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S. HRG. 113–308 

STANDARD-ESSENTIAL PATENT DISPUTES AND 

ANTITRUST LAW 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ANTITRUST, 

COMPETITION POLICY AND CONSUMER RIGHTS 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

TUESDAY, JULY 30, 2013 

Serial No. J–113–24 

Printed for the use of the Committee on the Judiciary 

( 
(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

DIANNE FEINSTEIN, California 

CHUCK SCHUMER, New York 

DICK DURBIN, Illinois 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

MAZIE HIRONO, Hawaii 

CHUCK GRASSLEY, Iowa, Ranking Member 

ORRIN G. HATCH, Utah 

JEFF SESSIONS, Alabama 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

MICHAEL S. LEE, Utah 

TED CRUZ, Texas 

JEFF FLAKE, Arizona 

BRUCE A. COHEN, Chief Counsel and Staff Director 

DAVID YOUNG, Republican Chief of Staff 

SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS

AMY KLOBUCHAR, Minnesota, Chairman 

CHUCK SCHUMER, New York 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

MICHAEL S. LEE, Utah, Ranking Member 

LINDSEY GRAHAM, South Carolina 

CHUCK GRASSLEY, Iowa 

JEFF FLAKE, Arizona 

CRAIG KALKUT, Democratic Chief Counsel 

BRYSON BACHMAN, Republican General Counsel 
(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota ................... 1 

Lee, Hon. Mike, a U.S. Senator from the State of Utah ...................................... 3 

Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa ............................ 4 

Hirono, Hon. Mazie, a U.S. Senator from the State of Hawaii ............................ 5 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 36 

WITNESSES 

Witness List ............................................................................................................. 35 

Munck, Suzanne, Chief Counsel for Intellectual Property, and Deputy Director, Office of Policy Planning, Washington, DC ................................................. 6 

prepared statement .......................................................................................... 38 

Melamed, A. Douglas, Senior Vice President and General Counsel, Intel Corporation, Santa Clara, California ....................................................................... 8 

prepared statement .......................................................................................... 51 

supplemental prepared statement .................................................................. 72 

Rosenberg, Donald J., Executive Vice President, General Counsel, and Corporate Secretary, Qualcomm Incorporated, San Diego, California .................. 9 

prepared statement .......................................................................................... 77 

supplemental prepared statement .................................................................. 98 

Kulick, John D., Ph.D., Chair, Standards Board, The Institute of Electrical 

and Electronics Engineers Standards Association, New York, New York ...... 11 

prepared statement .......................................................................................... 108 

QUESTIONS SUBMITTED BY SENATORS GRASSLEY AND KLOBUCHAR 

Questions submitted by Senator Grassley for Suzanne Munck ........................... 176 

Questions submitted by Senator Grassley for A. Douglas Melamed ................... 177 

Questions submitted by Senator Grassley for Donald J. Rosenberg ................... 179 

Questions submitted by Senator Grassley for John D. Kulick, Ph.D. ................. 181 

Questions submitted by Senator Klobuchar for Suzanne Munck ........................ 182 

Questions submitted by Senator Klobuchar for A. Douglas Melamed ................ 183 

Questions submitted by Senator Klobuchar for Donald J. Rosenberg ................ 184 

Questions submitted by Senator Klobuchar for John D. Kulick, Ph.D. .............. 185 

ANSWERS SUBMITTED BY WITNESSES 

Responses by Suzanne Munck to questions submitted by Senators Grassley 

and Klobuchar ...................................................................................................... 186 

Responses by A. Douglas Melamed to questions submitted by Senators Grassley and Klobuchar ................................................................................................ 190 

Responses by Donald J. Rosenberg to questions submitted by Senators Grassley and Klobuchar ................................................................................................ 204 

Responses by John D. Kulick, Ph.D., to questions submitted by Senators 

Grassley and Klobuchar ...................................................................................... 215 

MISCELLANEOUS SUBMISSIONS FOR THE RECORD 

Ericsson, Inc., statement ......................................................................................... 220 

Letter to Senator Klobuchar and Congressman Lee from Timothy Molino, 

BSA ....................................................................................................................... 226 
Page

IV 

Reverend Jeffrey D. Thiemann, President and CEO, Portico Benefit Services, 

Minneapolis, Minnesota; statement .................................................................... 234 

Standards Essential Patent Disputes and Antitrust Law, David J. Teece, 

Director, Institute for Business Innovation, University of California, Berkeley, California ....................................................................................................... 238 
(1) 

STANDARD-ESSENTIAL PATENT DISPUTES 

AND ANTITRUST LAW 

TUESDAY, JULY 30, 2013, 

U.S. SENATE, SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY, AND CONSUMER RIGHTS,, COMMITTEE ON THE JUDICIARY,, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:01 a.m., in 

Room SD–226, Dirksen Senate Office Building, Hon. Amy 

Klobuchar, Chairman of the Subcommittee, presiding. 

Present: Senators Klobuchar, Schumer, Coons, Hirono, Lee, and 

Grassley. 

OPENING STATEMENT OF HON. AMY KLOBUCHAR, A U.S. 

SENATOR FROM THE STATE OF MINNESOTA 

Chairman KLOBUCHAR. Good morning, and welcome to today’s 

hearing about standard-essential patents and antitrust law, or as 

we like to say, ‘‘Why can’t we be FRANDs?’’ That is just a little 

patent joke to start things out. 

[Laughter.] 

Chairman KLOBUCHAR. We are going to have a vote supposedly 

at 10:15, and so Senator Lee and I will take turns chairing, and 

we may have to recess for just a few minutes, but I thought it was 

more important to get the hearing going. 

This hearing follows one that we had last week that was also 

about the intersection of intellectual property and antitrust. That 

was in the context of pay-for-delay agreements to settle pharmaceutical patent litigation. Today we will be examining standard-essential patents, patents that are necessary components to cell 

phones, laptops, and other devices that have become indispensable 

to our everyday lives. 

We have heard concerns that consumers can face higher prices 

for these products when disputes occur about what the fair, reasonable, and non-discriminatory, or FRAND, rates should be to license 

these unique patents. 

Now, this may seem like a dry and technical subject for a hearing, but we will try to keep things interesting. What this hearing 

really boils down to is that antitrust and competition issues are increasingly at the center of the so-called patent wars, and we are 

trying to figure out whether standard-essential patent holders and 

implementers, instead of being at war, can be ‘‘FRANDs.’’ 

Last summer, Chairman Leahy held an oversight hearing where 

the DOJ and FTC testified about the harm to competition from the 

use of International Trade Commission exclusion orders to enforce 
2 

standard-essential patents. Since then, we have continued to hear 

concerns about how the market power conveyed by standard-essential patents and the ability to seek injunctions and exclusion orders 

can distort competition and harm consumers. 

Our hearing is particularly relevant this week because the administration is expected to complete its review of a dispute over 

standard-essential patents between Apple and Samsung at the 

International Trade Commission. 

We approach this hearing from the premise that industry standards are a valuable public good that foster invention and innovation. For example, standards ensures that our cell phones and 

smartphones can connect to each other, cellular networks, and WiFi. Once standards are set, they enable competition between the 

businesses that implement the standards into their consumer products. That is the reason we have a wide variety of competitors selling electronics such as smartphones, game consoles, and computers, to name a few. 

But any joint endeavor between potential competitors raises antitrust red flags. Standard setting involves competitors deciding 

what technology will become an industry standard, and in doing so 

they convey significant market power to whoever holds patents 

that are necessary to implement the standard. 

To counter this market power, standards organizations typically 

encourage participants to agree prior to setting a standard to license any patents that are ultimately included in a standard on 

FRAND terms. Consequently, competition can be distorted if a 

standard-essential patent owner reneges on its FRAND commitment by demanding higher royalty rates or more costly licensing 

terms after a standard is adopted than they could have before the 

standard was chosen. 

On the other hand, standard-essential patent owners say that 

sometimes their good-faith FRAND offers are rejected, perhaps in 

part because the potential licensees know the patent holder has already committed to licensing their technology. 

So we will examine these dynamics and ask important questions 

about how we can better protect consumers. Should the ability to 

get injunctions and exclusion orders be limited in cases when the 

promise was made to license patents on FRAND terms? Should 

FRAND commitments travel with a patent if it is transferred to another owner? And how can unwilling licenses be identified and willing licensees be identified and forced to the bargaining table? 

These are just a few of the issues that we are going to explore 

today. 

Cooperative standard setting has a long history in a variety of 

different industries, from the standard railroad track gauge and 

the aviation technology to nuts and bolts and every electronic device that we use today. But we need to make sure that safeguards 

are in place to ensure that standard setting continues to provide 

consumers with the most innovative products and that antitrust 

principles make sure consumers get them at the best prices. 

With that, I will turn it over to our Ranking Member, Senator 

Lee. 
3 

OPENING STATEMENT OF HON. MIKE LEE, A U.S. SENATOR 

FROM THE STATE OF UTAH 

Senator LEE. Thank you, Madam Chair. Our hearing today focuses on standard-essential patents. Everyone who is participating 

in or watching this hearing can agree that cooperative industry 

standards are good for consumers, producers, and for the economy 

as a whole. 

By enabling interoperability and interconnectivity, standards 

have played a vital role in the development of many extraordinary 

technologies that we now take for granted, including wireless networks and cell phones. 

We like standards, and we need them. Everyone here I think 

likewise agrees that our patent system benefits consumers and is 

itself essential to our country’s continued economic progress. By 

incentivizing the investment that leads to research, development, 

and innovation, the government’s recognition and protection of intellectual property provides an environment in which Americans 

can take risks, invent new products, and advance our standard of 

living in this country. 

Consumers thus rely on both a robust system of standard setting 

and dependable protection of intellectual property. Any conflict between these two important elements of our economy necessarily affects consumers and is a matter of real concern for this Subcommittee. 

Companies and individuals that use patents increasingly complain of what is called the ′′hold-up,′′ the scenario in which a holder 

of a standard-essential patent refuses to grant a license to use its 

patent or threatens to refuse to grant a license unless the user 

agrees to pay an excessive royalty. The holder of a standard-essential patent has a powerful leverage point due to the potentially prohibitive switching costs for companies who are already using the 

standard to make their product. 

To avoid such a hold-up, standard-setting organizations often require patent holders whose intellectual property has been included 

in a standard to agree to license their patent on fair, reasonable, 

and non-discriminatory terms, also known as FRAND terms. But 

a breakdown in bilateral negotiations over what constitutes 

FRAND may leave in place insufficient safeguards to prevent a 

patent holder from seeking an injunction in federal court or an exclusion order from the International Trade Commission. 

The result, some argue, is a situation in which holders of standard-essential patents can obtain excessive fees due to the very 

threat of a hold-up. Others argue that there is no hold-up problem. 

They point out that standard-setting organizations generally do not 

include terms in their agreements prohibiting patent holders from 

seeking injunctions or exclusion order, and for good reason. Injunction provide patent holds necessary leverage in negotiations to 

avoid litigation. 

Absent the ability to obtain an injunction or to obtain an exclusion order, holders of standard-essential patents will be forced to 

internalize the costs of litigating for damages against each potential licensee that refuses to pay reasonable licensing fees. Companies that have invested heavily in the development of intellectual 

property thus assert that, if anything, reverse hold-up is the real 
4 

threat, and any policy that discourages injunctions will devaluate 

standard-essential patents and thus reduce the ability and the incentive of innovators to invest in future research and development. 

