Technical Standards and Ex Ante Disclosure: Results and Analysis of an Empirical Study

Abstract

Ex ante disclosure of patent licensing terms has been proposed as one solution to the problem of holdup in standard setting. Critics of ex ante disclosure argue that requiring early disclosure of licensing terms will impede standards-development processes and create additional legal risks for participants. Yet, in a NIST-funded study that we conducted of three standards development organizations (SDOs), we found no evidence that ex ante disclosure policies resulted in measurable negative effects on the number of standards produced, staff 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 also evidence to suggest that the adoption of ex ante policies may have contributed to positive effects observed on some of these variables. In addition, a significant majority of participants at one SDO 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. We concluded, on the basis of the data reviewed, that the process-based criticisms of ex ante policies and the predicted negative effects flowing from the adoption of such polices, were not supported by the evidence reviewed.

Nevertheless, ex ante policies have not achieved significant support among standards-development organizations. The causes for this lack of support may include self-interested advocacy by market participants pursuing a patent monetization strategy, as well as fear by other participants that complying with such policies could be costly, inconvenient, and likely to provoke otherwise passive patent holders to seek royalties on their standards-essential patents. Moreover, because of patent-stacking effects, the benefits of ex ante disclosures may not be clear in SDOs characterized by large quantities of standards-essential patents held by multiple participants. However, I argue that ex ante disclosure of licensing terms, while perhaps insufficient, standing alone, to address the effects of patent stacking in the standards context, is a necessary element of most proposed solutions to the stacking problem. Ex ante disclosure is also likely to lessen disputes regarding compliance with fair, reasonable, and nondiscriminatory (FRAND) licensing commitments. Accordingly, the standards-development community should reconsider the adoption of policies requiring ex ante disclosure of licensing terms for standards-essential patents.

Keywords: standards, FRAND, patent, ex ante, antitrust, SDO

JEL Classification: K21, O34