by William Diaz
The head of the United States Department of Justices’s (DOJ) Antitrust Division, Christine Varney, gave a speech to the Chamber of Commerce on June 24, 2011. One of the topics she discussed involved IP/antitrust issues regarding standard-setting organizations (SSOs). Provided below is the excerpt from her remarks dealing with this topic. While her remarks do not signify a change in the way the DOJ analyzes SSOs, they serve as a reminder that the DOJ is vigilant of anticompetitive practices related to standard-setting.
Christine Varney’s Remarks on SSOs:
One issue that arises in the context of civil non-merger enforcement, and which I understand is of considerable interest to the business community, is the application of the antitrust laws to standard setting. I have examined standard setting since my days as a Federal Trade Commissioner, when I voted to challenge Dell Computer Corporation’s anticompetitive conduct in a Standard Setting Organization (SSO). The FTC alleged that Dell—as a member of an SSO—restricted competition in the personal computer industry and undermined the standard-setting process by threatening to exercise undisclosed patent rights against computer companies that had adopted the standard. In that settlement, the FTC made clear that the antitrust laws do not allow firms to commit to an open standard, and only after the standard is adopted, assert patent rights to block use of the design or increase prices.
However, if structured appropriately, standards promulgated by an SSO can be permissible under the antitrust laws. As you well know, standard setting creates enormous benefits for businesses and consumers, including reducing production costs and fostering public health and safety. The Division has expressed this support for SSOs in a joint report with the FTC, in business review letters and in speeches.
I personally support the role of standard setting in promoting innovation as long as such standards comply with the basic and fundamental principles of the antitrust laws. This requires that standards be open and published, with clear disclosure and license rules, and should be apportioned fairly and efficiently, with no company able to distort the process. In addition, standards should be limited to technical and operational functions that support individual business decisions—not thwart the competitive process by enabling collective and collusive business decisions. The best SSO framework may vary by industry, but these fundamental principles remain.
To view Christine Varney’s full comments, please click here.