This article has been written by Nagesh Karale pursuing a Diploma in US Intellectual Property Law and Paralegal Studies from LawSikho and edited by Shashwat Kaushik.

Introduction

As per dictionary meaning, a standard is something set up or established by an authority as a rule for the measure of quantity, weight, extent, value, or quality. It ensures consistency, compatibility, interoperability, and safety. Standards are applicable to a range of areas, such as technology, education, business, etc. It provides specifications and regulations for goods, procedures, or services.

Role of standards in promoting innovation

Standards are essential for promoting innovation in a variety of ways. They provide a common language and framework for businesses and organisations to communicate and collaborate, and they help to ensure that products and services are compatible and interoperable. By reducing uncertainty and risk, standards can also help encourage businesses to invest in new and innovative technologies.

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  • Standards maintain quality of products or services.
  • Standards reduce investment risk in new emerging technologies. (e.g., cellular infrastructure, silicon chip designs).
  • Standards boost the confidence of investors and reduce uncertainty and confusion.
  • Effective collaboration among scientists, engineers, and companies becomes easy.
  • Standards reduce costs during production and development of products or services.
  • Due to standards, entry of a new player becomes easy in the competitive market.
  • Standards enhance market reach internationally due to product compatibility.
  • Standard processes and specifications lead to large-scale production and global promotion of products. It fosters economies of scale.
  • Standards encourage healthy competition by ensuring nearly the same price and quality of products.
  • International standards encourage governments to make better rules and regulations for trade.
  • By adapting universally accepted standards, companies can confidently participate in the global manufacturing chain.

The US is also involved in formulating international standards. The U.S. has adapted a private sector–driven and consensus-based approach. 

Intellectual property rights in the United States

In the U.S., there is no need for the registration of copyright for original works. But getting them officially registered is advised for legal purposes. The United States Patent and Trademark Office (USPTO) issues patents. Patents are issued for utility, design, and plant aspects. Trademarks are registered first for use on a commercial basis.

The USA is a signatory to key international IP agreements like the Paris Convention, Berne Convention, Madrid convention and Patent Cooperation Treaty (PCT), but not to the Hague Agreement. It is beneficial to register an IP, which offers various benefits.

Importance of IPR in fostering innovation

  • IPR offers incentives for innovation and invention of products or services.
  • It guarantees a return on investment for inventors and small businesses.
  • Society gets benefits from the introduction of new technologies.
  • IPR converts the inventor’s knowledge into a commercially tradable asset.
  • IPR promotes business growth and job creation through licencing.
  • IPR increases appeal to investors for technology commercialization.
  • IPR motivates people to generate new ideas and inventions through the patenting process.
  • IPR acts as a preventative measure against unethical third parties taking advantage without permission or proper credit.
  • The commercial success of patented technologies contributes to funding future research and development.
  • IPR generates technical information and business intelligence, which foster innovation.
  • Patent information mapping aids policymakers in shaping innovation-friendly policies.

Standardisation, organisations and processes

Following are the few important organisations involved in developing standards in the US. It works across different industries.

  • American National Standards Institute (ANSI): It is a private, non-profit organisation. It supervises the creation of standards voluntarily. This institute deals with standards related to products, services, processes, systems, and personnel.
  • National Institute of Standards and Technology (NIST): The role of NIST involves developing and endorsing measurement standards. It is a federal agency.
  • Institute of Electrical and Electronics Engineers (IEEE): it is involved in establishing worldwide standards in the fields of electrical engineering, electronics, and related disciplines.
  • American Society for Testing and Materials (ASTM International): It is a globally recognised leader in development. It provides voluntary consensus standards for a wide range of materials, products, systems, and services.
  • International Organisation for Standardisation (ISO): ISO is responsible for developing and publishing international standards. The United States is one of the members of ISO committees.
  • International Telecommunication Union (ITU): It develops standards for connecting networks and telecommunications standards.
  • Internet Engineering Task Force (IETF): It is an open standards organisation that the Internet Society’s Internet Architecture Board oversees. The IETF defines internet operating protocols.

These organisations play an important role in various sectors of the economy. It guarantees safety, interoperability, and quality. Industry consortia and government agencies are responsible for setting standards. Both jointly establish, maintain and promote these standards.

Industry consortia assist in addressing common challenges within a specific industry or sector and promoting shared interests. Consortia often develop industry-specific standards to ensure interoperability, compatibility, and efficiency among products or services. These standards are typically voluntary but widely adopted within the industry.

