Source: https://www.justice.gov/atr/response-institute-electrical-and-electronics-engineers-incs-request-business-review-letter
Timestamp: 2019-04-24 16:24:22+00:00

Document:
This letter responds to your request on behalf of the Institute of Electrical and Electronics Engineers, Inc. ("IEEE") and its Standards Association ("IEEE-SA") for a business review letter from the Department of Justice pursuant to our Business Review Procedure, 28 C.F.R. § 50.6. You have requested a statement of the Department's antitrust enforcement intentions with respect to a proposed patent information policy that will allow patent holders to publicly commit to specific restrictions on their future licensing terms and conditions for the use of patents that are essential to IEEE standards. This proposed change in IEEE's patent information policy is designed to better ensure that any willing licensee can implement IEEE standards and that IEEE standards will become widely adopted.
IEEE is a non-profit professional association with over 385,000 members whose technical interests cover the fields of aerospace systems, computers, telecommunications, biomedical engineering, electric power, and consumer electronics.(1) IEEE has long been involved with technological collaborative standard-setting activities in the United States. IEEE was formed in 1963 as a result of a merger between the American Institute of Electrical Engineers, formed in 1884, and the Institute of Radio Engineers, formed in 1912. Standards development was a major part of both of IEEE's predecessor institutions, and IEEE-SA has continued that tradition by establishing more than 900 standards, with more than 400 standards currently in development. The standards issued by IEEE-SA are used in fields and industries including information technology, power and energy, instrumentation and measurement, mobile and stationary batteries, nanotechnology, organic electronics, telecommunications, and transportation safety.(2) Many IEEE standards have been developed to enhance the interoperability of communications products. One important example is the 802® series of standards for local and metropolitan area wireless and wired networks. Ethernets, token rings, wireless local area networks ("LANs"), and bridging and virtual bridged LANs, for example, are widely used today because they allow users to reliably access and share information over communications systems by interconnecting many compatible products manufactured by different producers.
Two processes for developing standards are used within IEEE-SA. The first involves all interested qualified individuals who each may vote on the decisions made in the standard-setting process. More recently, IEEE-SA has set some standards using a corporate-based program in which each materially interested participating corporation, educational institution, or government agency has one vote on the decisions made in the standard-setting process.
IEEE-SA has decided to change its policy to give patent holders the option to publicly disclose and commit to the most restrictive licensing terms (which may include the maximum royalty rate) they would offer for patent claims(18) that are found to be essential to the standard.(19) In addition, IEEE working group members will be allowed to discuss within certain limits the relative costs and benefits of alternative technologies within technical standard-setting meetings.
The Department analyzes the competitive effects of standard-setting activities under the rule of reason unless the standard-setting process is being "used as a sham to cloak naked price fixing or bid rigging."(41) We examine both the expected competitive benefits of IEEE's proposed patent policy and its potential to restrain competition.
Requiring patent holders to disclose their most restrictive licensing terms in advance could help . . . preserv[e] the benefits of competition between alternative technologies that exist during the standard-setting process. Currently, VITA working group members choose between alternative technologies primarily based on technical merit. They generally have little information about how eventual licensing terms for alternative technologies are likely to differ. Under the proposed policy, each working group member also will be able to compare the most restrictive licensing terms associated with each alternative technology, including freely-available public domain technologies, when deciding which technology to support for inclusion in the draft VSO specification. Disclosure of this information, enforced by the requirement that nondisclosed patents be licensed royalty-free, permits the working group members to make more informed decisions when setting a standard. . . .
Although the proposed IEEE-SA policy does not require patent holders to publicly commit to their most restrictive licensing terms during the standard-setting process, the ability to make such commitments could generate similar benefits as patent holders may compete to offer the most attractive combination of technology and licensing terms.