Although these arguments appear to pit innovators against implementers, consumers have a real interest at stake here. Any policy that reduces participation in standards or that raises the cost 

of patent licenses will ultimately affect consumers, potentially limiting their access to new products or raising prices that they pay 

for those products. 

No one is suggesting that patent protection should be limited or 

that deception by holders of standard-essential patents should be 

tolerated. These issues are complex, and any potential solution 

must be carefully considered and weighed to take into account that 

complexity. 

The Federal Government should not intervene where free market 

forces are sufficient to remedy harmful conduct. At the same time, 

where existing laws and regulations create unfair incentives that 

damage our economy or that tend to harm consumers, Congress 

and government enforces must be willing to address the situation. 

In the event the evidence points to increased and unjustified 

costs for consumers as a result of a patent hold-up, our Subcommittee should seriously consider taking steps to discourage 

such behavior. 

Throughout our consideration of these issues, we must keep our 

focus on protecting competition and not insulating competitors. As 

Robert Bork forcefully demonstrated more than two decades ago in 

‘‘The Antitrust Paradox,’’ the proper focus of our antitrust laws is 

to maximize consumer welfare. By carefully evaluating the evidence and applying rigorous economic analysis, we can continue to 

ensure that competition and free market forces allocate resources 

to their most valuable use. 

I look forward to hearing from all of our witnesses today. I thank 

them for coming and welcome you to the hearing. 

Chairman KLOBUCHAR. Thank you very much, Senator Lee. 

Senator Grassley, the Ranking Member of the Judiciary Committee, we are pleased to have you here. Do you want to say a few 

words? 

OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. 

SENATOR FROM THE STATE OF IOWA 

Senator GRASSLEY. Just a few. In addition to a few words, when 

we have this vote at 10:15, I will have to go to the Budget Committee, and I do not know whether I will get back here. And if I 

do not, I will have some questions for answer in writing. 

Chairman KLOBUCHAR. Very good. 

Senator GRASSLEY. Thank you for this privilege of addressing the 

Subcommittee and our audience and, more importantly, for holding 

this hearing on standard-essential patents. 

Industry standards are critical to innovation and new technologies, products, and services. Standards are also important to 

allowing different electronic and mobile devices to interface and 

connect with each other. Consumers like competition, interoperability, and choice with respect to their devices. When companies 

agree to make their patents an industry standard, they commit to 
5 

make those patents available on fair, reasonable, and non-discriminatory licensing terms. So companies that have incorporated standard-essential patents into their products expect to be able to negotiate reasonable royalties with the patent holder. 

So these are questions that I will be looking for answers for. 

What are the obligations of companies that believe that their patents are being infringed or they are not getting a fair and reasonable royalty fee? Is it always anticompetitive or anticonsumer when 

standard-essential patent holders exclude or seek injunctive relief 

against companies that have implemented their standards? How 

extensive is the hold-up problem? How extensive is the hold-out 

problem? And how do these problems impact innovation and competition? 

I am looking forward to hearing from the witnesses today about 

the standard-setting process and whether it is being abused as well 

as how companies negotiate standard-essential patents. I am also 

looking forward to hearing what is happening in the courts with respect to standard-essential patent issues. 

We have seen an increase in lawsuits over the way that standard-essential patents are used and enforced, so continued oversight 

by this Committee, as you are doing today, is important in this 

area. 

Thank you. 

Chairman KLOBUCHAR. Thank you very much, Senator Grassley. 

Senator Hirono, do you want to give us a few words? 

OPENING STATEMENT OF HON. MAZIE HIRONO, A U.S. 

SENATOR FROM THE STATE OF HAWAII 

Senator HIRONO. Just very briefly. I know how important this 

morning’s hearing topic is for our technology sector, and it raises 

issues that I think most people are not aware of, and so I am here 

to listen to our panelists, and thank you very much. 

Chairman KLOBUCHAR. Thank you very much. 

I am going to introduce our witnesses. Our first witness will be 

Suzanne Munck, who I will note is seven months’ pregnant with 

twins. And I know this hearing will calm the twins down, unless 

something really exciting happens. She is the Chief Counsel for Intellectual Property and Deputy Director of the Federal Trade Commission’s Office of Policy Planning. Before joining the FTC, she was 

an antitrust and IP litigator in Los Angeles, and I would like to 

point out that she received her J.D. from the University of Minnesota Law School. 

We also have with us Mr. Douglas Melamed. He is the senior 

vice president and general counsel for Intel. Mr. Melamed was previously a partner at Wilmer Hale. He also served in the Department of Justice as Acting Assistant Attorney General in charge of 

the Antitrust Division and as Principal Deputy Assistant Attorney 

General. 

Our third witness will be Mr. Donald Rosenberg. He is the executive vice president, general counsel, and corporate secretary of 

Qualcomm. He has also served as senior vice president, general 

counsel, and corporate secretary for Apple and has held numerous 

positions at IBM, including senior vice president and general counsel. 
6 

Our final witness to testify will be Mr. John Kulick. Mr. Kulick 

is the Chair of the Standards Association Board of the Institute of 

Electrical and Electronics Engineers and a senior consultant for 

technical regulation and standardization in corporate research for 

Siemens Corporation. 

With that, I ask all our witnesses to stand and raise your right 

hand. Do you affirm that the testimony you are about to give before 

the Committee will be the truth, the whole truth, and nothing but 

the truth, so help you God? 

Mr. MELAMED. I do. 

Mr. ROSENBERG. I do. 

Ms. MUNCK. I do. 

Mr. KULICK. I do. 

Chairman KLOBUCHAR. Thank you. Why don’t we begin with Ms. 

Munck. 

STATEMENT OF SUZANNE MUNCK, CHIEF COUNSEL FOR INTELLECTUAL PROPERTY, AND DEPUTY DIRECTOR, OFFICE 

OF POLICY PLANNING, FEDERAL TRADE COMMISSION, 

WASHINGTON, D.C. 

Ms. MUNCK. Thank you very much. Chairman Klobuchar, Ranking Member Lee, and Members of the Subcommittee, thank you for 

the opportunity to testify this morning. The written statement submitted with my testimony represents the views of the Federal 

Trade Commission. My oral presentation and responses to questions are my own and do not necessarily reflect the views of the 

Commission or any Commissioner. 

My testimony focuses on SEPs that a patent holder has committed to license on reasonable and non-discriminatory, or RAND, 

terms. In this context, hold-up describes the potential that a SEP 

holder can use the leverage it may acquire as a result of the standard-setting process to negotiate higher royalty rates or other more 

favorable terms after the standard is adopted than it could have 

credibly demanded beforehand. 

As outlined in the written statement, the Commission recognizes 

that America’s economic growth and competitiveness depends on its 

capacity to innovate. It also recognizes that intellectual property 

and competition laws share the fundamental goals of promoting innovation and consumer welfare. 

Collaborative standard setting plays a valuable and pro-competitive role in promoting innovation. Firms in the IT and telecommunications industries frequently face the problem that hundreds, thousands, and sometimes hundreds of thousands of different inventions need to work together. They often solve this interoperability problem through voluntary consensus-based standardsetting organizations, or SSOs. SSOs create technical standards to 

ensure that devices will work together in predictable ways. Such 

standards can create enormous value for consumers by increasing 

competition, innovation, product quality, and choice. 

Many standards, particularly in the high-tech sector, include a 

large number of patented technologies. This can benefit consumers. 

However, incorporating patented technologies into standards also 

has the potential to distort competition by enabling SEP holders to 

engage in patent hold-up. 
7 

The threat of patent hold-up arises as a result of the standardsetting process. Before a standard is adopted, multiple technologies 

may compete for selection into the standard. Once a standard is 

adopted, an entire industry begins to make investments tied to the 

standard. At that time, companies may not be able to avoid the 

standardized technology unless all or most other participants in the 

industry agree to do so in compatible ways. 

Because all of these participants may face substantial switching 

costs in abandoning initial designs and substituting a different 

technology, an entire industry may become locked into practicing 

the standard. In this situation, a SEP holder can demand royalty 

payments and other favorable licensing terms based not only on 

the market value of the patented invention before it was included 

in the standard, but also on the costs and delays of switching away 

from the standardized technology. 

Hold-up and the threat of hold-up involving RAND-encumbered 

SEPs can deter innovation by increasing costs and uncertainty for 

other industry participants. It can discourage adoption of standards 

and reduce the value of standard setting, depriving consumers of 

the substantial pro-competitive benefits of standardized technology. 

It can also harm consumers when excess costs are passed on to 

them. 

Market-based factors may mitigate the risk of hold-up. Frequent 

participants in standard-setting activities may avoid engaging in 

patent hold-up to preserve their reputation. Patent holders who 

manufacture technology may find it more profitable to offer attractive licensing terms and promote the adoption of the standard, increasing demand rather than extracting hold-up royalties. 

Nevertheless, SSOs commonly seek to mitigate the threat of patent hold-up by seeking commitments from participants to license 

SEPs on RAND terms, often as a quid pro quo for the inclusion of 

the patents in the standard. A RAND commitment can make it 

easier to adopt a standard, but the potential for hold-up remains 

if the RAND commitment is later disregarded. 

I would like to close by reinforcing the important point that competition and intellectual property laws work together to promote innovation. Voluntary consensus-based standard setting facilitates 

this purpose; however, including patented technology in a standard 

creates the potential for patent hold-up. As outlined in the written 

statement, the Commission will continue to advocate before the 

federal courts and the ITC for policies that mitigate the potential 

for patent hold-up and will bring enforcement actions where appropriate. 

Thank you very much. I am happy to answer any questions that 

you have. 

[The prepared statement of Ms. Munck appears as a submission 

for the record.] 

Chairman KLOBUCHAR. Thank you very much, Ms. Munck. 

Mr. Melamed. 
8 

STATEMENT OF A. DOUGLAS MELAMED, SENIOR VICE PRESIDENT AND GENERAL COUNSEL, INTEL CORPORATION, 

SANTA CLARA, CALIFORNIA 

Mr. MELAMED. Chairman Klobuchar, Ranking Member Lee, and 

distinguished Members, thank you for convening today’s hearing on 

abuses of standard-essential patents, or SEPs. 

Intel Corporation is the world’s largest semiconductor company, 

and it is a major exporter and manufacturer that employs approximately 50,000 people in the United States. Intel is also a leading 

innovator. Last year, Intel spent more than $10 billion on R&D, 

more than any other publicly traded company in the United States. 

Intel invented, among many other universally used technologies, 

the first dynamic random access memory, or DRAM, the first 

microprocessor, and the universal service bus, or USB. Intel holds 

nearly 40,000 patents and has been a top-10 recipient of U.S. patents for eight of the last 10 years. Intel has been instrumental in 

developing countless industry standards, including Wi-Fi standards. Intel cares deeply both about protecting legitimate patent interests and about ensuring the robust, pro-competitive development 

and implementation of industry standards. 

The high-tech industry is being threatened by the increasingly 

frequent anticompetitive behavior of a few. Some patent owners 

who commit to license their patents for use in industry standards 

on fair, reasonable, and non-discriminatory, or FRAND, terms are 

reneging on those commitments after their patents have been incorporated into the standards. FRAND abuse has threatened significant harm to competition, innovation, and consumer welfare. 

In the standard-setting process, patent holders compete to have 

their patented technologies included in the standard. After the 

standard is adopted and gains commercial acceptance, however, 

this competition is eliminated because to comply with the standard, 

manufacturers must use the SEPs embodied in the standard, and 

using an alternative technology that was available before the 

standard’s adoption is no longer feasible. 

