1 ipr and standards section # slide 1 gsc-9 seoul, korea may 12, 2004 amy a. marasco ansi vice...

1

IPR and StandardsIPR and Standards

Section #Slide 1

GSC-9

Seoul, Korea

May 12, 2004

Amy A. MarascoANSI Vice President and General Counsel

GSC9/IPR_008

2

Slide 2

What is ANSI?What is ANSI?

ANSI is the established forum for the U.S. voluntary standardization community

Among other things, ANSI Works with industry, government, trade associations and

professional societies, consumer interests, other stakeholders. Accredits standards developing organizations (SDOs), U.S.

Technical Advisory Groups (TAGs) and conformity assessment systems

Approves standards as American National Standards ANSI requirements for openness, due process and consensus must be met

Is the U.S. member body to the major non-treaty international and regional standards organizations such as ISO and IEC

Serves as a neutral policy forum

3

Slide 3

ANSI Patent GroupANSI Patent Group

Formal ANSI policy committee Participation is open to all ANSI members Well represented by ICT industry representatives

Provides leadership in formulating ANSI positions as to any proposed changes to the ANSI and ISO/IEC Patent Policies Monitors Patent Policy developments in other standards organizations

Example: ANSI participates on the TSB Director’s IPR Ad Hoc Group

Interacts with representatives from the U.S. Federal Trade Commission and the U.S. Department of Justice (Antitrust Division) on issues arising when patented technology is embedded in standards

4

Slide 4

ANSI’s Patent PolicyANSI’s Patent Policy

Similar to that at ISO/IEC and the ITU-T Balances rights of patent holders with implementers of the

standard Requests that patent holders of technology “essential” for

implementation of the standard provide a patent statement Statement provides an assurance that either

A license to use the technology will be made available to applicants without monetary compensation (F, formerly R-F) to the patent holder, or

A license will be made available on reasonable and non-discriminatory (RAND) terms and conditions

5

Slide 5

ANSI Patent PolicyANSI Patent Policy

ANSI’s Patent Policy provides a mechanism for addressing this situation in a way intended to reduce antitrust risks without unduly burdening the process In practice, once a patent holder provides the necessary assurances

regarding access to its patented material, the policy essentially is then self-policing

Patent Policies generally Efficacy evidenced by the extremely small number of occurrences when

antitrust/unfair competition issues have been raised in the past decade When a participant in the process intentionally failed to disclose an

essential patent in order to gain an unfair competitive advantage, it has been called to task by its competitors and enforcement bodies

Pro-competitive since non-discriminatory licensing promotes competitors’ access to the standardized technology at a reasonable fee

6

Slide 6

Recent “Hot Issues” Regarding IP Recent “Hot Issues” Regarding IP and Standards and Standards

Patents: Duty to disclose patents Duty to search patent portfolio and “imputed knowledge” issues Licensing obligations Discussion of specific licensing terms as part of the standard-setting

process Copyrighted Material:

Treatment of normative copyrighted software Current U.S. landscape:

FTC/DOJ hearings FTC enforcement actions

Copyright in Standards as Documents Veeck court decision

7

Slide 7

Duty to Disclose PatentsDuty to Disclose Patents

ANSI encourages, but does not mandate disclosure Companies have incentives to disclose

Preference for their own patented inventions to become standardized– Royalty revenues– Time to market

Avoidance of allegations of improper conduct Efficacy of ANSI policy evidenced by no adjudicated abuse of the

process relating to patents in connection with any American National Standard

Some standards organizations’ policies mandate disclosure by participants Some based on participants’ actual knowledge Some arguably seek to bind the company

8

Slide 8

Duty to Search and “Imputed Duty to Search and “Imputed Knowledge” IssuesKnowledge” Issues

ANSI policy does not require individuals participating on a technical standards committee to make binding disclosures on behalf of their employer that their employer either has or does not have essential patents Nor does it “impute” knowledge of an employer corporation to

an employee participant Otherwise, essentially requiring patent searches

Expensive and time-consuming Not necessarily dispositive Legal aspects in addition to technical ones Moving target Disincentive to participation

9

Slide 9

Licensing ObligationsLicensing Obligations

Some policies mandate a licensing obligation as a condition to participation R-F obligation RAND obligation Limited obligation based on essential patents in

company’s own contribution ANSI does not impose a licensing obligation on patent

holders

10

Slide 10

Discussion of Actual Licensing Terms as Part Discussion of Actual Licensing Terms as Part of Standards-Setting Processof Standards-Setting Process

