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Competition law and Intellectual Property (II)

Ian S. FORRESTER,Q.C.

The Commission’s Guidelines on horizontal agreements1 deal with standard setting in the context of Article 81. The Guidelines developed a number of principles that companies should follow in all standard setting process to ensure compatibility with Article 81. Standards should not limit innovation. The Commission will examine the effects of standard on innovation on a case-by-case basis.2 Participation in standard setting should be open to all, unless such participation leads to inefficiency or some other mechanism exists for the collective representation of all interests.3 Finally, standards which exclude actual or potential competitors are contrary to Article 81(1) and will not be exempted if third parties cannot access the standard on fair, reasonable and non-discriminatory terms.4

Although the Commission Guidelines do not specifically refer to standard setting involving IP rights, they would nevertheless apply to such cases by analogy. One of the critical issues in standard setting involving IP rights is the non-disclosure of proprietary technology (patent, patent applications, copyright, sui generis rights) to industry standard-setting groups.

This issue has been examined by the FTC in the Dell Computer case.5 In this case, the standard setting body established a rule requiring disclosure of any IP rights needed to practice a proposed standard. The standard setting participants came up with a new product which quickly became widely used and commercially successful. After the standard was adopted and new products based on the standard entered the market, Dell began to assert that these products infringed its patent, despite having twice certified during the standards development process that it had no intellectual property rights. If Dell had provided information on its patent claim up front, the participants could have made an informed choice whether to avoid the Dell technology and opt instead for a technology without any IP conflicts. The FTC alleged that Dell’s belated assertion of IP rights was an unfair method of competition in violation of US antitrust law. Dell agreed to a consent order, under which it would not assert its patent rights against the standard.