The US Department of Justice announced that it would not challenge a proposal by the Institute of Electrical and Electronics Engineers, Inc. (IEEE) to update the organization’s patent policy.

Background

The IEEE is a nonprofit association with more than 400,000 members, including representatives of all of the world’s major electronics companies.  IEEE standards include the 802.11 standard for Wi-Fi.  The new policy governs the incorporation of patented technology in industry standards approved by the IEEE.The IEEE requested a business review letter from the DOJ’s antitrust division, seeking a statement about whether the division intended to challenge the organization’s actions under antitrust law.

Patent Licensing Terms

Under the IEEE policy, the holder of a potentially standards-essential patent is asked to submit a Letter of Assurance (LOA) in which it selects one of four options for licensing its technology:

  • The patent owner will make a license available, without charge, to an unrestricted number of applicants for uses implementing the standard.
  • The patent owner will make a license available under “reasonable rates, with reasonable terms and conditions that are demonstrably free of any unfair discrimination,” to an unrestricted number of applicants.
  • The patent owner will not enforce its patent rights against any person or entity complying with the industry standard.
  • The patent owner is unwilling or unable to license its patent rights without compensation or under reasonable rates, or agree that it will not enforce its patent rights.

Most standards-essential patents are licensed under what are called FRAND (fair, reasonable, and non-discriminatory) or RAND terms.However, courts have struggled to determine what patent licensing rates are “reasonable.”

What’s reasonable?

Under the new IEEE policy, a reasonable rate is defined as “appropriate compensation . . . excluding the value, if any, resulting from the inclusion of [the patent claims] technology in the IEEE standard.” Of course, “appropriate” could be considered just as amorphous as “reasonable.” The real value comes in the second part of the clause:

This provision reduces the possibility that a patent holder that has made an IEEE RAND Commitment could hold up implementers of a standard and obtain higher prices (or more favorable terms) for its invention than would have been possible before the standard was set.

Also, the new policy limits the ability of patent holders to seek injunctions that would prevent companies willing to license an essential patent from making, using, or selling products that comply with the standard.

The DOJ noted that industry standards can have significant pro-competitive benefits. For example, they can help different products work together, lower costs for consumers, encourage innovation and efficiency, and increase competition among technologies seeking to be included in industry standards.

Questions?

If you have questions about patent licensing or FRAND patents,  please contact our office at 626-796-4000 or toll-free at 855-UR-IDEAS (855-874-3327) for a free initial consultation with one of our intellectual property attorneys. Please also visit our website for more information about us.

Photo Attribution:  By The Institute of Electrical and Electronics Engineers (http://www.ieee-cifer.org/) [Public domain], via Wikimedia Commons.

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