Nationally or internationally, government agencies often set regulatory standards. These standards are useful for public safety, health, and environmental protection. Compliance with these standards is often mandatory. 

Industry consortia and government agencies work jointly. This collaboration ensures that industry standards align with regulatory objectives. Industry consortia may share information and insights with government agencies. This input is used as feedback for the regulatory process. 

Industry consortia standards are typically voluntary. These standards allow for flexibility and innovation. Regulatory standards set by government agencies are often mandatory. These are in compliance with laws and regulations.

Both industry consortia and government agencies may participate in international standard-setting bodies. This leads to the global harmonisation of standards. International standards are useful for trade and interoperability on a global scale.

Here are examples illustrating the roles of industry consortia and government agencies in standards development:

Industry consortia

  1. Bluetooth Special Interest Group (SIG)
    • Role: The Bluetooth SIG is a consortium of companies promoting the Bluetooth wireless communication standard.
    • Standards development: The consortium develops and maintains standards for wireless communication, ensuring interoperability among devices like smartphones, headphones, and IoT devices.
  2. World Wide Web Consortium (W3C)
    • Role: W3C is an international community. It formulates standards to secure the sustained development of the Internet.
    • Standards development: W3C develops and maintains standards like HTML, CSS, and Web accessibility, influencing web development practices globally.

Government agencies

  1. Food and Drug Administration (FDA)

The FDA monitors the safety and labelling of most food products to ensure that they meet established standards and do not pose health risks to consumers. The FDA reviews and approves new medications before they can be marketed and sold to the public. This involves rigorous testing to ensure their safety and effectiveness. The FDA plays a central role in maintaining and improving public health by regulating a wide range of products that impact people’s lives daily.

  1. National Institute of Standards and Technology (NIST)

NIST serves various roles, primarily focusing on standards development and technology advancement. NIST establishes and maintains measurement standards for a wide range of industries. NIST plays a crucial role in developing and promoting cyber security standards. It also provides scientific research and calibration services.

Collaboration between consortia and agencies

  1. Automotive industry

The Society of Automotive Engineers (SAE) serves as a vital organisation that sets standards in the dynamic and innovative fields of automotive and aerospace engineering.

  1. Energy efficiency standards

The International Electrotechnical Commission (IEC) is a global organisation that plays a significant role in standardising technologies in the field of electrical engineering and electronics.

Global harmonisation

  1. ISO (International Organisation for Standardisation)

ISO is a global body that develops and publishes international standards to ensure the quality, safety, and efficiency of products, services, and systems. ISO includes the participation of experts, industry professionals, and representatives from governments, non-governmental organisations, and consumer groups. ISO standards include ISO 9001, which is a widely recognised standard for quality management systems. Organisations that follow ISO 9001 demonstrate their commitment to quality and continuous improvement.

  1. International Telecommunication Union (ITU)

The International Telecommunication Union (ITU) is a specialised agency of the United Nations that focuses on issues related to information and communication technologies (ICTs). ITU is involved in developing international standards for telecommunications, spectrum allocation, cyber security and assisting research and development in the field of ICTs.

FRAND commitments and fair competition

A Standard-Essential patent is a patent that is essential for implementing a specific technology standard. These standards are typically established by SSOs. SEPs are essential for ensuring interoperability among products or services that adhere to a specific standard. They define key technologies or functionalities that enable devices from different manufacturers to work together. Its licencing terms are expected to be fair, reasonable, and non-discriminatory to facilitate widespread adoption of the standard.

Following are the few challenges faced by technology industries due to Standard-Essential Patents (SEPs):

  • Patent holdup- Patent hold-up happens when a company with a crucial patent for a widely-used technology demands more money than initially promised. The patent holder takes advantage of the fact that many products already rely on that technology. This can be a problem because it limits fair competition and innovation. So the end result is increased costs for consumers. 
  • Royalty base- Instead of considering the value of the specific patented part, SEP holders sometimes calculate fees based on the total price of the end product. This can be problematic for those who want to use the patented technology. It may result in higher fees that aren’t directly proportional to the value of the patented component. It’s like paying for the entire pizza when you only had a slice! 
  • Royalty stacking- Royalty stacking occurs when companies have to pay fees to multiple owners of Standard-Essential Patents (SEPs) for using various patented technologies in their products. If these fees add up to more than what companies earn from selling their products, 
  • There is a concern that owners of Standard-Essential Patents (SEPs) might threaten to stop others from selling products unless they agree to pay high fees. This is a problem because it goes against the commitment to fair and reasonable licencing and breaks competition laws. 

