Order Code RL31951
Report for Congress
Received through the CRS Web
Innovation, Intellectual Property,
and Industry Standards
May 29, 2003
nam e redacted
Visiting Scholar in Entrepreneurship and Economic Growth
Resources, Science, and Industry Division
Congressional Research Service ˜
The Library of Congress
Innovation, Intellectual Property, and Industry
Standards
Summary
An “industry standard” is a set of technical specifications that provides a
common design for a product or process.
Relating to products ranging from
typewriter keyboards to high technology computer protocols, standards are pervasive
in the modern economy. Standards sometimes arise through government action or
through the operation of the marketplace. However, private industry groups called
standards bodies have long been active in promulgating standards.
Standards bodies and their members have encountered a growing number of
claims that a privately held “intellectual property right” — such as a copyright or
patent — covers an industry standard. Most of these assertions have involved
patents. If the patent is valid and enforceable, it is possible that the standard cannot
be employed without infringing that patent.
Striking a balance between open industry standards, on one hand, and exclusive
intellectual property rights, on the other, is an important component of contemporary
industrial policy. Industry standards potentially bring economic benefits ranging
from a broad range of interoperable products to more robust, competitive markets.
In turn, intellectual property rights may promote innovation, the disclosure of new
inventions and technology transfer.
Conflicts between industry standards and
intellectual property rights require a careful weighing of these competing interests.
Aware of potential conflicts between industry standards and intellectual property
rights, many standards bodies have enacted intellectual property polices. Although
these policies vary, they generally require that members of the standards body (1)
disclose intellectual property that is pertinent to a proposed standard and (2) license
the intellectual property to others, often on “reasonable and nondiscriminatory”
terms. Past litigation and governmental agency actions have involved cases where
a member of a standards body allegedly did not abide by these obligations. Various
legal doctrines, including contract law, fraud, equitable estoppel and antitrust law,
have been employed to compel the observance of disclosure and licensing
commitments. However, some uncertainty surrounds the enforceability of the
intellectual property polices of standards bodies, particularly against individuals and
firms that were not members of the group that promulgated the standard.
Should Congress have an interest in this area, several options present
themselves. No action need be taken if the current relationship between industry
standards and intellectual property is deemed satisfactory, particularly as standards
bodies become increasingly aware of intellectual property and as the growing number
of judicial precedents may make the legal situation clearer. Congress might also
encourage the development of model intellectual property disclosure and licensing
obligations for use by standards bodies; assist standards bodies in identifying
intellectual property that pertains to a proposed standard; and, as a possible more far-
reaching legal reform, encourage proprietors to disclose intellectual properties that
bear upon proposed industry standards.
Contents
Fundamentals of Standards and Standards Bodies . . . . . . . . . . . . . . . . . . . . . . . . 3
The Impact of Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Formation of Industry Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Fundamentals of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Patent Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Patent Acquisition and Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Potential Conflicts Between Industry Standards
and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The VL-Bus Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Gasoline Formulation Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The Electronic Commerce Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Current Legal Environment Concerning Industry Standards
and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Standards Bodies Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Enforceability of Standards Bodies Policies . . . . . . . . . . . . . . . . . . . . . 16
Legislative Issues and Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Innovation, Intellectual Property, and
Industry Standards
Virtually every participant in the modern economy is familiar with the concept
of an industry standard: a set of technical specifications that provides a common
design for a product or process.1 For example, electrical plugs and outlets ordinarily
conform to a standard voltage, impedance and plug shape. In the absence of such
specifications, consumers might face significant difficulties in obtaining safe and
functional products.
The contemporary marketplace provides countless other
examples of standardized products, ranging from typewriter keyboards, to automobile
transmissions, to Internet connection protocols. Commentator James Surowiecki has
concluded that standards are so significant that “without standardization there
wouldn’t be a modern economy.”2
Standards come into existence through a number of mechanisms, including the
operation of the marketplace and government regulation.3 Another principal vehicle
for standard formation is the activity of a standards body. A standards body —
sometimes termed a “standards setting organization” or “standards developing
organization”4 — is a private industry group that sets standards for its members.5 As
the U.S. economy becomes more oriented towards networked information
technologies, the number of standards bodies has increased in recent years.6 Many
large high technology firms are members of dozens of standards bodies.7
Standards bodies and their members have increasingly encountered claims that
an intellectual property right — such as a patent or copyright — covers an industry
1Mark A. Lemley, “Intellectual Property Rights and Standard-Setting Organizations,” 90
California Law Review (2002), 1889.
2James Surowiecki, “Turn of the Century,”
Wired (Jan. 2002), 85.
3David M. Schenck, “Setting the Standard: Problems Presented to Patent Holders
Participating in the Creation of Industry Uniformity Standards,” 20
Hastings
Communications & Entertainment Law Journal (1998), 641.
4Maurits Dolmans, “Standards for Standards,” 26
Fordham International Law Journal
(2002), 163.
5Janice M. Mueller, “Patent Misuse Through the Capture of Industry Standards,” 17
Berkeley Technology Law Journal (2002), 623.
6Timothy Baumann, “As Standards Proliferate, So Too a Rise in Defendants Asserting
‘Standards Abuse’,” 2
Patent Strategy & Management (June 2001), 1.
7Lemley,
supra note 1, at 1907.
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standard.8 For example, a telecommunications standards body might develop a
standard relating to cellular telephones while under the impression that no intellectual
property rights cover that standard. When a patent owner later informs members of
the telecommunications industry that their phones use a proprietary technology, a
potential conflict arises. If an intellectual property right is valid and enforceable, its
owner may possess the ability to prevent others from employing the standard
altogether.9 On the other hand, because license fees are often paid to owners of
intellectual property that is incorporated into a standard, standards may provide
significant incentives for firms to innovate and to permit the use of a patented
invention within a standard.10
The intersection of industry standards and intellectual property is of particular
significance to entrepreneurs and small firms. On one hand, these entities may be
especially reliant upon intellectual property rights in order to capture the benefits of
their innovations.11 On the other, industry standards may particularly advantage
individuals and small companies. Standards can ensure that new products are
compatible with established ones, allowing small entities to access a larger user base
than they might otherwise enjoy.12 More generally, the interaction between industry
standards and intellectual property is an important consideration in the modern
economy, determining whether members of the public are free to use the standard or
not; whether products can be built to the standard when multiple intellectual property
rights apply; and whether a climate favorable to innovation is preserved.13
This report considers the impact of industry standards and intellectual property
law upon innovation. This report first introduces the fundamentals of industry
standards, standards bodies, and the intellectual property laws. It then explains
potential conflicts between industry standards and proprietary intellectual property
rights and explores legal responses to these conflicts. This report closes with an
overview of legislative issues and options for addressing intellectual property rights
and industry standards.
