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President 

Douglas K. Norman 

Eli Lilly and Co. 

Vice President 

Richard F. Phillips

Exxon Mobil Corp. 

Treasurer 

Carl B. Horton General Electric Co.

Directors

T.J. Angioletti 

Oracle USA, Inc. 

Russell W. Binns, Jr. 

Avaya, Inc. 

William J. Coughlin

Ford Global Technologies LLC 

Timothy Crean

SAP AG 

Robert DeBerardine

Sanofi-Aventis 

Bart Eppenauer 

Microsoft Corp. 

Mark Farber

Covidien

Scott M. Frank 

AT&T 

Michael L. Glenn 

Dow Chemical Co. 

Bernard J. Graves, Jr. 

Eastman Chemical Co. 

Krish Gupta 

EMC Corporation 

Jack E. Haken

Koninklijke Philips Electronics N.V. 

Dennis R. Hoerner, Jr.

Monsanto Co. 

Soonhee Jang

Danisco U.S., Inc.

Michael Jaro 

Medtronic, Inc. 

Philip S. Johnson

Johnson & Johnson 

George W. Johnston 

Roche Inc. 

Lisa Jorgenson 

STMicroelectronics, Inc. 

Dean Kamen 

DEKA Research & Development 

Corporation 

Charles M. Kinzig

GlaxoSmithKline 

David J. Koris 

Shell International B.V. 

Mark Lauroesch 

Corning Inc. 

Richard J. Lutton, Jr. 

Apple Inc. 

Scott McDonald 

Mars Incorporated 

Jonathan P. Meyer 

Motorola Solutions, Inc. 

Steven W. Miller 

Procter & Gamble Co. 

Jeffrey L. Myers 

Adobe Systems Inc. 

Sean O’Brien 

United Technologies, Corp. 

Kevin H. Rhodes 

3M Innovative Properties Co. 

Mark L. Rodgers 

Air Products & Chemicals, Inc. 

Manny Schecter 

IBM, Corp. 

Steven Shapiro 

Pitney Bowes Inc. 

David Simon 

Intel Corp. 

Dennis C. Skarvan 

Caterpillar Inc. 

Russ Slifer

Micron Technology, Inc. 

Daniel J. Staudt 

Siemens Corp. 

Brian K. Stierwalt 

ConocoPhillips 

Thierry Sueur 

Air Liquide 

James J. Trussell

BP America, Inc. 

Cheryl Tubach 

J.M. Huber Corp. 

Danise van Vuuren-Nield

Coca-Cola Co. 

Roy Waldron 

Pfizer, Inc.

Michael Walker 

DuPont 

BJ Watrous 

Hewlett-Packard Co. 

Stuart Watt

Amgen, Inc. 

Jon D. Wood 

Bridgestone Americas Holding, Inc.

Paul D. Yasger 

Abbott Laboratories 

Executive Director

Herbert C. Wamsley 

March 7, 2011 

Dr. Patrick Gallagher 

Director National Institute of Standards and Technology 

Co-Chair, National Science and Technology Council’s 

 Sub-Committee on Technology 

Via e- mail: SOS-RFI@nist.gov 

Re: Standardization feedback for Subcommittee on Standards; Comments of the 

Intellectual Property Owner’s Association 

Dear Dr. Gallagher: 

The Intellectual Property Owners Association (IPO) welcomes this opportunity to 

provide its views on the interplay between intellectual property protection and standards in 

response to the Request for Information (RFI) issued by the National Institute of Standards 

and Technology (NIST), dated December 2, 2010 in Docket Number 0909100442-0563-02. 

 IPO is an international association, based in the United States. Its members include 

more than 200 companies, and approximately 11,000 individuals are involved in the activities 

of the association either through their companies or as inventors, authors, executives, law 

firms, or attorney members. Founded in 1972, IPO represents the interests of all owners of 

intellectual property covering all areas of technology, many of whom are involved in various 

formal and informal standards development organizations (SSOs) around the world. 

IPO supports strong intellectual property rights. We believe that the constitutional 

mandate to “promote the Progress of Science and the useful Arts, by securing for limited 

Times to Authors and Inventors the exclusive Right to their respective Writings and 

Discoveries,” promotes the free enterprise system that has stimulated the American economy 

to its outstanding performance. Innovation is the key to increasing the standard of living for 

all Americans. Through innovation we explore new science, develop new products, and 

become more productive, all of which promote the general good for businesses and citizens in 

the United States and throughout the world. 

Indeed, our members are among the most innovative companies in the world. 

