Understanding the Potential Pitfalls Arising From Participation in Standards Bodies

Some standardization organizations even require that contributors acknowledge that the information they submit is not considered confidential. The following, fairly standard extract from the Internet Standards Process ' Revision 3 (RFC 2026) from the Internet Engineering Task Force (IETF) is illustrative of this point:

The contributor, the organization (if any) he represents and the owners of any proprietary rights in the contribution, agree that no information in the contribution is confidential and that the ISOC [Internet Society] and its affiliated organizations may freely disclose any information in the contribution.

Unfortunately, those involved in the prosecution of the later-filed patent application may not know of this non-confidential disclosure. Rest assured ' when your company decides to assert the patent, the accused infringer will find out. Further, if the inventor or others involved in the prosecution knew of the prior disclosure, the patent may also be found unenforceable due to inequitable conduct caused by the failure to identify this prior nonconfidential disclosure to the Patent Office.

You Want Us to Disclose What? When?

While each standardization body has its own rules and regulations, virtually all have some form of intellectual property rights (IPR) obligations. These obligations may amount to finely crafted works of legal obfuscation regarding the timing of any disclosure. The question thus arises: when must this disclosure of patent-related IPR occur? Must one disclose IPR at the time one makes a technical submission or contribution? What are the obligations of a company participating in a standards organization but not active in a particular working group? Must IPR be disclosed if the standard is not finalized and thus subject to change?

Turning to the IPR itself, what must be disclosed? The easy case would seem to be an already-issued patent. The patent is publicly available and the metes and bounds of the patent are set by the already issued claims. What about a published patent application on the other hand, where the invention has already been disclosed to the public, but the claims may have not yet been allowed? What about a patent application that has been filed but not published? What about an idea for which an application is being prepared but has not yet been filed? What, on this sliding scale, needs to be disclosed?

Unfortunately, this is not a wholly academic exercise. If IPR is disclosed too early in the standardization process, the standard may change to avoid your IPR thus negating potential licensing revenue. The standard may also develop in a direction in which your company has less technical development, thereby causing delays in your product development.

On the other hand, if IPR is disclosed too late in the process, then you may have legal problems. There have been recent discussions, which were jointly sponsored by the Department of Justice and Federal Trade Commission, on this issue. On February 6, 2002 the Opening Day Comments of the Joint DOJ-FTC Hearings on Competition and Intellectual Property Law and Policy in Knowledge-Based Economy was held. During the Hearings, Charles James, the assistant attorney general of the Antitrust Division of the U.S. Department of Justice, identified, as topics of interest, the practice of requiring grant backs (eg, where a licensee is required to grant a license back to the licensor on a patent in exchange for a patent license from the licensor), refusals to license a patent, and standards setting organizations. This concern about disclosure to standards bodies is also reflected in litigations where defendants are raising defenses and counterclaiming based on perceived improper activities in association with the belated disclosure of IPR to standards bodies. See, e.g., Rambus Inc. v. Infineon Technologies A.G., 318 F.3d 1081 (Fed. Cir. 2003).

Reasonable and Non-Discriminatory (and Undefined)

Not only must IPR be disclosed to a standardization organization, but the company owning the IPR often must agree to license it to all parties at Reasonable and Non-Discriminatory (RAND) terms. What good is a standard if an injunction can be obtained to prevent the standard's deployment? In some cases, members of a standards organization are required, as part of their membership agreement, to acknowledge that they will license any IPR pertinent to any standard. In other cases, the standards organization requires a specific statement offering to license IPR identified as potentially pertinent to a particular standard. Examples of specific and general IPR statements for the IETF can be found at http://www.ietf.org/ipr.html. The IETF has also published several drafts of 'A Template for IETF Patent Disclosures and Licensing Declarations.' See http://www.ietf.org/internet-drafts/draft-ietf-ipr-template-05.txt. Failure to secure an appropriate statement from the necessary parties may result in the delay or abandonment of the issuance of the particular standard.

Assuming your company has agreed to license its patents related to a particular standard, the question becomes: what are appropriate RAND terms? Are you limited to a paid-up royalty or can you ask for a running royalty? What about a grant-back of a patent from the licensee? Must the grant-back be of a patent related to a standard? Must all potential licensees be licensed on the same exact terms? What if your patent covers an 'optional' portion of the standard, ie, the portion of the standard your patent covers is not required to implement the basic standard. In that case, do you need to disclose anything at all, much less license? Again, standards organizations historically did not have any specific requirements (or even guidelines). The IETF in RFC 2026 states:

[The IETF] will not make any explicit determination that the assurance of reasonable and non-discriminatory terms for the use of a technology has been fulfilled in practice. It will instead use the normal requirements for the advancement of Internet Standards to verify that the terms for use are reasonable. ' [T]he assumption is that the terms must be reasonable and to some degree, non-discriminatory. This assumption may be challenged during the Last-Call period.

Recognition by the standards organizations that licensing presents issues in this context has led some to try to provide further guidance. See, eg, Intellectual Property Rights in IETF Technology at www.ietf.org/internet-drafts/draft-ietf-ipr-technology-rights-10.txt. Other organizations such as the World Wide Web Consortium (W3C) have proposed that all members make the IPR that they believe to be essential to a standard available Royalty Free (RF).

