1 Overview of Policies and Principles for the Treatment of Patents in American National Standards (ANS) Presented by Earl Nied Vice Chair, ANSI IPRPC September 3, 2010 IPR and Standards

ANSI / CNIS Meeting September 9, 2010 Slide 2 ANSI’s Patent Policy Similar to Common policy of ISO/IEC/ITU Requests that patent holders of technology “essential” for implementation of the standard provide a patent statement or a Letter of Assurance (LoA)  Statement provides an assurance that either A license will be made available on reasonable and non-discriminatory (RAND) terms and conditions which can include compensation; A license will be made available on reasonable and non-discriminatory (RAND) terms and conditions without monetary compensation (often called “RF”) to the patent holder; or The patent holder does not hold and does not anticipate holding any essential patent claim(s);

ANSI / CNIS Meeting September 9, 2010 Slide 3 ANSI Patent Policy ANSI’s Patent Policy provides a mechanism for addressing this situation in a way intended to reduce antitrust risks without unduly burdening the process  In practice, once a patent holder provides the necessary assurances regarding access to its essential patent claims, the policy essentially is then self-policing Patent Policies generally  Efficacy evidenced by the extremely small number of occurrences when antitrust/unfair competition issues have been raised in the past decade When a participant in the process intentionally failed to disclose an essential patent in order to gain an unfair competitive advantage, it has been called to task by its competitors and the US FTC.  Pro-competitive since non-discriminatory licensing promotes competitors’ access to the standardized technology under reasonable terms.

ANSI / CNIS Meeting September 9, 2010 Slide 4 Recent “Issues” Regarding IP and Standards Patents:  Duty to disclose patents  Duty to search patent portfolio and “imputed knowledge” issues  Licensing obligations  Discussion of specific licensing terms as part of the standard-setting process  Current U.S. landscape FTC enforcement actions FTC/DOJ hearings Copyrighted Material:  Treatment of normative copyrighted software  Veeck decision relating to copyright in the standards themselves

ANSI / CNIS Meeting September 9, 2010 Slide 5 Duty to Disclose Patents ANSI encourages, but does not mandate disclosure  Companies have incentives to disclose May support preference for their own patented inventions to become standardized –Royalty revenues –Time to market Avoidance of allegations of improper conduct Efficacy of ANSI policy evidenced by no adjudicated abuse of the process relating to patents in connection with any American National Standard (ANS) at ANSI Some standards organizations’ policies (including those of some ASDs) mandate disclosure by participants  Some based on participants’ actual knowledge  Some arguably seek to bind the company

ANSI / CNIS Meeting September 9, 2010 Slide 6 Duty to Search and “Imputed Knowledge” Issues While it does not preclude ASD policies requiring so, ANSI policy does not require individuals participating on a technical standards committee to make binding disclosures on behalf of their employer that their employer either has or does not have essential patents  Nor does it “impute” knowledge of an employer corporation to an employee participant Otherwise, essentially requiring patent searches may  Involve expensive and time-consuming activities  Not necessarily be dispositive  Introduce legal and business considerations in addition to technical ones  Create moving target  Create a disincentive to participation

ANSI / CNIS Meeting September 9, 2010 Slide 7 Licensing Obligations Some policies mandate a licensing obligation as a condition to participation  R-F obligation  RAND obligation  Limited obligation based on essential patents in company’s own contribution ANSI does not impose a licensing obligation on patent holders

ANSI / CNIS Meeting September 9, 2010 Slide 8 Discussion of Actual Licensing Terms as Part of Standards- Setting Process ANSI Guidelines state all such negotiations should take place outside the standards-setting process  Expertise of standards participants usually is technical Licensing involves complex business and legal issues  Injects delay into the process  May delay or discourage contribution/disclosure of innovative patented technology  May expose standards-setting organizations to allegations of improper collusion or price-setting under its auspices Generally, patent statement representations set up adequate third-party beneficiary relationship to enable would-be implementers of the standard (licensees of the patented technology) to enforce their rights in this regard This issue has engendered much discussion and some controversy

ANSI / CNIS Meeting September 9, 2010 Slide 9 FTC Enforcement Actions Only four FTC enforcement actions in past two decades Such actions signal that intentional failure to disclose information or abide by a commitment in a deliberate effort to gain an unfair competitive advantage will be challenged  In re Dell Computer Corp., 121 F.T.C. 616, No. C-3658, 1996 FTC LEXIS 291 (May 20, 1996)  In re Rambus Inc., Docket No (June 18, 2002)  In re Union Oil Company of California (“Unocal”), Docket No (March 4, 2003)  In the Matter of NEGOTIATED DATA SOLUTIONS LLC, (“N- Data”) Docket No. C-4234 (January 28, 2008)

