Competition, Intellectual Property Rights and Collaboratively Set Standards: Federal Trade Commission Advocacy and Enforcement

Abstract

Collaboratively set interoperability standards are a prominent feature of many modern markets, particularly in the information and communication technology (ICT) industries. These standards often incorporate technology contributed by a number of firms, which may have declared that they own patents essential to the standard. The assertion of such standard essential patents (SEPs), through both licensing and the courts, is not only a matter of economic significance but also raises a number of distinct legal issues. SEP assertion often involves litigation governed by patent law. In addition, owing to the collaborative nature of the standard setting process, SEP assertion often raises questions of competition law. Finally, standard setting organizations (SSOs) often adopt private contract that governs SEP assertion by their members. The Federal Trade Commission (FTC) promotes innovation and competition through both law enforcement and competition advocacy. Section 5 of the FTC Act empowers the agency to prevent the use of “unfair methods of competition in or affecting commerce.” In addition, Section 6 of the FTC Act provides the FTC with the ability to “gather and compile information,” thereby developing economic expertise relevant to competition in a number of markets. The FTC has a long history of engaging in competition advocacy before regulators, legislatures, the courts and others, sharing its expertise when these entities contemplate action that may affect competition. The FTC has drawn upon both its enforcement and its competition advocacy expertise to promote innovation and competition in markets impacted by SEPs. For over thirty years, the FTC has used its enforcement authority to police abuses of the collaborative standard setting process. For over twenty years, the FTC has also issued guidance regarding the application of competition law to intellectual property licensing. Finally, for over a decade, the FTC has been involved in competition advocacy regarding the patent system, offering its expertise on issues such as patent quality, notice, and remedies. This paper reviews the FTC’s use of both enforcement and competition advocacy to address competitive harms raised by the assertion of SEPs. In particular, it examines the limited circumstances in which the FTC has used its enforcement authority—to police opportunistic behavior in contravention of SSO policies or practices—and contrasts these circumstances to the situations where the FTC has used its role as an advocate to promote competition more generally.