moreover, because
the proposed definition only includes selective
factors, and not many
other factors that would be relevant to a full
determination of what a
willing licensor and willing licensee would
agree to at the time of the
negotiations, it could be argued too that
it is equivalent to a price
fixing agreement. Again, the purpose of
this point is not to say that
such a claim would necessarily succeed,
but rather to point out that it
may survive a motion to dismiss. This
may not be a Golden Bridges' type
allegation, but I don't think the
IEEE should be limiting itself to only
those type of antitrust
theories. (This comment also does not address
the fact that in my
view, wearing an SDO hat, this is just bad policy
because it would
impose a rigid definition that is not applicable to
many situations
that arise in the standards process.)
Likewise, although not
related to the Golden Bridges' decision, the
approach of the LoA is
problematic because it could have the exact
contrary effect than I
had thought was intended. Rather than providing
information early in
the standards development process, it could result
in causing patent
owners to wait until the very last minute to disclose
IP and to
submit an LoA. This likelihood is already more probable than
not
because of the fact that any LoA will not be binding and
irrevocable.
The very real problem is that it may be impossible to
identify what
is an "essential patent" until the standard is well along
the way to
being final. Accordingly, unless a patent owner wishes to
give a
blanket license (which as proposed would apply to all
essential
patents whether disclosed or not, which itself reflects a
fundamental
change from the ANSI policy), it runs the risk of having
to make
licensing commitments without even knowing whether its IP is
essential.
If such IP is then subjected to a collective negotiation
of terms or
mandatory rate caps, prices for non-essential competing
patents would be
fixed as would rates for essential patents. I think
you do understand
the potential antitrust risk
there.
Similarly, the proposed LoA's approach to Organizational
Knowledge could
exacerbate these problems, especially for companies
that themselves are
not members, but who's employees are members. How
would the concept of
Organizational Knowledge as proposed even apply
in that circumstance?
Further, how could an employee who has nothing
to do with licensing
issues or his employer's patent portfolio be in
a position to bind his
company, much less affiliates, successors and
assigns?
Further, the proposal to make the LoA binding by having
it signed by the
IEEE also involves antitrust issues. Such a step
clearly would allow
the argument that the concerted action element of
a Section 1 Sherman
Act claim is satisfied, and any anticompetitive
effects achieved through
implementation of the LoAs, especially under
a rule of reason analysis,
would require extensive analysis, and
resulting costs and times.
I hope these comments help you. Please
understand they are not being
offered for any purpose other than to
express what I believe may result
in less efficient, and thereby less
procompetitive, standards
development. These are my views regarding
the standards process, and
should not be ascribed to any particular
company that I may or may not
represent. I hope you take them in that
way, and that you do not think
that they are offered to
counterbalance your positions. I do think it
would be a very bad
result, however, if rules are adopted, no matter how
well
intentioned, that will not accommodate all stakeholders' interests
in
the IEEE type of open standards body, and that will give rise to
even
the prospect of greater litigation risks, to say nothing of
liability
risks. I think this would be especially unfortunate if such
rules are
adopted because of a flawed process or a failure to
consider all of the
very complex variables that exists in standards
development, as well as
in connection with the current state of
technology, competition and
licensing.
Look forward to seeing
you soon.
Richard S. Taffet, Esq.
Bingham McCutchen
LLP
399 Park Avenue
New York, New York 10022-4689
T: (212)
705-7729
F: (212) 702-3603
email:
richard.taffet@bingham.com
cell: (914)
582-2477
-----Original Message-----
From: Gil Ohana
(gilohana) [mailto:gilohana@cisco.com]
Sent: Thursday, March 09, 2006 7:27 PM
To: Taffet,
Richard S.; PP-DIALOG@listserv.ieee.org
Subject: RE: [PP-DIALOG]
Application of per se rule to ex ante joint
conduct
Thanks
Richard. I'm not aware that the issue of royalty caps, which as
we
both know is alive in ETSI, is on the IEEE-SA agenda. I'm also
not
aware that the rules changes that PatCom is being asked to
consider, as
you put it, "rules that will invariably (at least
allegedly) lead to
fixing of license terms by joint conduct." PatCom
is being asked to
consider rules that will give patricipants in
standard-setting and
implementers of IEEE standards more information
about what terms they
will have to accept to practice those
standards. I'm missing how that
leads to "fixing of license
terms."
On your suggestion regarding agenda efficiency and the
views you ask me
to present, all I can say in response is that it was
you, not me, that
posted the Golden Bridge opinion in what could be
seen as an attempt to
raise in the minds of PatCom members the
specter of antitrust risk as a
reason not to favor the ex ante
proposals. Further to my prior postings
in response, perhaps you can
make your reasoning explicit. You are a
leading practitioner that has
been engaged in standard-setting and
antitrust issues since for a
while, and your views would, I'm sure, be
illuminating.