8See Baumann,
supra note 6.
9
See infra notes 66-69 and accompanying text.
10National Research Council, National Academy of Sciences,
Standards, Conformity
Assessment and Trade: Into the 21st Century (National Academy Press, Washington, DC
1995), 32-33.
11Sally Wyatt & Gilles Y. Bertin, “Multinationals and Intellectual Property” (Harvester
1988), 139.
12Joseph Farrell, “Standardization and Intellectual Property,” 30
Jurimetrics Journal (1989),
35.
13Lemley,
supra note 1.
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Fundamentals of Standards and
Standards Bodies
The Impact of Standardization
Standards are ubiquitous in the modern U.S. economy.14 For example, products
ranging from soda cans to light bulbs to batteries come in standard sizes; consumers
routinely fax documents to each other using fax machines from different
manufacturers; and typists easily switch from one QWERTY keyboard to another.
Standards are so prevalent in the current U.S. marketplace that the absence of
standardization sometimes surprises consumers. Computer users who transfer files
between “Word” and “Word Perfect,” for example, may unexpectedly discover the
lack of interoperability between data storage protocols of these competing word
processing software packages
Many benefits may result from the use of standards. Standards may convey
information about the product, regulate quality, ensure compatibility and enhance
competition.15 For example, foods labeled “low sodium” communicate the fact that
their sodium content is below certain standards set by the federal government. Other
sorts of standards, such as professional licensing requirements or safety codes, can
improve public health and safety. One example is building codes, which guard
against construction companies from fabricating dangerous housing.16 A standard that
allows interoperability also facilitates the manufacturing and sale of new products by
increasing both the likelihood of sufficient volume of business for manufacturers, and
of a sufficient range of interoperable products for consumers. Standards can also
lead to a robust, competitive market for replacement parts or product maintenance.17
The benefit of standards is most noticeable in markets that exhibit network
effects.18 In such markets, the value of a product is a function of how many other
consumers use a compatible product.19 A classic example is the telephone system,
where the worth of the system may be measured by the total number of subscribers.20
Suppose, for example, that two mutually exclusive telephone networks serve a
14Margaret Jane Radin, “Online Standardization and the Integration of Text and Machine,”
70
Fordham Law Review (2002), 1125.
15Sean P. Gates, “Standards, Innovation, and Antitrust: Integrating Innovation Concerns Into
the Analysis of Collaborative Standard Setting,” 47
Emory Law Journal (1998), 583.
16Robert W. Hamilton, “Prospects for the Nongovernmental Development of Regulatory
Standards,” 32
American University Law Review (1983), 455.
17Lemley,
supra note 1.
18Mark A. Lemley & David McGowan, “Legal Implications of Network Economic Effects,”
86
California Law Review (1998), 479.
19Gregory J. Werden, “Network Effects and Conditions of Entry: Lessons from the
Microsoft Case,” 69
Antitrust Law Journal 87 (2001).
20Michael A. Carrier, “Unraveling the Patent-Antitrust Paradox,” 150
University of
Pennsylvania Law Review (2002), 761.
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particular town. New residents to the town must choose one telephone network or
the other. A rational newcomer will ordinarily subscribe to the network with the
larger subscriber base, so that he may call the greatest number of businesses and
persons. As one network grows larger than the other over time, it is unlikely that
both market entrants will survive. The market may eventually “tip” in favor of the
larger network, likely resulting in a single “winner-take-all” telephone network in
that town.21 Carol Shapiro and Hal Varian, economists at the University of California
at Berkeley, cite the video recorder market (VHS vs. Beta) and personal computer
operating markets (Apple vs. Windows) as examples of markets that eventually
tipped in favor of a single, dominant entrant.22
In markets driven by network effects, the availability of standards can support
competition policy. Without a standard, a single firm would likely be the sole
provider of a dominant network technology. Standards instead allow multiple firms
to supply services and equipment, which may lower prices and lead to greater
consumer choices.23
Standards may also lead to negative economic consequences, however.
Standardization can reduce competition by diminishing the ability of competitors to
differentiate their products.24 The specifications of a particular standard may make
it harder for one firm to make a product better or cheaper, for example. Some
standards may also increase circumstances of consumer “lock-in.”25 Lock-in occurs
when a consumer faces significant costs in switching from one technology to another.
It is easy enough for a consumer to switch from a Ford to a Chevrolet automobile, for
example, but changing computers from a Macintosh to a Windows-based machine
may entail certain costs. The purchase of a different computer may require a
consumer to purchase new software, buy a new printer and other hardware peripheral
devices, convert text and other files, and in general become familiar with the new
machine.26 Standardized products may lead to such significant lock-in effects that
consumers may be strongly discouraged from changing products, even where the new
product is superior.
Similarly, standardization may also retard innovation.27 Once a particular
market achieves standardization, one firm may find that the introduction of an
entirely new “system” is economically prohibitive. That firm might prefer to
21Michael L. Katz & Carl Shapiro, “Network Externalities, Competition, and Compatibility,”
75
American Economic Review (1985), 424.
22Carl Shapiro & Hal Varian,
Information Rules (Harvard Business School Press 1999), 173-
79.
23Robert Pitofsky, “Antitrust and Intellectual Property: Unresolved Issues at the Heart of the
New Economy,” 16
Berkeley Technology Law Journal (2001), 535.
2413 Herbert Hovencamp,
Antitrust Law ¶ 2136 (1999).
25Renato Mariotti, “Rethinking Software Tying,” 17
Yale Journal of Regulation (2000), 367.
26Jay Dratler, Jr., “Microsoft as an Antitrust Target: IBM in Software?,” 25
Southwestern
University Law Review (1996), 671.
27Farrell,
supra note 12, at 37.
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introduce a better complementary component to an existing system, allowing it to
take advantage of an established user base. As a result, standards could create an
environment more receptive to incremental rather than pioneering innovation.28
The Formation of Industry Standards
Product standardization can occur through three principal mechanisms: the
operation of the marketplace, government intervention and private standards bodies.29
First, consumers may gravitate toward one product and reject its competitors,
resulting in a de facto standard.30 As noted previously, de facto standardization is
most common in markets that exhibit strong network effects, where there are large
benefits from using the same product that everyone else does.31 Given the dominant
market share of the Windows operating system, for example, consumers that opt for
this system both gain access to an extensive array of compatible hardware and
software, and find it easy to share information with others.
