1. Gil Ohana Cisco Systems Legal Department
Standard-Setting, Competition Law and the Ex Ante Debate Presentation to ETSI SOS Interoperability III Meeting Sofia Antipolis, France 21 February 2006
Gil Ohana
Cisco Systems Legal Department

2. What We’ll Cover Competition Law and Standard-Setting
Ex Ante and Competition Law
US Outreach Efforts by Ex Ante Supporters
Possible Future Directions for ETSI and Other SDOs

3. 1
Competition Law and Standard Setting

4. Standard-Setting and Competition Law
“Typically, private standard-setting associations … include members having horizontal and vertical business relations.
[M]embers of such associations often have economic incentives to restrain competition and that the product standards set by such associations have a serious potential for anticompetitive harm.
Agreement on a product standard is, after all, implicitly an agreement not to manufacture, distribute, or purchase certain types of products.
Accordingly, private standard-setting associations have traditionally been objects of antitrust scrutiny.” Allied Tube & Conduit v. Indian Head Corp., US Supreme Court (1988)

5. Standard Setting and Competition Law
SDO IPR policies address two different competition law concerns in standard setting:
Patent-holder gaining market power by failing to disclose patent or refusing to license disclosed patent on FRAND terms
Depends on FRAND commitment being meaningful constraint on patent-holder’s legal right to charge licensees whatever it wants (Broadcom v. Qualcomm)
“Group boycott” among participants with collective market power who extort cheap licenses from holder of valuable patents
Where participants have market power, patent-holder cannot be compelled to license as condition of participating (Federal Trade Commission Sanitary Engineering Decision (1986), EU ETSI Investigation, )

6. 2
Ex Ante and Competition Law

7. Ex Ante and Competition Law
SDO IPR policies shaped by competition law concerns
Prohibitions on disclosure and negotiation of actual license terms within working groups
FRAND substitutes for statement of actual terms
Disclosure and negotiation happen outside standards process
Bilateral process (contributor and prospective licensee)
Makes real-time comparison of technology substitutes difficult

8. Ex Ante and Competition Law ― Disclosure
Ex ante proponents encourage SDOs to re-think role competition law concerns play in shaping SDO IPR policies
Wide range of interpretations patent-holders give to FRAND increases uncertainty participants and implementers face in creating standards and commercializing standards-compliant products
Ex ante proponents respond by urging SDOs to adopt rules that at least permit disclosure of detailed license commitments in standards forum
Proponents believe that benefits of disclosure of licensing terms in standard-setting outweigh minimal competition law risks that disclosure may raise

9. Ex Ante and Competition Law ― Negotiation
Ex ante proponents encourage SDOs to re- think role competition law concerns play in shaping SDO IPR policies
SDOs uniformly prohibit negotiation of licensing terms within standards bodies
Ex ante proponents suggest that SDO prohibition be re-examined in light of guidance from competition agencies that joint negotiation with suppliers does not necessarily raise competition law concerns

10. 3
US Outreach Efforts by Ex Ante Supporters

11. US Outreach Efforts by Ex Ante Supporters
Context: State of Play as of Early 2005
DG Competition, European Commission’s competition regulator, addresses ex ante issue in ¶ 225 of Technology Transfer Block Exemption Guidelines
Issue raised in US during 2002 Federal Trade Commission / Department of Justice Intellectual Property Hearings, but discussion not followed by guidance from US agencies

12. US Outreach Efforts by Ex Ante Supporters
Response by ex ante proponents:
Approach US agencies, encourage them to offer guidance to SDOs and participants regarding agency enforcement intentions relative to ex ante disclosure and negotiation of licensing terms
Guidance needed to help SDOs and participants make realistic assessment of competition law risks associated with adoption of ex ante rules
Meetings with both Federal Trade Commission and Justice Department Antitrust Division scheduled for June 2005
IEEE, leading SDO in computing and networking, participates as observer

13. US Outreach Efforts by Ex Ante Supporters
Even before meetings, Hewitt Pate, head of Antitrust Division of Justice Department, addresses ex ante issue:
“Some standards development organizations have reported to the Department of Justice that they currently avoid any discussion of actual royalty rates, due in part to fear of antitrust liability. It would be a strange result if antitrust policy is being used to prevent price competition. There is a possibility of anticompetitive effects from ex ante license fee negotiations, but it seems only reasonable to balance that concern against the inefficiencies of ex post negotiations and licensing hold up.”
Hewitt Pate, “Competition and Intellectual Property in the U.S.: Licensing Freedom and
the Limits of Antitrust”, available at

14. US Outreach Efforts by Ex Ante Supporters
Following meetings, FTC Chairman Majoras addresses issue in September, 2005 speech:
“First, a patent holder’s voluntary and unilateral disclosure of its maximum royalty rate … is highly unlikely to require antitrust scrutiny.”
* * *
“[J]oint ex ante royalty discussions that are reasonably necessary to avoid hold up do not warrant per se condemnation.”
Deborah Platt Majoras, “Recognizing the Pro-Competitive Potential of Royalty Discussions
In Standard Setting”, available at

15. 4
Possible Future Direction for ETSI and Other SDOs

16. Future Directions for SDOs
Statements from US enforcement officials, like ¶ 225 of European Commission’s TTBER Guidelines, should offer SDOs some comfort that:
SDO adoption of rules permitting ex ante disclosure of royalty rates is exceedingly unlikely to raise competition law concerns
SDO adoption of rules permitting joint negotiation of royalty rates does not necessarily violate competition law rules

17. Future Directions for SDOs
Now that agencies on both sides of Atlantic have offered high level guidance, more specific agency examination of ex ante issue awaits SDO adoption of ex ante rules
US agencies have formal process for seeking advice, but invoking process may require SDO to enact ex ante rules before seeking guidance
Discussions over adoption of ex ante rules underway at IEEE and other US SDOs

18. Future Directions for SDOs
SDOs, participants and others involved in ex ante discussion should approach agencies with realistic expectations:
Because agencies will not bless ex ante categorically, ex ante opponents will cling to argument that adoption of ex ante rules will necessarily create competition law concerns
Agency statements can, however, help SDOs realistically assess competition law risks and weigh them against benefits ex ante has for standards-development process
Competition agencies cannot address questions SDOs and participants face regarding impact of ex ante rules on standards process
Just as standard-setting is global, agency guidance needs to come from leading competition law regulators in US, EU, and elsewhere

19. Questions
Questions