Collectively, they spend huge sums every year on research and development (R&D). For the 

most part, this innovation is practical innovation designed to improve the products and 

services offered by our members or to develop new products members can offer to their 

customers. As a result of their investment and innovations, our members file approximately 

30 percent of the patent applications filed in the United States Patent and Trademark Office 

(USPTO). 
INTELLECTUAL PROPERTY OWNERS ASSOCIATION 

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Our members regularly address diverse issues involving patents, copyrights, trade 

secrets, standards, and other aspects of intellectual property. They are active licensors and 

licensees of intellectual property rights and understand day-to-day considerations that drive 

licensing transactions. IPO members license intellectual property to generate a return on the 

owner’s R&D investment while allowing the licensee recipient to avoid R&D costs or meet 

market needs not supplied by the intellectual property owner. In this regard, IPO members 

recognize the need to define principles that achieve the optimum balance between the rights of 

intellectual property owners and other industry standard stakeholders. 

In recent years, IPO has observed and commented on proposals that, if adopted, could 

upset this balance by undervaluing the contribution of intellectual property owners in 

standards setting activities. See for example, Revision of National Standards Involving 

Patents, released by the Standardization Administration of China (SAC) on 02 November 

2009. As written, this policy could have: 1) encumbered patent holders not participating in the 

standardization process; 2) required patent holders to license their technology “at a price 

significantly lower than the normal royalties” and 3) required compulsory national standards 

to be patent free. Based on its vast practical experience, IPO believes successful 

standardization patent polices are marked by certain general characteristics. While not an 

exhaustive list, these SSO policies: 1) apply to those parties agreeing to be bound by the 

policy, 2) balance the interests of all stakeholders, 3) permit patent holders to receive a return 

on their investment, and 4) recognize the value of negotiation of licensing terms between 

licensor and licensees outside of the standardization process. 

Participants/Members

Most standard setting organizations (SSO) have their own rules governing what 

intellectual property rights must be disclosed and licensed (IPR Policy). Some bodies have 

IPR policies under which their members or participants, who are owners of specific, identified 

intellectual property, commit to licensing their intellectual property to all on a reasonable and 

non-discriminatory (RAND) basis to the extent the intellectual property rights are necessary to 

practice the standard. Some require that this license be granted royalty- free (together with 

other RAND terms and conditions). The development of standards through a standard setting 

body can advance a particular technology to the benefit of consumers and industry. 

Balanced Interests

There is a natural tension among firms involved in standardization based on their 

business models and the way that they decide to use their intellectual property. Stakeholder 

interests must be considered and IPR policies must balance the interests of IPR owners with 

the interests of those who seek to use IPRs as part of standardized solutions (recognizing that 

in the standards ecosystem these are not distinct categories of stakeholders). Prescriptive rules, 

by their nature however, do not provide the flexibility to accommodate all such interests and 

all potential circumstances, as well as each dynamic variable that might arise in connection 

with standards development. Of particular importance is that the adoption of rigid prescriptive 

rules may discourage firms with significant IPRs from participating at all. For these reasons, 

IPO believes that innovation is and will continue to be best served when standard setting 

organizations and their members/participants agree on reasonable IPR disclosure and licensing 

policies. They are in the best position to properly balance the interests of all stakeholders and 

avoid the risk of diluting the value of IPRs of entities that participate in the standards 

development process. It also will enable competition among standards and standards bodies, 

which can have its own benefits. 
INTELLECTUAL PROPERTY OWNERS ASSOCIATION 

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 To balance the interests of implementers and innovators, most SSOs adopt disclosure 

and licensing rules to achieve a practical balance between producing a standard that can be 

implemented by all and one that encourages innovators to invest in innovative technologies 

and contribute such technologies for use in the standards. The disclosure policies of most 

SSOs are limited to patents that contain a claim that may be an essential claim. Any 

commitments to offer licenses, however, typically apply only to those claims that are

“essential” (or “necessary”) – which generally means implementing the final, approved 

standard necessarily infringes the claim. 

This difference makes sense and addresses the underlying purpose for disclosure and 

licensing statements. The disclosure rule is designed to ensure that standards developers are 

on notice of the companies that may have patent claims essential to the standard. The 

licensing statement is then designed to ensure that companies holding patents that are actually 

essential to the standard will state whether they will offer licenses to such patent claims 

typically on RAND terms, or whether they are unwilling to license them. This early statement 

of refusal helps the SSO and its members determine how they wish to proceed to ensure 

implementation. IPO understands that for this reason, with few exceptions, existing IPR 

policies defer discussion and determination of licensing terms to the negotiations of the parties 

in a prospective licensing agreement outside the standards organization.1

 

In short, owners of IPRs should be provided incentives for making their inventions 

available, even if there is a cost for obtaining access to such technology through a license. As 

the European Commission has explained, the opportunity of firms to gain access to patented 

technology, which can lower their costs of market entry and participation, creates a virtuous 

cycle of dynamic competition that more than offsets any short term effect of high prices 

during the term of a patent’s life. And to the extent patented technology improves 

performance or reduces the cost of implementation of a standard, the increase in value or cost 

savings may significantly outweigh any associated licensing costs. 