Second, the government sometimes sets obligatory standards.32 For example,
the Federal Communications Commission dictates various standards for the
electronic equipment used in the telecommunications and broadcasting industry. As
a result of these standards, it is possible to receive signals broadcast by multiple
television stations with the same television equipment across the country.33
The third possibility is that members of industry agree on a standard through the
auspices of a standards body.34 A large number of standards bodies are active in the
United States, featuring diverse organization structures. Some are standing entities,
while others are formed on an ad hoc basis for the purpose of promulgating a single
standard. Membership in some standards bodies is restricted, while other standards
bodies are open to any interested party.
Although standards bodies employ varying procedures, in broad outline most
standard bodies employ the following process. First, a proponent of a standard
develops a technical specification that details the key points of a technology and
preliminarily defines the scope of the intended standard. This specification is subject
to commentary from members of the standards body and sometimes members of the
28Joseph Farrell & Garth Saloner, “Competition, Compatibility, and Standards: The
Economics of Horses, Penguins & Lemmings,” in
Product Compatibility as a Competitive
Strategy (Gabel & Landis, ed., Amsterdam: North-Holland 1987), 1.
29Lemley,
supra note 1.
30Mark R. Patterson, “Inventions, Industry standards, and Intellectual Property,” 17
Berkeley
Technology Law Journal (2002), 1043.
31
See supra notes 18-25 and accompanying text.
32Lemley,
supra note 1.
33Gates,
supra note 15.
34Michael G. Cowie & Joseph P. Lavelle, “Patents Covering Industry standards: The Risks
to Enforceability Due to Conduct Before Standard-Setting Organizations,” 30
American
Intellectual Property Law Association Quarterly Journal (2002), 95.
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public, often resulting in revisions to the proposed standard. Finally, an elected or
appointed board gives final approval to the specification, raising it to the level of a
standard.35
No single entity, public or private, controls the U.S. standards development
system. The private, nonprofit American National Standards Institute (“ANSI”)
coordinates the efforts of many standards bodies, however. ANSI is an organization
of firms, trade associations, technological societies, consumer organizations, and
government agencies.36 ANSI oversees the process of setting voluntary standards and
ensures that an appropriate degree of consensus is reached with regard to the
proposed standard. ANSI also ensures that access to the standards process, including
an appeals mechanism, is made available to anyone directly or materially affected by
a standard that is under development. ANSI further promotes the use of U.S.
standards internationally, advocates U.S. policy and technical positions in
international and regional standards organizations, and encourages the adoption of
international standards as national standards where they meet the needs of the user
community.37
The National Institute of Standards and Technology (“NIST”) also promotes
voluntary standard-setting in the United States.38 NIST is a non-regulatory federal
laboratory within the Technology Administration of the U.S. Department of
Commerce.
Serving as a technical contributor to the nation’s standards
infrastructure, NIST laboratories develop more accurate ways to measure length,
time, mass, temperature, and other physical quantities that are fundamental to
standard-setting. NIST further supports voluntary standardization efforts by providing
technical expertise and facilitating private sector agreement. NIST also coordinates
the use of voluntary standards by federal agencies.39
Fundamentals of Intellectual Property
The term “intellectual property” identifies a number of legal instruments,
including copyrights, patents and trademarks, that provide innovators with
proprietary interests in their intangible creations.40 Copyright provides authors with
exclusive rights in their writings, visual works and other works of authorship; patents
protect inventors of products, processes and other useful inventions; while trademark
35eWeek Magazine, “Path to Approval,” [http://www.eweek.com/image_popup/
0,3662,s=702&iid=20053,00.asp].
36American National Standards Institute, “About ANSI” at [http://www.ansi.org/
public/about.html].
37
Ibid.
38CRS Report 95-30,
The National Institute of Standards and Technology: An Overview, by
(name #r edacted).
39
Ibid.
40Roger E. Schechter & (nam e# redacted), “Intellectual Property: The Law of Copyrights,
Patents and Trademarks” (Thomson-West Group, St. Paul, Minnesota 2003), 1-2.
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law concerns the identifying symbols used by merchants to identify their goods and
services.41 Although industry standards potentially impact each of these legal
disciplines, past controversies and current debate have focused upon patents.42 As
a result, this report too will focus upon the patent law, although its broader discussion
of the relationship between industry standards and intellectual property is applicable
to copyrights, trademarks and other similar proprietary interests.
Patent Policy
By providing individuals with exclusive rights to their inventive products and
processes, the patent law allows innovators to appropriate the economic benefits of
their discoveries. Absent a patent system, competitors might readily be able to
appropriate the benefits of an innovator’s research and development efforts. Aware
of these potential “free riders,” firms might devote few, if any resources towards
innovation.
The patent law solves this market failure problem by providing
economic incentives for individuals and institutions to engage in research and
development.43
The patent system is also said to encourage the disclosure of new technologies.44
Each issued patent must include a description sufficient to enable skilled artisans to
practice the patented invention.45 Issued patents may also encourage others to “invent
around” the patentee’s proprietary interest. Others can build upon the patentee’s
disclosure to produce their own technologies that fall outside the exclusive rights
associated with the patent.46
Patent rights may also facilitate technology transfer.47 Absent patent rights, an
inventor may have no tangible asset to sell or license. In addition, an inventor might
otherwise be unable to police the conduct of a contracting party. Any technology or
know-how that has been disclosed to a prospective buyer might be appropriated
without compensation to the inventor. The availability of patent protection decreases
the ability of contracting parties to engage in opportunistic behavior. By lowering
41Gordon U. Sanford, III, “An Intellectual Property Roadmap: The Business Lawyer’s Role
in the Realm of Intellectual Property,” 19
Mississippi College Law Review (1998), 177.
42Lemley,
supra note 1.
43Simone Rose, “Patent ‘Monopolyphobia’: A Means of Extinguishing the Fountainhead?,”
49
Case W. Res. L. Rev. 509 (1999).
44Keith E. Maskus, “The Role of Intellectual Property Rights in Encouraging Foreign Direct
Investment and Technology Transfer,” 9
Duke Journal of Comparative and International
Law (1998), 10.
4535 U.S.C. § 112 (2000).
46Rebecca S. Eisenberg, “Patents and the Progress of Science: Exclusive Rights and
Experimental Use,” 56
University of Chicago Law Review (1989), 1017.
47Jonathan Eaton & Samuel J. Kortum, “Trade in Ideas: Patenting and Productivity in the
OECD,” 40
Journal of International Economics (1996), 251.