Gil
Ohana
Director, Antitrust and Competition
Cisco Systems,
Inc.
300 E. Tasman Drive
MS 10/2
San Jose, CA 95134
United
States of America
Phone: +1 408 525 2853
Mobile: +1 408 203
5301
E-mail: gilohana@cisco.com
-----Original
Message-----
From: Taffet, Richard S. [mailto:richard.taffet@bingham.com]
Sent: Thursday, March 09, 2006 3:44
PM
To: Gil Ohana (gilohana); PP-DIALOG@listserv.ieee.org
Subject: RE: [PP-DIALOG] Application of per se rule to ex ante
joint
conduct
I certainly agree wholeheartedly with your point
that it is important to
consider how enforcement agencies will
consider changes in SDO rules.
Some may be positive and some may be
negative, as I understand has been
the reaction of the EC officials
to certain positions in ETSI.
I am not too concerned with agenda
efficiency, however. I am more
concerned that whomever is making the
decision does so on a fully
informed basis and not to advance a
specific agenda.
I think specifically when you get into issues
such as royalty caps, and
rules that will invariably (at least
allegedly) lead to fixing of
license terms by joint conduct, grave
concerns should exist.
Likewise, I would think that if agenda
efficiency is the primary
motivating factor here, please do share
with us your views how each of
the proposals that have been made will
not conclusively allow any claim
of concerted action or an
anticompetitive effect. If you can do that by
first of next week, we
will have a basis to continue the dialog.
Richard S. Taffet,
Esq.
Bingham McCutchen LLP
399 Park Avenue
New York, New York
10022-4689
T: (212) 705-7729
F: (212) 702-3603
email:
richard.taffet@bingham.com
cell: (914)
582-2477
-----Original Message-----
From: Gil Ohana
(gilohana) [mailto:gilohana@cisco.com]
Sent: Thursday, March 09, 2006 6:17 PM
To: Taffet,
Richard S.; PP-DIALOG@listserv.ieee.org
Subject: RE: [PP-DIALOG]
Application of per se rule to ex ante joint
conduct
Thanks
Richard. For better or worse, neither of us is a member of the
Patent
Committee. I'm hoping that the people that actually get to do
the
voting are monitoring this list, and they would benefit from
hearing
your views as to why the specific legal theory asserted by
the plaintiff
in the Golden Bridge case you chose to post to the list
is relevant to
the votes they will be asked to cast on the 27th. They
also may benefit
from understanding more generally, particularly in
the wake of the
various statements regarding the issue of ex ante
disclosure rules and
antitrust risks that have been made by the
European Commission and the
leadership of both US federal antitrust
agencies, what role
consideration of antitrust risk should play in
their consideration of
the various proposals for the changes to the
IEEE-SA rules involving ex
ante disclosure of licensing
comitments.
That is not an easy question, and it merits careful
consideration from
the members of PatCom (after all, if you're right
about the connection
you seem to posit between between ex ante rules
and increased antitrust
risk, then IEEE-SA would seem to have a
significant organizational
interest at stake in avoiding the "messy
and unpredictable" process of
antitrust litigation). I'm hoping that you share my goal of
addressing
those issues in advance of the meeting so that we can
proceed through
the agenda efficiently.
Best
regards,
Gil Ohana
Director, Antitrust and
Competition
Cisco Systems, Inc.
300 E. Tasman
Drive
MS 10/2
San Jose, CA 95134
United States of
America
Phone: +1 408 525 2853
Mobile: +1 408 203 5301
E-mail:
gilohana@cisco.com
-----Original Message-----
From:
Taffet, Richard S. [mailto:richard.taffet@bingham.com]
Sent: Thursday, March 09, 2006 2:57
PM
To: Gil Ohana (gilohana); PP-DIALOG@listserv.ieee.org
Subject:
RE: [PP-DIALOG] Application of per se rule to ex ante
joint
conduct
Gil
What's your rush? What conclusions
will you draw? I am not sure what
the basis will be to conclude
anything one way or the other, or what
signficance it will have in
what the IEEE is considering on the merits.
If there is a need for
you to find out more information on a particular
schedule, give me a
call and we can schedule a time to discuss each of
the proposals and
each of their implications. If it is important to
you, we can try to
schedule such a call in advance of the March 27
meeting Let me
know.
Richard S. Taffet, Esq.