As a result, if unchecked, the SEP holder can have enormous 

market power which derives not from the SEPs themselves, which 

are often insignificant, but from their inclusion in the standard. 

To prevent this, standard-setting organizations require those 

whose technologies are included in the standards to commit to license their SEPs to everyone on FRAND terms. These FRAND 

commitments are, in effect, a bargain. In exchange for vastly increasing the number of users of the patented technology and, thus, 

the licensing opportunities available to those technologies, the SEP 

holder voluntarily agrees to forgo the market power created by the 

inclusion of its patent in the standard. This bargain preserves the 

competitive benefits that existed before the standard was adopted 

and ensures that the royalty reflects the value of that competition. 

Recently an alarming trend has emerged where some companies 

are reneging on their FRAND commitments and seeking to exercise 

the market power that they previously agreed to relinquish. In 

Intel’s written submission, I point out six abuses of FRAND commitments. This morning I will briefly address two of particular importance. 
9 

First, although companies that make FRAND commitments have 

promised to license every willing implementer, some SEP holders 

refuse to license component manufacturers like Intel. They insist 

instead that it is okay for them just to license our customers, manufacturers of PCs and other end products. Aside from the obvious 

breach of a contractual commitment to license everyone, these refusals to license chip makers inflicts substantial harm. 

SEP holders refuse to license chip makers so that they can seek 

excessive royalties. In one recent case in which we were involved 

in litigation, a SEP holder sought a 50-cent royalty on a $2 chip. 

It admitted at trial that it did so because it believed it could get 

larger royalties by going after the PC manufacturer than by going 

after the chip maker. It believed that the jury would reject as excessive a 50-cent royalty charged on a $2 chip that consumed the 

entire technology but would not reject a 50-cent royalty as excessive in a $700 computer. This company has only 50—about three 

percent of the SEPs in the standard, and there are about 250 

standards in a PC. So the 50-cent royalty it sought implies an aggregate royalty burden of more than $4,000 for a $700 computer. 

The second critical FRAND abuse occurs when SEP holders 

threaten injunctions against a willing licensee. They do so not to 

prevent copying of their products but, rather, to gain leverage with 

which to extract from the users of their products excessive royalties 

greater than the reasonable royalties they promised to accept. 

FRAND abuse is a serious and growing problem. Intel appreciates the Subcommittee’s interest in this issue, and I thank you 

for the opportunity to participate in this hearing. 

[The prepared statement of Mr. Melamed appears as a submission for the record.] 

Chairman KLOBUCHAR. Thank you very much. 

We are going to recess briefly when I go to vote, and Senator Lee 

will take it up, and I will be back shortly. So thank you, everyone. 

You can have some water or do whatever you need to do to get 

through the hearing. Thank you very much. 

[Recess at 10:26 a.m. to 10:35 a.m.] 

Senator LEE. [Presiding.] Okay. Why don’t we go back in now. 

Chairman Klobuchar should be back in a moment, but we will resume. 

Why don’t we hear from Mr. Rosenberg? Go ahead, sir. 

STATEMENT OF DONALD J. ROSENBERG, EXECUTIVE VICE 

PRESIDENT, GENERAL COUNSEL, AND CORPORATE SECRETARY, QUALCOMM INCORPORATED, SAN DIEGO, CALIFORNIA 

Mr. ROSENBERG. Thank you, Ranking Member Lee, for the opportunity to testify today. My name is Don Rosenberg, and I am executive vice president and general counsel for Qualcomm, 

headquartered in San Diego. Qualcomm is a leading developer of 

wireless communication technologies and the largest producer of 

chip sets for wireless devices. Since our founding in 1985 by seven 

engineers and academics, we have produced and commercialized 

ground-breaking mobile innovations that have transformed modern 

communications. Today we employ more than 27,000 people, more 
10 

than two-thirds of whom are engineers and scientists, with a majority based in the United States. 

Since our founding, Qualcomm has invested more than $25 billion in research and development, and our annual investments in 

R&D exceed 20 percent of our revenues. 

Qualcomm is active in more than 100 standard-setting organizations around the world, and we broadly license our standard-essential patents on FRAND terms. Despite what you may have heard, 

FRAND works well. It balances the rights of technology innovations on the one hand with those of implementers on the other. 

And it encourages all participants to choose collaboration over litigation. 

Qualcomm licenses virtually our entire portfolio of 3G and 4G 

patents to nearly 250 companies, including all major mobile device 

manufacturers. Qualcomm’s R&D investments and licensing program have lowered barriers to entry, promoted competition on 

prices and features, and significantly enhanced consumer choice 

and welfare. 

Qualcomm’s technologies have allowed newcomers to enter the 

mobile industry and compete with great success without having 

made R&D investments of their own in core wireless technologies. 

The mobile device in your purse or pocket would not function as 

the powerful, always connected handheld computer without 

Qualcomm’s contributions to wireless standards and our decision to 

make our technologies widely available. 

Contrast that with the many companies who develop or acquire 

proprietary technology solely for their own competitive advantage. 

For companies that rely on technology developed by others, patent 

royalties are a cost of doing business. But for wireless pioneers, 

patents provide economic incentives to encourage risky, long-term 

investments in innovation. 

Qualcomm is both a product company and an R&D institution, 

and we appreciate both perspectives. Yet we firmly believe that 

patents are critical to this country’s long-term economic future and 

global competitiveness. We are deeply concerned that certain policy 

proposals would devalue patented contributions to standards and 

strip patent owners of important property rights, contrary to longestablished SSO policies. 

Bear in mind, product makers that implement standardized technology are already protected against inappropriate threats of an injunction or exclusion order. In the United States, an exclusionary 

remedy will not be granted until an infringer’s FRAND defense is 

adjudicated. This is a high bar, leaving only unwilling licensees 

subject to injunctive or exclusionary relief. 

As you evaluate the merits of proposed changes to patent rights 

or standards policies, I ask you to consider three important questions. 

First, what do the facts tell us about the role of patents and 

standards in today’s innovation economy? By all objective economic 

measures, the mobile industry is an incredibly dynamic and a competitive ecosystem facilitated by literally thousands of licenses, 

cross-licenses, and other kinds of partnerships. Disputes among 

competitors are to be expected in a vibrant marketplace. Patent 
11 

litigation is common in periods of intense technological development and does not signify a breakdown in competition. 

Second, would proposed policy changes balance the interests of 

product makers and inventors? FRAND policies serve complementary goals of access to patented technologies and fair compensation 

for innovators. Policy changes that unfairly tip the balance to infringers would decrease incentives to invest in R&D and to contribute to standards. The recent joint USPTO-DOJ statement on 

SEPs explicitly rejects one-size-fits-all rules and recognizes the importance of balance and a case-specific approach to FRAND disputes. 

Third, and finally, will the proposed policy changes encourage respect for U.S. patented technologies abroad? The United States has 

historically pressed foreign governments to respect patent rights, to 

respect the freedom of contract and voluntary consensus-based 

standards. A backward shift in U.S. patent policies could encourage 

foreign governments to adopt measures that devalue American 

technologies through royalty rate regulation and compulsory licensing. 

In closing, I urge the Subcommittee to recognize that the creation of complex, game-changing technologies requires many billions of dollars of R&D investments over a period of several years, 

if not decades. This risk and reward dynamic depends on a strong 

U.S. patent system. 

I thank you, and I look forward to your questions. 

[The prepared statement of Mr. Rosenberg appears as a submission for the record.] 

Senator LEE. Thank you, Mr. Rosenberg. 

Dr. Kulick, let us hear from you. 

STATEMENT OF JOHN D. KULICK, PH.D., CHAIR, STANDARDS 

BOARD, THE INSTITUTE OF ELECTRICAL AND ELECTRONICS 

ENGINEERS STANDARDS ASSOCIATION, NEW YORK, NEW 

YORK 

Mr. KULICK. Good morning. My name is John Kulick. I am the 

Chair of the Standards Board of the IEEE Standards Association, 

known as IEEE-SA. I am also an employee of Siemens, but I am 

here solely in my IEEE-SA capacity. 

I would like to extend my thanks to Chairman Klobuchar, Ranking Member Lee, and the rest of the Committee for the opportunity 

to present testimony to the Subcommittee. 

We appreciate the foresight of the Subcommittee in looking into 

this important issue. IEEE-SA is a global leader in standards development. For example, probably everyone in this room has a 

laptop or tablet computer with wireless connectivity. That 

functionality is based on the 802.11 standard, one of the most wellknown standards developed by IEEE. 

IEEE-SA is the standards development arm of IEEE. IEEE is the 

leading global organization for engineers, scientists, and other professionals whose technical interests are rooted in electrical and 

computer sciences, engineering, and related arts and sciences. 

IEEE is a New York 501(c)(3) public charity whose mission is the 

advancement of technology for the benefit of humanity. IEEE has 

more than 425,000 members in over 160 countries. 
12 

We believe that the intersection of patents with standards is becoming a real issue. Therefore, the work of the Subcommittee is 

very timely and may be an inflection point in the global efforts to 

find long-term solutions to the growing challenge of patent quality. 

IEEE fully realizes the importance of a comprehensive patent 

policy and has put in place a balanced framework with detailed 

rules and procedures that defined how patented technology should 

be taken into account within IEEE standards. A detailed description of the IEEE standards development process is provided in the 

written submission to the Subcommittee. 

The strength of the IEEE-SA’s patent policies can be measured 

by whether the outcome of the standardization process is universally available, that is, broadly affordable to anyone and anybody. 

The success of a standard should be determined by the market. A 

proliferation of strategic standards coupled with a concentration of 

SEPs in the hands of a few corporations, individuals, or interest 

groups has the potential to block this governing principle. 

IEEE-SA was the first SDO to realize that the problems cannot 

be tackled anymore by merely applying downstream measures, essentially in the form of an SDO’s patent-related rules and procedures, no matter how good those procedures may be. The exponentially increasing number, the decreasing quality, and the ongoing 

concentration of patents, particularly in certain fields, in the hands 

of a few companies are not natural phenomena but, rather, the results of a systemic problem at the interface of the patent world and 

the standardization system. 

IEEE has taken the lead in influencing the international debate 

regarding the critical interplay between the patent and standardization systems. In 2010, IEEE-SA signed a strategic MOU with 

the European Patent Office, the first ever between an SDO and a 

regulatory authority. This cooperation has helped the EPO to improve the quality of its prior art searching and, thus, of the patents 

granted in the standardization domain of IEEE and beyond. 

Due to the global nature of many ICT standards, a similar cooperation between USPTO and IEEE, as well as among other leading SDOs, patent offices, and regulators, is necessary. As a matter 

of fact, a paradigm shift is necessary. The governance of the process must start with improved self-regulation of patenting behavior 

during the early phases of the standardization process through a 

close collaboration between patent offices and SDOs, rather than 

focusing exclusively on how patented technologies should be included into standards that are nearing the completion of their development or, as some have suggested, the increased regulation of 

SDOs. 

Simply put, for the standards implementer, it is easier to deal 

with one patent based on an original idea than with many more 

‘‘me too’’ inspirations based on information from within standards 

development communities. 

IEEE-SA’s patents policies are well established and responsive to 

ongoing developments. In the forum IEEE has created, we strive to 

adhere to recognized principles of standards development through 

due process, broad consensus building across a range of interests, 

transparency of information and records, balance without dominance, and openness to all interested parties. 
13 

In closing, I want to reiterate my thanks to Senator Klobuchar 

and Senator Lee for the chance to present testimony to the Subcommittee today. We appreciate the opportunity and look forward 

to further dialogue. 