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such transaction costs, the patent system may make technology-based transactions
more feasible.48
The patent system may also provide a more socially desirable outcome than its
chief legal alternative, trade secret protection. Trade secrecy guards against the
improper appropriation of valuable, commercially useful information that is the
subject of reasonable measures to preserve its secrecy.49 Taking the steps necessary
to maintain secrecy, such as implementing physical security measures, imposes costs
that may ultimately be unproductive for society.50 Also, while the patent law obliges
inventors to disclose their inventions to the public,51 trade secret protection requires
firms to hold their protections in secret. The disclosure obligations of the patent
system may better serve the goals of encouraging the diffusion of advanced
technological knowledge.
The patent system has long been subject to criticism, however. Some observers
believe that the patent system encourages industry concentration and presents a
barrier to entry in some markets.52
Others believe that the patent system too
frequently attracts speculators who prefer to acquire and enforce patents rather than
engage in socially productive activity.53 Still other commentators suggest that the
patent system often converts pioneering inventors into technological suppressors,
who use their patents to block subsequent improvements and thereby impede
technical progress.54
When analyzing these contending views, it is important to note the lack of
rigorous analytical methods available for analyzing the effect of the patent law upon
the U.S. economy as a whole. The relationship between innovation and patent rights
remains poorly understood. Concerned observers simply do not know what market
impacts would result from changing patent term from its current twenty-year period,
for example.55 Consequently, current economic and policy tools do not allow us to
calibrate the patent system precisely in order to produce an optimal level of
investment in innovation.
48Robert P. Merges, “Intellectual Property and the Costs of Commercial Exchange: A
Review Essay,” 93
Michigan Law Review (1995), 1570.
49American Law Institute, Restatement of Unfair Competition Third § 39 (1995).
50David D. Friedman
et al., “Some Economics of Trade Secret Law,” 5
Journal of Economic
Perspectives (1991), 61.
5135 U.S.C. § 112 (2000).
52(nam e# redacted), “Collusion and Collective Action in the Patent System: A Proposal for
Patent Bounties,”
University of Illinois Law Review (2001), 305.
53
Ibid.
54
See Robert P. Merges & Richard R. Nelson, “On the Complex Economics of Patent
Scope,” 90
Columbia Law Review (1990), 839.
55
See F. Scott Kieff, “Property Rights and Property Rules for Commercializing Inventions,”
85
Minnesota Law Review (2001), 697.
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Patent Acquisition and Enforcement
Patent rights do not arise automatically. Inventors must prepare and submit
applications to the U.S. Patent and Trademark Office (“USPTO”) if they wish to
obtain patent protection.56 USPTO officials known as examiners then assess whether
the application merits the award of a patent.57
In deciding whether to approve a patent application, a USPTO examiner will
consider whether the submitted application fully discloses and distinctly claims the
invention.58 In addition, the application must disclose the “best mode,” or preferred
way, that the applicant knows to practice the invention.59 The examiner will also
determine whether the invention itself fulfills certain substantive standards set by the
patent statute. To be patentable, an invention must be useful, novel and nonobvious.
The requirement of usefulness, or utility, is satisfied if the invention is operable and
provides a tangible benefit.60 To be judged novel, the invention must not be fully
anticipated by a prior patent, publication or other knowledge within the public
domain.61 A nonobvious invention must not have been readily within the ordinary
skills of a competent artisan at the time the invention was made.62
The USPTO publishes most pending patent applications approximately 18
months after they are filed.63 For example, if an inventor filed a patent application
on August 1, 2003, then the USPTO will make that application available to the public
on or after February 1, 2005. Pre-grant publication of patent applications potentially
alerts interested parties of the possibility that patent might later issue.64 However, if
the inventor has abandoned the application, or has certified that no patent
applications on the same technology will be sought outside the United States, then
the USPTO will not publish the pending application.65
If the USPTO allows the patent to issue, the patent proprietor obtains the right
to exclude others from making, using, selling, offering to sell or importing into the
United States the patented invention.66 The maximum term of patent protection is
5635 U.S.C. § 111 (2000).
5735 U.S.C. § 131 (2000).
5835 U.S.C. § 112 (2000).
59
Ibid.
6035 U.S.C. § 101. (2000).
6135 U.S.C. § 102 (2000).
6235 U.S.C. § 103 (2000).
6335 U.S.C. § 122(b) (2000).
64
See Joseph M. Barich, “Pre-Issuance Publication of Pending Patent Applications: Not So
Secret Any More,”
Journal of Law, Technology and Policy (Fall 2001), 415.
6535 U.S.C. § 122(b) (2000).
6635 U.S.C. § 271(a) (2000).
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ordinarily set at 20 years from the date the application is filed.67 The patent applicant
gains no enforceable rights until such time as the application is approved for issuance
as a granted patent, however. Once the patent expires, others may employ the
patented invention without compensation to the patentee.
Patent rights do not enforce themselves. A patentee bears responsibility for
monitoring its competitors to determine whether they are using the patented invention
or not. Patent proprietors who wish to compel others to observe their intellectual
property rights must usually commence litigation in the federal district courts. The
U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) possesses exclusive
national jurisdiction over all patent appeals from the district courts.68 In turn, the
U.S. Supreme Court possesses discretionary authority to review cases decided by the
Federal Circuit.69
Potential Conflicts Between Industry Standards
and Intellectual Property
Conflicts potentially arise between industry standards and intellectual property
rights.70 When one firm has manufactured products or performed processes that
comply with an industry standard, sometimes another entity has asserted that those
products or processes infringe an intellectual property right. The possibility of
license fees and royalties may provide a significant incentive for firms to innovate
and to permit the incorporation of a proprietary technology into a standard.71 On the
other hand, the intellectual property holder may possibly prevent others from using
the standard altogether for a set period of time.72 Past disputes in this area have
generally involved patent rights.
A review of three well-publicized examples
illustrates the potential tension between industry standards and intellectual property
rights.
The VL-Bus Patent
In 1992, the Video Electronics Standards Association (VESA), a non-profit
SSO, established a standard relating to the so-called VL-Bus. This standard provided
mechanisms for transferring instructions between a computer’s central processing
unit and its peripherals, such as a disk drive or video display. Subsequently, Dell
6735 U.S.C. § 154(a)(2) (2000). Although patent term is based upon the filing date, the
patentee gains no enforceable legal rights until the USPTO allows the application to issue
as a granted patent. A number of Patent Act provisions may modify the basic 20-year term,
considering examination delays at the USPTO and delays in obtaining marketing approval
for the patented invention from other federal agencies.
6828 U.S.C. § 1295(a)(1) (2000).
6928 U.S.C. §1254(1) (2000).
70
See Mueller,
supra note 5.
