IEEE Patent Policy Could Stifle Competition, Economist Says
An IEEE patent policy could stifle competition and encourage collusion, said Criterion Economics Chairman Gregory Sidak. The policy, which addresses how businesses that voluntarily comply with fair, reasonable and nondiscriminatory (FRAND) licensing terms may evaluate patent royalty rates, was established…
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in February by IEEE in what it said will protect against patent holdup and royalty stacking. Businesses that are a part of standard setting-organizations agree to abide by FRAND practices when it comes to the licensing of their patented technology. IEEE's policy said it puts safeguards in place so companies with patents determined to be an industry standard for a certain technology can't raise the licensing price for other entities too high, or multiple companies with essential patents can't stack up royalty demands. "There is very little evidence" to support the theories, Sidak said. During a Hudson Institute event Wednesday, Sidak said he doesn't see any proof that products aren't being brought to market because royalty stacks are too high. He also said that in a court case, it is hard for people to provide data that stacking and holdups are happening. "When you actually litigate one of these cases," said Sidak, "there will be a lot of lip service paid to one of these theoretical principles, but when you actually have to compute a royalty, they're not feasible because the data typically isn't in existence." At IEEE's request, the Justice Department's Antitrust Division issued a business review letter analyzing antitrust implications. "Harm is unlikely to occur" to competition by "anticompetitively reducing royalties" and "diminishing incentives to innovate" as a result of the new policy, said the DOJ. Sidak said the division has never written a business review letter about issues related to standard essential patents (SEPs) and failed to address whether royalty stacking and patent holdup occur. After the IEEE submitted its request for a business review letter, Sidak wrote his own letter to the division, stating that, contrary to what the IEEE suggests, the amendments to its policy threaten competition and consumer welfare. Sidak wrote that he has consulted for companies concerning SEPs and has advised IEEE members; he said the remarks in his letter to the DOJ were only on his behalf. "Although these clients have urged me to write to you, they have also asked that I express strictly my own views," he wrote. DOJ and IEEE had no comment Thursday.