Thank you. 

[The prepared statement of Mr. Kulick appears as a submission 

for the record.] 

Chairman KLOBUCHAR. [Presiding.] Very good. Thank you very 

much. I think I will start with you, Dr. Kulick, as you sort of—I 

like the drama about the juncture in time and how it is that our 

Committee really has an obligation for competition’s sake to get involved in this. And you talked about a paradigm shift because of 

the fact that we need standards, that would be correct, we would 

start with that, we need standards. But you—and I do not want to 

paraphrase this exactly, but you feel that with the concentration of 

the patents holders and some of the demands and things that are 

happening, the process is getting messed up, and you think we 

need a paradigm shift. You suggested self-regulation. What other 

ideas would you have to try to solve this problem? 

Mr. KULICK. Thank you for the question. Yes, I think what else 

could be done, I think, is important. I think the example that we 

have already established with the EPO and trying to work more 

closely with the Patent Office to provide more information to make 

prior art searches more complete so that when patent applications 

are being evaluated, they can be done more thoroughly with information that they may not have ordinarily had access to. And so in 

the granting of the patents, they can do a more thorough and complete examination. 

Chairman KLOBUCHAR. Very good. Mr. Melamed, do you want to 

comment on the solutions here? You talked about the serious implications for competition. You heard from Mr. Rosenberg who talked 

about how reasonableness is the currency of standard setting and 

does not see patent hold-up as a problem. Do you want to respond 

to that and talk about what you see as the solutions? 

Mr. MELAMED. Thank you, Chairman Klobuchar. Let me begin 

on a point that Mr. Rosenberg made. He said it was critically important that we respect patents and that we respect contracts and 

that we set an international standard in doing so. So I would start 

right there and say it is critically important that we respect the 

bargain that is made by a SEP holder when it says that in exchange for the vastly increased opportunity to license my patent 

when my technology is included in the standard, I commit to license on fair and reasonable terms. 

I think it is critically important that we have a wide understanding that is enforced in the courts, that is enforced by the antitrust agencies where antitrust violations are found, that holds SEP 

holders to their bargains and gives meaning to the FRAND commitment. 

I think in addition to that, we might focus on specific remedies 

that will deal with the problem of hold-out that Senator Lee referred to and that I know Mr. Rosenberg referred to in his written 

statement, namely, the notion that there might be people who are 

using a standard and try to avoid having to pay for a license. One 

way we do that is by making meaningful the treble damage remedy 
14 

for willful infringement. Another way might be by fee-shifting legislation, which has been proposed elsewhere in the Congress, legislation that would make it more costly and less attractive to engage 

in frivolous litigation on either the plaintiff side or the defense 

side. 

Those would be two measures that could deal with the problem, 

and that is a problem, by the way, that I would be glad to address 

at greater length later in this hearing. 

I want to comment again, briefly, as you invited, on Mr. Rosenberg’s statement that there really is not much of a problem because 

there is robust competition. Yes, there is robust competition in 

most information technology spaces. But there is, nevertheless, a 

very serious problem. The problem is the excessive and increasingly frequently excessive taxes imposed by SEP holders on innocent implementers of public standards. 

We see that not so much in the occasional litigated case that a 

company like Intel or Microsoft can afford to undertake. But we see 

that in the settlements, the licenses that are entered into by parties that say, ‘‘I cannot pay millions of dollars to litigate. I am 

going to have to enter into a settlement agreement.’’ 

Now, those are not ordinarily public, but when you go through 

trials such as our trials, a SEP holder says, ‘‘Look at all the agreements that parties have entered into. That shows the value of my 

patent.’’ But the agreements do not show that. They show the coercive power of a threat of an injunction, of a threat of excessive royalties, of a threat of an exclusion order. 

Chairman KLOBUCHAR. Mr. Melamed, could you talk a little bit 

about how, in your view, this would then affect consumers? We 

know the strong testimony here from you about how it can affect 

competitors, and your point is not just ones the size of Intel but 

also smaller competitors. How does it affect consumers? 

Mr. MELAMED. It affects consumers, I think, in two ways. The 

most immediate way is the traditional antitrust way in which a 

party that exercises market power it should not have can hurt consumers, namely, by raising prices, which, of course, restricts output 

and transfers wealth from consumers to SEP holders. 

In the long run, perhaps the more insidious harm is that this is 

a tax on the industry and on innovation. It reduces the incentives 

of parties to continue to innovate and to improve. And while to be 

sure, as Mr. Rosenberg said, there has been a lot of innovation, 

what we do not know is how much more innovation there could be 

if the FRAND commitments are widely complied with and how 

much less there will be if this growing problem of reneging on 

FRAND commitments continues. 

Chairman KLOBUCHAR. So what you are saying is, you know, you 

acknowledge there is competition, but once the standards are set 

and someone is fortunate enough to have their patent included in 

a standard, then you see lessening competition, which has an effect 

on prices for consumers and competition going forward. 

Mr. MELAMED. Prices and incentives to innovate, yes. 

Chairman KLOBUCHAR. Right. Mr. Rosenberg, do you want to respond to that? 

Mr. ROSENBERG. Yes. Thank you, Chairman Klobuchar. Let me 

start by saying there have been a lot of words and discussion 
15 

today, mostly about things like hold-up as potential problems or 

the fear of hold-up or the possibility of hold-up. And what I ask is 

that the Committee, the Subcommittee, look at the record, look at 

the facts, the history, the empirical data. Look at all the lawsuits. 

Mr. Melamed describes a lawsuit. We can all come up with some 

fringe problems in any number of areas, but those fringe—that 

margin is not where legislation should be focused. If there are 

problems with the patent system, if we want to make the patent 

system more efficient, I absolutely agree with that. But that is 

where we should start. 

And there is also confusion, I think, caused by some commercial 

interests about what standard-essential patents are and what they 

are not. And I cannot take too much of your time to explain the 

process, but the process is a collaborative one from beginning to 

end, and it involves multiple engineers collaborating on all kinds 

of questions about which technology is best. 

What we hear is concerns about what may happen. The fact of 

the matter is the mobile communication industry, as I said earlier, 

is healthy and dynamic. This is the second time I have heard in 

a discussion like this that things might have been better. Well, I 

cannot respond to that. There is no way I know what might have 

been. What I do know is that the success of this industry is well 

documented. Prices have fallen. Technology has advanced. The 

phone that you have, as I said earlier, in your pocket would not be 

there if there was not a dynamic, competitive industry. There have 

been multiple examples of new entry. How does one enter a market 

that is the subject of things like hold-up and royalty stacking? 

There are multiple examples of entry. There are multiple examples of successful companies, and consumers have benefited dramatically, to answer your question, because of the technological advances and the falling prices. 

Chairman KLOBUCHAR. Okay. With that, I am going to turn over 

to Senator Lee, and I will be back for a follow-up on that. Thank 

you. 

Senator LEE. Thank you, Madam Chair. 

I think I would like to start with Ms. Munck. Ms. Munck, first 

of all, I should tell you you are in good company. Both I and Senator Coons are the fathers of twins. 

Ms. MUNCK. Congratulations. 

Senator LEE. Mine are 18 and his are 14. Mine at least love 

standard-essential patents. 

[Laughter.] 

Senator LEE. In the small town of Alpine, Utah, where I live, we 

speak of little else. 

[Laughter.] 

Senator LEE. They do, of course, benefit from these, as all of us 

do every single day, whether we regard ourselves directly as the 

beneficiaries of the patent, of the intellectual property itself or not. 

So in your testimony, you argue that the patent holders’ failure 

to abide by the FRAND commitment can be anticompetitive. You 

note that a hold-up can have some potential to raise prices for consumers and to distort and blunt some of the incentives to innovate. 
16 

I feel the need to ask: Is it always anticompetitive for a holder 

of an SEP to see an injunction or an exclusion order? And if not, 

in what circumstances might it not be anticompetitive? 

Ms. MUNCK. Thank you, Senator Lee. I think that there are certain circumstances where the Commission in the past has said that 

it is, you know, generally okay to seek an injunction or an exclusion order. Those are situations where you have someone who is an 

unwilling licensee, where you have someone who is refusing to pay 

a rate that has been negotiated, where you have someone that is 

outside the jurisdiction of the U.S., and that is important because 

that would implicate the ITC’s jurisdiction; and then where you 

have someone who is unable to pay. 

Senator LEE. So certainly in those circumstances it would have 

that. Now, do you think—is it your sense that either the federal 

courts or the ITC failing properly to weigh the public interest factors in making these decisions with regard to whether or not to 

issue an injunction or to issue an exclusion order? 

Ms. MUNCK. Sure. So speaking personally, I think there are a 

number of different situations where the courts are looking into 

these issues, and without sort of drawing a broad conclusion, I 

think that it is very important for the courts under the eBay analysis to consider whether once someone has made a FRAND commitment—and, actually to take a step back, there is no requirement of making a FRAND commitment, and so in most instances, 

if you are not dealing with a FRAND-encumbered SEP, the patent 

laws are set up to promote sort of exclusive use, and that is why 

you have eBay not really weighing one way or the other. It is mean 

to be fairly neutral. 

But once someone makes a FRAND commitment, you know, 

what I personally think they are saying is, ‘‘I am willing to license 

broadly; I am willing to accept monetary remedies for any use of 

my technology.’’ And so I think that once you have made that commitment, under eBay it is very difficult to show that monetary remedies would be inadequate. 

Senator LEE. So it does not always follow from the fact that one 

has a standard-essential patent, it does not always follow from that 

that you necessarily make the FRAND commitment. But once that 

commitment is made, you have got to stick with it. 

Ms. MUNCK. I think that is right. One of the very interesting 

things about this area is the variety among SSO policies. So some 

standard-setting organizations require a FRAND commitment. 

Some ask that you license your intellectual property on a royaltyfree basis. So I think that, you know, as with all of these issues, 

it is fairly fact specific. But once one company says, ‘‘I would like 

to include my technology in the standard, I would like to compete 

for inclusion, I know I am going to receive benefits as a result of 

being included, and I am going to make that FRAND commitment,’’ 

then that needs to be taken into consideration by the district courts 

when considering whether an injunction should issue. 

Senator LEE. Okay. Thank you. 

Mr. ROSENBERG. Senator, may I? 

Senator LEE. Yes, sure. Go ahead. 

Mr. ROSENBERG. All true, but, again, I think what constantly 

gets lost in the discussion is the fact that a FRAND commitment 
17 

is a contractual commitment. And for a contract and a bargain, you 

need two sides. The FRAND commitment made by the standard-essential patent holder—and we make FRAND commitments every 

day—is one side of that bargain. The other side of that bargain is 

the beneficiary of that contract—which is the contract between the 

standard-essential patent owner and the standard body. So the 

third-party beneficiary is the implementer. The implementer has to 

be, as Ms. Munck said, a willing licensee. If you do not have a willing licensee on the other side, who has obligations as well, then it 

is impossible for the standard-essential patent owner to have a bargain and a contract. 

And Intel, I think, is going farther even than the FTC or the 

DOJ in terms of opposing injunctive relief at all, or at least opposing the request for injunctive relief. I think both agencies agree 

that there are situations where injunctive relief may be appropriate. There is the unwilling licensee. Those of who have been in 

the industry know that there are times when the other side is simply saying, ‘‘Sue me. I am not going to pay. And if you win, if you 

happen to sue me and you spend a lot of money on litigation and 

you happen to win, and I happen to lose the appeal, then at that 

point I will pay you your royalty.’’ Well, that is years down the 

road. 