71National Research Council,
supra note 9.
72
See supra notes 64-69 and accompanying text.
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Computer Corporation (“Dell”), a leading U.S. manufacturer of personal computers,
alerted several firms that their use of the VL-Bus standard infringed a patent that Dell
had obtained in 1992. The Dell announcement provoked considerable controversy
because Dell itself was a member of VESA. According to some commentators, Dell
had voted in favor of the VESA standard.73 Further, during this process a Dell
representative had allegedly certified to VESA that “to the best of his knowledge,”
he knew of no patent, copyright or trademark that the VL-Bus design would violate.74
The Federal Trade Commission (FTC) subsequently brought an administrative
complaint against Dell. The FTC complaint asserted that Dell’s actions were unfair
and that they unreasonably restrained competition in the computer industry. On
November 5, 1995, Dell agreed to a consent decree under which it agreed not to
enforce its patents relating to the VL-Bus.75 Dell further agreed not to enforce any
patent rights that were intentionally not disclosed upon the request of any standards
body, and to provide information that would assist the FTC in ensuring Dell’s
compliance. According to William J. Baer, Director of the FTC’s Bureau of
Competition, the FTC’s action concerning the VL-Bus standard marked the first time
federal law enforcement authorities took action against a company regarding
intellectual property rights and industry standards.76
The Gasoline Formulation Patent
A patent dispute between the Unocal Corporation and other firms operating in
the oil industry has raised issues concerning intellectual property and industry
standards.77 In 1990, Unocal engineers developed specially formulated gasolines that
result in cleaner automobile emissions. Unocal promptly filed patent applications
claiming these inventions at the USPTO. Contemporaneously, representatives of
Unocal, along with those of other oil companies and members of the automobile
industry, met with California state air-pollution regulators. Some of Unocal’s
competitors reportedly believe that during lengthy discussions with state regulators,
Unocal did not disclose it had filed patent applications, while at the same time
advocating adoption of clean-fuel requirements consistent with the proprietary rights
it sought to obtain.
California ultimately adopted stricter emissions rules in November 1991 that
became effective in 1996. As well, in February 1994, the USPTO issued the first of
several patents Unocal has obtained on its gasoline technology. According to some
observers, a comparison of the California regulations with the Unocal patents reveals
73“Dell Tells the FTC It Won’t Press Claim For Computer Patent,” Wall Street Journal B13
(Nov. 3, 1995).
74
Ibid.
75Federal
Trade
Commission,
“Dell
Computer
Settles
FTC
Charges,”
[http://www.ftc.gov/opa/1995/9511/dell.htm].
76
Ibid.
77Alexei Barrionuevo, “Exhausting Feud: A Patent Fracas Pits Unocal Corp. Against Big
U.S. Oil Producers,”
The Wall Street Journal (Aug. 17, 2000).
CRS-12
it would be difficult and expensive to produce conforming fuels without infringing
the Unocal patents.78
In 1995, Unocal announced that it expected its competitors to pay royalties to
produce gasoline consistent with the California standard. Several oil companies soon
filed suit against Unocal in U.S. district court, asserting that one of Unocal’s patents
was invalid. A 1997 trial resulted in a verdict that upheld the Unocal patent and
found that the patent was infringed by several of Unocal’s competitors. The court
also awarded Unocal damages of $69 million, based upon infringing sales of low-
emission gasoline during a five-month period in 1996.79 The U.S. Court of Appeals
for the Federal Circuit upheld this judgment on appeal.80
Competing views exist concerning the Unocal gasoline formulation patents.
The Attorney General of the State of California filed a brief with the U.S. Supreme
Court, joined by 33 states and the District of Columbia, arguing that Unocal has tried
to “hijack and distort” the state regulatory process.81 Some commentators have
expressed concern that the Unocal patent will cause consumers to pay higher gasoline
prices.82 Still others have associated the Unocal patent with sharp increases in
gasoline prices experienced in some parts of the United States during 2000.83 In
contrast, Unocal’s chief executive, Roger Beach, reportedly stated: “Inventions that
result from independent research enhance the rule-making process.”84
Unocal
management also reportedly asserts that it was not required to disclose its patent
applications during the regulatory process, and that it has a right to profit from its
intellectual property.85
In the meantime, legal scrutiny of the Unocal patents continues. On March 4,
2003, the Federal Trade Commission issued an administrative complaint alleging that
Unocal gained monopoly power by defrauding California authorities and industry
groups during the emissions rulemaking process.86 Initial hearings concerning this
complaint are scheduled for June 2003.
78
Ibid.
7934 F. Supp. 2d 1208, 1222 (C.D. Cal. 1998).
80208 F.3d 989 (Fed. Cir. 2000).
81State of California, Department of Justice, Office of the Attorney General, “Attorney
General Bill Lockyer Files “Friend of Court” Brief Over Unocal Gasoline Patent” (Sept. 14,
2000) (available at [http://caag.state.ca.us/newsalerts/2000/00-122.htm]).
82
See Alexei Barrionuevo, “FTC May Seek to Stop Unocal From Enforcing Gasoline
Patents,”
The Wall Street Journal (Jan. 8, 2003), D6.
83
See Cliston Brown, “Unocal Scores Another Win in Gas Patent Case: Five Refiners Seek
Supreme Court Ruling,” 10
Corporate Legal Times (Oct. 2000), 94.
84Barrionuevo,
supra note 77.
85
Ibid.
86Federal Trade Commission, Complaint, In the Matter of Union Oil Company of California,
Docket
No.
9305
(March
4,
2003)
(available
at
[http://www.ftc.gov
/os/2003/03/unocalcmp.htm].)
CRS-13
The Electronic Commerce Patents
Controversy has also arisen over patents held by the IBM and Microsoft
Corporations concerning proposed standards for negotiating electronic commerce
transactions. Much of this discussion concerns the “Simple Object Access Protocol”
(SOAP) and the “electronic business using eXtensible Markup Language” (ebXML).
SOAP is a protocol that allows for the exchange of information in a decentralized,
distributed environment.87
ebXML provides firms with a standard method to
exchange business messages, conduct trading relationships, communicate in common
terms and define business processes on the Internet.88 Some observers forecast that
these two proposed standards “will one day be as important as the standard protocols
(such as TCP/IP and HTTP) on which the Internet is based today.”89
IBM, Microsoft, and possibly other firms have reportedly obtained several
patents that cover SOAP and ebXML, as well as patents on complementary
extensions of these standards that allow for data encryption and provide other useful
features.90 Some firms that lack these patent portfolios, as well as certain standards
body representatives, are concerned that intellectual property rights holders will be
in a position to charge tolls over a large amount of Internet traffic. For example,
members of the World Wide Web Consortium (W3C), the standards body that is
overseeing development of the SOAP specification, are said to have expressed
concerns about the propriety of charging royalties for patent licenses for standardized
computer technologies.91
Some commentators are critical of these electronic commerce patents.