In addition, IEEE-SA working group members may make better informed decisions by considering potential licensing fees when weighing the relative costs of technological alternatives in addition to their technical merits. Moreover, the increased predictability of licensing terms, created by LOA commitments and the knowledge that such commitments bind the patent holder's affiliates and any future patent assignees, could lead to faster development, implementation, and adoption of a standard as well as fewer litigated disputes after a standard is set.
IEEE-SA has an important role in setting many standards in a vast array of technical fields. These standards promote and enable competition in the products and services that conform to IEEE-SA standards. IEEE-SA's proposed patent information policy is a sensible effort to preserve competition between technological alternatives before the standard is set in order to alleviate concern that commitments by patent holders to license on RAND terms are not sufficient to avoid disputes over licensing terms or litigation that may delay the implementation of IEEE-SA's future standards.
The Department has no present intention to take antitrust enforcement action against the conduct you have described. This letter expresses the Department's current enforcement intention. In accordance with our normal practices, the Department reserves the right to bring an enforcement action in the future if the actual operation of the proposed conduct proves to be anticompetitive in purpose or effect.
This statement is made in accordance with the Department's Business Review Procedure, 28 C.F.R. § 50.6. Pursuant to its terms, your business review request and this letter will be made publicly available immediately, and any supporting data you submitted will be made publicly available within thirty days of the date of this letter, unless you request that part of the material be withheld in accordance with paragraph 10(c) of the Business Review Procedure.
1. IEEE, About the IEEE, http://www.ieee.org/web/aboutus/home/index.html (last visited Feb. 21, 2007).
3. Inst. of Elec. & Elecs. Eng'rs, Inc., IEEE-SA Standards Board Bylaws 5.2.2(a)­(e) (2007), available at http://standards.ieee.org/guides/bylaws/sb-bylaws.pdf [hereinafter IEEE-SA Standards Board Bylaws]; IEEE Standards Association, IEEE Standards Companion, http://standards.ieee.org/guides/companion/part1.html#sponsor (last visited Feb. 21, 2007).
4. IEEE Standards Companion, supra note 3; see IEEE-SA Standards Board Bylaws, supra note 3, 5.2.3.
5. IEEE Standards Companion, supra note 3; see IEEE-SA Standards Board Bylaws, supra note 3, 5.2.3.
6. Inst. of Elec. & Elecs. Eng'rs, Inc., IEEE-SA Standards Board Operations Manual § 5.4.3.1 (2007), available at http://standards.ieee.org/guides/opman/sb-om.pdf [hereinafter IEEE-SA Standards Board Operations Manual]; IEEE Standards Companion, supra note 3. The sponsor sends out an invitation to join a balloting group to those IEEE members or participants it thinks may be interested in voting on the draft standard. Those that respond affirmatively to this request comprise the balloting group. IEEE-SA Standards Board Operations Manual, supra, § 5.4.2.
7. IEEE-SA Standards Board Operations Manual, supra note 6, 5.4.3.1.
8. IEEE Standards Companion, supra note 3; see IEEE-SA Standards Board Operations Manual, supra note 6, 5.4.3.1­2.
9. See IEEE-SA Standards Board Operations Manual, supra note 6, 5.6.2.4.
10. There are several opportunities for appeal. Working group members may appeal to the sponsoring committee if they believe the process has been unfair and members of the balloting group may appeal to the Standards Board. IEEE-SA Standards Board Bylaws, supra note 3, § 5.4.
11. Letter from Michael A. Lindsay, Dorsey & Whitney LLP, to Thomas O. Barnett, Assistant Attorney Gen., U.S. Dep't of Justice 2 (Nov. 29, 2006) [hereinafter IEEE-SA Business Review Request].
12. IEEE-SA Standards Board Operations Manual, supra note 6, § 6.3.2.
13. IEEE-SA Standards Board Bylaws, supra note 3, § 6.
14. IEEE-SA Business Review Request, supra note 11, at 2. Based on conversations with you, it is our understanding that the Standards Board will defer approval of a draft standard until some response has been received from the patent holder.
