Institute for Communication Technologies and Embedded Systems

Standard Setting Organizations in an Area of Tension between Antitrust Law, Intellectual Property Law, and Innovation

Standard Setting Organizations in an Area of Tension between Antitrust Law, Intellectual Property Law, and Innovation

In high-tech industries Standard Setting has developed into an essential method of maintaining interoperability among technical products of different producers. An industrial standard is any set of technical specifications that provides a common design for a product or process. There are many benefits for both the members of an SSO and the consumers. While members of an SSO minimize their research and development costs and even mitigate the risk of market entry due to a higher acceptance by consumers, the latter benefit from an increased availability of compatible devices. This is particularly true in the so-called network markets, where the value of the product to a particular consumer increases with the total amount of users of the same product. Indeed, in telecommunication industry it is impossible to create global connected networks without any kind of technical standardization.

From a legal point of view, many issues arise from the collaboration of competitors through SSO, particularly in the field of antitrust law and intellectual property law. Even though the EC-Commission acknowledges the generally procompetitive character of SSO, they concede that this is only insofar the case as long as adopted Standards are open for the application of any competitor. Due to this openness approach issues arise when an SSO adopts a standard that is covered in whole or in part by an intellectual property right, so that in order to conform with the standard a competitor is forced to use the particular IP right. In this case the owner of the IP right may control the application of the whole standard through his licensing behavior. This kind of control already has been used by different manufactures of computer parts, e.g. Dell and Rambus. They adopted the deliberate strategy to not disclose their patents in the standardization process while influencing the process in a way that would involve using their patents. Once the standard was adopted and devices were produced in application of the standard they would then charge their competitors with extraordinary high royalties. This behavior (patent hold-up) also raises questions about violations of fair trade law.

In response to that danger of hold-up, many SSO developed so-called IPR-Policies. These policies stipulate, as a condition of participation in the Standard Setting process, mandatory and extensive IP disclosure, requiring all IP holders to disclose all their granted and pending IP claims referring to a specific standardization process, and a commitment to license their IP on (fair) reasonable and nondiscriminatory (frand-) terms. Whether these IPR-Policies are reliable and enforceable in case of need, i.e. by contract or even antitrust law, remains unanswered up to now. Moreover, as many of these policies contain pricing rules for licensing and therefore could be suspected as a buyer's cartel, antitrust issues concurrently arise from these policies.

Furthermore, the enforceability of intellectual property rights in the context of Standard Setting is disputable. Standard Setting enables the IP holders to increase patent revenues that are not a result of the intellectual property right itself but rather a result of the widely adopted standard and thereby caused network-effects. Considering this effect, patent revenues may well become excessive. There is the risk that compensations goes well beyond a reasonable compensation for the inventor's efforts, that threatens the economic interest in a supply with affordable new technology on the free market. Thus, under antitrust considerations, it is disputable whether an IP holder in the context of standardization should be able to enforce his intellectual property by an injunctive relief. The German Federal Court does provide the so-called compulsory license objection (in German: "Zwangslizenzeinwand") – a remedy to an injunctive relief for those defendants who apply proprietary technology adopted in an industrial standard without having been able to license this technology due to the restrictive licensing behavior of the intellectual property owner. In the context of Standard Setting the premises of this compulsory license objection deserve detailed study.

The research project aims to cover all these preceding questions, also taking into account the American law and legal practice and, as far as possible, offer proposals for a solution.



Guido Dartmann, Stephan Dorn, Adrian Ispas