FRAND stands for fair, reasonable, and non-discriminatory. FRAND commitment is commonly associated with technical standards. This commitment is made between the owner of a patent (essential for a standard) and a standards development organisation (SDO). It lays out the fair and reasonable conditions under which the patent will be licenced for essential technologies.

These organisations require their members to reveal patents that could be essential, commonly known as Standard Essential Patents (SEPs). Also, there is a requirement for a declaration of their readiness to licence SEPs on FRAND terms. The extent of this commitment differs among SDOs as per their bylaws.

The decision to make a FRAND commitment is voluntary. These FRAND commitments are based on Standards Development Organisation’s (SDO) requirements. The licensing terms for Standard Essential Patents (SEPs) are decided by the patent holder and implementers. Disputes arising from FRAND terms may be resolved through legal proceedings. The FRAND commitment is regarded as a binding and enforceable contract.

The courts have provided direction on disputes related to FRAND commitments. Determining a reasonable royalty for FRAND-encumbered patents is often guided by considering comparable licences. In cases where implementers sell products globally, some courts have asserted that FRAND licences should have a global scope. The courts have provided guidelines to resolve the disputes related to FRAND – committed agreements.

The discussion around FRAND commitments extends to antitrust considerations. While some assert that violating FRAND obligations amounts to an antitrust violation, U.S. courts have not supported this perspective. In cases such as FTC v. Qualcomm (2020), courts underscored the importance of presenting evidence of harm to competition, emphasising that merely breaching contractual duties related to FRAND commitments does not automatically constitute an antitrust violation.

FRAND commitments avoid the monopoly of SEP holder companies in the market. FRAND avoids patent hold-ups. In this matter, patent holders demand excessive fees or use legal threats to gain an unfair advantage. FRAND is useful for striking a balance between innovation and fair compensation for patent holders.

Antitrust laws and standardisation

The U.S. government has enacted antitrust laws with the intention of preventing anticompetitive and unjust business practices, ultimately aiming to safeguard consumers. The anticompetitive activities include:

  • Market allocation involves entities dividing business activities to create a de facto monopoly. 
  • Bid rigging is an illegal practice. It occurs when parties collude to determine contract winners. 
  • Price fixing involves intentionally setting prices, limiting consumer choices.
  • Monopolies, which lead to the dominance of an industry in the market,.
  • Mergers and acquisitions are classified into horizontal (combining dominant companies), vertical (merging buyers and sellers), and potential competition mergers.

U.S. antitrust laws consists of three key legislations:

  • Sherman Anti-Trust Act of 1890 – This act targets unreasonable restraints of trade and monopolisation, with severe penalties for violations.
  • Federal Trade Commission Act establishing the FTC – This Act prohibits unfair competition and deceptive practices and aligns with the Sherman Act.
  • Clayton Antitrust Act- This act focuses on additional practices, including regulating mergers, preventing discriminatory practices, and empowering private parties to sue for damages.

In the United States, antitrust measures are enforced by both the Department of Justice (DOJ) and the Federal Trade Commission (FTC). Following are some antitrust issues that arise in standard setting.

  • Patent ambush – where a company doesn’t reveal important patents during standard setting but later uses them to gain an unfair advantage.
  • Patent hold-up – where a patent owner demands higher fees after a standard is set. This poses difficulties to other companies to compete in the market.
  • Royalty stacking – when multiple patent owners charge fees for a single standard, creating high costs for businesses.
  • Competitors cooperate in secret to set standards to benefit them. It creates an unfair situation in the tech industry.
  • Restricting interoperability is like preventing devices from easily working together which slows down progress in technology.
  • Exclusive agreements that limit working with others can raise concerns about fair competition.

Patent pools and collaboration

A patent pool may be defined as a consortium of at least two companies agreeing to cross-license patents relating to a particular technology. Patent pools are useful as they can save patentees and licensees’ time and money. The patent pool prevents the blocking of essential patents. Patent pools are useful for the development of new products but their licencing practices may give rise to competition-related issues.

According to American economist Carl Shapiro, a patent thicket is “a dense web of overlapping intellectual property rights that a company must hack its way through to commercialise new technology.” In the telecommunications industry, there are many technologies involved that are protected by many patents. For example, a cell phone may be covered by more than 2.5 lac patents for its components, such as LCD, antennas, processors, batteries, etc. To enable the protection of that individual cell phone, it is necessary to gather access to all surrounding technologies.

