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A Comment on the Proposed Patent Policy and the ensuing controversy

From: Paul Levy <PLEVY@citizen.org>
Date: Thu, 11 Oct 2001 16:37:34 -0400
Message-Id: <sbc5cb70.076@mail.citizen.org>
To: <www-patentpolicy-comment@w3.org>
I have been reviewing with interest the discussion about the decision to legitimize the acceptance of web technology that depends on patents that will be available on "reasonable and nondiscriminatory basis" instead of simply a royalty fee basis, and the accusation that this is basically a plot by some big companies that failed to get in on the ground floor of the development of the web to take advantage of their size and their ability to develop new technology to insinuate their products into the basic structure of the web, thereby creating a reliable revenue stream. The argument further proceeds from the assumption that the individuals who have been involved in writing this policy, and presumably the individuals who will be implementing it and deciding whether various standards comply with it (whether RAND requirement is being satisfied), work for the companies who have direct interest in the anticipated revenues. 

I do not pretend to know whether these charges are true; nor do I have the technical expertise to comment on whether the web so badly "needs" access to technology that might be available only on a RAND basis that the rules should be changed as is now being proposed.

However, I am a litigator, and I am one who has been looking, from a public interest perspective, at the question of whether litigation is a sensible way to address problems that various participants in the Internet community have brought to our attention.  In the domain name context, for example, we at Public Citizen gave careful consideration to a proposed suit over the delegation of authority to ICANN.  In the end we decided to abstained from litigation for the time being.  Among other things, we were concerned about the potentially destabilizing impact that this litigation could have and about whether the end-result of the contemplated litigation would be "better" than the current situation.  But our eyes remain open.

Assuming that my first paragraph above is an accurate summary of the charge that the opponents of the change have put forward, I should be concerned about the litigation possibilities that follow from it.  The "W3C's Response to Public Comments on the Patent Policy Framework
Working Draft", http://lists.w3.org/Archives/Public/www-patentpolicy-comment/2001Oct/0189.html, makes the point that it is not at all unheard of for standards organizations to rely on RAND licensing.  But this point also brings to mind the fact that private standard setting bodies are constantly facing scrutiny from antitrust regulators not to speak of private antitrust litigators over the possibility that a standard represents a cartel or monopolistic device.  So, what happens when a group of companies set a rule that governs a pervasively necessary communications system, that requires frequent decisions about what prices it is fair for them to charge for the technology that they are embedding in the system? Sounds like fair game for antitrust litigation, no?  

In this regard, the institutions that govern the various aspect of the internet have walked a tightrope between being treated as "government" entities, and being treated as private entities.  The advantage of being deemed government is that they are free of antitrust scrutiny; for example, in defending against antitrust litigation Network Solutions has tended to argue that its activities are so closely controlled by the Commerce Department or other federal regulation as to be sheltered by the government's immunity from antitrust litigation.  Moreover, when activities that were previously government have been turned over to private entities, you have the question of whether Congress or some other entity was required to consent to the divestment of what could be deemed a government asset.  On the other hand, if the governing bodies are governmental then you have problem of who picked them and whether various constitutional principles that apply to government bodies then apply.  In sum, there is an interestingtension between the avoidance of the "government" label and the avoidance of the "private" label, which is one key issue we considered on the question of litigating ICANN's legitimacy.

It is questionable that the W3C could claim that it is a government body, or to claim immunity from antitrust litigation on the theory that their adoption of the RAND approach to patents, and then the inclusion of RAND patents in standards, was undertaken pursuant to government authority and direction.  Moreover, a huge number of private interests could be affected by the policies determined to be "non-discriminatory" and by the fees determined to be "reasonable," and each such interest would have standing to initiate antitrust litigation. Moreover, a successful antitrust plaintiff can obtain an award of attorney fees against the defendant, so there is a tremendous incentive for private lawyers to take on this sort of case.  In summary, litigation would almost certainly result.  Thus, we are concerned that the adoption of the approach that permits RAND patents could lead to a tremendous amount of litigation.

Presumably, this legal angle - - not only the question of whether such lawsuits could succeed, but also the question of whether such litigation would be sufficiently tenable that all of the transaction costs of litigation would become inevitable if RAND licensing is allowed - - is something that those who are making this decision should consider very carefully.

Paul Alan Levy
Public Citizen Litigation Group
1600 - 20th Street, N.W.
Washington, D.C. 20009
(202) 588-1000
Received on Thursday, 11 October 2001 16:40:34 UTC

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