Journalist David Berlind cautions: “If the protocols do become standards, either by
virtue of an independent standards organization’s imprimatur or by attaining a de
facto status, IBM and Microsoft — or any other company that maintains the
intellectual property rights to them — could legally impose royalties on that
[Internet] traffic.”92 However, IBM, Microsoft and other propriety rights holders
have reportedly agreed to license some applicable patents on a royalty-free basis, and
to license others on reasonable and nondiscriminatory terms.93 As SOAP, ebXML
8 7
See
Simple
Obj ect
Access
Protocol
( SOAP)
1.1
(available
at
[http://www.w3.org/TR/SOAP]).
88
See General Information About ebXML (available at [http://www.ebXML.org]).
89David Berlind, “IBM, Microsoft plot Net takeover,”
Enterprise from ZDWire (April 11,
2002).
90Paul Krill, “W3C Close to Ratifying SOAP 1.2,”
InfoWorld Daily News (Nov. 1, 2002);
Micheal Meehan, “IBM Claim to ebXML Patent Sparks Furor: Critics See Hold on Trading
Partner Portion of Spec as Big Blow to Open Standards,”
Computerworld (April 22, 2002),
1.
91Paul Krill, “W3C Promotes Royalty-Free Web Services Standards,”
InfoWorld Daily
News (Nov. 14, 2002).
92Berlind,
supra note 89.
93Matt Migliore, “IBM Patents for ebXML Raise Red Flag on Royalties for Standards,”
(continued...)
CRS-14
and other proposed electronic commerce standards continue to evolve, more
information about the role of intellectual property may become available.
The Current Legal Environment Concerning
Industry Standards and Intellectual Property
As these examples demonstrate, standards and intellectual property rights may
potentially conflict. Some standards bodies have attempted to preempt these disputes
by establishing policies concerning intellectual property rights.94 These polices often
require members to disclose relevant patents prior to the formation of the standard,
or to license these patents to other members of the standards body either on
reasonable and nondiscriminatory terms, or on a royalty-free basis.95 However, some
uncertainty persists as to the extent to which these rules are enforceable, both with
respect to members of that standard body, and in particular against nonmembers.
Standards Bodies Policies
The policies of standards bodies towards intellectual property vary considerably.
A recent survey by Mark Lemley, a member of the law faculty of the University of
California, Berkeley, revealed a number of differences among standards bodies
policies.96 Some standards bodies have no intellectual property policy at all,97 an
approach that presumably allows members a considerable degree of flexibility
regarding intellectual property acquisition and enforcement. At the other extreme,
some standards bodies reportedly prohibit their members from owning intellectual
property relating to the standard.98 The intellectual property policies of many other
standards bodies fall somewhere between these extremes.
Many standards bodies impose some sort of disclosure obligation regarding the
intellectual properties of their members. These disclosure obligations vary among
standards bodies. Some standards bodies require their members to disclose issued
patents.99 Others further oblige the disclosure of patent applications that have been
93(...continued)
Enterprise System Journal (July 1, 2002), at 20.
94Jennifer L. Gray, “Internet Standards Bodies: Antitrust Guidelines,” 637 Practising Law
Institute Patents, Copyrights, Trademarks and Literary Property Course Handbook Series
(February-March 2001), 529.
95
Ibid.
96Lemley,
supra note 1.
97
Ibid.
98Professor Lemley reports that OMG, the Object Management Group, imposes this
requirement.
Ibid. See also Object Management Group, “About the Object Management
Group” (available at [http://www.omg.org/gettingstarted/gettingstartedindex.htm]).
99
See World Wide Web Consortium, “Current Patent Practice” (January 24, 2002) (available
(continued...)
CRS-15
filed, but have not yet issued as granted patents.100 Some standards bodies further
require the disclosure of published patent applications, but not those that were
unpublished.101
Standards body policies often address circumstances where a member owns a
patent relating to an adopted standard. Some standards bodies require that such
patents be licensed on a royalty-free basis to other members.102 This arrangement
apparently contemplates that the patent could be enforced against firms that are not
members of the standards body.
Other standards bodies instead require that the patent be licensed on “reasonable
and nondiscriminatory terms,” a standard commonly known as RAND licensing.103
Some policies do not specify whether this obligation applies to members and
nonmembers alike.104 According to Mr. Lemley, although the RAND standard is
commonly employed, it is not often further defined in terms of a specific royalty rate
and other clauses.105
Some standards bodies mandate that in circumstances where a patent covers a
proposed standard, it is more difficult to adopt that standard. For example, at least
one standards body requires a three-quarters majority to adopt a standard covered by
a patent.106 Other standards bodies make it easier to revoke a previously adopted
standard if it is later revealed that a patent covers that standard.107
In sum, the intellectual property policies of standards bodies vary considerably.
One implication of this diversity of rules is that intellectual property owners may face
difficulty in knowing the particular rules that will govern a particular intellectual
property right. This difficulty may be especially pronounced with regard to market
segments, such as the Internet, that are governed by multiple standards bodies with
99(...continued)
at [http://www.w3.org/TR/2002/NOTE-patent-practice-20020124#sec-Disclosure]).
100
See, e.g., JEDEC Solid State Technology Association, “JEDEC Patent Policy” (available
at [http://www.jedec.org/Home/manuals/JEDEC_Patent_Policy_Stmt.pdf]).
101The ATM Forum, ATM Standards, §3.3.1 (“Intellectual Property Rights”) (available at
[http://www.atmforum.com/standards/policies.html]).
102RosettaNet, RosettaNet Intellectual Property Policy (June 11, 2002) (available at
rosettanet.org).
103
See, e.g., The Internet Engineering Task Force, “IETF Page of Intellectual Property Rights
Notices” (available at [http://www.ietf.org/IESG/Section10.txt]).
104
See, e.g., ECMA International, “Code of Conduct in Patent Matters” (available at
[http://www.ecma-international.org]).
105Lemley,
supra note 1.
106
See The ATM Forum, “Patent Policy” (available at [http://www.atmforum.com
/standards/policies.html]).
107
See European Telecommunications Standards Institute, “ETSI IPR Policy” (November
22, 2000) (available at [http://www.etsi.org/aboutetsi/home.htm]).