There has to be some ability to say, no, you cannot just say, I 

am unwilling to license on any terms, let alone fair, reasonable, 

and non-discriminatory terms. 

Senator LEE. Do you want to respond to that, Mr. Melamed? 

Mr. MELAMED. Just briefly, if I may clarify. Mr. Rosenberg, I 

think, misunderstood or perhaps I failed to articulate clearly Intel’s 

position. Intel agrees that injunctions might be appropriate where 

the implementer of the standard is not willing to pay a FRAND 

royalty. But we do think that where the implementer is willing to 

pay and to negotiate in good faith over a FRAND royalty, the injunction, the threat of an injunction, and an ITC exclusion order 

should be off the table. 

Senator LEE. Okay. Will the increasing consensus within the federal courts, Mr. Melamed, increasing consensus to the effect that 

injunctions should not issue in cases involving SEPs, would that reduce the prevalence of patent hold-up situations? 

Mr. MELAMED. Yes, it is certainly a movement in the right direction. I do not know that the law is quite as clear on the principle 

that Ms. Munck and I are articulating as one would like. But certainly since eBay, the law in the federal courts has moved in the 

direction that reduces the risk of hold-up from the threat of district 

court injunctions. But there remains the risk of hold-up from the 

threat of an ITC exclusion order, and increasingly SEP holders are 

using the ITC as their forum of choice precisely because of the 

availability of that remedy. And there is a risk of hold-up from 

other strategies that are employed by SEP holders such as refusing 

to license at the chip level and in general seeking excessive royalties. 

Senator LEE. Okay. My time has expired. Mr. Rosenberg wants 

to respond on that point, if that is okay. And we will let him do 

that. 
18 

Mr. ROSENBERG. Again, I want to try to respond with some facts. 

There is a lot of discussion about standard-essential patents that 

gets conflated with the discussion about patents generally, about 

litigation and related issues, and you should focus on the following: 

The vast majority of the district court cases that are referred to 

commonly as ‘‘smartphone cases’’ do not involve standard-essential 

patents. They primarily involve nonstandard-essential patents. 

There is not one example of an ITC exclusion order involving a 

stadard-essential patent, including the recent ruling in the AppleSamsung case in which the Commission never definitively resolved 

the question of essentiality of Samsung’s patent but did find that 

Samsung’s offer to license the patent at issue was consistent with 

FRAND. I am aware of one court ruling that involved a standardessential patent, but it wasn’t in the 3G, 4G area of technology. 

And the defendant in that case, as the record shows, was clearly 

an unwilling licensee, I think, under anyone’s definition. 

So we talk a lot about this problem. As I said earlier, words are 

thrown around, fears are thrown around, hypotheticals are thrown 

around, the use of hold-up, the use of royalty stacking, even this, 

talking about litigation as if it is common or as if there are injunctions happening every day involving standard-essential patents, 

when the facts are absolutely clear, documented, and can be 

checked. It is just not happening. 

Senator LEE. Thank you. I see my time has expired. I hope to 

get back with some of you on the next round. Thank you. 

Chairman KLOBUCHAR. Very good. Senator Hirono. 

Senator HIRONO. Thank you very much. 

I understand that these FRAND commitments are essentially 

contractual, and so there is a question that I have. Perhaps you 

can all respond, but I would like to hear Ms. Munck’s comments 

on this. Is there a role for us, for the Federal Government, in this 

arena? Mr. Rosenberg, you seem to indicate that things are going 

pretty well as far as you are concerned. 

Ms. MUNCK. Thank you very much. So speaking for the FTC and 

also speaking personally, I think that there has been a role for the 

FTC to play here. We have taken, I would say, three series of actions. 

One is that SSOs often ask us to monitor their IPR policies or 

their IPR meetings, and we have been very grateful to be included 

in that. I think that is very important, because it is difficult for me 

personally as a person in our Policy Office to advise on policy without actually knowing what is happening on the ground. So I also 

frequently meet with members of standard-setting organizations 

and members of the technical community to understand what is 

happening here. So I think that is one role that you can play. And 

I usually classify that as outreach. 

The second role that can be played is advocacy. Examples of advocacy are in our written statement. One would be the statements 

that the FTC made last June to the ITC, and the second would be 

the amicus brief that the FTC filed with the Federal Circuit in 

Judge Posner’s decision in the Apple v. Motorola case. 

And then the third would be our enforcement tools. 

Senator HIRONO. Do any of the other panelists wish to comment 

briefly? 
19 

Mr. ROSENBERG. Senator Hirono, thank you. I know I, to some 

extent, as you say, sound like I am saying it is not broken so do 

not fix it. And that is largely what I am saying. But I am not suggesting that there are not problems, as they say, at the margins 

that appear. But they are all being handled in the way that these 

systems are built to handle them. Both our courts and other agencies are involved in helping to deal with the marginal problems. 

So, again, I want to emphasize that they are marginal problems, 

and, frankly, I believe in the free market system. I believe in the 

process of bilateral negotiations. What I hear here is we need oversight, we need competition law oversight over the enforcement of 

intellectual property rights. 

I have spent over 35 years at what people call the intersection 

of intellectual property and antitrust law, and they are complementary, and they can co-exist, and they both can foster consumer welfare. We do not need one holding sway over the other. We see all 

over the world. There are over 100 competition authorities in the 

world. They are all trying to best each other on what is the right 

way to regulate. 

There are already laws in some of those countries which very 

much focus in their antitrust laws about controlling intellectual 

property rights. That is not some place where I want to see us go. 

I think the systems are working well. I think the courts are handling these marginal cases. I think the Federal Circuit is doing a 

good job of defining the law as it is developing. And I would urge 

that we allow that to continue. 

Senator HIRONO. And yet at the same time, though, these contractual agreements are supposed to be based on a standard of reasonableness and fairness, and it often is within the negotiating 

power of the people who are negotiating these kinds of FRAND 

commitments. So it is a moving target, a moving ball. Is there any 

kind of a standard for what constitutes fair and reasonable in 

FRAND agreements? 

Mr. ROSENBERG. Well, standards bodies have for years, if not 

decades, debated the question of whether FRAND and RAND 

should be a flexible standard or one that is very much defined with 

very precise borders, and they have unanimously decided that they 

want a flexible standard. They want, as I said, the bilateral giveand-take of a negotiation to determine what the right terms are. 

By the way, we often talk about FRAND as just royalties, but it 

is terms, fair, reasonable, and non-discriminatory terms. There are 

extensive terms in a lot of these licensing agreements that go well 

beyond the question of what the royalty payment is. There are 

cross-licensing provisions, for example, as well as others. 

So, again, I would say, yes, you have an obligation when you 

make a representation to negotiate on fair, reasonable, and nondiscriminatory terms. The other side has an obligation to also negotiate on fair, reasonable, and non-discriminatory terms. 

Senator HIRONO. Ms. Munck, representing the Federal Government and FTC is focused also on consumer benefits, so in your advocacy and your monitoring, is that a framework from which you 

operate that the consumer should be benefited from these agreements, these discussions that are occurring in the private sector? 
20 

Ms. MUNCK. Yes, absolutely, and I think it is fair to say that a 

large number of FRAND negotiations are working. I think that is 

true. I think that you see disputes in particular instances. And I 

think that even if you have flexible FRAND terms, you still need 

a means to determine what is going to happen when there is a 

FRAND dispute. 

And so if you look at some of the proposals, there is a recognition 

that you need to have dispute resolution mechanisms, that the IPR 

policies themselves are thinking, that the SSOs themselves are 

thinking of, and that is one way of dealing with it. 

But, yes, to get back to your question, you want to look at the 

impact on consumers, and that can be the pass-through of hold-up 

rates; that can be a degradation of faith in the standard-setting 

process. And I think to that second point, that would be a problem 

because you have heard everyone on the panel talk about the importance of standard setting, so you would not want to have a situation where you have the degradation of that process. 

Senator HIRONO. Did you want to add something? 

Mr. MELAMED. Yes, Senator Hirono, thank you. I do want to comment on a couple of ideas. 

I believe there is room for the government to improve the situation, and I want to start by something Mr. Rosenberg said. He said: 

This really has not been much of a problem. There have been only 

a handful of litigated judgments involving some of the issues that 

we are talking about today. 

I think that is focusing on the wrong question. What really is 

happening is that the threat of onerous provisions extracted by the 

holders of SEPs have enabled them to enter into bargains, license 

agreements, or settlements of litigation and to extract in those settlements and in those bargains consideration far in excess of and 

far more onerous than that to which they committed with the 

FRAND commitment. 

For example, a SEP is simply a patent that a patent holder 

claims reads on the standard. In fact, Intel has been sued three 

times on some SEPs in Germany. Not one of them was found to be 

valid and infringed. 

In Texas, we were sued recently on five SEPs. Two of them were 

found not to be valid or infringed. None of those patents was an 

SEP. 

In the KMotorola-Microsoft case, a great number of the patents 

that were asserted by the SEP holder there were found not, in fact, 

to be valid and infringed. 

One party to a major onslaught of SEP litigation reports that 

less than 20 percent of the patents asserted against it were found 

in litigation to be SEPs. 

So you have parties asserting patents that they claim are SEPs, 

claiming the right to injunctions, claiming the right to excessive 

royalties, refusing to license at the chip level, and extracting from 

them onerous settlements and licensing agreements. That is where 

the problem comes from. 

So we cannot rely on the courts. We have to rely on a clear understanding of what the ground rules are to inform the negotiations in the settlements. 
21 

Senator HIRONO. Thank you. My time is up. Perhaps somebody 

else will ask what would be your suggested remedies. 

Thank you. 

Chairman KLOBUCHAR. Thanks. We are going to turn over to 

Senator Schumer, and we are going to do a second round here if 

you are interested, Senator Hirono. Thank you very much. 

Senator Schumer. 

Senator SCHUMER. Well, thank you. First, I want to thank you, 

Senator Klobuchar, for holding this important hearing. I want to 

thank all the witnesses for being here. 

The issue of how patents are being used and abused to inhibit 

competition and stifle innovation is a critical one for us to explore. 

There is a real problem. It is growing every day. The only good 

news is that our awareness of the problem and commitment to 

solving it is also growing every day. And this hearing is focused on 

one important aspect of the issue: standard-essential patent disputes. 

There is certainly a problem in this area, and I am glad we are 

taking a closer look at it. But it is not the only problem by far. 

Now, I spend a lot of time talking to high-tech entrepreneurs in 

New York. These folks are an economic engine driving growth 

throughout our city and State. In fact, for every high-tech job they 

create, 4.3 non-tech jobs are created. Last year, in terms of venture 

capital into high tech, New York City placed second after San 

Francisco—no one is here from Massachusetts—replacing Boston. 

Take that, Red Sox. 

[Laughter.] 

Senator SCHUMER. Since they are about seven games ahead of 

the Yankees, we take what we can get. 

Chairman KLOBUCHAR. That is what we always say about the 

Twins. 

Senator SCHUMER. And when I talk to them about the challenges 

facing their businesses, they invariably mention two problems: 

first, immigration and the ability to get high-tech workers. We are 

obviously working on that one. And the second one that all of them 

mention is patent trolls. I have talked to businesses which have 

had to stop hiring or, worse, fold up entirely as a result of patent 

troll suits. Technology is becoming the engine of New York’s economy, and trolls are trying to pour sugar in the gas tank. They must 

be stopped. 

