Andrew Updegrove
	Editor and Publisher
	2005 ANSI President’s Award for Journalism
The complete series of Consortium Standards Bulletins is available on-line at http://www.consortiuminfo.org/bulletins/  It can also be found in libraries around the world as part of the EBSCO Publishing bibliographic and research databases

Bringing a complaint to the Antitrust Division about "excessive" royalties, without more, is a losing strategy. Antitrust enforcers are not in the business of price control. We protect a competitive process, not a particular result, and particularly not a specific price. In fact, if a monopoly is lawfully obtained, whether derived from IP rights or otherwise, we do not even object to setting a monopoly price. A high patent royalty rate, after all, might just reflect that the Patent Act is functioning correctly and the market is rewarding an inventor for a pioneering invention. When a complainant begins a presentation by telling the Antitrust Division that a royalty rate is "excessive," the staff responds that the complainant is putting the cart before the horse. A complaining party must first identify some anticompetitive conduct beyond a mere unilateral refusal to license and beyond the mere attempt to charge, where a lawful monopoly exists, a monopoly price.16

Why then do some SSO members not simply define the RAND obligation more exactly?  There are several reasons why this does not appear to offer a palatable alternative to ex ante disclosure.  The first is that while vendors do not wish to be charged extortionate fees when they are licensees, neither do they wish to have their freedom of action systemically limited when they are on the opposite side of the licensing equation as patent owners.  Further, opening up the RAND Pandora's box would lead to discussion of such difficult questions as what to do about existing cross licenses?  Frequently, there are underlying licensing agreements already in existence between the largest vendors.  When a new standard is approved that involves the Necessary Claims of some subset of such a group, there may be few, if any, royalties that actually change hands among the group.

In such a situation, what should "non-discriminatory" mean?  That smaller companies that lack an existing cross license agreement with the owner of Necessary Claims should receive a royalty-free license as well?  Currently, that is not the case, and many large companies would doubtless prefer to maintain that state of affairs, as it provides at minimum an advantage over, and at times perhaps an effective barrier to entry by, smaller companies that might otherwise build competitive implementations of the same standard.

Because even the largest companies in the information and communications technology sectors are today feeling the pain of a spate of what are perceived to be excessive royalty demands by the owners of Necessary Claims under important standards, these companies are seeking an alternative solution to refining the RAND definition in order to relieve their stress.  And that solution is ex ante disclosure.17

II.  The Ex Ante Alternative

Why ex ante?  While the potential value of ex ante disclosures is accepted by most (if not all), there are costs as well as benefits to be considered in adopting an IPR policy that permits, or requires, such revelations.  Further, due to antitrust concerns, the optimal timing, degree, and process of disclosure is a matter of debate, with some advocating for conservatism and others for aggressiveness.  Thoroughly understanding these costs and benefits is essential, given that standards development is a consensus-based process, and the value proposition supporting any type of ex ante disclosure must therefore be clear to at least a significant majority of the decision makers of any given SSO before the necessary process changes can be approved without loss of dissenting members.

            Benefits: the arguments in favor:  Proponents of ex ante disclosure cite the following motivations (some of which have already been mentioned above) for advocating such disclosures:

• Chaos:  The current disclosure system represents a disorderly bazaar, rather than an orderly marketplace.  If an economically efficient result occurs, it is only by accident.  As a result, the likelihood of efficiency is very low.

• Variations in experience:  Different industries have widely divergent practices, to the disadvantage of those that are not versed in the ways of that industry.  For example, in some standard settings, there are active contemporaneous one-on-one negotiations among patent owners and would-be implementers "in the halls," resulting in advantages for those that are skilled in horse-trading

• Certainty:  In some SSOs, it is common to make blanket statements that reserve the right to assert a patent and require a royalty, without requiring the respondent to disclose the Necessary Claims themselves.  As a result, would-be implementers not only cannot evaluate whether a royalty may need to be paid (does the respondent actually have a Necessary Claim at all?), but whether it agrees that the claim in question is in fact an enforceable Necessary Claim.

• Avoidance of total failure:  Developing a high quality, useful standard is a lengthy and time-consuming process.  If one or more patent owners later set unduly high royalty rates or impose other burdensome licensing terms, even the best standard, from a technical perspective, may totally fail.  In such a case, not only the investment in the standard itself, but the much higher opportunity cost to vendors, service providers and end-users alike of the failure to effectively fill a standards gap may be very high indeed.

• Slow adoption:  Every standard must survive a critical period during which the market decides whether or not to adopt it, with many implementers adopting a "wait and see" attitude.  Where licensing terms are known in advance, early adopters can enter the market more quickly, without the need to engage in licensing negotiations where each side may be testing the other, and all would-be implementers can make more intelligent assumptions about whether adopting the standard will prove to be a good bet or not.

• Avoidance of RAND non-discrimination risk:  Where licensing terms are out in the open, each participant has a much higher level of assurance that it is getting fair terms relative to other similarly-situated industry players, and that it is getting the vendor's "best price" as well – somewhat akin to buying from a "no haggling" car dealer.

