National Institute of Standards and Technology, No. GCR 11-934, June 2011
60 Pages Posted: 25 Aug 2011 Last revised: 24 Dec 2013
Date Written: June 27, 2011
The threat of patent “hold-up”, in which patent holders demand compensation from implementers of technical standards following wide-scale adoption of those standards, has focused significant governmental, academic and industry attention on means for averting such scenarios. One method of addressing patent hold-up risk is the imposition of an obligation on patent holders participating in the standardization process to license their standards-essential patents to implementers on “fair, reasonable and nondiscriminatory” (FRAND) terms. The precise meaning of FRAND commitments, however, have proven difficult to determine with precision, leading to further litigation and uncertainty. An alternative approach proposes that each patent holder participating in a standards-development organization (SDO) to disclose in advance (“ex ante”) the material terms on which it will license its standards-essential patents. The risks and merits of such ex ante licensing disclosure policies have been debated extensively. In 2006-07 the U.S. Department of Justice approved limited ex ante licensing disclosure policies adopted by two U.S.-based voluntary SDOs, VMEBus International Trade Association (VITA) and the Institute for Electrical and Electronics Engineers (IEEE). At the time these policies were adopted, critics predicted that early disclosure of patent licensing terms could lead to anticompetitive conduct by standards implementers and would unduly burden the already lengthy and costly standards development process. This study represents the first empirical investigation of the effects of ex ante licensing disclosure policies on standards development. We examined data relating to SDO membership, standards projects initiated, standards approved, speed of the standardization process, individual time commitment and quality of standards for VITA, IEEE and the Internet Engineering Task Force (IETF) from 2003/4 to 2010. We also conducted a survey of VITA participants to assess individual reactions to the adoption of the VITA ex ante policy in 2007.
In general, we did not find that ex ante disclosure policies resulted in measurable negative effects on the number of standards started or adopted, personal time commitments or quality of standards, nor was there compelling evidence that ex ante policies caused the lengthening of time required for standardization or the depression of royalty rates. There was some evidence to suggest that the adoption of ex ante policies may have contributed positively to some of these variables. Moreover, a significant majority of VITA participants responding to our survey felt that the information elicited by the organization’s ex ante policy was important and improved the overall openness and transparency of the standards-development process. Thus, while there are numerous areas in which further study and analysis may be warranted, and other organizations in which the implementation of ex ante policies may have different effects, we conclude, on the basis of the data that we have reviewed, that the process-based criticisms of ex ante policies and the predicted negative effects flowing from the adoption of such polices, are not supported by the evidence reviewed.
Keywords: standards, patent, hold-up, ex ante, VITA, IEEE, IETF, SDO, FRAND
JEL Classification: K21, L63, L96
Suggested Citation: Suggested Citation
Contreras, Jorge L., An Empirical Study of the Effects of Ex Ante Licensing Disclosure Policies on the Development of Voluntary Technical Standards (June 27, 2011). National Institute of Standards and Technology, No. GCR 11-934, June 2011. Available at SSRN: https://ssrn.com/abstract=1916743