An Empirical Study of the Effects of Ex Ante Licensing Disclosure Policies on the Development of Voluntary Technical Standards

Jorge L. Contreras

6/11/2014
(Original Publish Date: 6/27/2011)

The threat of patent “hold-up”, in which patent holders demand compensation from implementers of technical standards following wide-scale adoption of those standards, has focused significant governmental, academic and industry attention on means for averting such scenarios. One method of addressing patent hold-up risk is the imposition of an obligation on patent holders participating in the standardization process to license their standards-essential patents to implementers on “fair, reasonable and nondiscriminatory” (FRAND) terms. The precise meaning of FRAND commitments, however, have proven difficult to determine with precision, leading to further litigation and uncertainty. An alternative approach proposes that each patent holder participating in a standards-development organization (SDO) to disclose in advance (“ex ante”) the material terms on which it will license its standards-essential patents. The risks and merits of such ex ante licensing disclosure policies have been debated extensively. In 2006-07 the U.S. Department of Justice approved limited ex ante licensing disclosure policies adopted by two U.S.-based voluntary SDOs, VMEBus International Trade Association (VITA) and the Institute for Electrical and Electronics Engineers (IEEE). At the time these policies were adopted, critics predicted that early disclosure of patent licensing terms could lead to anticompetitive conduct by standards implementers and would unduly burden the already lengthy and costly standards development process. This study represents the first empirical investigation of the effects of ex ante licensing disclosure policies on standards development. We examined data relating to SDO membership, standards projects initiated, standards approved, speed of the standardization process, individual time commitment and quality of standards for VITA, IEEE and the Internet Engineering Task Force (IETF) from 2003/4 to 2010. We also conducted a survey of VITA participants to assess individual reactions to the adoption of the VITA ex ante policy in 2007.