Issue discussed on the last day of the 2002 FTC/DOJ hearings ANSI mandates that all such negotiations take place outside the

standards-setting process Expertise of standards participants usually is technical

Licensing involves complex business and legal issues Injects delay into the process Discourages disclosure Exposes standards-setting organizations to allegations of improper

collusion or price-setting under its auspices Patent statement representations set up adequate third-party

beneficiary relationship to enable would-be implementers of the standard (licensees of the patented technology) to enforce their rights in this regard

This issue has engendered much discussion and some controversy

11

Slide 11

ANSI PolicyANSI Policy

ANSI’s policy and guidelines are under review and likely revision Likely will include some changes Likely will include policy related to normative

software/copyrighted material Likely will clarify use of trademarks in standards Will clarify to what extent an ANSI-accredited

standards developer can “add-on” to the ANSI baseline policy

Clarify that willingness to license should be worldwide

12

Slide 12

Patent Policies GenerallyPatent Policies Generally

In general, effective IP policies: Maintain incentives to interoperate, innovate and compete by respecting

intellectual property Promote the use of the best technical solutions given commercial

requirements Encourage participation and the contribution of valuable intellectual

property Balance the interests of all stakeholders so that the outcomes are

representative, inclusive and more broadly supported Are open and transparent for all to review and understand Are consistent with international norms

Policies that mandate corporate patent searches, impose unreasonable disclosure obligations, or seek to impose inflexible licensing commitments on patent holders discourage collaboration and international acceptance

13

Slide 13

CopyrightCopyright

Normative software/source code Inclusion of normative software often is discouraged

Patent rights and copyright are legally very different Usually standards can be written to avoid mandating that

all implementers use one proprietary software solution ITU-T approach

14

Slide 14

FTC UpdateFTC Update

FTC/DOJ Joint Report In re Dell In re Rambus In re Unocal

15

Slide 15

FTC/DOJ Joint ReportFTC/DOJ Joint Report

FTC/DOJ hearings on “Competition and Intellectual Property Law and Policy in the Knowledge-based Economy”

FTC issued first report in late October 2003 Focused on recommendations regarding the patent system

FTC/DOJ Joint Report expected in late spring/early summer 2004 Will focus on antitrust perspective Will address standards-setting Likely will address role of standards-setting body

FTC has advised that it will meet with the ANSI Patent Group shortly after the report is issued

16

Slide 16

In Re DellIn Re Dell

1996 enforcement action Video Electronics Standards Association (“VESA”) was seeking to

establish “open” standards that did not include any essential patents Imposed an affirmative disclosure requirement on its members Requested committee members to certify on behalf of their companies

Dell representative allegedly made a false certification Consent decree

Dell gave up rights to seek royalties FTC sought public comment Clarified that the decree was limited to the facts of the case and should

not be read to impose a general duty to search

17

Slide 17

In Re RambusIn Re Rambus

FTC Complaint filed June 18, 2002 Alleged that Rambus had engaged in conduct in connection

with a standards-setting activity that violates the federal antitrust laws in Section 5 of the FTC Act Allegations include:

Rambus participated at JEDEC (a consortium affiliated with EIA)

JEDEC policy arguably mandated disclosure of essential patents and patent applications

Rambus deliberately failed to disclose patents and pending patents

Rambus proceeded to amend its patent applications to map evolving standard

18

Slide 18


After a lengthy trial, Initial Decision issued February 23, 2004 ALJ found that Rambus’s conduct did not constitute an unfair

method of competition JEDEC patent policy did not mandate disclosure Rambus made no affirmative misrepresentations Rambus did not promote its technology “No case has been cited to or was found holding that Section

5 of the FTC Act imposes a duty upon corporations that participate in standards setting organizations to comply with the rules of the standard setting organizations, to disclose their patent applications, or to act in good faith towards other members”

19

Slide 19


Prior to the hearing, the ALJ denied Rambus’ motion for summary judgment (filed in wake of the Infineon decision) Decision sets forth the reasons why there is sufficient evidence of

the key elements of the FTC’s case to warrant a trial Among other things, ALJ noted that Rambus had attempted to

frame the issue too narrowly: “[The FTC’s] allegations are far broader than whether

Respondent simply had a disclosure obligation under JEDEC patent policies. The Complaint at paragraph 2 alleges that Respondent engaged in anti-competitive practices ‘in violation of JEDEC’s own operating rules and procedures – and through other bad-faith, deceptive conduct’.”

