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Archived updates for Wednesday, November 01, 2006

U.S.D.O.J. Provides IP Guidance on VITA Standards-Setting Policy

On October 30, 2006, the U.S. Department of Justice announced that it would not oppose a proposed policy by the VMEbus International Trade Association on disclosure and licensing of patents during its standards settings process. Among other things, the policy requires declaration of a maximum royalty rate that "may become essential to implementation of a draft VSO specification."

The current proposal requires each working group member to make a "good faith and reasonable inquiry" into the patents owned, controlled, or licensed by the company she represents(13) and to disclose all patents or patent applications that the company owns, controls, or has a license to, that she believes may become essential to the VSO specification the working group is developing. With regard to timing, the proposed policy identifies three specific periods during the standard-setting process when working group members must identify any previously undisclosed essential patents, patent applications, and third-party patents.

First, a VITA member that proposes a new specification must make a patent declaration before a working group is formed to begin drafting the specification. Second, all working group members must make declarations within sixty days after the working group is formed. Third, all working group members must make declarations within fifteen days after the draft specification is published. In addition to these three specific periods, the proposed policy requires each working group member to disclose any previously undisclosed essential patents at the beginning of all face-to-face meetings of the working group. Any such disclosures made at face-to-face meetings must be followed by a declaration within thirty days.(19)

A working group member who fails to disclose a known essential patent, and/or fails to declare the associated most restrictive licensing terms according to the timing process described above, commits the VITA member company he or she represents to license the essential claims of the undisclosed patent for implementation of the VITA standard to all interested parties on a royalty-free basis and with the restricted non-price terms.(21)

According to the Justice Department:

VITA's proposed patent policy is an attempt to preserve competition and thereby to avoid unreasonable patent licensing terms that might threaten the success of future standards and to avoid disputes over licensing terms that can delay adoption and implementation after standards are set. The proposed policy does so by requiring working group members to disclose patents and patent applications that may become essential to implement a draft VSO standard, to commit to license on FRAND terms, and unilaterally to declare the most restrictive
licensing terms that will be required. In addition, the proposed policy establishes an arbitration process which may be used to resolve compliance disputes. Adopting this policy is a sensible effort by VITA to address a problem that is created by the standard-setting process itself. Implementation of the proposed policy should preserve, not restrict, competition among patent holders. Any attempt by VITA or VSO members to use the declaration process as a cover for price-fixing of downstream goods or to rig bids among patent holders, however, would be summarily condemned.

The Department has no present intention to take antitrust enforcement action against the conduct you have described. This letter expresses the Department's current enforcement intention. In accordance with our normal practices, the Department reserves the right to bring an enforcement action in the future if the actual operation of the proposed conduct proves to be anticompetitive in purpose or effect.

In its press release, VITA claims that it is now "the first standards developer in the world to receive guidance for 'ex ante' procedures from any legal authority."
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