Who Creates U.S. Standards Policy?
Today, there is a surfeit of entities independently engaged in the development of U.S. policy for standards. Here are ten of the most notable.
- Federal Trade Commission. In its role investigating and prosecuting “unfair methods of competition” over the past three decades, the FTC has brought numerous enforcement actions against alleged antitrust abuses (or violations of antitrust law) in the area of standardization. The FTC also produces industry studies and policy statements that address issues at the intersections of standardization, intellectual property, and antitrust law.
- Department of Justice Antitrust Division. As the other U.S. agency charged with enforcing the antitrust laws, the principal outlets for DOJ policymaking in the area of standardization have been business review letters (BRLs) requested by private parties and policy statements, often issued in conjunction with other agencies. While DOJ officials have occasionally advanced policy initiatives through public speeches, during the Trump administration, the DOJ markedly increased its policy advocacy regarding standardization through a spate of speeches and interventions in third-party litigation.
- National Institute of Standards and Technology (NIST). Housed within the Department of Commerce, NIST is charged by statute “to coordinate the use by Federal agencies of private sector standards.” In addition, NIST promulgates standards in areas such as measurement, cybersecurity, and electrical power, but it had not addressed matters of commercial standardization policy or intellectual property until its recent participation in a joint policy statement with the DOJ and Patent and Trademark Office, discussed below.
- Patent and Trademark Office (PTO). Another entity within the Department of Commerce, the PTO is largely concerned with the examination, issuance, and maintenance of patents and trademarks. Yet beginning in 2013, the PTO has more actively engaged in policy discussions over standards-related patent litigation.
- American National Standards Institute (ANSI). ANSI is a private trade association that accredits U.S. standards developers and represents the United States in some international standardization bodies. ANSI often acts as a spokesperson for U.S. standardization policy, though several significant U.S.-based standards development organizaitons (SDOs) are not ANSI members, and ANSI’s rules lack the force of law.
- Federal Courts. There has been significant patent, antitrust, and contractual litigation over standards during the past several decades, and several U.S. federal district and appellate courts have issued influential opinions in the area. At the appellate level, the U.S. Courts of Appeal for the D.C. Circuit, Federal Circuit, and Ninth Circuit have emerged as the leading venues for decisions in this area, although their opinions are often not entirely consistent. The U.S. Supreme Court has not heard a significant standards-related case since a pair of landmark antitrust decisions in the 1980s.
- International Trade Commission (ITC). The ITC is, among other things, an adjudicatory body that protects U.S. markets from counterfeit imports. Beginning in 2012, the ITC began to play a prominent role in international patent disputes over standardized products, and today numerous standards-related patent disputes are heard by the ITC.
- Office of the U.S. Trade Representative (USTR). The USTR, a cabinet-level office, is responsible for developing and coordinating U.S. policy on international trade and investment. The USTR made a significant contribution to standardization policy in 2013 when it disapproved (i.e., vetoed) an ITC exclusion order that would have prevented the importation of Apple products with standardized features into the United States.
- Office of Management and Budget (OMB). The White House OMB coordinates the activities of federal agencies, and since 1980 it has issued rules regarding the use and promulgation of technical standards by such agencies, notably in its Circular A-119.
- Office of the Federal Register (OFR). The OFR, an office within the National Archives and Records Administration (NARA), promulgates rules regarding the incorporation of privately developed standards into federal regulation —rules that have become the focus of recent litigation over the copyrightability of standards documents.
Conflicts and Reversals in Standards Policy
The development of policy by the multiple entities described above has resulted in numerous conflicts and policy reversals—a trend that reached fever pitch during the Trump administration. A few examples will illustrate this trend.
ITC Exclusion Orders Against Standardized Products
Conflict among U.S. agencies over standards policy began in 2012, when the ITC considered requests for exclusion orders against standardized products that allegedly infringed U.S. patents. The first such actions were instigated by Motorola Mobility (the holder of patents covering the H.264 video encoding standard and the 802.11 Wi-Fi standard), which sought exclusion orders against both Apple and Microsoft products implementing those standards. The FTC submitted a Third Party Statement of Interest to the ITC with respect to both cases, arguing that the “issuance of an exclusion . . . order in matters involving RAND-encumbered SEPs . . . has the potential to cause substantial harm to U.S. competition, consumers and innovation.” Then, in January 2013, the DOJ and PTO issued a joint policy statement addressing the same question and coming to much the same conclusion as the FTC.