Assuming you have decided not to go the RF route, other potential issues arise. For example, if you cannot come to an agreement with the potential licensee and delay in bringing suit for patent infringement, you may be subject to claims of laches, equitable estoppel or implied license. See, e.g., Wang Labs., Inc. v. Mitsubishi Elecs. Am. Inc., 103 F.3d 1571 (Fed. Cir. 1997); Stambler v. Diebold, Inc., 11 U.S.P.Q.2d 1709 (E.D.N.Y. 1988); Potter Inst. Co. v. Storage Tech. Corp., 207 U.S.P.Q. 763 (E.D.Va. 1980). Similarly, if your actions are believed to be sufficiently egregious, there is the potential to be investigated by the Antitrust Division of the Department of Justice and the Bureau of Competition of the Federal Trade Commission. See, e.g., In re Rambus Inc., No. 9302 (F.T.C. filed June 18, 2002); see also In re Dell Computer Corp., 121 F.T.C. 616 (1996).

Congratulations, You Are On Notice

Participation in standards organizations provides a further potential pitfall. Assume you participated in the standards organization and you launch a product. Suddenly, you receive a complaint stating that your product infringes another of the participant's patents. They point out that they clearly stated to the standards body that practicing the standard implicates their patent. You failed to secure a license in advance. 'Well,' you say, 'I'll take that license.' Not so fast: You were put on notice of the relevant patent, never got an outside opinion of patent counsel, and now are potentially liable for willful infringement and enhanced damages. Your best defense will be a good offense; perhaps the plaintiff may have delayed in identifying the patent to the standards organization, may have delayed in bringing suit, or you may have an implied license to the technology in question.

Benjamin Hershkowitz is a partner at the New York office of Kenyon & Kenyon, an intellectual property firm, where he focuses on litigation, licensing and counseling.

Chances are that if your company is involved in research and development of new technology there is a standards setting organization exploring the potential standardization of such technology. While there are clear benefits to participation in standards organizations ' keeping abreast of industry developments, targeting product development toward standard compliant products, steering research and intellectual property protection into potential areas of future standardization ' such participation does not come without certain risks. Whether you are in-house counsel or outside counsel, you may be called upon to advise participants in standard-setting bodies about intellectual property issues or to participate yourself. You may also be asked to review patent policy of the standard-setting body that sets forth the disclosure and notification requirements with respect to patents for that organization. Here are some potential patent pitfalls that can catch the unwary off-guard.

How to Invalidate Your Own Patent Without Really Trying

While patent counsel often repeat as a mantra ' 'do not disclose the invention prior to filing a patent application' ' employees do not always follow this advice. Participation in standards organizations, especially technical participation in a working group, may tempt participants to divulge the company's recent innovations. This disclosure, which may be documented in the working group meeting notes, starts the one-year countdown to placing a patent application on file in the United States. See 35 U.S.C. '102(b). Other countries, including many in Europe, are not so lenient, and disclosure of the innovation prior to filing the patent application can completely bar an inventor from obtaining foreign patent rights.

Some standardization organizations even require that contributors acknowledge that the information they submit is not considered confidential. The following, fairly standard extract from the Internet Standards Process ' Revision 3 (RFC 2026) from the Internet Engineering Task Force (IETF) is illustrative of this point:

The contributor, the organization (if any) he represents and the owners of any proprietary rights in the contribution, agree that no information in the contribution is confidential and that the ISOC [Internet Society] and its affiliated organizations may freely disclose any information in the contribution.

Unfortunately, those involved in the prosecution of the later-filed patent application may not know of this non-confidential disclosure. Rest assured ' when your company decides to assert the patent, the accused infringer will find out. Further, if the inventor or others involved in the prosecution knew of the prior disclosure, the patent may also be found unenforceable due to inequitable conduct caused by the failure to identify this prior nonconfidential disclosure to the Patent Office.

You Want Us to Disclose What? When?

While each standardization body has its own rules and regulations, virtually all have some form of intellectual property rights (IPR) obligations. These obligations may amount to finely crafted works of legal obfuscation regarding the timing of any disclosure. The question thus arises: when must this disclosure of patent-related IPR occur? Must one disclose IPR at the time one makes a technical submission or contribution? What are the obligations of a company participating in a standards organization but not active in a particular working group? Must IPR be disclosed if the standard is not finalized and thus subject to change?

Turning to the IPR itself, what must be disclosed? The easy case would seem to be an already-issued patent. The patent is publicly available and the metes and bounds of the patent are set by the already issued claims. What about a published patent application on the other hand, where the invention has already been disclosed to the public, but the claims may have not yet been allowed? What about a patent application that has been filed but not published? What about an idea for which an application is being prepared but has not yet been filed? What, on this sliding scale, needs to be disclosed?

Unfortunately, this is not a wholly academic exercise. If IPR is disclosed too early in the standardization process, the standard may change to avoid your IPR thus negating potential licensing revenue. The standard may also develop in a direction in which your company has less technical development, thereby causing delays in your product development.

