November 16, 2017

High Transparency May Help SSOs Under Attack by US DOJ

Taking aim at SSOs for potentially anti-competitive behavior, Assistant Attorney General, Makan Delrahim delivered remarks at the U.S.C. Gould School of Law's Center for Transnational Law and Business Conference (Los Angeles, CA, Friday, November 10, 2017)

The new Assistant Attorney General has taken aim at SSOs and stated that, “enforcers should carefully examine and recognize the risk that SSO participants might engage in a form of buyer’s cartel, what economists call a monopsony effect.” Mr. Delrahim was even more pointed when he stated, “I therefore urge antitrust enforcers to take a more humble approach to the application of antitrust to unilateral violations of SSO commitments and to take a fresh look at concerted actions within SSOs that cause competitive harm to the dynamic innovation process. I likewise urge SSOs to be proactive in evaluating their own rules…” In order to act in a proactive fashion SSOs could adopt a high transparency protocol to establish a symmetric arena for SSO parrticipants to negotiate RAND terms.

Mr. Delrahim also singled out RAND commitments as being susceptible to cause the skewing of negotiations in favor of licensees he stated, “SSO rules purporting to clarify the meaning of 'reasonable and non-discriminatory, that skew the bargain in the direction implementers warrant a close look to determine whether they are the product of collusive behavior within the SSO.” In order for SSOs to steer clear of skewing negotiations in favor of licensees --with respect to FRAND commitments-- further transparency in disclosure of licensing terms could alleviate some risk for SSOs. Putting some sunshine on the root of the hold-up or hold-out behavior---a reasonable royalty rate---could help keep SSOs from anti-trust scrutiny. For example adoption of a TRAND protocol, that requires some level of transparency with respect to licensing terms could be used by SSOs to ward off anti-trust allegations.

Mr. Delrahim further stated that, “The old notion that “openness” alone is sufficient to guard against cartel-like behavior in SSOs may be outdated, given the evolution of SSOs beyond strictly objective technical endeavors.” The new TRAND protocol mentioned above does not merely call for “openness” in some vague manner. The TRAND system specifically requires transparency used as a check on compliance with the non-discriminatory prong of a RAND obligation, but also requires transparency with respect to the disclosure of aggregated licensing terms. The linking of transparency to licensing terms helps correct an asymmetry problem (also raised by Mr. Delrahim) regarding licensors having more data than licensees, but also levels the playing field for all participants by allowing for a national data base comprising SEP licensing data providing comparable data necessary to establish an efficient IP marketplace.

For further discussion regarding SSO action and TRAND protocol click here to register for the webinar.