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Alden Abbott, Mar 16, 2015
The setting of industry standards is widely recognized as a driver of economic growth—standards may reduce production costs; increase innovation, efficiency (through greater product interoperability, for example), and consumer choice; foster public health and safety; and facilitate international trade. In the United States, standards development is sector-based and market-led, with American businesses typically voluntarily collaborating within private standard-setting organizations to develop standards that all firms from their sector (including firms not within the SSO) can employ. Outside the United States, governments more frequently are involved in promoting and providing guidance to particular SSOs.
Many SSOs require their members to offer to license their patents that cover technology necessary to implement a standard—standard-essential patents —on “fair, reasonable, and non-discriminatory” terms. Standards can also be set in the marketplace, where firms compete to have their own technology accepted by users as a de facto standard (Microsoft’s Windows operating system and the Android mobile operating system currently developed by Google are examples).
Despite its substantial benefits, however, standard setting has long been a concern of antitrust law enforcers, primarily because it brings together competitors that have an inherent incentive to restrict competition among themselves. In recent years, competition law has focused substantial attention on potential competitive abuses stemming from patents held by individual standard-setting participants or their transferees.
This article briefly surveys the current U.S. competition law treatment of patent rights affected by standard setting, which centers on preventing “excessive” returns to individual patent holders, as contrasted to the traditional concern with forestalling collusion among competitors. I conclude that the current approach is welfare-inimical and misplaced. It should be replaced instead with an exclusive focus on potential collusion among patentees, an approach that would better promote consumer welfare and innovation.