Making the World Safe for Standard Setting

Abstract

The stance of antitrust oversight of standard setting activities remains a work-in-progress. Over time, antitrust authorities have grown increasingly hospitable to cooperative standard setting efforts whereby jointly developed standards will facilitate the development of new products or services. In the information industries, such standards are ubiquitous and, moreover, are set by international standard setting organizations (SSOs) like the Internet Engineering Task Force (IETF). To be successful, SSOs must develop strategies to prevent firms from patenting technologies used in official standards and charging exorbitant royalties once a standard is adopted. In particular, SSOs face a range of options in terms of policies that govern the use of patents in official standards - even within the popular strategy of mandating reasonable and non-discriminatory (RAND) access to patents necessary to practice a standard. With multi-jurisdictional oversight of SSOs, the role of antitrust law - if inconsistent and overly aggressive - could be counterproductive.

This paper argues that international antitrust authorities should be humble about second guessing policies of standard setting bodies related to patent policies or playing an aggressive enforcement role. By so doing, antitrust authorities will signal to standard setting bodies that they must rely fundamentally on their own strategies for ensuring compliance with their own policies. Such policies, for example, could include a mandate that firms disclose the relevant licensing terms and conditions before the body decides to endorse a particular technology as part of a standard. To be sure, there is still a role for antitrust authorities to sanction egregious abuses of the standard setting process, such as the Federal Trade Commission's action in Rambus, but such actions should be exceptional and not viewed as an alternative to a standard setting body's safeguards against abuses by firms that obtain patents on technologies necessary to practice the standard.

Keywords: antitrust, globalization, standards, standard setting

JEL Classification: K21