This problem extends well beyond the tech community. We hear 

from retailers, grocery stores, advertisers, basically every kind of 

business you can imagine, who are getting with patent lawsuits for 

having things like Wi-Fi in their stores or using scanners. 

It is clear there is a problem. It is clear we need to solve it. 

Now, I have a bill that will help clear out poor-quality business 

method patents. Several of my other colleagues have bills they are 

working on. And Senator Klobuchar is making sure we are focused 

on regulatory and antitrust aspects. All of these solutions go hand 

in hand. This problem is big enough that we need all of the tools 

in our toolbox. 

So I want to commend the Chair for having this hearing and convening it, and I have a few questions for the witnesses. 
22 

First, Ms. Munck, as I mentioned, we are hearing more and more 

stories about negative effects patent trolls are having on small 

businesses. In many of these cases, the trolls leveled a lack of 

transparency in patent ownership and the cost of litigation against 

small businesses who do not have armies of lawyers on their side 

and cannot afford to litigate out a dispute, even when they know 

they have not infringed. 

What do you plan to do to protect the ability of small businesses 

to compete in the marketplace? 

Ms. MUNCK. Thank you very much, Senator Schumer. I think 

that there are a number of tools available to protect small businesses and other entities that are dealing with ‘‘patent trolls,’’ as 

you call them, or as I have been sort of indoctrinated to call them, 

‘‘patent assertion entities,’’ which I hope is okay. 

Senator SCHUMER. Patent what? 

Ms. MUNCK. Patent assertion entities. Forgive me. I have to say 

it. 

So I think that there are several tools—— 

Senator SCHUMER. That sounds worse. 

[Laughter.] 

Chairman KLOBUCHAR. That is quite obvious, Senator Schumer. 

Ms. MUNCK. So I think that the FTC has several tools available 

to deal with this issue. One is, as you mentioned, where you have 

a situation of someone suing large numbers of small entities who 

may not be sophisticated in understanding sort of what is happening. And I think that in certain situations, the FTC’s UDAP authority, or unfair or deceptive acts or practices authority, can step 

in there. I think if you have a situation where you have someone 

who is claiming infringement for intellectual property that they do 

not have the right to enforce, or they are claiming infringement of 

intellectual property that is expired, or if they are threatening to 

sue to get the costs that you are talking about, to get that settlement, but they do not actually have any intention to sue, I think 

that all of those categories would be under our Section 5 authority. 

But I also agree completely with you that this is an issue where 

multiple solutions are needed, both from Congress, from the courts, 

from the agencies. 

Senator SCHUMER. Okay. Well, I certainly encourage the FTC to 

be vigilant here, because you have on the most ridiculous of claims 

people being put out of business, you know, just, ‘‘We can out-lawyer you.’’ And for a big company, they can do that over a small 

company. 

Now, we heard Mr. Melamed and Mr. Rosenberg say that these 

are marginal problems. Have you found them to be marginal problems? I certainly have not. Talk to a company that has gone out 

of business. 

Ms. MUNCK. Sure. So if you do not mind, I think that if I—I do 

not want to mischaracterize your testimony, but I believe that they 

may—— 

Senator SCHUMER. I will give them a chance. 

Ms. MUNCK. Okay. They may have been talking about standardessential patents, and the PAE issue, I agree with you, it is a very 

important issue. It is the reason why the FTC together with the 

DOJ held a workshop last December, because we recognized that 
23 

we did not have a good understanding of what was happening in 

this area. And so we wanted to bring together folks who were being 

affected by PAE activity, the economists looking at the harms and 

the efficiencies of the model, and also to understand what antitrust 

remedies are possible. But I agree with you, this is a very important issue. 

Senator SCHUMER. Yes, Mr. Rosenberg. 

Mr. ROSENBERG. Thank you, Senator. And, by the way, before I 

moved to San Diego, I spent the rest of my life in New York, where 

I was general counsel at IBM, and I spent 31 years there. 

Senator SCHUMER. Very nice. 

Mr. ROSENBERG. And I say that for two reasons. I have spent a 

lot of my career—I managed litigation there for about 15 years— 

dealing with patent litigation, mostly as a defendant, well before 

people were talking about standard-essential patents, or SEPS, and 

even before people were talking about trolls or PAEs. And there is 

no question that the threat from non-practicing entities is a difficult one to deal with, not only for the small companies that you 

talk about, but for large companies as well. And I was happy that 

Ms. Munck added that bit of clarification. When you walked in, I 

was talking about standard-essential patents, and I would love to 

go back to that at some point, if you would like, talking about the 

marginal cases. 

You talked about there is a problem, and you said there is certainly a problem with SEPs, but there is a bigger problem, or at 

least the problem you are focused on, with trolls. I would like to 

tell you that the so-called problem with SEPs is more one perceived 

than real, and I have waxed on this a while here, so I will not go 

back to that at this point. 

On trolls or PAEs, look, there is no question that something 

ought to be done. What I am asking is that you be very careful to 

operate with a scalpel and not a cleaver. There is a tendency—and 

you know better than I—for sometimes good-intentioned legislation 

to paint with—I am using a lot of metaphors here—a broader 

brush than it was intended to. 

And so, for example, I just want to be careful that there are legitimate companies that license technology, such as Qualcomm, 

who also produce enormous benefits and designs and products, who 

should not be painted with a legislative brush that talks about nonpracticing entities or trolls. And so I would ask just for that kind 

of careful consideration. 

Senator SCHUMER. I appreciate that. My time is up. And I 

mischaracterized Mr. Melamed. He said there are serious problems, 

so you do not have to rebut yourself. All I can tell you, to continue 

your metaphor, patent trolls do not paint a pretty picture. 

[Laughter.] 

Chairman KLOBUCHAR. Okay. Very good. 

Senator Coons. 

Senator COONS. Thank you, Senator Klobuchar. Thank you for 

convening this hearing. Thank you to the panel for your hard work 

and your engaging testimony so far. And to Senator Lee, I do not 

know, your twins might be SEP fans. My twins were having a fight 

the other day about whether it is RAND or FRAND. I had to break 

that up, go to both corners of the rec room. 
24 

[Laughter.] 

Senator COONS. But to the extent that Wi-Fi and video compression has literally changed our lives, or at least our gaming platforms, I wanted to go to Dr. Kulick, if I could, just because bringing 

SSOs into the conversation, IEEE, AST, and others, I think, is an 

important piece of the structure of this hearing. 

I wondered, Dr. Kulick, if you would, whether the IEEE has a 

position about whether a no-injunction commitment should be inferred from the RAND commitment in existing standard-setting 

contracts and whether you have any plans to include a no-injunction policy in future standard-setting contracts. 

Mr. KULICK. Thank you very much. With respect to an injunction, when a patent holder submits a letter of assurance to the 

IEEE stating that it will license it for FRAND conditions, then the 

patent holder has actually stated that it is willing to accept a reasonable royalty. However, the Standards Association has not expressly at this time adopted a policy that actually speaks to whether there are circumstances when an injunction would be available. 

However, the Standards Association recently started a process to 

consider potential revisions to our patent policy. That process is 

currently underway right now, and certainly one of the topics that 

is being discussed for consideration here is this topic of injunctions. 

But at the present time, the Committee has not reached its conclusion, and I do not want to prejudge what the outcome might be at 

this particular time. 

Senator COONS. One of the things that has made the whole practice of standard setting, in my view, so successful is that it is a repeat game, that you see lots of cross-licensing in the market historically. What are the SSOs thinking about the issue of hold-up 

by NPEs? Do you see this as an increasing threat? Is there something being done by SSOs to specifically guard against hold-up? 

Mr. KULICK. With respect to hold-up, the SSOs—I mean, as a 

neutral body, we try to avoid taking a position whether any particular royalty rate or licensing term is reasonable. However, it still 

can be said that at least within our membership and our stakeholders, there is a perception of or a potential for potential patent 

hold-up, and I believe that that was the reason that—was a factor 

in many of the stakeholders back in 2005 when we went through 

our last revision of our patent policy, caused them to consider these 

types of conditions and terms. 

So we do not have a position with respect to the individual, you 

know, royalty question because we are neutral body. It is always 

a potential for a problem. 

Senator COONS. Well, if I might, Mr. Rosenberg, I would just be 

interested—I know you have a rejoinder to that, if you would, but 

also I would be interested in hearing something about what is the 

incentive structure for companies to invest in technologies that 

really are advancing standards-oriented technologies as opposed to 

sort of more substantive or performance-based? How does this uncertainty or how does this current marketplace setting give signals 

about innovation and the potential consequences for investing in 

purely standard-setting technology? 

Mr. ROSENBERG. Well, I will address that one first and then go 

back, if I can recall. 
25 

The motivation for invention, lots of people can discuss that, but 

clearly our system has been built around incentives to invest the 

enormous amount of research and development funds that companies like Qualcomm invest. And it is not done with the expectation 

of excessive reward, but it is done with the expectation that there 

will be reasonable compensation. 

As you know, Senator Coons, when you invest enormous amounts 

of dollars in R&D, you do not know where they are going to lead. 

And more often than not, they lead down a blind alley. So it is the 

successful ones that once you hit that mark, you want to be able 

to make sure that you have been compensated for the expense and 

the research and development costs and also some fair return; but 

you also, as we have done, want to be able to then use that as a 

virtuous cycle, put those funds back into the R&D process. And as 

I said earlier, we do that to the tune of over 20 percent of our revenues every year. 

So that is the incentive, and that is the incentive system—at 

least that is one of the incentive systems that I am most concerned 

about when you look at patent problems and conclude that the 

problems are more serious than we think they are, or at least you 

get confused. There has been a discussion here already today about 

PAEs and trolls and SEPs. It is confusing. I live with this every 

day. I cannot imagine how you can follow this. But what I said earlier and I want to repeat is that we have to be very careful about 

not allowing problems in one area to allow you to assume that 

there are greater problems in another area. 

And if I can just take a couple more seconds, on the SDOs, of 

course, Dr. Kulick is here, but there are other standards bodies all 

over the world. ETSI is one of the big ones. The whole 3G PP 

standards area, which is the one that we live in, which is the 

connectivity, the 3G, the 4G, the thing that allows your phone to 

be connected all over the world, they have looked at these issues 

as well. 

Multiple standards bodies have said while the theory of hold-up 

is there, we have not seen it. We have not seen it actually occur. 

We have not seen it interfere with the acceptance of a standard or 

interfere with new technology. And ETSI has said that, ANSI has 

said it, and they have said it in testimony. 

And, in fact, as you look at some of these lawsuits that Mr. 

Melamed has talked about, even the economists there, while they 

talk about the theory of hold-up, none of them can come up with 

any real-life examples of how hold-up has actually stopped a standard or injured technological advancement. 

So we can talk about negotiations that go on and threats, as Mr. 

Melamed did, which, you know, I cannot respond to because I am 

not sure what precisely he is talking about. But negotiations happen all the time, and people have leverage and other sides use 

their leverage as well. 

Senator COONS. Thank you, Mr. Rosenberg. 

Would the Chair indulge Mr. Melamed for a response? 

Mr. MELAMED. Thank you. I appreciate that, Senator Coons. I 

will try to be brief. I want to respond to two of the points in the 

recent colloquy. 
26 

First, as to the incentives to invest in standards, yes, there are 

enormous incentives. These standards are a part of the growing 

economy. But I can tell you, as a company that invests tens of billions of dollars in standards-compliant products, we look at the 

costs and the risks associated with intellectual property in deciding 

how much to invest and what to invest. Excessive royalties imposed by those SEP holders that renege on their FRAND commitments at the margin reduce and distort investment in these technologies. 

