The U.S. Patent and Trade Office (USPTO), National Institute of Standards and Technology (NIST) and the Department of Justice (DOJ) recently announced that they withdrew from the 2019 Policy Statement on Remedies for Standards-Essential Patents (SEP) Subject to Voluntary reasonable and non-discriminatory (RAND) or fair, reasonable and non-discriminatory (FRAND) terms (collectively F/RAND) commitments. The policy’s original intent was to encourage good-faith negotiation on licensing between standards-essential patent owners and those wishing to license patented products.
In a joint announcement, the agencies withdrew from the statement after considering public input, saying that doing so prompted competition and innovation. This is also in response to a 2021 executive order by President Biden that encouraged “a fair, open, and competitive marketplace” as part of the American economy. He also urged the Agencies to review the 2019 Statement to ensure it effectively promoted competition.
According to Under Secretary of Commerce for Intellectual Property and USPTO Director Kathi Vidal, “Forging our global leadership in new industries cannot happen without greater investment in research and development in technologies that may become international standards. We also need greater U.S. engagement in global standards-setting organizations from our large multinational companies, as well as from small to medium-sized businesses and start-ups. I stand behind any measure that will enable innovation that will drive sustainable, long-term growth in the U.S. economy.”
The DOJ’s Antitrust Division will scrutinize any conduct that threatens to stifle competition in violation of the law. The DOJ will act in a law enforcement role and scrutinize the conduct of SEP holders, standards implementors, or anything else that stifles competition. The various agencies will continue to work together on this issue.
What does it all mean?
The standards developing organizations (SDOs) may require SEPs to engage in F/RAND, which furthers consumer choice and spurs competitiveness, particularly for small and medium-sized entities and those involved in emerging technologies. F/RAND commitments will be present but vary by SDOs. Moreover, refusal by SEP owners to grant licenses on F/RAND terms can violate antitrust law, and the DOJ will scrutinize the actions of SEP holders in this regard on a case-by-case basis. U.S. laws and regulations will govern contracts and the details outlined therein.