US backs IEEE move to modify rules for standards patents

The U.S. Department of Justice has backed a move by the IEEE Standards Association to modify the rules governing patents that go into making standards, so as to curb excessive royalties and attempts to ban rival products that implement the patents.

The proposed rules, for example, exclude any benefits from the inclusion of the technology of an essential patent claim in a standard of the IEEE in the calculation of a "reasonable rate" of compensation to the patent holder.

The update would also limit the ability of patent holders who have made a commitment to the standards body to seek prohibitive orders "unless the implementer fails to participate in, or to comply with the outcome of, an adjudication, including an affirming first-level appellate review."

The Institute of Electrical and Electronics Engineers is part of the old guard of standards bodies. The IEEE-SA proposal would also ensure that the patent agreements survive their transfer to other parties.

Patents licensed under reasonable and non-discriminatory (RAND) terms are considered critical to a number of industries including mobile telephony.

But "the inherent ambiguity in the meaning of the terms 'reasonable' and 'nondiscriminatory,' however, can limit the benefits of RAND licensing commitments," the DOJ's antitrust division wrote Monday in a business review letter to a counsel of the IEEE.

"By bringing greater clarity to the IEEE RAND Commitment, the Update has the potential to facilitate and improve the IEEE-SA standards-setting process" it added.

Cisco Systems, Microsoft, Intel and some other companies have backed the changes proposed by IEEE-SA.

A number of companies are, however, opposed to the proposals, claiming it could shift the balance of power in the industry and reduce the incentive to innovate.

Irwin Jacobs, Qualcomm's founding chairman and CEO Emeritus said the proposed changes aim to provide short-term commercial benefits to its backers, who include manufacturers of standards-compliant products, by lowering the compensation to companies that develop the technology underlying the standards. But the move could in the long term reduce the incentive to do research and development.

The proposed changes "have been pushed through despite the absence of any evidence of actual real-world problems with the existing patent policy," he added in a letter in November to the IEEE president and board.

Qualcomm earned over US$1.8 billion of its revenue of $7.1 billion in its fiscal first quarter ended Dec. 28 from licensing its wireless patents.

The IEEE-SA Board of Governors voted in December to approve the update, contingent upon the receipt of a favorable business review letter from the DOJ and review by the IEEE Board of Directors. The IEEE Board is expected to vote on the changes this month, DOJ said in its letter.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com