Bingham McCutchen LLP
399
Park Avenue
New York, New York 10022-4689
T: (212) 705-7729
F:
(212) 702-3603
email: richard.taffet@bingham.com
cell: (914)
582-2477
-----Original Message-----
From: Gil Ohana
(gilohana) [mailto:gilohana@cisco.com]
Sent: Thursday, March 09, 2006 5:28 PM
To: Taffet,
Richard S.; PP-DIALOG@listserv.ieee.org
Subject: RE: [PP-DIALOG]
Application of per se rule to ex ante
joint
conduct
Richard, why wait for the meeting? You have
the chance to enlighten all
of us now.
To frame the question
again, I'm not asking you generally for your view
of why ex ante
disclosure rules increase the risk that SDOs and
companies
participating in standard-setting will face antiturst
ligitation. I'm
going back to the Golden Bridge decision you chose to
bring to the
attention to the list and asking you to explain which of
the specific
rules changes that IEEE-SA's Patent Committee would
increase the risk
that IEEE-SA or participants in IEEE-SA's technical
working groups
would face group refusal to deal claims. It's a simple
enough
question, and if your response is that you'll need all the
time
between now and March 27 to think of an answer, then we'll draw
the
appropriate conclusions. I'm optimistic (there I go again) that
we
won't have to wait that long.
Gil Ohana
Director,
Antitrust and Competition
Cisco Systems, Inc.
300 E. Tasman
Drive
MS 10/2
San Jose, CA 95134
United
States of America
Phone: +1 408 525 2853
Mobile: +1 408 203
5301
E-mail: gilohana@cisco.com
-----Original
Message-----
From: Taffet, Richard S. [mailto:richard.taffet@BINGHAM.COM]
Sent: Thursday, March 09, 2006 2:14
PM
To: PP-DIALOG@listserv.ieee.org
Subject: Re: [PP-DIALOG]
Application of per se rule to ex ante joint
conduct
I am sure
the PatCom chair will afford us plenty of time to discuss how
the
IEEE proposals could raise the same type of claims as alleged in
the
Golden Bridges case. I think you are also truly the optimist
in
thinking that rules, which have already engendered significant
debate
when merely being proposed, will lead to anything but more
litigation.
Words have a funny way of being interpreted in
interesting ways in the
context of lawsuits.
Richard S.
Taffet, Esq.
Bingham McCutchen LLP
399 Park Avenue
New York,
New York 10022-4689
T: (212) 705-7729
F: (212) 702-3603
email:
richard.taffet@bingham.com
cell: (914)
582-2477
-----Original Message-----
From: Gil Ohana
(gilohana) [mailto:gilohana@cisco.com]
Sent: Thursday, March 09, 2006 5:10 PM
To: Taffet,
Richard S.; PP-DIALOG@listserv.ieee.org
Subject: RE: [PP-DIALOG]
Application of per se rule to ex ante joint
conduct
Thanks
Richard. Recognizing your point that the 3GPP standards are
being
revised, what Golden Bridge has alleged is a group refusal to deal
by
a number of large potential licensees, effectuated through
an
informal agreement reached in what the opinion
terms is an "offline
session." I'm still not seeing the connection
between any of the
proposed rules changes that IEEE-SA is considering
and the conduct
alleged in Golden Bridge. Nothing about, for example,
permitting
patentees disclosing essential patents to an IEEE-SA
working group to
state a "not to exceed" royalty or attaching to
their LoA a binding
licensing commitment would in any way increase
the exposure that IEEE-SA
or participants in IEEE-SA working groups
face under the antitrust laws
from the kinds of claim asserted by
Golden Bridge.
So I go back to the point made in my earlier
e-mail: are you just trying
to remind us that participants in
standard-setting face antitrust risk?
Or are you trying to argue that
there is something specific in the
proposed IEEE-SA rules changes
that the Patent Committee is to consider
in a few weeks that
increases the risk IEEE-SA and participants in
IEEE-SA standards
working groups face from group refusal to deal claims?
It's
easy enough to mention ex ante and antitrust risk in the
same
sentence and hope that people associate the two. But, after
the
endorsement of ex ante disclosure rules provided both in
Chairman
Majoras' speech and in the press release the European
Commission issued
in December following the change to ETSI's rules,
it would be helpful to
the
debate if you could provide a more specific causal linkage
between
the rules that IEEE-SA is considering adopting and increased
antitrust
risk to IEEE-SA or its members.
One more thing: I
agree with you that litigation is "messy and
unpredictable." Of
course, a major benefit of the adoption of ex ante
rules is that they
avoid the need for companies seeking to implement a
standard to avoid
the need to litigate patent disputes with patentees
that seek to
define what a "reasonable" royalty is expansively. Those
cases, too,
can be "messy and unpredictable."
Gil Ohana
Director,
Antitrust and Competition
Cisco Systems, Inc.