Nevertheless, in June 2013, the ITC issued an exclusion order against Apple smartphones and tablets that allegedly infringed Samsung patents covering wireless telecommunications standards. In response, the USTR, acting on behalf of the Obama administration, disapproved (thereby reversing) the ITC’s exclusion order against Apple. The USTR reasoned that the ITC had not acted on the basis of a sufficient factual record regarding, inter alia, “information on the standards-essential nature of the patent at issue . . . and the presence or absence of patent hold-up or reverse hold-up.” The USTR’s disapproval of the exclusion order against Apple took many by surprise. In subsequent cases, the ITC has more carefully considered factors relating to SEPs when conducting its public interest analysis.
Yet in 2019, the DOJ and PTO reversed their earlier position, which had urged restraint in the issuance of ITC exclusion orders. They took the unusual step of withdrawing their 2013 Policy Statement and replacing it with a new policy statement that was joined, for the first time, by NIST. The agencies attributed this action to “additional experience with disputes concerning standards-essential patents” over the intervening years, as well as concerns that the 2013 Policy Statement was being “misinterpreted.” But many viewed the move simply as the latest in a series of steps initiated by the DOJ Antitrust Division to strengthen the rights of SEP holders to the detriment of manufacturers of standardized products.
The IEEE Business Review Letter
In 2015, the IEEE Standards Association (the SDO responsible for computer networking standards, including the popular 802.11 Wi-Fi standard) amended its intellectual property rights (IPR) policy. Among other things, the amended policy clarified the basis for the “reasonable and nondiscriminatory” (RAND) royalties that IEEE members were permitted to charge for the use of their SEPs and limited the ability of SEP holders to seek injunctive relief against “willing” potential licensees. This policy amendment was vehemently opposed by significant SEP holders at IEEE. Nevertheless, after reviewing the policy, the DOJ issued a positive BRL that concluded that the policy “has the potential to benefit competition and consumers by facilitating licensing negotiations, mitigating hold up and royalty stacking, and promoting competition among technologies for inclusion in standards.” The DOJ concluded that it had “no present intention to take antitrust enforcement action against” the IEEE.
However, in 2017, soon after he assumed leadership of the Antitrust Division, Assistant Attorney General Makan Delrahim began to question the continuing vitality of the IEEE BRL. Prominent SEP holders like U.S.-based Qualcomm, which had originally opposed IEEE’s 2015 amendments, urged the DOJ to revisit the 2015 BRL. Other large SEP holders, most of them based in Europe, joined the criticism of the IEEE policy and the DOJ’s 2015 BRL. One commentator, who later became Qualcomm’s Director of Antitrust Policy and Litigation, expressly urged “the DOJ’s new leadership to announce its intention to investigate the process concerns with the amendments to the IEEE’s IPR Policy. . . . [and] renounce . . . sections of the prior administration’s IEEE BRL . . . ”
The DOJ obliged, and in 2020 it took the unprecedented step of issuing a new letter to “supplement, update, and append” its 2015 BRL. The 2020 update made a number of sweeping statements about ways in which U.S. law had changed since 2015, including the stunning (and incorrect) assertion that there is a “consensus view in the United States that seeking an injunction is an ‘exclusive right’ conferred by the U.S. Constitution.” The update letter suggests that the original process by which the 2015 IEEE amendments were adopted might have been biased against SEP holders and, thus, anticompetitive. It concludes by encouraging IEEE “to consider whether changes are needed to promote full participation, competition, and innovation in IEEE’s standard setting activities.” In other words, in sharp contrast to its own 2015 BRL, the DOJ suggests that IEEE would be well advised to consider revoking the 2015 amendments to its IPR policy and substituting something more favorable to SEP holders.
The DOJ’s reversal has upended reliance on the BRL by standards organizations in the United States and elsewhere, and it has given the impression, around the world, that U.S. policy in this area rests on shaky ground.
Interventions in FTC v. Qualcomm
In 2017, the FTC brought an action against Qualcomm, Inc., for alleged violations of the Sherman Act in connection with the licensing of SEPs for wireless telecommunications standards. In yet another unprecedented move, the DOJ intervened in the suit not once, but twice, to oppose the FTC and support Qualcomm. In its Statement of Interest at the Ninth Circuit, the DOJ included separate supporting declarations from the Department of Defense (DOD) and the Department of Energy (DOE).
