Patent Policies and Standards Setting: The Issues - What Is Going On? Why Should I Care?

Abstract

This article is intended as background for persons impacted by the current discussions of patent policies in the standards-setting arena: What are the issues? Why and how will these issues affect standards development organizations, their members, and users? What may transpire over the next few years? Patent policies represent the choice a standards-developing organization (SDO) makes to balance the rights of patent holders and the need for implementers to be able to use proprietary technology that may be essential for compliance with a standard while protecting and advancing the SDO’s own interests. The incorporation of a patent that is essential to practice a standard leads to a variety of hypothetical and practical problems. These include: Patent ambush; Patent hold-up; Royalty stacking and the closely rated issue of patent thickets. Problems may also arise when NPEs (non-practicing entities, who do not build anything) seek unreasonable or unnecessary royalty bearing licenses from implementers of a standard. It seems that, relatively speaking, only a small number of standards embedding SEPs drive the current attention to revision of SDO patent policies...between one in one thousand and one in ten thousand. This is not to discount the importance of the problems that do arise nor that such problems are unworthy of attention and solution; but rather to place these problems in perspective within the global voluntary standards system. One possible explanation for the relative low rate of patent disputes involving standards is that existing patent policies have been and continue to be effective. Some of the topics under discussion within standards development organizations are: Transfer of Ownership; Disclosure Requirements; What is an Assurance to License on RAND terms?; Injunctions; Conditions of Reciprocity; Role of Arbitration. Many aspects of the voluntary standards system discourage bad behavior by participants. It is important to understand the primary causes for patent disputes in order to propose the best solutions if the goal is to reduce the overall number of disputes. While different SDOs will make different choices, all patent policies have the goal of attracting the best technology for their standards while not discouraging implementers from adopting them. In this respect, a shared characteristic of an SDO patent policy is the balancing of divergent points of view of stakeholders and the needs of the SDO itself. There is no reason to “reinvent the wheel.” SDOs will benefit from the patent policy lessons learned from experiences of organizations that have practical experience about what has worked and not worked. Its patent policy is one aspect of an SDO’s competitive position in the global market for standard setting, and the consequences of right or wrong decisions are significant.

Keywords: patent policy, standard, hold up, standard developing organization, competition, global market

JEL Classification: K00