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A Comment on the Proposed Patent Policy and the ensuing controversy (reformatted)

From: Paul Levy <PLEVY@citizen.org>
Date: Thu, 11 Oct 2001 17:44:06 -0400
Message-Id: <sbc5db13.094@mail.citizen.org>
To: <www-patentpolicy-comment@w3.org>

After careful consideration of the draft patent policy, Apple believes

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 setting body represents a cartel, or that 
one of its standards or decisions constitutes 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 interesting tension 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 could 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 the incorporation of 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
http://www.citizen.org/litigation/litigation.html
Received on Thursday, 11 October 2001 17:47:11 GMT

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