Patent thickets disrupt innovation. Obtaining many essential patents from different patent holders becomes a difficult task. It may lead to increased patent litigation. Negotiating licencing agreements becomes a complicated task due to the involvement of many patent holders. Anti-competitive collusion among competitors attracts violations of competition law. The increased cost of a patent transaction reduces the profit margins.

Though standards set uniform criteria for engineering practices and methods, they pose entry barriers due to the difficulty of switching between standards.

Patent pools recognise standardisation needs for shared patents. Patent pool members can use each other’s patents and offer licences. The licencing fees are distributed among pool members.  Patent pools must comply with antitrust rules.

The Department of Justice (DOJ) has specific criteria for patent pools under antitrust law. Patents must be clearly identified and available for individual or package licencing. Patents need to be valid, not expired. The pool should focus on technically essential patents. The patents must avoid competition. An independent expert checks a patent’s essential nature. The pool should have a limited duration, and the proposed royalties must be reasonable. Worldwide, non-exclusive licences should be offered. Licensees should have the freedom to use alternative patents. They must also grant back licences for essential patents. Patent pool members shouldn’t fix prices beyond the pool’s scope. 

Licensing and enforcement issues

Enforcing intellectual property rights related to standards poses several challenges:

  • Technical standards often include many patents from various owners. It is very difficult to identify, manage, and enforce these IP rights within various different standards.
  • Patent pools mostly include standard-essential patents (SEPs). It is difficult to negotiate FRAND licencing terms. 
  • Standards can vary globally. Different countries have their own different IP laws. So it becomes difficult to decide on uniform enforcement rules due to different jurisdictions of laws.
  • Patent holders who are involved in patent holdups demand excessive royalties for their SEPs. Due to conflicts in negotiations, it becomes very difficult to enforce stacking where multiple royalties accumulate for different SEPs within a standard.
  • Some holders of Standard-Essential Patents (SEPs) may refuse to share essential patents or impose unfair and discriminatory licencing terms. It hampers fair competition. 
  • SEP holders might threaten to stop others from using their patents to gain an advantage in licencing negotiations. This can result in legal battles and make it difficult to enforce intellectual property rights.
  • It is difficult to resolve IPR issues such as cross-border disputes and different legal interpretations across jurisdictions.
  • Disputes over licencing terms, as per FRAND commitments, can lead to long legal battles. This delays the enforcement of IP rights.

International cooperation and standardised dispute resolution mechanisms are required to resolve the issues related to SEP licencing. Continuous efforts are required to bring transparency and fairness to standard licencing processes.

Emerging technologies and future considerations

Types of emerging technologies are:

Artificial Intelligence (AI)

Artificial intelligence (AI) is influencing industries like healthcare, finance, and production. AI systems can create original works like literature, art, and music. Authorship and ownership of AI-generated work are debatable issues.

This poses challenges for traditional intellectual property (IP) laws. The uncertainty in these IPR laws makes it difficult to protect AI-generated content. AI requires vast input data to train generative AI systems. So without infringing on other intellectual property rights, it is not possible to create new work.

Blockchain technology

Blockchain ensures secure data storage by preventing hacking. It provides proof of ownership, timestamps, and smart contracts for enforcing IP rights. It’s like a super-secure vault that also keeps track of who owns what and when. This is a decentralised and transparent technology. Blockchain creates unchangeable ownership records and automates the enforcement of IP rights using smart contracts. However, using blockchain may lead to legal issues like privacy concerns, jurisdiction problems, and compatibility challenges.

3D Printing

3D printing or additive manufacturing, is the construction of a three-dimensional object from a CAD model or a digital 3D model. 3D printers are easy to operate. Anyone can replicate existing patented goods by using 3D printing. This technology raises concerns regarding infringement of copyrighted work and counterfeiting. Moreover, 3D printing introduces the risk of trademark violations.

Conclusion

The right balance is required for encouraging innovation, promoting fair competition, and protecting IP rights. The U.S. follows a path of private sector leadership and collaboration. The US is handling challenges posed by standard-essential patents, antitrust issues and evolving technologies like AI, block chain, and 3D printing. Strategic investments in research, development, and international partnerships are also important issues. 

The United States should have a proactive, long-term plan to lead in Converging Technologies (CET) standards. It should stick to its private sector-led approach. To succeed, the U.S. must invest in R&D for CET. The US also tries to build strong partnerships and support a skilled workforce to create international standards. These investments will create economic opportunities, protect standards integrity, and ensure durable standards that benefit both domestic and global communities.

References

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