The intermingling of standard-setting and patents has been a contentious topic in legal and technology circles in the last several years. Some say there is an inherent conflict between standard-setting (as an open and public activity) and patents (which are by nature closed and proprietary). Disclosure and licensing are two areas of concern for patent owners interested in participating in standard-setting. Several recent news items highlight these issues for patent owners.
Disclosure - Rambus v. Infineon
Standards bodies have long required disclosure by participants of their patent interests in standards under development. A US case has raised the possibility that a patent holder's failure to make full disclose to a standards body can be construed as fraud on a co-participant, giving rise to civil liability.
Rambus, Inc., a manufacturer of RAM chips and holder of numerous patents, asserted its patents for SD-RAM against fellow chipmaker, Infineon Technologies. Both parties were participants in a JEDEC, a standards body devoted to semiconductor technology. Infineon alleged that not only did it not infringe on the SD-RAM patents, but that Rambus' patents were unenforceable anyway, since they were not disclosed while Rambus was a member of JEDEC. It was also alleged that Rambus, while a member of JEDEC, committed inequitable conduct by taking technology under discussion for the standard and incorporating it secretly into its pending patent applications. 1
The infringement case was unsuccessful on its merits (see Rambus, Inc. v. Infineon Technologies North America Corp., Civ. 3:00cv524, E.Dist. Va, March 15, 2001). In a further decision on Infineon's counterclaim for fraud, the Eastern District Court of Virginia found that Rambus had committed fraud against JEDEC to the detriment of Infineon (see Rambus v. Infineon, Civ. 3:00cv524, E.Dist. Va., August 9, 2001, motion for Judgment as a Matter of Law). Estoppel was the basis of the damages award ($350,000, the limit under a statutory cap), since Rambus failed to disclose its material patents to JEDEC, while under a duty to disclose, which disclosure was relied upon by Infineon to its detriment. 2
The case considered how non-compliance with disclosure obligations to a standards body can be fraud on a co-participant giving rise to civil liability. Non-disclosure may also affect the enforceability of a patent. 3 A patent owner who participates in standards-setting must comply with the disclosure obligations set by the standards body - including obligations of timeliness, and fullness of disclosure. In certain circumstances, the obligations of disclosure may survive the departure of the participant from the standards group, especially where a patent is for a technology that is critical to the implementation of the standard.
The policy rationale is that standards are beneficial instruments for the development and adoption of new technology (as patents are also beneficial). In order for standards to be effective, however, they must be available to be implemented in the competitive marketplace. Patents which give one owner a monopoly in a technology are in conflict with standards setting, unless competitors can license the technology from the patent owner. In order to set a standard that fairly takes into account potential patent claims, disclosure is required, allowing the standard-setting process to work around the patented technology, if practical, or to prevail on the patent owner to make the technology available through non-discriminatory licensing provisions.
For patent owners participating in standard-setting, it may be prudent to have a patent lawyer review the disclosure obligations particular to the standards body. Patent portfolio searches may be advisable in certain situations. Where it appears that a patent or patent application may have claims essential to a standard under development, the owner may consider obtaining a formal legal opinion studying the nexus between the proposed standard and the patent claims to determine whether or not to disclose the patent interest. 4 Since Rambus, the stakes for deliberate non-disclosure are high. In addition to the fraud judgment against it, Rambus is facing investigation by the Federal Trade Commission for misconduct in its participation in JEDEC. 5
Patent lawyers also need to be aware of client participation in standards-setting activities. Patent policies vary between organizations, and the disclosure requirements should be reviewed for the particular body (or particular working group charter, in some cases). It is also important to consider the customary requirements of a particular body or working group, which may or may not be captured in its written patent policy. Standards organizations may also have policies restricting the types of licenses that can be granted by the patent owner.
Licensing - W3C Patent Policy Review
Licensing is a key issue in standards bodies. A standards body's patent policy typically contains a minimum licensing commitment for participants. It is also common for participants to require cross-licensing of patents by other participants. The policy obligations are particular to each standards body. Some organizations require that licenses of technology essential to a standard be royalty-free ("RF") or require that royalties be reasonable and non-discriminatory ("RAND"). In addition, groups may have informal licensing customs that should be considered.
Companies developing web standards will be especially interested in following the current World Wide Web Consortium (W3C) revision of its patent policy. (W3C is a standard-setting organization for Internet-related technologies.) Recognizing the increasing prevalence of software patents in the industry, the W3C has undertaken an overhaul of its current patent policy, which currently requires standards to work around any known patents. The current patent practice was published as a W3C Note on January 24, 2002.
Several versions of the revised draft policy, which has been open to public consultation and debate, have received considerable scrutiny from the free software/open source software community. Under debate is whether the policy should permit Working Groups to allow royalty-based patent licensing where essential patent claims come to light in the discussion of a standard. 6 The most recent draft policy would require participants to disclose essential claims in issued patents (and possibly published or unpublished patent applications) which disclosure information would be included in the public standard when adopted. All participants would commit to grant RF licenses to implementers of the standard, unless the participant expressly excludes the patent from the RF commitment within a specified "opt-out" window (typically, 60 days from publication of the first requirements document at the commencement of the Working Group). Even with opt-out, the minimum licensing commitment for participants in the Working Group would be to provide a RAND license to implementers. 7
A final draft is expected to be published later in 2002.
Licensing - Open Standards Definition
As an alternative to the for-fee licensing norm in standard-setting bodies 8, one member of the Open Source community has proposed an "Open Standard" definition to assist in the development and implementation of royalty-free, publicly available standards for the Internet. A draft document "Open Standards: Principles and Practice" 9 has been put forward for comment by Bruce Perens of Debian Linux (also the creator of the "Open Source" definition, the widely used standard definition for open source software copyright licenses).
The Open Standards draft puts forward 6 principles for standards to be "Open":
The document does not condemn patents or require standards to be patent-free, but it requires that any essential patents be freely-licensed without royalties.
Perens has invited public comment on the document through a moderated listserv at his website.
When patent owners participate in standard-setting, their licensing strategies must be tailored to conform with organization policy. A lawyer may be of assistance in interpreting and implementing licensing obligations, and suggesting effective participation strategies to preserve licensing options where appropriate (some organizations for instance allow "observer" participation without licensing commitments, or the ability to opt-out or withdraw from the group at an early stage). Experienced legal counsel can also advise on how other licensing terms can be maximized even where organization licensing commitments must be observed (such as the use of cross-licensing stipulations).
Standard-setting raises many difficult patent disclosure, licensing, competition and antitrust issues.
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