300 E. Tasman
Drive
MS 10/2
San Jose, CA 95134
United States of
America
Phone: +1 408 525 2853
Mobile: +1 408 203 5301
E-mail:
gilohana@cisco.com
-----Original
Message-----
From: Taffet, Richard S. [mailto:richard.taffet@bingham.com]
Sent: Thursday, March 09, 2006 1:45
PM
To: Gil Ohana (gilohana); PP-DIALOG@listserv.ieee.org
Subject:
RE: [PP-DIALOG] Application of per se rule to ex ante
joint
conduct
Not sure your very careful attempt to
distinguish the import of this
case from the discussion of joint ex
ante is terribly meaningful, or
would be found persuasive by either a
court or a plaintiff's lawyer who
seeks to address ex ante conduct
that eliminates the inclusion of a
patented technology in a standard
or deprives a patent owner of
flexibility in licensing terms. Not
suggesting that the allegations
of the case have merit, but there are
quite a number of companies that
now are spending a lot of money and
time litigating for what might be
considered competitively benign
conduct.
Happy to discuss these points further, but one fact I
think you will
agree is that especially in the 3GPP context,
standards are continuously
being revised, and there is no simple
conclusion that can be reached
when a standard is final. So, in
connection with this specific case,
the elimination of of Golden
Bridge's technology was part of the
evolution of the 3GPP
standard.
Accordingly, the key take away might be that nice
theories can always be
justified, but legal claims and litigation are
messy and unpredictable
-- which leads to high costs and less
efficiency in standards
development.
Speak to you
soon.
Richard S. Taffet, Esq.
Bingham McCutchen LLP
399
Park Avenue
New York, New York 10022-4689
T: (212) 705-7729
F:
(212) 702-3603
email: richard.taffet@bingham.com
cell: (914)
582-2477
-----Original Message-----
From: Gil Ohana
(gilohana) [mailto:gilohana@cisco.com]
Sent: Thursday, March 09, 2006 4:34 PM
To:
Taffet, Richard S.; PP-DIALOG@listserv.ieee.org
Subject: RE:
[PP-DIALOG] Application of per se rule to ex ante
joint
conduct
Richard, thank you for providing the Golden
Bridge opinion. As I read
the opinion, it stands for the
(uncontroversial) position that a group
refusal to deal among
competitors that collectively have market power
can violate Section 1
of the Sherman Act. Aside from the fact that the
particular group
refusal to deal alleged happened in the context of
standard-setting,
I'm having trouble understanding how the case relates
to (as the
title of your e-mail states) "ex ante joint conduct". Per
the facts
of the opinion, the discussion among the defendants that led
to
Golden Bridge's technology being dropped as an optional feature
of
the 3GPP standard occurred after the 3GPP
standard had already been
approved by 3GPP. See Opinion at 2 ("In
1999 cPCH [Golden Bridge's
patented technology] was adopted by 3GPP
as an optional part of the 3GPP
standard."). The allegedly
anticompetitive acts Golden Brdge is
complaining of did not occur
until years later.
If your goal is to remind participants in IEEE
standard-setting that
antitrust issues swirl around standard-setting,
then the Golden Bridge
opionion is a useful reminder of that point.
But if (as I suspect from
the title of your e-mail) your goal is to
suggest that the antitrust
risks standards bodies or their
participants face are increased by the
adoption of those bodies of ex
ante disclosure rules, then I must admit
that the support the Golden
Bridge opinion provides for that proposition
is escaping
me.
Gil Ohana
Director, Antitrust and Competition
Cisco
Systems, Inc.
300 E. Tasman Drive
MS 10/2
San Jose, CA
95134
United States of America
Phone: +1 408 525 2853
Mobile:
+1 408 203 5301
E-mail:
gilohana@cisco.com
-----Original Message-----
From:
Taffet, Richard S. [mailto:richard.taffet@BINGHAM.COM]
Sent: Thursday, March 09, 2006 11:27
AM
To: PP-DIALOG@listserv.ieee.org
Subject: [PP-DIALOG]
Application of per se rule to ex ante joint conduct
The recent
decision from the United States District Court for the
Eastern
District of Texas is another example where joint ex ante
standards
conduct relating to IP was alleged to violate the antitrust
laws,
including under a per se theory. In this case, defendants' motion
for
summary judgment was denied, including on the ground that per
se
treatment might be appropriate. Even without the issue of whether
the
conduct should be considered under a per se or rule of reason
approach,
the fact is the case is now going to trial and will involve
all of the
costs and uncertainties that necessarily
result.
<<show_case_doc.pdf>>
Richard S.
Taffet, Esq.
Bingham McCutchen LLP
399 Park Avenue
New York,
New York 10022-4689
T: (212) 705-7729
F: (212)
702-3603
email: richard.taffet@bingham.com
cell: (914)
582-2477
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