Note on the relationship between regulators and standard-setting organizations

New in the TEXAS LAW REVIEW: "Note, Why the Enforcement Agencies' Recent Efforts Will Not Encourage Ex Ante Licensing Negotiations in Standard-Setting Organizations" by Lauren E. Barrows, 89 TEXAS L. REV. 967 (2011). Description:

Enforcement agencies, through a series of speeches and documents, have recently adopted a policy to encourage private industry groups known as standard-setting organizations (SSOs) to engage in ex ante licensing negotiations.  Patent holders and many potential licensees are typically SSO members.  As a group, they could potentially determine licensing terms when considering whether to incorporate patented technology into a standard but do not for fear of antitrust liability.  In this Note, Barrows argues that given the new policy, SSOs will continue to not engage in ex ante licensing negotiations without further agency action.  DOJ and FTC statements currently do not provide sufficiently clear guidance.  So, SSOs will continue to fear antitrust liability, and thus the new policy will not be implemented.  Not only does this undermine the agencies’ credibility, writes Barrows, it will also remain unclear whether ex ante licensing negotiations are actually desirable.

Barrows provides some background on SSOs and their importance, specifically in the context of the IP-intensive, high-technology industries.  Barrows explains that, in an effort to mitigate holdup, many SSOs require members to license any patented technology incorporated into a standard on certain terms.  But, because SSOs fear antitrust liability, they do not determine these terms through ex ante licensing, and the terms that they do use are vague.  Barrows notes that could undercut their usefulness.

Moreover, Barrows argues that the approach of the enforcement agencies matters.  She provides an overview of the Sherman Act and then looks at two violations potentially posed by ex ante licensing negotiations.  Barrows then analyzes the recent statements of the DOJ and FTC, arguing that the agencies failed to provide clear guidance to the SSOs to encourage them to undertake such negotiations.  Finally, she offers a pair of suggestions for limiting the chance that SSOs who engage in such negotiations will face liability.

Antitrust is a field we usually don't mess with in introductory administrative law courses, but the lessons learned and principles established in the antitrust arena (with its high stakes inviting expensive appellate litigation) often filter down to more everyday regulatory activities. It follows that keeping up with antitrust stuff is a good idea. The concept of private regulation — the delegation of regulation from government to private authorities — is growing. The relationship between private regulators, such as the standard setting organizations discussed in this Note, and government regulators is therefore important. EMM