In response to the European Commission, IPO noted inherent characteristics of 

standardization that mitigate concerns related to “excessive” or “abusive” royalties and fees.2

 

For example, IPR holders seeking broad adoption of their patented technologies (especially 

over available competing technologies), may moderate the royalties sought so as to gain 

inclusion of the technology in the standard in the first instance and widespread implementation 

of the standardized solution. By so doing, IPR holders will be able to realize favorable returns 

on their R&D investment while a wide standards community can access the patented 

technology. Other firms may not even seek royalties because their strategy is to realize a 

return on their R&D investment through the sale of products or services and the defensive use 

 

1

 In addition, there is concern about the potentially anticompetitive effects of ex ante discussions or 

agreements by IPR holders regarding royalties or fees, including ex ante agreements by potential IPR 

users regarding the maximum royalties or fees they will pay, as a condition for including a technology 

in a standard. Placing this type of condition on the inclusion of technology in a standard may also have 

anticompetitive effects by reducing the value of IPRs below the level at which a return on an IPR 

holder’s investment is possible. Such actions can have adverse competitive effects by discouraging 

participation in standards organizations and reducing incentives for firms to invest in R&D. 

2

 See IPO’s letter to the European Commission Regarding the Draft EC Horizontal Guidelines, June 18, 

2010,http://www.ipo.org/AM/Template.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&

CONTENTID=26182. 
INTELLECTUAL PROPERTY OWNERS ASSOCIATION 

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of their patents. Further, firms may seek to use their IPRs only defensively, and may offer 

Fair, Reasonable, and Non-Discriminatory (FRAND) terms without compensation and seek to 

attract the cross-licensing of other standards essential IPRs. Regardless of their approach to 

licensing, IPR holders are generally motivated by their business interests to negotiate terms 

that support rapid adoption and wide use of standards. These market dynamics help support 

the efficient development and introduction of most standards. In sum, self-governing 

conditions and incentives already exist to prevent, or at least reduce, opportunities for 

anticompetitive conduct that may give rise to competition law concerns. 

Government Participation

The continuous growth in productivity and innovation over the past several decades 

has been attributed in large part to the current voluntary consensus-based system where private 

industry stakeholders work in collaboration with the government. IPO foresees this 

partnership continuing particularly in those areas enumerated in this RFI and encourages the 

active participation of federal agencies in existing SSOs. However, to the extent there are 

several government agencies involved in areas such as Smart Grid, Health IT and 

cybersecurity, IPO suggests there may need to be greater coordination between these agencies 

to ensure government interests are clearly and adequately represented in the standardization 

process. In any event, the government should continue to abide by the principles set forth in 

the National Technology Transfer and Advancement Act, Pub. L. 104-113 (1995) and the 

1995 OMB Circular A-119. In this regard, IPO believes the basic principles forming the U.S. 

Standards Strategy remain sound, relevant and essential to both U.S. competitiveness and 

global cooperation. This strategy, as embodied in OMB Circular A-119, directs government 

agencies, except in certain cases, to use voluntary consensus standards. OMB A-119 states in 

pertinent part: 

a. For purposes of this policy, “voluntary consensus standards” are standards 

developed or adopted by voluntary consensus standards bodies, both domestic 

and international. These standards include provisions requiring that owners of 

relevant intellectual property have agreed to make that intellectual property 

available on a non-discriminatory, royalty-free or reasonable royalty basis to all 

interested parties. For purposes of this Circular, “technical standards that are 

developed or adopted by voluntary consensus standard bodies” is an equivalent 

term. 

(1) “Voluntary consensus standards bodies” are domestic or international 

organizations which plan, develop, establish, or 

coordinate voluntary consensus standards using agreedupon procedures. For purposes of this Circular, 

“voluntary, private sector, consensus standards bodies,” 

as cited in the Act, is an equivalent term. The Act and 

the Circular encourage the participation of federal 

representatives in these bodies to increase the likelihood 

that the standards they develop will meet both public 

and private sector needs. A voluntary consensus 

standards body is defined by the following attributes: 
INTELLECTUAL PROPERTY OWNERS ASSOCIATION 

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(i) Openness. 

(ii) Balance of interest. 

(iii) Due process. 

(iv) An appeals process. 

(v) Consensus, which is defined as general agreement, but not 

necessarily unanimity, and includes a process for attempting to 

resolve objections by interested parties, as long as all comments have 

been fairly considered, each objector is advised of the disposition of 

his or her objection(s) and the reasons why, and the consensus body 

members are given an opportunity to change their votes after 

reviewing the comments. 

The current voluntary consensus-based system as articulated above is viewed 

inclusively to cover a diversity of standards-setting approaches, both formal and informal (as 

in consortia), that meet the needs of the government and other implementers in providing 

critical standards and promoting innovation. All relevant stakeholders, including the 

government, should continue to promote this system that has driven the innovation economy 

for decades. 

Thank you for the opportunity to comment on this important issue and for your 

continued efforts to address the very difficult and complex area involving competition law, IP 

law, and standardization. This is an area of great interest and concern for IPO members, and 

any advances in clarifying the issues are always welcome. 

Sincerely, 

Herbert C. Wamsley 

Executive Director