Second, with respect to the question of the position of the standard-setting bodies, I think you have to look at it this way: First, 

a standard-setting body is an industry-wide organization. Ordinarily the antitrust laws would be very skeptical of agreements by 

bodies of that nature, but they are allowed to have industry-wide 

standards because there are lots of benefits from standards, to the 

extent that they act in the public interest. So what those standardsetting bodies do needs to be constrained by and interpreted in 

light of the public interest. 

The standard-setting bodies agreed on these FRAND requirements many years ago. Now we learn about the abuses that were 

not fully anticipated—the threats of injunctions, the resulting negotiated excessive royalties and so forth. 

If you go back to the standard-setting body now and say, ‘‘What 

is your position on injunctions? What are you going to do about this 

problem?’’ what you find is that these are consensus bodies, and 

the SEP holders who are taking advantage of the ambiguities or 

the apparent ambiguities are preventing a consensus cure. 

It is as if you had a contract that was written 10 years ago, and 

then you are in court today litigating what it means, and someone 

said, ‘‘We ought to let the parties decide what does it mean.’’ They 

are litigating it because they do not agree on what it means. And 

the standard-setting bodies’ decision making is constrained by the 

parties who disagree and cannot be relied upon as to the final answer. 

Chairman KLOBUCHAR. All right. Very good. 

I am going to focus on you here, Ms. Munck, because I know we 

could go back and forth here between Mr. Melamed and Mr. Rosenberg, and I think it is important to make the point that this is 

more than just a price dispute, more than just a lawsuit between 

companies, that this is also about consumers. 

Could you talk about how these disputes implicate antitrust 

laws, how they affect consumers, and particularly what are the potential harms to competition and consumers if a holder of FRANDencumbered SEPs reneges on a FRAND commitment? What is the 

harm to consumers? Ms. Munck. 

Ms. MUNCK. Thank you very much, Senator Klobuchar. I think 

that, you know, if you do take a step back, you are looking at a 

situation where you have several competitors who are coming together. And Mr. Melamed said, that is something that you would 

generally look at under the antitrust laws. But because these competitors are coming together in, you know, generally pro-competitive ways that lead to all the interoperability we have been talking 

about today, my iPhone on the T-Mobile network can call your 
27 

Samsung phone on the Verizon network, et cetera, et cetera. Those 

are very significantly pro-competitive. 

But I think that you also need to take the potential for anticompetitive harm into account, and as we have been talking about 

today, that is the situation where you have numerous competitors 

seeking to be included in the standard. One of them is ultimately 

chosen. Then, when you are implementing that standard, you then 

need to use that particular technology. You no longer have the 

choice among technologies if you want to be standard essential. 

So that is where you lead to the situation of lock-in and the situation where you have someone who is holding that SEP has the potential to charge higher costs, higher rates, as a result of having 

the competitors come together in the first place. So I think that is 

the category of antitrust harm that you are concerned about. 

Chairman KLOBUCHAR. Exactly, and Senator Schumer came in 

and talked about patent trolls or, as you like to call them, ‘‘patent 

assertion entities.’’ Is that correct? 

Ms. MUNCK. Yes. 

Chairman KLOBUCHAR. All right. I clearly understand the difference between them, but I do want to understand the intersection, and I know that Chairwoman Ramirez has called on the Commission to undertake the 6(b) study to investigate the potentially 

harmful effects of competition of patent trolls. And I wrote a letter 

to the full Commission actually urging them to promptly approve 

such a study. 

Are the concerns about patent trolls and competition any different or worse when the patents at issue are standard-essential 

patents? 

Ms. MUNCK. That is a very good question that many people have 

been thinking about, and to sort of go back to Senator Coons’ question as well, I think that you see that some of the SSOs are looking 

at transfer obligations. What happens when one person, you know, 

develops the standard—or develops the technology, pardon me, patents it, makes the FRAND commitment, and then later transfers 

that intellectual property to a third party? And ETSI, for example, 

has recently tightened their rules regarding transfer. I think that 

is an important point because it shows that the SSOs themselves 

are trying to deal with these issues. And I think that robust transfer agreements, speaking personally, will carry over to the PAE 

issue, because if you have an implementer who has made a FRAND 

commitment and then transfers that intellectual property to a third 

party, be it a PAE, another implementer, et cetera, if that FRAND 

commitment transfers, then you are binding the PAE to that original commitment. And I think that that is very important. 

Chairman KLOBUCHAR. One note on that 6(b) study. I think it is 

critically important. That is why I wrote the letter. And I do not 

want to wait two or three years for this study, so can you provide 

some kind of update on the status of the Commission’s review of 

the proposed study and give us any sense of how long it will take? 

Ms. MUNCK. Certainly. I do not have any update from what the 

Chairwoman said last week, but I can sort of direct you to studies 

that we have done in the past. For example, we had a generic drug 

study that took place in 2000. It took about two years to complete 

from beginning to end. And that is because it went through the 
28 

OMB process and we needed to—there are a lot of technical issues 

that I will not go into, but that is a good example, I think. 

Chairman KLOBUCHAR. Okay. Very good. 

We also have the issue that has been raised here several times 

today about the recent ITC decision to grant its first exclusion 

order related to a FRAND-encumbered SEP in the Samsung-Apple 

case. A decision by the President whether to veto or let the exclusion order stand is due any day now. 

Last year, the FTC weighed in with the ITC in a similar case 

and unanimously said that exclusion orders should not be granted 

on FRAND-encumbered standard-essential patents. 

What was the FTC’s basis? And why are exclusion orders based 

on SEPs unique? 

Ms. MUNCK. Sure, and if it is okay, I would like to talk about 

our basis last June because the current Commission has not addressed this issue. 

What we were talking about last June was the importance of a 

flexible public interest analysis, and we were talking about the existing authority that the ITC has under 337. As you know, if they 

find infringement and they are going to issue an exclusion order, 

they need to consider the impact on the public interest. And one 

of the factors that they must consider is the impact on U.S. consumers and competition. 

And so what we were saying last June was that when they are 

conducting that analysis, it is important to consider whether the 

intellectual property at issue has been committed on FRAND 

terms. 

Chairman KLOBUCHAR. Last year, in a case now on appeal before 

the Federal Circuit, Judge Posner in the Seventh Circuit, who was 

one of my professors in law school at the University of Chicago, 

someone that Senator Lee also knows, issued an opinion holding 

that injunctive relief is not available to holders of FRAND-encumbered patents. Many have claimed that Judge Posner’s opinion goes 

beyond the Supreme Court precedent in eBay and the antitrust 

agencies’ enforcement actions and guidance. What are your views 

of the opinion? And are there circumstances in which a SEP holder 

should rightfully have the ability to seek an injunction? 

Ms. MUNCK. Sure. So speaking personally, I was part of the 

group that wrote the amicus brief to the Federal Circuit, and we 

supported Judge Posner’s analysis that when you make a FRAND 

commitment, it will be difficult to show that monetary remedies are 

inadequate. And I think that is because of the broad commitment 

that you are making to license to multiple folks on multiple terms. 

As I mentioned earlier, that is different from a situation where 

someone, you know, gets a patent and decides to use it for their 

own exclusive use. So I think you do need to compare those two situations. 

Chairman KLOBUCHAR. Very good. I am turning it over to Senator Lee. Thank you. 

Senator LEE. Thank you, and I would like to pick things up with 

Ms. Munck. There are those who say that this is more of a theoretical problem than a real one. Do you want to just sort of respond 

to that? Do you think this is just a theoretical problem? To the ex-
29 

tent it is theoretical, does that still have ramifications that we 

ought to be concerned about? 

Ms. MUNCK. Absolutely. So I do not believe it is only a theoretical problem, and my sort of basis for that would be the Google 

and Bosch decisions that the Commission dealt with earlier this 

year and late last year. I do think, however, there is a strong theoretical basis for the idea of hold-up, and, you know, one of my favorite cases is from the late 1800s. It is cited in a case called Hynix 

v. Rambus, and it talks about a situation where—I believe it was 

the city of Pittsburgh laid down patented streets, and then someone came along and said, ‘‘Well, I want an injunction because you 

are using my technology.’’ Now, this is not in the SEP context. And 

the court said, listen, you know, you can charge an exorbitant 

value for the use of this technology because you are not going to 

pull up those streets. You are already locked in. You are already 

using that technology. 

And so I think that there is a strong theoretical basis and a 

strong basis in the literature for the idea that once an entire industry decides to practice a standard, that does create leverage for the 

patent holder, and that that is the leverage that is intended to be 

mitigated by the FRAND commitment. 

Senator LEE. Are there ways of keeping that leverage in check? 

For each leverage point, is there a counterpoint? 

Ms. MUNCK. Absolutely. I think that one situation that you can 

have is, you know, where you have a situation where there is a dispute over a FRAND term—because that is something that we are 

seeing recently, right? That has not really been an issue in the 

past, but it is coming up. You can go to a third party to decide if 

someone is willing, if the rate is within FRAND, et cetera. I think 

there are mechanisms for dealing with this issue. 

Senator LEE. Okay. Thank you. 

Mr. Rosenberg, if you had a standard-setting organization that 

decided to adopt rules specifically prohibiting the holders of a 

standard-essential patent from seeking injunctions with regard to 

those patents, either in federal district court or an exclusion order 

from the ITC, what impact might that have on Qualcomm? And 

what impact might that have specifically on Qualcomm’s inclination to participate in standard setting with that organization? 

Mr. ROSENBERG. Well, I would answer it this way: Certainly that 

particular act, perhaps combined with other attempts to limit the 

ability of a standard-essential patent owner from actually being 

able to enforce its patent, would probably cause companies like 

Qualcomm—and not just Qualcomm—to think hard about whether 

it is best to, in fact, continue to contribute to standards bodies or 

whether one should act in a proprietary nature, such as companies 

that we all know and are quite popular who do not contribute to 

standards bodies. 

Mr. Melamed talked about the fact that Intel has contributed a 

lot to standards bodies and has a lot of standards. Not in our area. 

There are a couple of handfuls of patents on the Intel side in the 

important—what I talked about as 3GPP, the telecommunications, 

important radio frequency, the thing that allows what Ms. Munck 

described as the handing off to different carriers throughout the 

world. That is what we do. And we have done that for the entire 
30 

existence of our company. And we want to continue to do that because we think there are a lot of benefits. People have talked about 

them, including the interoperability benefit. 

But if the risk, if what you pay, the price you pay in contributing 

your technology to the standards body is not that you use leverage 

to—I disagree—or so-called market power, as Mr. Melamed has 

said, to extract higher royalties, but, in fact, what they want is for 

you to collect lower royalties, they want you not to be able to enforce your patents at all, it seems to me it stands on its head when 

you take the critical technology—and that is what this is—that is 

determined by this collaborative body to be key to a standard, and 

then say now that critical technology is less valuable than it was 

before or less valuable than patents that are held as proprietary 

patents, there is something wrong with that logic. 

And so anything that, as I said, limits our ability to enforce, limits our ability to get returns on the investments that we have 

made, would have to be considered very carefully, if we were to 

continue in the standards. 

Senator LEE. Okay. Mr. Melamed, did you want to respond to 

that? 

Mr. MELAMED. Yes. The statement that Mr. Rosenberg made, 

which I think I can quote correctly, is, ‘‘They want you not to enforce your patents at all.’’ That is simply wrong. That is not our 

position. We are strong believers in the enforceability of patents. 