CRS-16
overlapping subject matter concerns.108
Mr. Lemley comments that “many
technology companies today face a hodgepodge of rules and obligations of which
they are only dimly aware.”109
The Enforceability of Standards Bodies Policies
Although many standards bodies have promulgated intellectual property
policies, some uncertainty surrounds their enforceability.110 Suppose that a member
of a standards body asserts a patent that it did not disclose during the standard-setting
process, for example, or refuses to license a disclosed patent in keeping with
standards body policies. As well, a firm that is not a member of the standards body
may assert a patent against a competitor that sells products compliant with the
standard. In such circumstances, the standards body or its members may wish to
continue to employ its standard free of the intellectual property right. Past disputes
of this kind have largely been based upon contract law, the doctrines of fraud and
equitable estoppel, as well as the antitrust law.111 This report reviews these doctrines
in turn.
The intellectual property policy of a standards body amounts to an agreement
between members to comply with certain rules regarding their intellectual
properties.112 The failure of one member of the standards body to comply with these
rules could be considered a breach of a binding contract. The contract law would
therefore appear to be a principal mechanism for enforcing one member’s promises
regarding intellectual property.
Several difficulties attend the use of contract law in this context, however. First,
the intellectual property policy of a standards body can only bind members of that
group.113 Nonmembers are not parties to the contract and cannot be held to have
agreed to it.
Second, the intellectual property policies of standards bodies sometimes employ
vague language. For example, some standards bodies require only that intellectual
property rights be licensed on “reasonable and nondiscriminatory terms.”114 Given
that the term “reasonable” is susceptible to varying interpretations, it is possible that
108Lemley,
supra note 1.
109
Ibid.
110Cowie & Lavelle,
supra note 34, at 98 (describing patent and competition law principles
concerning standards bodies as “far from settled”).
111
Ibid.
112Lemley,
supra note 1.
113III E. Alan Farnsworth,
Farnsworth on Contracts § 10.1 (Aspen Publishers, Inc., New
York, New York 1998) (observing basic principle that contracts may be enforced only by
the contracting parties).
114
See supra notes 103-05 and accompanying text.
CRS-17
a court may find this provision unenforceable.115 On the other hand, the court may
be willing to determine whether a royalty is reasonable based upon the treatment of
patents of similar scope in related industries.116
In addition, contracts without a specified term may ordinarily be terminated at
will by any contracting party, so long as appropriate notice is given to the other
party.117 An example of this general rule is the familiar “employee-at-will” doctrine,
where employees may resign from their position, or be fired, at any time provided
that reasonable notice is given.118 This principle leaves open the possibility that a
member of a standards body may simply withdraw from the group after a standard
has been formed. In such cases, that firm may no longer be subject to the group’s
intellectual property policy.
Contract law does provide one approach for ameliorating this difficulty:
standards bodies bylaws could provide that members must disclose or license patents
that cover any standard adopted or under consideration while the member was a
member of the standards body. This promise should be enforceable even after a
member has resigned from the standards body.119 The number of standards bodies
that have actually adopted this policy is uncertain, however.
The doctrine of fraud provides another mechanism for policing behavior during
the standards-setting process. The legal system generally defines fraud to include the
following elements: “1) a false representation (or omission in the face of a duty to
disclose), 2) of a material fact, 3) made intentionally and knowingly, 4) with the
intent to mislead, 5) with reasonable reliance by the misled party, and 6) resulting in
damages to the misled party.”120 If a member of a standards body knowingly failed
to disclose the existence of an intellectual property right, then an accused infringer
may be able to assert the existence of all six elements of fraud.121
An assertion of fraud presents some difficulties when used to enforce standards
bodies rules, however. Notably, the proponent of a fraud defense may find it difficult
to prove that the intellectual property owner possessed a specific intent to defraud
other members of the standards body.122 Additionally, the doctrine of fraud is
premised upon the existence of a duty of honesty between the intellectual property
11511 Richard A. Lord,
A Treatise on the Law of Contracts § 30:3 (West Group, St. Paul,
Minnesota 1999).
116Lemley,
supra note 1.
117Farnsworth,
supra note 110, at § 2.14.
118
See California Labor Code § 2922 (2003).
119Lemley,
supra note 1.
120
Rambus Inc. v. Infineon Technologies AG, (Fed. Cir. 2003).
121Cowie & Lavelle,
supra note 34, at 129.
122
Ibid.
CRS-18
owner and the entity that relied upon the false representation.123 As with a breach of
contract argument, fraud is unlikely to be successfully employed by entities that were
not members of the standards body, including other market actors and consumers.124
An additional legal mechanism for ensuring compliance with intellectual
property polices is termed “equitable estoppel.” Equitable estoppel applies when “a
patentee, through misleading conduct, leads the alleged infringer to reasonably infer
that the patentee does not intend to enforce its patent against the alleged infringer.
Conduct may include specific statements, action, inaction, or silence where there was
an obligation to speak.”125 Equitable estoppel serves as a defense to a charge of
patent infringement.
The accused infringer must show that it relied upon the
misleading conduct and that it will be materially prejudiced if the patent is
enforced.126
Courts have applied the equitable estoppel doctrine in cases where a member of
a standards body fails to disclose its intellectual property rights during the standard-
setting process.127 In one case,
Stambler v. Diebold, Inc.,128 an individual was
estopped from enforcing his patent even though the standards body did not have an
intellectual property policy at all. In that case, Stambler invented a new card
validation system for use with automatic teller machines. He later sat on an ANSI
standards committee that ultimately developed an industry standard that Stambler
believed infringed his patent. Stambler subsequently left the committee without
informing it of his patent. Later, Stambler brought suit against an automatic teller
machine manufacturer that employed the industry standard. The U.S. District Court
for the Eastern District of New York held that the doctrine of equitable estoppel
applied, concluding:
Plaintiff had a duty to speak out and his silence was affirmatively misleading.
Plaintiff could not remain silent while an entire industry implemented the
proposed standard and then when the standards were adopted assert that his
patent covered what manufacturers believed to be an open and available
standard. Furthermore, plaintiff’s silence could reasonably be interpreted as an
indication that plaintiff had abandoned its patent claims.129
The estoppel doctrine provides one mechanism for enforcing implied or express
promises to disclose intellectual property that bears upon a proposed industry
123Lemley,
supra note 1.
124
Ibid.
125A.C. Auckerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020, 1028 (Fed. Cir.
1992) (en banc).
126Schechter & Thomas,
supra note 40.
127Cowie & Lavelle,
supra note 34, at 103-13.
