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Monday, October 21, 2013

REPs Not SEPs: A Reasonable and Non-Discriminatory Approach to Licensing Commitments

John D. Harkrider (Axinn, Veltrop & Harkrider LLP) advocates REPs Not SEPs: A Reasonable and Non-Discriminatory Approach to Licensing Commitments.

ABSTRACT: A lot of ink has been spilled on the subject of RAND commitments in recent years. Lawyers and judges have offered opinions on the proper methodology for calculating RAND royalties, regulators have sought to clarify the circumstances under which pursuing injunctive relief comports with a RAND commitment and competition law, and academics have suggested frameworks for arbitrating RAND license disputes. Seemingly everyone has extolled the virtuous role that RAND commitments play in fostering industry standards and interoperability and condemned the opportunistic breach of such commitments.

Much of that analysis and discussion, however, has been unduly narrow, with commentators focusing on RAND commitments made to formal, collaborative standard-setting organizations and which encumber so-called standard-essential patents. Indeed, much of the discussion has focused on the even narrower subset of SEPs related to smartphones and other wireless technology. Yet SEPs are merely a subset of the larger category of patents that are encumbered by RAND commitments, and patentees make such commitments in a variety of settings-not just in the context of formal SSO standard-setting efforts. In whatever setting they are made, RAND commitments serve the same purpose: to encourage firms to adopt the underlying patented technology-either on a standalone basis or as incorporated into a standard-by assuring them that they will not be subject to unreasonable licensing demands or other types of "hold-up." The reasons for condemning the breach of such commitments, in turn, also depend on the effect on injured implementers, not on the institutional context in which the promises were originally made. For some, the failure to consider non-SSO RAND commitments in their analysis of the issue is likely unintentional. Many of the recent RAND disputes that have prompted commentary, lawsuits, and enforcement actions have involved formal SSOs and SEPs, so it is perfectly understandable that some discussions would restrict themselves to that arena. Other commentators, however, have suggested that concerns over RAND commitments are fundamentally unique to SSOs because of the collective nature of institutionalized standard-setting. That conclusion, however, misunderstands the underlying antitrust principles at stake. Simply put, there is no legal or economic reason to discriminate between a RAND commitment made to an SSO and a RAND commitment made to an industry at large. In either case, what matters is the effect that commitment has on encouraging industry adoption of the underlying patented technology. And if we are concerned about the wrongful acquisition of market power, it is important to recognize that both RAND commitments made unilaterally and RAND commitments made as part of collective SSO activities can induce industry adoption and confer market power on the underlying technology. On the other hand, there may also be SSO-developed standards that themselves face competition, such that even the right to entirely exclude others from practicing the standard would not confer a substantial degree of market power. Assessing whether a breach of a RAND commitment is anticompetitive, therefore, requires a case-by-case inquiry and the mere presence or absence of an SSO on its own does not reveal very much. A broader understanding of the contractual and competitive importance of both SSO and non-SSO RAND commitments will not just promote doctrinal coherence, it will have salutary practical effects as well. By establishing general rules that at least presumptively govern all RAND commitments, it will make clear to stakeholders that RAND commitments carry with them a predictable set of norms and obligations. That, in turn, will help RAND commitments achieve their principal purpose: encouraging the development and adoption of new technologies by assuring both innovators and implementers that neither will exploit the other.

http://lawprofessors.typepad.com/antitrustprof_blog/2013/10/reps-not-seps-a-reasonable-and-non-discriminatory-approach-to-licensing-commitments.html

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