ANSI / CNIS Meeting September 9, 2010 Slide 10 Antitrust and Patent Issues Some recent situations (such as the Rambus litigation) have prompted people to question whether stricter “rules” should be instituted or greater obligations required with regard to patent policies  Suggestion that industry participants in the process should have more defined duties regarding disclosure  Suggestion that standards developers should have a greater responsibility to ensure that all relevant patents – and possibly, proposed licensing terms - are identified before the standard is finalized ANSI’s position is that a one-size-fits-all approach will eliminate necessary flexibility to devise individual patent policies that best accommodate the objectives of the standards-setting project and the consensus of its participants  In addition, recent enforcement actions have highlighted that patent policies and compliance with their terms do not define improper conduct from an antitrust perspective

ANSI / CNIS Meeting September 9, 2010 Slide 11 ANSI PATENT POLICY 3.1 ANSI patent policy - Inclusion of Patents in American National Standards There is no objection in principle to drafting an American National Standard (ANS) in terms that include the use of an essential patent claim (one whose use would be required for compliance with that standard) if it is considered that technical reasons justify this approach. If an ANSI-Accredited Standards Developer (ASD) receives a notice that a proposed ANS or an approved ANS may require the use of such a patent claim, the procedures in this clause shall be followed Statement from patent holder The ASD shall receive from the patent holder or a party authorized to make assurances on its behalf, in written or electronic form, either: a)assurance in the form of a general disclaimer to the effect that such party does not hold and does not currently intend holding any essential patent claim(s); or b)assurance that a license to such essential patent claim(s) will be made available to applicants desiring to utilize the license for the purpose of implementing the standard either: i) under reasonable terms and conditions that are demonstrably free of any unfair discrimination; or ii) without compensation and under reasonable terms and conditions that are demonstrably free of any unfair discrimination.

ANSI / CNIS Meeting September 9, 2010 Slide 12 ANSI PATENT POLICY (cont’d) Record of statement A record of the patent holder’s statement shall be placed and retained in the files of both the ASD and ANSI Notice When the ASD receives from a patent holder the assurance set forth in b) above, the standard shall include a note substantially as follows: NOTE – The user’s attention is called to the possibility that compliance with this standard may require use of an invention covered by patent rights. By publication of this standard, no position is taken with respect to the validity of any such claim(s) or of any patent rights in connection therewith. If a patent holder has filed a statement of willingness to grant a license under these rights on reasonable and nondiscriminatory terms and conditions to applicants desiring to obtain such a license, then details may be obtained from the standards developer Responsibility for identifying patents Neither the ASD nor ANSI is responsible for identifying all patents for which a license may be required by an American National Standard or for conducting inquiries into the legal validity or scope of those patents that are brought to their attention

ANSI / CNIS Meeting September 9, 2010 Slide 13 Key points to remember about ANSI patent policy Focused on essential patent CLAIMS vs PATENTS ANSI encourages early disclosure of patent claims, but stops short of mandating disclosure Re Patent Searches (ANSI Guidelines)  “This is not to suggest that a standards developer should require any participant in the development process to undertake a patent search of its own portfolio or of any other. The objective is to obtain early disclosure concerning the existence of patents, where known.”

ANSI / CNIS Meeting September 9, 2010 Slide 14 Key points to remember about ANSI patent policy (cont’d) Early Disclosure (ANSI Guidelines)  “Early disclosure permits notice of such patent claims to the standards developer and ANSI in a timely manner, provides participants the greatest opportunity to evaluate the propriety of standardizing the patented technology, and allows patent holders and prospective licensees ample time to negotiate the terms and conditions of licenses outside the standards development process itself.” Pending Published Patent Applications (ANSI Guidelines)  “Similarly, a standards developer may wish to encourage participants to disclose the existence of pending U.S. patent applications relating to a standard under development.”

ANSI / CNIS Meeting September 9, 2010 Slide 15 Key points to remember about ANSI patent policy (cont’d) Discussions of licensing terms in Technical Committees (ANSI Guidelines)  “It should be reiterated, however, that the determination of specific license terms and conditions, and the evaluation of whether such license terms and conditions are reasonable and demonstrably free of unfair discrimination, are not matters that are properly the subject of discussion or debate at a development meeting. Such matters should be determined only by the prospective parties to each license or, if necessary, by an appeal challenging whether compliance with the Patent Policy has been achieved.”

ANSI / CNIS Meeting September 9, 2010 Slide 16 QUESTIONS?