Contrast with final decision?

20

Slide 20

RambusRambus

ALJ held that any duty must be clear in order to be binding Any obligations under a patent policy must be totally

unambiguous Company must be bound by those obligations JEDEC policy did not clearly obligate disclosure (either

in written form or as evidenced by testimony) Policies applying to patents “related to” the standard may

be fatally vague

21

Slide 21

RambusRambus

“Open standards” issue Policies that seek to avoid the inclusion of patented

technology in standards may themselves be suspect under the antitrust laws

In re American Society of Sanitary Engineering

22

Slide 22

RambusRambus

ALJ held that, even assuming a disclosure obligation, Rambus did not violate the policy Rambus did not have any issued or pending patents that

were essential to the standards under development at the relevant times

ALJ concurred with Federal Circuit’s explanation in Infineon that any disclosure duty must be premised on an objective evaluation as to essentiality and not the subjective belief of the participant

23

Slide 23

RambusRambus

ALJ held that Rambus did not mislead JEDEC members Crisp did not promote inclusion of Rambus technology

Declined to comment JEDEC members were fully aware that Rambus’s IP had

features under consideration for inclusion in the JEDEC standards

Rambus submitted letter and patent list when Crisp left JEDEC reserving all of Rambus’s rights

Rambus’s efforts to amend its patent applications properly claimed priority to the original ‘898 application

24

Slide 24

RambusRambus

ALJ held that Rambus’s conduct was not exclusionary Rambus had monopoly power in relevant markets

Not attributable to the JEDEC standards Compatibility requirements in the DRAM industry are not high Rambus had sufficient business justification for its conduct

Trade secrets “[A]n open standards committee, to function effectively, needs to

be able to assure member companies that legitimate business justifications for protecting innovative, proprietary information will not be undermined by inconsistent, inartfully drafted and practiced disclosure policies”

25

Slide 25

RambusRambus

ALJ held that there were no causation and anti-competitive effects No evidence JEDEC could or would have chosen an equally

effective standard that avoided Rambus IP Rambus’s superior technology, and Intel’s endorsement,

conferred market power on Rambus Standards-setting usually only confers market power when

There are high compatibility requirements There are several technologies that are reasonably equivalent

from a cost-performance perspective Standards setting elevates one of them

26

Slide 26

RambusRambus

ALJ held that document destruction was “troublesome” but there was no indication that any relevant and material records were destroyed Due to litigation concerns, Rambus had instituted an

aggressive records retention policy that included destruction of all archived emails after 3 months

Employees, Board members and counsel were advised to “clean out” hardcopy and electronic files

27

Slide 27

RambusRambus

Status FTC Complaint Counsel filed an appeal Commission empowered to determine both fact and legal

findings de novo Commission likely to review the appeal and render a

decision, at least to clarify the scope of possible FTC enforcement actions vis-à-vis standards-setting activities

28

Slide 28

UnocalUnocal

Unocal filed a motion for summary judgment Initial Decision dated November 25, 2003 FTC Complaint Counsel appealed on January 14, 2004 21 States and Commonwealths joined the CARB state

regulatory authority on an amici brief

29

Slide 29

UnocalUnocal

For purposes of motions, facts alleged in complaint were assumed to be true

Unocal deliberately lied to the California Air Resources Board (CARB) and two industry groups in an effort to have its IP embedded in CARB regulations relating to low emissions, reformulated gasoline (RFG) Offered its IP and represented that it was non-proprietary

and in the public domain Billions spent in refinery modifications Millions paid to Unocal in royalties

30

Slide 30

UnocalUnocal

ALJ held that Noerr-Pennington doctrine shielded Unocal from any antitrust liability Provides immunity when the ultimate “restraint upon trade or

monopolization is the result of valid government action, as opposed to private action”

A party may petition for governmental action that restrains trade

“Genuine efforts to induce government action are shielded by Noerr even if their express and sole purpose is to stifle or eliminate competition”

Based on right to influence the passage of laws and First Amendment right to petition the Government for redress of grievances