During the Trump administration, the FTC and DOJ clashed on numerous other issues of antitrust enforcement and policy, revealing a deep and public rift in the two agencies’ philosophical approaches to patents, standards, and antitrust law.
Ultra Vires Advocacy
The three examples above illustrate numerous interagency conflicts and destabilizing policy reversals in relation to standardization policy. Without more, these developments alone would be of significant concern. But even more troubling is the fact that, in many cases, the subject matter of these agency actions lies outside of the agencies’ primary missions and statutory competency. In taking such policy positions the agencies are, in fact, acting in a manner that is ultra vires, outside the scope of their legal power and authority.
This pattern of ultra vires advocacy in standard setting predates the Trump administration. It began with a set of FTC, DOJ, and PTO policy statements submitted to the ITC in 2012–2013. The FTC and DOJ are the U.S. antitrust enforcement agencies. Yet these agencies somehow saw fit to advise the ITC on the propriety of injunctive relief as a remedy for patent infringement—a matter not grounded in antitrust law. Likewise, until then the PTO had not ventured into the policy debates surrounding standardization or patent litigation remedies. Nevertheless, it joined the DOJ in issuing the 2013 Policy Statement addressing remedies under Section 337 of the Tariff Act of 1930, well beyond its usual purview.
In November 2017, AAG Delrahim publicly rebuked Judge Richard Posner and the Federal Circuit for their respective decisions in Apple v. Motorola, a case involving the availability of injunctive relief for SEP holders in federal court. What is most remarkable about AAG Delrahim’s criticism is not that he disagreed with the courts’ decisions, but that the case did not concern antitrust law. He was disagreeing with an application of the Supreme Court’s equitable test for injunctive relief under eBay v. MercExchange —a matter of patent remedies. As such, the issue was outside the authority and competence of the DOJ Antitrust Division.
And while many of the Antitrust Division’s interventions in private litigation arguably addressed issues of antitrust law, the Division was rebuked in 2019 by the Chairman of the Subcommittee on Antitrust, Commercial, and Administrative Law of the House Committee on the Judiciary, who questioned the Division’s allocation of substantial resources to intervening in private litigation absent the request of any court and in the FTC’s case against Qualcomm, apparently without following accepted inter-agency clearance practices.
But perhaps the Trump DOJ’s most puzzling and extreme exercise of non-antitrust advocacy in the area of standardization arose at the Ninth Circuit in FTC v. Qualcomm. There, the Antitrust Division ventured far afield from antitrust law, making arguments, supported by the DOD and DOE, that entering an injunction against Qualcomm for anticompetitive conduct would adversely affect national security and encourage cyber-espionage.
Agency Capture
It is well known that political appointees to federal agencies tend to favor the parties and causes they supported prior to their appointments, and that they will often continue to represent those parties and causes in the private sector after the term of their government service. Criticism of the FTC and DOJ Antitrust Division in this regard began before the Trump administration.
Former ITC Commissioner F. Scott Kieff and economist Anne Layne Farrar have studied the susceptibility of the DOJ Antitrust Division and the FTC to political and commercial pressures, using the term “government holdup” to describe the well-known phenomenon of regulatory capture by private interests. Economist J. Gregory Sidak has also criticized the political capture of the DOJ Antitrust Division, observing that “[t]he electoral cycle drives the political process that installs the Division’s top officials into positions of ephemeral authority.” He attributes particularly short-sighted decisions to the “political cycle” and to the fact that, when ill-advised policies eventually hurt the economy, “[s] omeone else will be running the Antitrust Division.”
Analysts have observed that “[t]he Obama administration recruited dozens of former Google employees to serve in the White House and at agencies like the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC).” Likewise, before his appointment to the DOJ, Mr. Delrahim had publicly disclosed (as required by law) his service as a lobbyist for Qualcomm through December 2016 on matters relating to “[i]ntellectual property and competition policy, including issues related to domestic and foreign antitrust enforcement,” precisely the matters on which he was most active at the DOJ. Indeed, one commentator observed that Mr. Delrahim believed that “anything done by a patentholder is necessarily pro-competitive.”
The Risks of a Policymaking Vacuum
In our current political system, it is inevitable that interested officials will come into power with changes in the administration, and often with views that differ from those of their predecessors. But it is not inevitable that public policy will pivot 180 degrees with each such change, or that decades of past precedent and agency guidance will be overturned within the space of a single administration.