On the other hand, if IPR is disclosed too late in the process, then you may have legal problems. There have been recent discussions, which were jointly sponsored by the Department of Justice and Federal Trade Commission, on this issue. On February 6, 2002 the Opening Day Comments of the Joint DOJ-FTC Hearings on Competition and Intellectual Property Law and Policy in Knowledge-Based Economy was held. During the Hearings, Charles James, the assistant attorney general of the Antitrust Division of the U.S. Department of Justice, identified, as topics of interest, the practice of requiring grant backs (eg, where a licensee is required to grant a license back to the licensor on a patent in exchange for a patent license from the licensor), refusals to license a patent, and standards setting organizations. This concern about disclosure to standards bodies is also reflected in litigations where defendants are raising defenses and counterclaiming based on perceived improper activities in association with the belated disclosure of IPR to standards bodies. See, e.g., Rambus Inc. v. Infineon Technologies A.G. , 318 F.3d 1081 (Fed. Cir. 2003).

Reasonable and Non-Discriminatory (and Undefined)

Not only must IPR be disclosed to a standardization organization, but the company owning the IPR often must agree to license it to all parties at Reasonable and Non-Discriminatory (RAND) terms. What good is a standard if an injunction can be obtained to prevent the standard's deployment? In some cases, members of a standards organization are required, as part of their membership agreement, to acknowledge that they will license any IPR pertinent to any standard. In other cases, the standards organization requires a specific statement offering to license IPR identified as potentially pertinent to a particular standard. Examples of specific and general IPR statements for the IETF can be found at http://www.ietf.org/ipr.html. The IETF has also published several drafts of 'A Template for IETF Patent Disclosures and Licensing Declarations.' See http://www.ietf.org/internet-drafts/draft-ietf-ipr-template-05.txt. Failure to secure an appropriate statement from the necessary parties may result in the delay or abandonment of the issuance of the particular standard.

Assuming your company has agreed to license its patents related to a particular standard, the question becomes: what are appropriate RAND terms? Are you limited to a paid-up royalty or can you ask for a running royalty? What about a grant-back of a patent from the licensee? Must the grant-back be of a patent related to a standard? Must all potential licensees be licensed on the same exact terms? What if your patent covers an 'optional' portion of the standard, ie, the portion of the standard your patent covers is not required to implement the basic standard. In that case, do you need to disclose anything at all, much less license? Again, standards organizations historically did not have any specific requirements (or even guidelines). The IETF in RFC 2026 states:

[The IETF] will not make any explicit determination that the assurance of reasonable and non-discriminatory terms for the use of a technology has been fulfilled in practice. It will instead use the normal requirements for the advancement of Internet Standards to verify that the terms for use are reasonable. ' [T]he assumption is that the terms must be reasonable and to some degree, non-discriminatory. This assumption may be challenged during the Last-Call period.

Recognition by the standards organizations that licensing presents issues in this context has led some to try to provide further guidance. See, eg, Intellectual Property Rights in IETF Technology at www.ietf.org/internet-drafts/draft-ietf-ipr-technology-rights-10.txt. Other organizations such as the World Wide Web Consortium (W3C) have proposed that all members make the IPR that they believe to be essential to a standard available Royalty Free (RF).

Assuming you have decided not to go the RF route, other potential issues arise. For example, if you cannot come to an agreement with the potential licensee and delay in bringing suit for patent infringement, you may be subject to claims of laches, equitable estoppel or implied license. See, e.g., Wang Labs., Inc. v. Mitsubishi Elecs. Am. Inc., 103 F.3d 1571 (Fed. Cir. 1997); Stambler v. Diebold, Inc. , 11 U.S.P.Q.2d 1709 (E.D.N.Y. 1988); Potter Inst. Co. v. Storage Tech. Corp. , 207 U.S.P.Q. 763 (E.D.Va. 1980). Similarly, if your actions are believed to be sufficiently egregious, there is the potential to be investigated by the Antitrust Division of the Department of Justice and the Bureau of Competition of the Federal Trade Commission. See, e.g., In re Rambus Inc., No. 9302 (F.T.C. filed June 18, 2002); see also In re Dell Computer Corp., 121 F.T.C. 616 (1996).

Congratulations, You Are On Notice

Participation in standards organizations provides a further potential pitfall. Assume you participated in the standards organization and you launch a product. Suddenly, you receive a complaint stating that your product infringes another of the participant's patents. They point out that they clearly stated to the standards body that practicing the standard implicates their patent. You failed to secure a license in advance. 'Well,' you say, 'I'll take that license.' Not so fast: You were put on notice of the relevant patent, never got an outside opinion of patent counsel, and now are potentially liable for willful infringement and enhanced damages. Your best defense will be a good offense; perhaps the plaintiff may have delayed in identifying the patent to the standards organization, may have delayed in bringing suit, or you may have an implied license to the technology in question.

Benjamin Hershkowitz is a partner at the New York office of Kenyon & Kenyon, an intellectual property firm, where he focuses on litigation, licensing and counseling.