The Antitrust Division of the U.S. Department of Justice (DOJ) issued a business review letter stating that it would not challenge the Institute of Electrical and Electronics Engineers’ (IEEE’s) proposed revisions to its patent policy.  Letter from Renata B. Hesse, Acting Assistant Att’y Gen., U.S. Dep’t of Justice (Feb. 2, 2015), available here.

The IEEE policy revisions attempt to “provide greater clarity on issues that have divided [patent holders] and standards implementers.”  In doing so, the IEEE proposed four key changes to its patent policy.

First, the revised policy defines a reasonable rate to be “appropriate compensation to the patent holder for the practice of an Essential Patent Claim excluding the value, if any, resulting from the inclusion of that Essential Patent Claim’s technology in the IEEE Standard.”  This definition seeks to provide compensation to the patent holder for the value of the patent before the essential patent claim was incorporated into the IEEE standard.  The revisions, however, do not dictate a specific calculation methodology or specific reasonable and non-discriminatory (RAND) rates.

Second, the revised policy states that a patent holder that has submitted a letter of assurance (LOA) disclosing that its patent claims may be essential to a standard under development is not permitted to seek an injunction or exclusion order unless the standard implementer “fails to participate in, or to comply with the outcome of, an adjudication, including an affirming first-level review.”

Third, the policy seeks to clarify the meaning of non-discrimination.  The revisions make clear that a patent holder cannot refuse to license to any implementers once an LOA has been submitted, regardless of where a standard implementer sits in levels of production.  The purpose of this requirement is to prevent patent holders from discriminating against implementers that make components or sub-assemblies, rather than an end-use product.

Finally, the revised policy makes clear that where a patent holder’s LOA has indicated “reciprocity,” a potential standard implementer cannot both receive the benefit of the patent holder’s LOA and refuse to license to the patent holder the implementer’s own essential patent claims on the same standard.

Due to the potential concerns about the legality of its revisions under the antitrust laws, the IEEE requested that the DOJ review the patent policy and provide a statement on its current enforcement intentions.    

In its business review letter, the DOJ declared that it does not presently intend to challenge the IEEE’s revisions.  The DOJ concluded that harm is unlikely to result from the revised policy because its provisions are consistent with the direction of U.S. law interpreting RAND commitments.

The DOJ emphasized that the definition of RAND rates within the revised policy “provid[es] the patent owner with appropriate compensation, while assuring implementers that they will not have to pay any hold-up value connected with the standardization process.”

Addressing the ban on injunctions and exclusive orders for standard-essential patent holders, the DOJ praised the proposed revisions: “The threat of exclusion from a market is a powerful weapon that can enable a patent owner to hold up implementers of a standard.  Limiting this threat reduces the possibility that a patent holder will take advantage of the inclusion of its patent in a standard to engage in patent hold up, and provides comfort to implementers in developing their product.”