31

Slide 31

UnocalUnocal

ALJ and FTC Complaint Counsel disagree on whether the governmental body must be aware of the restraint that will result from the government action for N-P applicability

Complaint Counsel also asserts that Unocal’s conduct falls under the “misrepresentation” exception ALJ and Complaint Counsel disagree as to whether that

applies in “adjudicative” settings or “non-political arenas” Complaint Counsel also asserts that N-P does not apply to

the FTC Act

32

Slide 32

UnocalUnocal

According to FTC Complaint Counsel: “Unocal told CARB and the oil industry that they could make

reformulated gasoline using Unocal’s research without charge. This was business, not politics. And it was a lie, the centerpiece of a strategy to trick both CARB and the oil industry into making gasoline the Unocal way, which is now covered by five patents. Neither CARB nor the refiners had reason to believe that Unocal was gaming the regulatory process to create a monopoly for Unocal. Neither had the means to discover the truth, because only Unocal could know the truth: that it had applied for patents and intended to demand royalties once the patents issued. Only later, in 1995, after CARB and the oil industry each were locked in, did Unocal publicly announce for the first time the plan to charge for use of its reformulated gasoline technology.”

33

Slide 33

UnocalUnocal

With regard to the misrepresentations to the two industry groups, the ALJ held that, to the extent that Unocal’s statements were part of its scheme to defraud CARB, it is protected under N-P

Otherwise, the ALJ held that the FTC lacks jurisdiction to adjudicate claims involving substantial issues of patent law 28 U.S.C Section 1338(a) provides that the district courts have original

jurisdiction of any civil action arising under an Act of Congress relating to patents, etc. and the state courts do not

Complaint Counsel argued that FTC enforcement actions are not civil actions Section 1338(a) is silent as to venues other than district and state courts FTC has evaluated patent issues as part of past enforcement actions

Commission likely to review and decide the appeal, if only to clarify authority of the FTC to bring enforcement actions involving patent issues

34

Slide 34

VeeckVeeck Copyright Issue Copyright Issue

Lawsuits challenging whether a standards developer’s assertion of copyright is emasculated when a government entity at any level adopts or references the developer’s standards Veeck case initially decided by the Court of Appeals for the Fifth

Circuit (241 F.3d 398 (5th Cir. 2001)) Two small cities in Texas referenced a building code developed in

the private sector by the Southern Building Code Congress International (SBBCI) as applicable law

Mr. Veeck purchased a copy of the standard (complete with shrink-wrap license agreement) and posted the code on his website

Original 5th Circuit decision was favorable to SBBCI and its assertion of copyright protection

Court decided to rehear the matter en banc

35

Slide 35


Veeck supporters argued: Public must have free access to the law if it is to be bound by it Standards developers waive their copyright when they encourage

government bodies to adopt their standards Copyright incentives are unnecessary to encourage the development of codes

and standards SBBCI supporters argued:

Copyright Act provides incentives so that entities such as developers will undertake this work

Development of useful standards is costly process that must be underwritten if it is to continue to benefit our society

National Technology Transfer and Advancement Act encourages federal government reliance on private sector standards

Standards developers’ standards frequently are more accessible than government-drafted works

36

Slide 36


En banc Fifth Circuit decision was issued by the Court on June 7, 2002 (293 F.3d 791 (5th Cir. 2002)) The Fifth Circuit ruled that SBCCI retains the copyright in

its standard, but that “[w]hen those codes are enacted into law … they become to that extent ‘the law’ of the governmental entities and may be reproduced or distributed as ‘the law’ of those jurisdictions.”

The Court further observed that laws are not subject to federal copyright law, and “public ownership of the law means that ‘the law’ is in the ‘public domain’ for whatever use the citizens choose to make of it.”

37

Slide 37


Arguably inconsistent with Practice Management Info. Corp. v. American Medical Ass’n, 121 F.3d 516 (9th Cir. 1997) and CCC Info. Servs., Inc. v. Maclean Hunter Market Reports, Inc., 44 F.3d 61 (2d Cir. 1994)

In response to the concerns articulated by the standards developer community, the Court attempted to limit its decision to model codes that are referenced in their entirety as the law in its entirety This limitation is inconsistent with the Court’s main

holding

38

Slide 38


SBCCI filed a petition seeking review of the Fifth Circuit’s decision by the U.S. Supreme Court

On June 27, 2003 the Supreme Court denied certiorai