Yet, just such an upheaval has occurred in the realm of U.S. standardization policy because there is no explicit authority for developing such policy in the United States. The greatest statutory authority in the area of standardization resides with NIST, but this authority is incomplete, and NIST has not actively engaged in the intellectual property debates that have driven policymaking in this area over the past several decades.
The absence of any real U.S. policymaking authority or coordinator leaves a power vacuum in this key economic sector. Consequently, the area is ripe for appropriation by any agency or individual having the requisite appetite and resources. During the last administration, this agency was the DOJ Antitrust Division. Despite the Antitrust Division’s designated role as one of two antitrust enforcement agencies, the Division under AAG Delrahim significantly expanded its policymaking profile in the area of standardization. The Division effectively became the self-appointed arbiter and coordinator of standardization policy, making public pronouncements on matters well beyond antitrust law, intervening in private litigation to promote its views, and criticizing judicial decisions and members of the judiciary who failed to adhere to its positions on key issues. In an effort to shape the law in ways favorable to patent holders, it openly challenged its sister enforcer, the FTC, in the Qualcomm case and enlisted to its cause other federal agencies, including NIST and the PTO. It even sought to influence ANSI’s U.S. Standards Strategy, suggesting improvements such as an acknowledgement that patent holders be “appropriately compensated for their contributions.”
As an enforcement agency, the DOJ does not make law—even antitrust law—any more than the FBI makes the criminal trafficking and racketeering laws that it enforces. Yet the Antitrust Division’s pronouncements are viewed as authoritative by many and, outside the United States, are often mistaken for binding legal precedent. This confusion, together with the uncertainty caused by clashing federal agencies, has left the law regarding standardized products and related intellectual property rights in a state of disarray. As a result, private firms cannot effectively plan their engagement in standardization activities, standards bodies cannot operate in the interests of their members, and consumers bear the cost of this uncertainty.
Rationalizing the Development of U.S. Standardization Policy
With no centralized focus for the development or coordination of U.S. standardization policy, it is not surprising that this policy landscape remains subject to capture and manipulation by interested agencies, rapidly flipping with changes in administration. Therefore, I propose that a centralized agency or office be designated, either by Executive Order or statute, as the official coordinator of federal policy concerning technical standardization, including the application of patent and copyright laws to standardized products, the licensing of standards-essential patents, and the efficient resolution of disputes concerning standards.
Although the creation of a centralized policy-coordinating authority would not in itself prevent capture or bias in policy making, it would at least ensure, through interagency processes, that all relevant government and private stakeholders have a voice in policy formulation. The policy authority could also operate under an overarching policy framework, enshrined in legislation, regulation, or Executive Order, that would be more resistant to sudden change than unilateral agency pronouncements. Another advantage of such a policy authority would be its ability to represent the U.S. government in increasingly important international discussions regarding standardization —a function for which ANSI, as a private body, is not entirely suited.
One model for such a centralized office could be the OMB’s U.S. Intellectual Property Enforcement Coordinator (IPEC). This White House office organizes federal agency responses and actions in its subject domain (intellectual property enforcement) and helps to formulate policy in a structured and efficient manner. Standardization policy, while related to IP enforcement, would not necessarily fit within the current remit of the IPEC, but another office modeled on IPEC could serve this function.
Another potential candidate to fill the role of standards policy coordinator is NIST. This agency already has the advantage of a charter that encompasses standardization, and it has recently begun to engage in the policy arena around standards and intellectual property. Consequently, it could be charged with this responsibility.
Standards policy should not, however, be entrusted to one of the antitrust enforcement agencies. These agencies should continue to police standardization activity for violations of the antitrust laws, but their advocacy and policymaking should end there. Antitrust authorities lack a broad view of the technical, policy, and legal issues implicated by standardization, and enforcement agencies are not ideally suited to achieve consensus or to coordinate the views of multiple stakeholders. Rather, these agencies should participate in the development of standardization policy through a centralized coordination mechanism that respects their views, but they should not act unilaterally in any capacity other than the direct enforcement of the antitrust laws.
Rationalizing and centralizing the existing patchwork of agencies that participate in the formulation of policy for standardization should significantly improve the consistency, predictability, and stability of this important area of economic activity.
