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Standards Wars: Rights, Responsibilities, and Strategies

Participation in standard-setting organizations (SSOs) raises issues with grave implications for many companies. SSOs promote interoperability in technology systems through the adoption of technical standards. Conflicting demands for standardization, free dispersion of information, and the need to protect proprietary technologies, have left technology companies caught in the middle of industry standard "wars." To protect its core technology while remaining competitive, a company must learn to navigate these waters. A company that chooses to participate in SSOs must learn to do so without inadvertently subjecting itself to unclear or unacceptable obligations, without unintentionally giving up property rights, and without conferring unintended advantages on others.

Rambus: A Cautionary Tale

SSOs establish their own (often unclear and incomplete) rules for participation, including rules governing disclosure of any intellectual property rights required to practice a standard. The recent case of Rambus Inc. v. Infineon Technologies Ag., where a nine-figure sum was at stake, highlights some core issues for SSO participants. Rambus, a developer of memory technologies it licenses to memory manufacturers, joined an SSO and helped develop draft standards for new computer memory. Rambus had patent applications that in some sense "related" to this draft standard, but although Rambus disclosed a base patent application whose claims did not cover the standard, it did not disclose later applications originating from the same invention disclosure that had claims actually written to cover the draft standard. Rambus withdrew from the SSO before adoption of the final standard and subsequently sued Infineon for infringement, due to Infineon's manufacture of standard-compliant memory. Infineon counter-claimed for fraud on the grounds that Rambus violated its duty to disclose its patent rights and won at trial, only to lose the fraud claim on appeal.

The appellate court held that the SSO's requirement to disclose patents and applications "relating to" the standard was too inexact, that the burden was on the SSO to clearly specify member duties in a written policy, and thus that Rambus's duty to disclose extended only to patents and applications with claims actually necessary to practice the draft "standard" as it existed during Rambus' membership. A dissenting opinion held that members had a broader duty to disclose patent rights and that Rambus had failed to satisfy this duty.

Understand the Rules of the Game

Post-Rambus, companies must review the policies of "their" SSOs to determine or clarify participants' duties, while SSOs should make the scope of member duties clear and binding. Companies should heed the following guidelines:

  • Know what you are agreeing to before you become a member, and when/how these obligations can be changed.
  • Identify when and what you need to disclose and when these obligations will end.
  • Determine the level of detail you must provide, and whether this will impede technology protection.
  • Discover the mechanism (if any) that will govern allowable terms for licensing your patent rights, and beware of antitrust violations.

Should You Participate?

A company must weigh the benefits of participating in SSOs against the potential loss of proprietary information and rights. To avoid inadvertent consequences of SSO participation, have a written policy that requires employees to obtain approval before participating. Select participating individuals carefully.

Implement a formal evaluation and oversight process addressing how you weigh the benefits and burdens of participation, whether the rules of disclosure are clear, whether you can isolate your intellectual property while participating in the SSO, and whether you can retain some/all rights to "non-essential" claims. Also determine whether participation will require loss of secrecy or jeopardize the company's intellectual property strategy.

Your company can protect against "over" disclosure and "under" disclosure by limiting who does the disclosing, keeping careful records of information submitted, identifying clear entry and exit points, and continuously monitoring how participation will impact the company's other licensing arrangements and opportunities.

Keep track of SSO membership, and notice who is opting out. Know how your freedom of contract and licensing terms and how royalty rates will be constrained. And, make sure other participants are "coming clean."

Diligence before and during participation, both by the SSOs and the participants, will provide the best form of protection as the rules of this multi-player game continue to evolve.




Steve Henry, shareholder, and Ed Russavage and Liza Vertinsky, associates, are members of the IP Transactions Group at Wolf Greenfield (Boston), a leading intellectual property law firm. Contact them at 617.720.3500 or www.wolfgreenfield.com.

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