IPR and the Standards Process: A Broadcom View on Anti-Competetive Behavior
The remarks excerpted below were made by David Dull, Broadcom's SVP of Business Affairs, and their General Counsel on January 30, 2007.
David Dull's remarks were made in public Hearings on Single-Firm Conduct being conducted by the US Federal Trade Commission and the Department of Justice.
These are excerpts only, and the full text is available here ...
usdoj.gov
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David Dull to To Federal Trade Commission/Department of Justice: Excerpts
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Companies that use the strong positions they have obtained – even if attained by innovation - to close other markets to competition, or that use deception and false promises to obtain their strong position in the first place – are not innovating but rather are standing in the way of innovation. The antitrust laws must address that type of behavior. ...
Without disclosure, the standard is at constant risk of being “hijacked” by an IPR holder that has “hidden in the weeds” during development of the standard, or – even worse – has helped steer development towards its own undisclosed proprietary technology, only to spring its trap after the standard has been set and millions or billions of dollars have been invested in its implementation. ...
This risk is not an abstract or theoretical concern. In fact, these hearings are particularly timely. Just this past Friday, a federal jury in San Diego rejected an attack on my own company by a firm attempting to force us out of certain technology spaces by asserting two patents that it controlled. Its infringement case was based in substantial part on our implementation of an industry standard for video compression. The jury found no infringement – and, perhaps even more significantly, also found that our adversary had violated the disclosure rules of the standard-setting body by failing to disclose its patents which allegedly covered the standard. ...
Sadly, the company that launched this ill-founded patent assault on an international standard cynically justified its actions afterwards on the grounds that it had “nothing to lose” in bringing the action, even though – after a nine day trial – the jury unanimously agreed that the company abused the standards process and also violated its duty of honesty and fair dealing with the U.S. Patent and Trademark Office. ...
But disclosure, important as it is, is not enough. Disclosure is only the first step in providing assurances that hijacking will not occur. Disclosure merely allows the standards development body to thwart or compensate for attempts to insert proprietary technology into the standard. ...
It is at least equally important for industry participants to abide by the rules after the standard is in place. A key element of that is licensing terms and conditions. The rules typically provide that IPR that is essential to practice a standard will not be included in the standard unless the owner agrees to license that IPR to those that wish to practice the standard on either royalty-free or fair, reasonable and nondiscriminatory – so-called “FRAND” – terms. ...
Once a standard is set, the industry moves forward and invests millions if not billions of dollars in implementing the standard. That investment is based on the understanding and assumption that the IPR issues are resolved – either there will be no need to license the IPR or any licensing will be on FRAND terms. ...
If a company with essential IPR then seeks to impose non-FRAND license terms, the balance is completely upset. Suddenly the industry, which adopted the standard with the understanding that licensing costs would be reasonable, is confronted with a monopolist seeking to charge monopoly rates. ...
In industries that are involved in standard setting, there are certain practices that – I would venture to say – everyone understands are not FRAND terms. ...
For starters, refusing to license at all violates a FRAND commitment. Amazingly, there are some in the industry who take the position that – notwithstanding the commitment to license all who wish to practice the standard – essential IPR holders can pick and choose among potential licensees for any reason – including, it would seem, whether the potential licensee is a downstream competitor to the licensor. ...
Broadcom has been confronted by a licensor who participated in a standard setting process insisting that, as a condition to being granted a royalty-bearing license to the intellectual property essential to practice the standard, Broadcom would have to give back a royalty-free license to a much broader sweep of Broadcom intellectual property, including IP covering features and functions entirely unrelated to the standard. To usurp the blood, sweat, tears and genius of innovative companies in such a manner as a condition to practicing an industry standard runs directly contrary to the fundamental objectives of standard setting bodies. If this sort of practice is allowed, what incentive will any company have to innovate or invest, knowing that unrelated technology can be appropriated in this way as a price for making standardized products? ...
Another example that we have seen is a company attempting to use access to essential IPR to coerce customers into buying its products rather than letting the merits of the products determine who gets the sale. ...
And we have examples where a company has sought to “stack” a standard-setting organization with supposedly independent voters to skew the standard toward its own technology or away from its rivals’ technology. ...
To be clear, I do not suggest that a company should be required to share its technology with others – far from it. Patents are available to protect innovation, and Broadcom is a firm believer in our patent system. ...
But it is imperative that when a company has made a commitment to license on FRAND terms as a condition to getting its technology included in a standard, it must not be allowed to exploit the market position that it gained through incorporation of its IPR into the standard by reneging on that commitment. And a company likewise should not be allowed to subvert the rules that are put into place to ensure that standard-setting is a non-partisan exercise. ...
These are very real and contemporaneous examples of the kind of anticompetitive single firm conduct that we believe the antitrust laws are intended to address. ...
Some say that determining what is "fair and reasonable" is too hard a task – that it is a standard that cannot be enforced. Often, the firms that say this are the very firms that have failed to disclose their patents, have engaged in rampant discrimination that cannot possibly be reconciled with a FRAND obligation, and have engaged in other behavior that demonstrates that it is a lack of will, not a lack of ability, that has resulted in their FRAND violations. ...
"Fair and reasonable" simply means that the technology will be available on competitive terms, rather than on terms that reflect the market power gained through inclusion in the standard. It also means that no participant will charge a disproportionately high royalty so as to hobble the standard or render it uncompetitive. ...
Technology companies are often engaged in patent litigation where a question before the court is how to assess a reasonable royalty in damages. There is no reason to believe that the courts would have a harder time figuring out what a reasonable royalty is in the standards context than in any other. The court would take due account of the competitive goals of the standard setting body in requiring a FRAND commitment and otherwise undertake the same exercise that it goes through in determining contract damages and in other contexts. ... <snip rest> ...
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- Eric - |