15. IEEE-SA Business Review Request, supra note 11, at 2­3.
17. Id.; IEEE-SA Standards Board Operations Manual, supra note 6, § 5.3.3; IEEE-SA Standards Board Bylaws, supra note 3, § 2.1 ("The approval and publication of an IEEE standard implies that the document represents a consensus of the parties who have participated in its development and review. Since every attempt is made to involve all interests in the activity, it can be presumed that the document represents a consensus of interests concerned with the scope of the standard. Consensus is established when, in the judgment of the IEEE-SA Standards Board, substantial agreement has been reached by directly and materially affected interest categories. Substantial agreement means much more than a simple majority, but not necessarily unanimity. Consensus requires that all views and objections be considered, and that a concerted effort be made toward their resolution."); IEEE, Imperative Principles of the Standards Process (n.d.), http://standards.ieee.org/faqs/ImperativePrinciples.ppt.
18. Patent claims are defined as "one or more claims in issued patent(s) or pending patent application(s)." Inst. of Elec. & Elecs. Eng'rs, Inc., IEEE-SA Standards Board Bylaws § 6.1 (rev. 2006), in Letter from Michael A. Lindsay, Dorsey & Whitney LLP, to Frances Marshall, Special Counsel for Intellectual Prop., U.S. Dep't of Justice (Feb. 21, 2007) [hereinafter IEEE-SA Proposed Standards Board Bylaws].
19. A patent claim is essential if its use is "necessary to create a compliant implementation" of the proposed standard when "there was no commercially or technically feasible non-infringing alternative." IEEE-SA Proposed Standards Board Bylaws, supra note 18, 6.1.
20. See IEEE-SA Business Review Request, supra note 11, at 5.
21. IEEE-SA Proposed Standards Board Bylaws, supra note 18, § 6.2; Inst. of Elec. & Elecs. Eng'rs, Inc., IEEE-SA Standards Board Operations Manual § 6.3.2 (rev. 2006), in Letter from Michael Lindsay to Frances Marshall, supra note 18 [hereinafter IEEE-SA Proposed Standards Board Operations Manual I]. It is our understanding that a patent holder also may submit an LOA on its own accord. The term "patent holder" as used in this letter refers to an individual or organization that has, or will have, the legal right to license a patent claim that is potentially essential to an IEEE standard.
22. See IEEE-SA Proposed Standards Board Bylaws, supra note 18, § 6.2.
23. Inst. of Elec. & Elecs. Eng'rs, Inc., Letter of Assurance for Essential Patent Claims D.1.d (2006), in IEEE-SA Business Review Request, supra note 11, at exhibit B [hereinafter Letter of Assurance]; IEEE-SA Proposed Standards Board Bylaws, supra note 18, § 6.2.
24. IEEE-SA Standards Board Operations Manual, supra note 6, § 6.3.2.
25. IEEE-SA Proposed Standards Board Bylaws, supra note 18, § 6.2 ("The Submitter of the Letter of Assurance may, after Reasonable and Good Faith Inquiry, indicate it is not aware of any Patent Claims that the Submitter may own, control, or have the ability to license that might be or become Essential Patent Claims.").
30. IEEE-SA Proposed Standards Board Operations Manual I, supra note 21, § 6.3.4. A potential licensee may not invoke a blanket LOA if an LOA specific to that claim was filed on the same date. Blanket LOAs will apply to after-acquired essential patent claims unless the prior patent holder had already submitted an LOA for those claims. Id.
32. IEEE-SA Proposed Standards Board Bylaws, supra note 18, § 6.2.
34. IEEE-SA Proposed Standards Board Operations Manual I, supra note 21, § 6.3.
35. IEEE-SA Proposed Standards Board Bylaws, supra note 18, § 6.2. IEEE may request an LOA from excluded affiliates. IEEE-SA Proposed Standards Board Operations Manual I, supra note 21, § 6.3.
36. IEEE-SA Proposed Standards Board Operations Manual I, supra note 21, § 6.3.5. A new LOA must be requested when technologies are used in different proposed standards. Id.
