By Todd Wilson

Companies that develop and maintain patent portfolios and also participate in standards setting organizations (SSOs) must be aware of a duty to disclose patents and patent applications that relate to the development and publication of industry standards. Each SSO has disclosure policies to ensure that patented technology makes its way into industry standards in order to advance the state of the technology. Patent holders that participate in the development of the technology standards must understand the individual policies of the particular SSO in making a determination as to whether it must disclose its patent and applications and whether the required disclosure is financially tolerable.

The intersection of patent and antitrust law is highlighted in the case of disclosure requirements for patent holders who participate in SSOs. The United States Federal Trade Commission has noted in recent cases that including patented technology in industry standards includes the following anticompetitive effects:

1.Increased royalties or other licensing fees associated with the manufacture, sale or use of the most advanced technology;

2.Increased price and/or reduced use or output of certain technologies;

3.Decreased incentives on the part of manufacturers and others to participate in standards-setting activities and organizations;

4.Decreased incentives on the part of manufacturers to produce products using the most advanced technology; and

5.Decreased reliance on standards established by standards-setting collaborations.

The American National Standards Institute (ANSI), a group that acts as a parent organization and helps to manage the administrative needs of many SSOs, is often characterized as operating the more formalized standards-setting process in the United States. The ANSI patent policy allows for the inclusion of patented technology in industry standards as long as the technical experts from the different stakeholder groups participating in the standards-setting process arrive at a consensus that the inclusion is the best technical solution to fulfill the objective of the standard-setting activity. The ANSI policy recognizes the concern that excluding a patented invention from a standard can unreasonably restrain trade by misleading consumers, depriving them of information about the performance of the product, or even excluding a technically advanced product from the market.

ANSI also allows that any patent holder or any third party with actual, personal knowledge of relevant patents may disclose a patent embedded in a standard. Once disclosed, ANSI requires that the patent holder provide a written statement indicating that it provide licenses to those implementing the standard either (a) on a compensation-free basis or (b) under reasonable and non-discriminatory (RAND) terms. Often, the standard-setting participants are technical experts who may not have the legal or business responsibilities within their respective companies with regard to licensing issues. Therefore, once such a statement is provided, any such licensing activities are conducted outside the standard-setting body so as not to interfere with the ongoing standards-setting efforts.

The ANSI patent policy, and that of many of its member organizations, focuses primarily on “essential” patents – those patents which cover the standard and which would be infringed if the standard could not be implemented otherwise. However, ANSI does encourage the early disclosure of patents both that are “essential to” and “relate to” the standard so that the standards-setting body has as much relevant information available as the evolving standard is developed. The ANSI policy does not, however, impose a duty on a patent holder to undertake a search of its patent portfolio in order to make a definitive statement as to whether it has any essential patents. Nor does it impute knowledge of an employer-corporation to an employee-participant in the standards-setting process.

In addition to whatever credibility a participant loses in the standards-setting community by failing to disclose patents in the standards-setting process, the risks of intentional non-disclosure are serious:

1.The approval of the standard may be subject to withdrawal, often rendering the patented invention relatively useless.

2.Competitors can, and usually do, take advantage of available legal rights when they believe that they are being unfairly disadvantaged. Remedies including equitable estoppel, patent misuse, fraud and unfair competition may be available to prevent a patent holder from enforcing its patent covering an industry standard.

3.The United States Federal Trade Commission or the Department of Justice can intervene in cases of deliberate misconduct


On the other hand, if unintentional failures to disclose were punished by SSOs, companies might be discouraged from sending technical experts to the standards-setting committees which would likely result in a degradation of the quality of industry standards. Additionally, companies often have an incentive to disclose their patents as early in the standards-setting process in order to ensure that their patented technologies become the industry standard. Often, companies in this situation will agree to license on a RAND or royalty-free basis.

Standards-setting bodies often do not have the resources to undertake enforcement of disclosure requirements. Even if they did have the ability to take on such a responsibility, the might be faced with significant liability of legal claims if their determination of the existence and validity of essential patents was either incorrect or incomplete.

Because of some recent, highly visible court battles, however, many SSOs are tightening their rules and urging members to reveal patents related to developing standards. Many participants may be concerned that policies are not clear enough to avoid conflicting interpretations amongst SSO participants. Additionally, some participants may have sound business reasons for not revealing technology that they are currently development but for which they have not yet secured patent rights.

A proposed solution to these issues is often an advance agreement regarding royalty-free or RAND licensing fees in the event that an SSO member’s patent is covered by a proposed standard. Further, many legal advisors suggest that patent owners participating in standards-setting activities should have a patent attorney review the disclosure obligations imposed by the particular SSO and, in some situations, the company’s entire patent portfolio to determine if there is a nexus between the proposed standard and patent claims in order to make a determination as to whether to disclose the patent interest.

In order to avoid detrimentally affecting the value of its patent claims, patent holders must understand the policies of a particular SSO when participating in standards-setting activities. An unwary engineer or scientist’s failure to disclose under such a disclosure policy may cost the owner of patent rights dearly in terms of its inability to enforce its intellectual property rights upon publication of the technical standard. On the other end of the spectrum seems similarly unjust, however. The disingenuous non-disclosure of patents by standards-setting participants hoping to gain financially by other’s implementation of the standard – thereby setting a trap for the infringement of the incorporated patents – hardly seems productive in our patent system that attempts to protect the rights of inventors.