Patents on Standards: Highwaymen in Ambush or Driving Force for Innovation and Competition?

Abstract

The article first analyses the interplay between standard-setting and patents.

Especially de iure product-standards have a major impact on the global economy

and they can generate a number of very positive effects. On the other hand, the

vulnerability of markets that depend on a standard can impose a great danger.

Due to the network effect and other factors, the disadvantages of switching away

from a standard to another can be so high that markets and market players adhere

to a standard even if this entails severe disadvantages. This effect can give much

power to a market player controlling the standard, for example by holding a

patent that covers a technology which forms a part of the standard. All safety

measures against abusive behavior of such patent holders require that the patent

and its relevance to the standard are known in advance. A patent holder may,

however, conceal a standard-relevant patent, wait until the standard is implemented, and then demand high royalties to the standard users. This scenario can be called a patent ambush. The article then analyzes one of the most famous patent ambush-cases, the Rambus case, and shows how differently this case has been handled in the US and Europe respectively. Core problems in the handling of patent ambushes become evident in the Rambus case: relevant patents and their holders are not necessarily identifiable. The right to proscribe the use of a patented technology and the right to grant a license only in return of a royalty payment are core elements of the protection a patent confers. To restrain those powers in patent ambush cases means interfering heavily with the patent law system and its coherence. The protection and the rewards an intellectual property confers are very important incentives that help to foster a dynamic and innovative economy capable of generating public welfare. Therefore, interfering with rights conferred by standard-relevant patents is potentially very dangerous.

Against this background the article discusses several possible solutions to the

patent ambush-problem, i.e. contract law, patent law, and competition law. As this

exercise shows, patent law may be the most appropriate area of law to deal with

patent ambushes but it has not yet been developed an effective and widely

accepted instrument. As a result, the application of competition law is, for the time being, still necessary to assure the prevention of harmful patent ambush practices.