37. IEEE-SA Proposed Standards Board Bylaws, supra note 18, § 6.2 ("Copies of an Accepted LOA may be provided to the working group, but shall not be discussed, at any standards working group meeting."); Inst. of Elec. & Elecs. Eng'rs, Inc., IEEE-SA Standards Board Operations Manual § 5.3.8.2 (rev. 2006), in Letter from Michael A. Lindsay, Dorsey & Whitney LLP, to Frances Marshall, Esq., U.S. Dep't of Justice (Dec. 12, 2006) [hereinafter IEEE-SA Proposed Standards Board Operations Manual II] ("No discussions or other communications regarding the following topics shall occur during IEEE-SA working group standards-development meetings or other duly authorized IEEE-SA standards-development technical activities: The status or substance of ongoing litigation[, t]he essentiality, interpretation, or validity of patent claims[, s]pecific patent license terms or other intellectual property rights, other than distribution of accepted letter of assurance as permitted under the IEEE-SA patent policy (see section 6.2 of IEEE-SA Standards Board Bylaws)."). Although section 5.3.8 of the Proposed IEEE Standards Board Operations Manual is not officially part of the revised patent policy, it informs our understanding of how the proposed policy will be implemented. Section 5.3.8 was revised by the IEEE-SA Procedures Committee to be consistent with the changes to the patent policy. These changes were adopted in December 2006 and will take effect on April 30, 2007. In that document, section 5.3.8 will be renumbered as section 5.3.10.
38. IEEE-SA Proposed Standards Board Operations Manual II, supra note 37, § 5.3.8.3.
39. Letter of Assurance, supra note 23, at § F.
41. Letter from Thomas O. Barnett, Assistant Attorney Gen., U.S. Dep't of Justice, to Robert A. Skitol, Esq., Drinker, Biddle & Reath, LLP 8 (Oct. 30, 2006), available at http://www.usdoj.gov/atr/public/busreview/219380.pdf.
45. See IEEE-SA Proposed Standards Board Bylaws, supra note 18, § 6.2; supra note 37 and accompanying text; see also IEEE-SA Proposed Standards Operations Manual II, supra note 37, § 5.3.8.2.
46. IEEE-SA Business Review Request, supra note 11, at 6, 8.
47. The Department has indicated that it would typically apply a rule-of-reason analysis to joint negotiations of licensing terms in the standard-setting context. See U.S. Dep't of Justice & Fed. Trade Comm'n, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition 54 (2007), available at http://www.usdoj.gov/atr/public/hearings/ip/222655.pdf.
48. IEEE-SA Business Review Request, supra note 11, at 6; IEEE-SA Proposed Standards Board Operations Manual II, supra note 37, §§ 5.3.8.2, 5.3.8.3.
49. See IEEE, Instructions for the WG Chair (Feb. 2006), http://standards.ieee.org/board/pat/pat-slideset.ppt.
50. See Gerald F. Masoudi, Deputy Assistant Attorney Gen., U.S. Dep't of Justice, Efficiency in Analysis of Antitrust, Standard Setting, and Intellectual Property, Remarks at the High-Level Workshop on Standardization, IP Licensing, and Antitrust 15 (Jan. 18, 2007), available at http://www.usdoj.gov/atr/public/speeches/220972.pdf ("There certainly is no affirmative requirement in antitrust law that businesses must create a RAND, disclosure, or ex ante licensing system. Doing nothing remains an option, and may be a viable option in view of the fact that there are many self-correcting mechanisms within traditional standard setting approaches. It may be reasonable to conclude that reputational constraints are enough to prevent hold-up strategies in some industries, or that simple economic incentives ­ those who hold up a standard too much could delay or kill the standard, which would deprive them of royalties ­ would suffice. Or perhaps an SDO may recognize the benefits of a policy like VITA's, yet conclude that those benefits are not enough to compensate for the additional personnel, costs, and delays that such a policy may require.").

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