What we do not want is for people to be able to use devices to get 

more for their patents than they are truly worth. 

Senator LEE. More than they could otherwise get precisely because of the fact that they have been folded into the standard, 

right? I mean, once it is in there, a little bit analogous to the road 

material that is already on the road. 

Mr. MELAMED. Right. 

Senator LEE. Okay. 

Mr. MELAMED. Yes, Senator Lee. 

Mr. ROSENBERG. May I? 

Senator LEE. My time is up, but if you will be brief—— 

Mr. ROSENBERG. I will try. You can shut me off if I—— 

Senator LEE. Go ahead. 

Mr. ROSENBERG. The interesting thing—and I want to go back to 

something Senator Klobuchar asked before about the Apple v. 

Samsung case, and it fits in with all this. And Mr. Melamed said 

before that he has been accused of infringing standard-essential 

patents that turned out not to be standard essential. This is a very 

important point. People declare patents as potentially standard essential. The complicated process that I have tried to describe a little bit of in the standards bodies means that at some point a technology is adopted, and you are required as part of your membership in that standard, if you have contributed technology or if you 

know of technology that is covered by a patent, to say, ‘‘I have potentially patents that read on this standard,’’ because nobody really 

knows. 

And so until something like this gets litigated, that is how it is 

ultimately decided, because in the litigation process you look at the 

product and see how it is performing and you look at the patent 

claims and see whether there is infringement. And no one knows 
31 

until then whether it was actually essential to that. But you take 

your best guess. 

So it is another point of confusion that, I think, gets discussed 

here—not just here but in this whole debate about standard-essential patents. There is not a clear-cut instance where everybody 

knows this is a standard-essential patent. We only know that it is 

potentially a standard-essential patent. And that is a big difference. 

Senator LEE. And so it requires you to take your best guess, your 

best guess involving not only whether in the abstract the patent 

right at issue is going to be upheld, but also how much it is going 

to cost you to litigate it, how likely the other party is to sue. 

Mr. ROSENBERG. Very much like other patents. That is just what 

the process is. We used to joke all the time. You get an issued patent, but you do not really know if it is a good patent until it has 

been litigated in a court and a court has decided that. 

Senator LEE. Right. But under current law, that rather diminishes the efficacy, I suppose, of the treble damages provision in 

that you have got to show that it was a willful, knowing violation 

of the patent, and even then there is discretion in the judge. 

Mr. ROSENBERG. That is a very good point. And, you know, obviously litigators will try to show that, well, since you assume it is 

a standard-essential patent, then you must have known what you 

were doing because you were practicing that patent—assuming 

they can prevail on the question of whether there has been infringement. 

By the way, the patent that we are all talking about is an SEP 

in the Apple-Samsung ITC case. The Commission never concluded 

that it was a standard-essential patent. The lawyers did not get to 

the point where the Commission had to decide that. They said that 

specifically. They did not have to decide that it was a standard-essential patent. 

So it is another example that I am trying to say that we have 

to be careful about allowing others, mostly people who have legitimate commercial interests but their own commercial interests, to 

try to conflate all these things into problems when, in fact, we have 

to carefully define what the so-called problems are or are not. 

Senator LEE. Okay. Thank you very much. 

Chairman KLOBUCHAR. Very good. 

Just one last thing. Dr. Kulick, you have been sitting quietly 

here at the end, I am sure working on your standards and—— 

[Laughter.] 

Chairman KLOBUCHAR. But did you want to add anything to 

what you have heard today in terms of the work that you will be 

doing? 

Mr. KULICK. Yes, thank you, Senator, for the opportunity to comment. Clearly there has been a lot of interest and information 

shared here today. I did want to set a couple of points out, though, 

that I think actually read on what has been talked about today to 

some extent. 

We mentioned during our testimony about the need for perhaps 

higher-quality patents, and I think there is an opportunity there to 

try to help make some progress there. Better scrutiny on the quality of patents that are issued may help eliminate many of these 
32 

causes of concern or confusion and perhaps inappropriate claims regarding those patents in various litigation cases. 

So to the extent that SSOs can help facilitate that process by 

providing information available to patent offices and allowing them 

to do more thorough and perhaps more exhaustive searches as part 

of their application process, we certainly would stand ready and 

willing to cooperate in that respect. 

There was a brief mention—I think just a couple of comments 

here in general—about the importance of transferability of commitment. That is extremely important. And, in fact, the current IEEESA patent policy actually has a clause in it that commitments, once 

they are made to the IEEE-SA, they are irrevocable. So if your patents happen to get transferred by another means to another owner, 

the same commitment still binds the new owner to the commitments that were made. 

Chairman KLOBUCHAR. I know Chairwoman Ramirez has expressed interest in this, and I think referred to it as ‘‘privateering’’ 

in some of the work that, if you keep going, I thought that was important, too, yes. 

Mr. KULICK. Yes, that is very important. 

And then the last comment—well, two last comments, I guess. 

One was with respect to the current revision that we are doing 

with our patent policy, as I mentioned, we have an ad hoc committee that is considering the various issues, going to be making 

proposals. When that comes back, our process is open to all stakeholders. The Patent Committee will hold a series of open meetings 

where any interested stakeholder is able to attend, and all the 

views that will be considered by the committee will be those views 

that are brought forward by the stakeholders that attend. So, 

again, it is not necessarily a closed circle of people that are going 

to help develop any revisions to the policy. 

Then, finally, we have to consider very carefully as part of that 

process what the implications could be for what the new policy will 

then say to potential participants. And as Senator Lee mentioned 

at the very beginning, I think, in his testimony, any actions that 

potentially limit participation in a standards development organization could be detrimental to consumers. So we always keep that 

in mind as we are developing our policy to make sure that we are 

not going to end up doing something that is going to end up being 

detrimental to humanity or to the consumers. 

Thank you very much. 

Chairman KLOBUCHAR. Thank you very much, Dr. Kulick. I appreciate you ending on that note, and that is one of the questions 

I was so focused on with Ms. Munck, and that is this idea that in 

the end our job up here is to make sure there is competition, but 

it is to make sure there is competition so it is good for the people 

of this country and good for consumers. 

We have had a spirited debate. I do want to assure everyone up 

here that the record will remain open for two weeks, so you can 

respond to each other many times over that time. Maybe you could 

do like a round-robin by email. But we would welcome anything 

people want to submit as well as, I am sure, some of the Senators 

may have some additional questions on the record. 
33 

To me, there are clearly some legitimate antitrust concerns here. 

To me, the risk to consumers is clear. Ideally standards organizations, Dr. Kulick, and their members will voluntarily take steps to 

address these concerns by adopting best practices or updating their 

intellectual property rights policies. 

From the testimony we have heard today, it is evident that some 

standard-setting organizations are taking these concerns seriously. 

But if the standard-setting organizations are unable to address 

these issues, then we need to ask ourselves: When do we reach this 

tipping point when the DOJ and the FTC and others should step 

in with their enforcement role in standard setting? And that is 

what we are focusing on Ms. Munck with. Or when might Congress 

need to legislate? 

These are the questions that we are going to be considering. I 

can tell you that I am looking at potential legislation to address 

some of the competition issues in the patent world. We have heard 

a lot of discussion today about the appropriateness of injunctions 

and exclusion orders at the ITC. One reform I am considering 

would be to clarify the right standard for getting this kind of relief. 

I am also looking at possible legislation with respect to the FTC’s 

role in the patent troll debate and the impact on competition and 

consumers. I think we also know that Senator Leahy is working on 

this, our Chairman, and as has been mentioned, Senator Schumer, 

Senator Cornyn, and a number of other people are interested in 

this issue, in addition to Senator Lee and myself. 

And so I think this testimony has been very helpful. The debate 

has been helpful. But in the end, I know that our job is to look out 

for the consumers, and once we are reaching a tipping point where 

we think that Congress needs to be involved or we need to up the 

role of enforcement agencies and have that work complementary to 

the work of the standard-setting agencies or standard-setting entities doing their work, I think that time may have come. 

So, with that, do you want to add anything, Senator Lee? 

Senator LEE. Thank you, Madam Chair, for scheduling this, and 

thanks to all of you for coming and providing such insightful and 

in-depth testimony. I appreciate it. 

Chairman KLOBUCHAR. Very good. With that, the record will be 

open for two weeks, and the hearing is adjourned. Thank you, everyone. 

[Whereupon, at 11:50 a.m., the Subcommittee was adjourned.] 

[Submissions for the record follow.] 

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A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

WITNESS LIST
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PREPARED STATEMENTS OF HON. PATRICK LEAHY
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PREPARED STATEMENT OF SUZANNE MUNCK, CHIEF COUNSEL FOR INTELLECTUAL

PROPERTY, AND DEPUTY DIRECTOR, OFFICE OF POLICY PLANNING, FEDERAL TRADE

COMMISSION, WASHINGTON, D.C. 
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PREPARED STATEMENT OF A. DOUGLAS MELAMED, SENIOR VICE PRESIDENT AND

GENERAL COUNSEL, INTEL CORPORATION, SANTA CLARA, CALIFORNIA
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PRESIDENT AND GENERAL COUNSEL, INTEL CORPORATION, SANTA CLARA, CALIFORNIA
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PREPARED STATEMENT OF DONALD J. ROSENBERG, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL, AND CORPORATE SECRETARY, QUALCOMM INCORPORATED, SAN

DIEGO, CALIFORNIA
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PRESIDENT, GENERAL COUNSEL, AND CORPORATE SECRETARY, QUALCOMM INCORPORATED, SAN DIEGO, CALIFORNIA
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PREPARED STATEMENT OF JOHN D. KULICK, PH.D., CHAIR, STANDARDS BOARD, THE

INSTITUTE OF ELECTRICAL AND ELECTRONICS ENGINEERS STANDARDS ASSOCIATION, 

NEW YORK, NEW YORK
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QUESTIONS SUBMITTED BY SENATOR GRASSLEY FOR SUZANNE MUNCK
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QUESTIONS SUBMITTED BY SENATOR GRASSLEY FOR A. DOUGLAS MELAMED
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QUESTIONS SUBMITTED BY SENATOR GRASSLEY FOR DONALD J. ROSENBERG
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QUESTIONS SUBMITTED BY SENATOR GRASSLEY FOR JOHN D. KULICK, PH.D. 
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QUESTIONS SUBMITTED BY SENATOR KLOBUCHAR FOR SUZANNE MUNCK
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QUESTIONS SUBMITTED BY SENATOR KLOBUCHAR FOR A. DOUGLAS MELAMED
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QUESTIONS SUBMITTED BY SENATOR KLOBUCHAR FOR DONALD J. ROSENBERG
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QUESTIONS SUBMITTED BY SENATOR KLOBUCHAR FOR JOHN D. KULICK
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RESPONSES BY SUZANNE MUNCK TO QUESTIONS SUBMITTED BY SENATORS GRASSLEY

AND KLOBUCHAR
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RESPONSES BY A. DOUGLAS MELAMED TO QUESTIONS SUBMITTED BY SENATORS

GRASSLEY AND KLOBUCHAR
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RESPONSES BY DONALD J. ROSENBERG TO QUESTIONS SUBMITTED BY SENATORS

GRASSLEY AND KLOBUCHAR
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RESPONSES BY JOHN D. KULICK TO QUESTIONS SUBMITTED BY SENATORS GRASSLEY

AND KLOBUCHAR
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MISCELLANEOUS SUBMISSIONS FOR THE RECORD
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Æ