Intellectual Property Rights and Standard-Setting Organizations
Authors: Lemley Mark 
Published: July 2018

The role of institutions in mediating the use of intellectual propertyrights has long been neglected in debates over the economics ofintellectual property. In a path-breaking work, Rob Merges studied what hecalls "collective rights organizations," industry groups that collectintellectual property rights from owners and license them as a package.Merges finds that these organizations ease some of the tensions created bystrong intellectual property rights by allowing industries to bargain froma property rule into a liability rule. Collective rights organizations thusplay a valuable role in facilitating transactions in intellectual propertyrights.There is another sort of organization that mediates between intellectualproperty owners and users, however. Standard-setting organizations (SSOs)regularly encounter situations in which one or more companies claim to ownproprietary rights that cover a proposed industry standard. The industrycannot adopt the standard without the permission of the intellectualproperty owner (or owners).How SSOs respond to those who assert intellectual property rights iscritically important. Whether or not private companies retain intellectualproperty rights in group standards will determine whether a standard is"open" or "closed." It will determine who can sell compliant products, andit may well influence whether the standard adopted in the market is onechosen by a group or one offered by a single company. SSO rules governingintellectual property rights will also affect how standards change astechnology improves.Given the importance of SSO rules governing intellectual property rights,there has been surprisingly little treatment of SSO intellectual propertyrules in the legal literature. My aim in this article is to fill that void.To do so, I have studied the intellectual property policies of dozens ofSSOs, primarily but not exclusively in the computer networking andtelecommunications industries. This is no accident; interface standards aremuch more prevalent in those industries than in other fields. In Part I, Iprovide some background on SSOs themselves, and discuss the value of groupstandard setting in network markets. In Part II, I discuss my empiricalresearch, which demonstrates a remarkable diversity among SSOs even withina given industry in how they treat intellectual property. In Part III, Ianalyze a host of unresolved contract and intellectual property law issuesrelating to the applicability and enforcement of such intellectual propertypolicies. In Part IV, I consider the constraints the antitrust laws placeon SSOs in general, and on their adoption of intellectual property policiesin particular. Part V offers a theory of SSO intellectual property rules asa sort of messy private ordering, allowing companies to bargain in theshadow of patent law in those industries in which it is most important thatthey do so. Finally, in Part VI I offer ideas for how the law can improvethe efficiency of this private ordering process.In the end, I hope to convince the reader of four things. First, SSO rulesgoverning intellectual property fundamentally change the way in which wemust approach the study of intellectual property. It is not enough toconsider IP rights in a vacuum; we must consider them as they are actuallyused in practice. And that means considering how SSO rules affect IPincentives in different industries. Second, there is a remarkable diversityamong SSOs in how they treat IP rights. This diversity is largelyaccidental, and does not reflect conscious competition between differentpolicies. Third, the law is not well designed to take account of the modernrole of SSOs. Antitrust rules may unduly restrict SSOs even when thoseorganizations are serving procompetitive ends. And enforcement of SSO IPrules presents a number of important but unresolved problems of contractand intellectual property law, issues that will need to be resolved if SSOIP rules are to fulfill their promise of solving patent holdup problems.My fourth conclusion is an optimistic one. SSOs are a species of privateordering that may help solve one of the fundamental dilemmas ofintellectual property law: the fact that intellectual property rights seemto promote innovation in some industries but harm innovation in others.SSOs may serve to ameliorate the problems of overlapping intellectualproperty rights in those industries in which IP is most problematic forinnovation, particularly in the semiconductor, software, andtelecommunications fields. The best thing the government can do is toenforce these private ordering agreements and avoid unduly restricting SSOsby overzealous antitrust scrutiny.