12811 U.S.P.Q.2d (BNA) 1709, 1714-15 (E.D. Va.), aff’d, 878 F.2d 1445 (Fed. Cir. 1989).
12911 U.S.P.Q.2d at 1715.
CRS-19
standard.130 In particular, the doctrine of equitable estoppel may be more readily
applied than fraud because it lacks a specific intent element.131 Again, however,
estoppel does not appear to operate against intellectual property owners that were not
members of the standards body. Estoppel also does not appear to relate well to other
obligations imposed by standards policies, such as the duty to license intellectual
property on reasonable and nondiscriminatory terms.132
Another cause of action that has been employed in this context is based upon the
antitrust law.133 Antitrust law aims to protect the integrity of market competition
against attempts to raise prices or reduce output, either by a single firm that
dominates the market and excludes competition, or by a group of firms that act
collectively to coordinate their price and output decisions.134 In the context of
standards, an antitrust plaintiff could contend that a firm attempted to obtain market
dominance by abusing the standard-setting process, perhaps by failing to disclose
pertinent intellectual property or by failing to license it under the terms established
by a standards body’s intellectual property policy.
To date, most antitrust causes of action involving standards have involved
claims of attempted monopolization.135
To prove a claim of attempted
monopolization, the proponent must show: (1) a specific intent to monopolize; (2)
anticompetitive conduct in furtherance of that intent; and (3) a dangerous probability
of successful monopolization.136 As applied to standards bodies, the proponent of
this claim must prove that the intellectual property owner’s misrepresentations
manipulated the standard-setting process in such a way that the intellectual property
owner gained market power.137
Unlike fraud and equitable estoppel, which are defenses raised against a charge
of intellectual property infringement, attempted monopolization constitutes an
affirmative cause of action that may be asserted by any interested party.138 However,
a claim of attempted monopolization may be difficult to prove. At least in the
context of standards bodies, courts have generally imposed high standards of proof
130David M. Schneck, “Setting the Standard: Problems Presented to Patent Holders
Participating in the Creation of Industry Standards,” 20
Hastings Communications &
Entertainment Law Journal (1998), 641.
131
Ibid.
132
See supra notes 103-05 and accompanying text.
133Cowie & Lavelle,
supra note 34.
134CRS Report RL31026,
General Overview of United States Antitrust Law, by (name# re
dacted).
13515 U.S.C. § 2 (2000) (commonly known as “Section 2 of the Sherman Act”).
136
Spectrum Sports v. McQuillen, 506 U.S. 447, 456 (1993).
137Mueller,
supra note 5.
138Kevin J. Arquit et al., “Antitrust, Intellectual Property, Standards and Interoperability,”
524
Practising Law Institute Patents, Copyrights, Trademarks and Literary Property
Handbook Series (June 1998), 157.
CRS-20
on attempted monopolization claims.139 As a result, antitrust claims will likely be
limited to cases where an intellectual property owner’s actions lead to significant
anticompetitive consequences.140
In sum, standards bodies and their members have relied upon a number of legal
theories in order to enforce disclosure and licensing obligations, each with their own
advantages and shortcomings. Mr. Lemley concludes that “[t]aken together, these
legal rules do a fair job of ensuring that [intellectual property] owners do what they
promised to do.”141 However, there appear to be no mechanisms in place that will
enforce an industry standard against individuals and firms that were not themselves
members of the group that promulgated the standard.
Legislative Issues and Approaches
Given the wide recognition that intellectual property and industry standards are
of growing importance to the modern economy, the relationship between these fields
is the subject of increasing attention.142 Should Congress have an interest in this area,
a variety of approaches are available. If the current interface between intellectual
property rights and industry standards is considered satisfactory, then no action need
be taken. Indeed, growing awareness that intellectual property and industry standards
can sometimes conflict may lead to more sophisticated treatment of intellectual
property by standards bodies, as well as continued refinement of the governing law
in the courts.
Another approach is to encourage the technology community to develop model
intellectual property disclosure and licensing obligations for members of standards
bodies. Standards bodies would then be in a position to follow these guidelines when
developing their own intellectual property policies. This proposal might potentially
lead to more uniform treatment of intellectual properties by standards bodies. Given
the present diversity of intellectual property polices among standards bodies,
development of “best practices” for intellectual property may be welcome. It should
be noted, however, that these voluntary guidelines would not necessarily bind all
patent owners. Firms might still be subject to suit by patentees that have not joined
the relevant standards body, for example.
The government could also assist standards bodies in identifying intellectual
properties that might bear upon a proposed industry standard. For example, the
United States Patent and Trademark Office could, upon request by a standard body,
conduct a search of pending patent applications and issued patents in order to
determine whether these patents might bear upon a proposed standard.
This
capability would allow standards bodies to become more fully informed of
intellectual property rights during the standard-setting process. It should be noted,
139Lemley,
supra note 1.
140
Ibid.
141
Ibid.
142Mueller,
supra note 5.
CRS-21
however, that a number of patent research firms already exist that could conduct such
a search for a fee, at least with respect to issued patents and published patent
applications.143
More extreme possible legal reforms are also possible. For example, legislation
could call for public notice of approved industry standards. Proprietors would be
required to identify intellectual properties that are pertinent to the standard within a
set period of time. Failure to so identify applicable intellectual property to the
standards body might result in some limitation upon infringement remedies against
firms that practice the standard. One possibility is to grant a compulsory license in
favor of use of the industry standard, perhaps limited to a set period of time so that
the industry might develop a standard not subject to an intellectual property. Another
is that the patentee be unable to enforce the intellectual property against individuals
practicing that industry standard for a period of time, or perhaps altogether.144
Any possible legal reform would be well-advised to recognize that the U.S. high
technology industry is increasingly characterized both by rapid innovation and a high
degree of interconnectedness. The desire to capture the benefits of research and
development leads innovators to procure patents. Yet firms also desire to create
compatible products and secure greater aggregate sales, resulting in the development
of nonproprietary uniform standards. These two trends have sometimes led to
conflicts between exclusive intellectual property rights and open industry
standards.145 Striking a balance between promoting innovation, on one hand, and
maintaining the integrity of the standard-setting process, on the other, forms an
important component of contemporary industrial policy.
143Steve D. Beyer, “Searching — The Art Behind An Opinion,” 667
Practising Law Institute
Patents, Copyrights, Trademarks and Literary Property Course Handbook Series (Nov. 1,
2001), 45.
144
See Mark A. Lemley, “Standardizing Government Standard-Setting Policy for Electronic
Commerce,” 14
Berkeley Technology Law Journal (1999), 745.
145Schenck,
supra note 3.
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