• Avoidance of RAND ambiguity:  As has previously been discussed in detail, the definition of "RAND" is not only vague at the outset, but yet to be thoroughly developed in case law.  Ex ante disclosure avoids the need to define "reasonableness" at all, since the participants can simply decide whether the terms that are offered are appealing or not – a much more accurate, market based means of defining reasonableness under precisely relevant circumstances.  Even before Chairman Majoras made her policy announcement (and indeed several weeks before the five company meeting), Assistant Attorney General of the Antitrust Division of the Department of Justice delivered a speech recognizing the value of ex ante disclosures in avoiding the RAND quagmire:

  A difficulty of RAND…is that the parties tend to disagree later about what level of royalty rate is "reasonable." It would be useful to clarify the legal status of ex ante negotiations over price. Some standards development organizations have reported to the Department of Justice that they currently avoid any discussion of actual royalty rates, due in part to fear of antitrust liability. [footnote omitted] It would be a strange result if antitrust policy is being used to prevent price competition.18

            Costs: the arguments against:  Real concerns have also been expressed over permitting ex ante disclosures, although the degree to which each need in fact be a concern is highly dependent on the details of the process employed to permit such disclosures:

• Antitrust risk:  First and foremost in the minds of lawyers is the risk of inadvertent violation of the antitrust laws, but following close behind is concern over the costs of defending against any suit or government investigation, whether or not actual liability is finally assessed.  SSOs are characteristically (although not always) organizations with few resources and modest budgets, and are ill-equipped to defend themselves against the type of lengthy and expensive litigation that is typical of antitrust suits.19  In the minds of some, any increase in the threat of catastrophic litigation costs, no matter how small, is sufficient to outweigh any benefits to be derived from ex ante disclosure.20

• Management:  Enabling ex ante disclosures (and, to a far greater extent, negotiations) would require additional supporting infrastructure.  At minimum, times for such disclosures would need to be specified, the disclosures would need to be posted, and those that relate to claims that are relevant to finally adopted standards would need to be publicly displayed for the life of the standard.  More importantly, the staff that manages the process would need to be well coached on antitrust concerns in order to be sure that no missteps occurred in the process that might lead to liability.  If more than disclosures were permitted (e.g., actual negotiations), the situation would need to be very tightly controlled and supervised, as the antitrust risks would be far higher. 

• Cost of participation:  Some fear that it would become necessary to deploy legions of lawyers (a sobering, if not downright terrifying, prospect) as well as engineers to standard setting meetings, vastly driving up the cost of participation in the standards creation process.

• Delay:  While mere disclosure of licensing terms would not by definition draw out the standard setting process, those involved might request longer periods of time for certain process steps (e.g., to consider alternative submissions, to formulate licensing terms before any deadline for making disclosures, or for adoption voting) in order to decide what to disclose, and/or how to take advantage of the new information.  If actual negotiations leading to amendment of offered terms were to be permitted, a much longer delay might be required.

• Effect:  Not every standard setting participant would welcome even the "social pressure" of a voluntary disclosure policy, since the hoped-for result of such a policy would be to provide incentives to owners of potential Necessary Claims to not only lay their cards on the table, but perhaps to engage in a reverse auction as well.

While recognizing the validity of these concerns, it is worth noting that many of the issues associated with ex ante disclosures already exist – they simply arise at other points and outside the process that begins with the chartering of a working group, and ends with the wide deployment of a standard.  In short, in order to decide on a net basis whether ex ante disclosure provides a net benefit or a net cost in comparison to the current regime as to a single standard, the entire standards creation and deployment cycle must be taken into consideration, including the costs, delays and negative effects in the current system that would be reduced or eliminated by the introduction of ex ante disclosures.  When conversion to ex ante disclosure is considered on a systemic basis, the development and opportunity costs of those standards that failed due to hold-ups should be factored into the calculations as well.

Ex ante variations:  There are a variety of ways that one could imagine introducing an ex ante element into the standard setting process.  The following examples are presented in ascending order of complexity and risk, but not in sufficient detail to more than suggest the types of process elements and antitrust risks that would need to be considered before any of them were actually to be put into place. 

            Removing prohibitions on voluntary disclosure:  The simplest alternative is simply to remove any prohibitions in an IPR policy that would prohibit one member from informing other participants in the standard setting process about its specific licensing intentions.  Since any such act would be voluntary, neither the SSO nor any of its members would be forced to disclose, nor, assuming the absence of additional facts, would there be any collusion between members to establish either a ceiling or a floor on what a member could demand.  Only some SSOs currently have such a prohibition, but one of them is the IEEE.  As a result, simply eliminating this constraint is one approach that IEEE is currently considering.  However, without providing any additional process steps, voluntary disclosures might not be made at the most useful times, and other participants might react to such disclosures with a degree of conservatism that would diminish, the value of the disclosures made.

            Permitting and enabling voluntary disclosure:  If an SSO hopes that voluntary disclosures will become a regular and useful adjunct to its standard setting process, such disclosures should be channeled in a way that is most likely to result in the benefits desired.  For example, the time when such disclosures are permitted to be made could be restricted to a period during the standard setting process that is far enough along that the likelihood of infringement could be well assessed by both the owners of would-be Necessary Claim as well as by the other members of the standards working group, and yet early enough that a decision could be made to design around any prohibitively priced Necessary Claims.  In those processes that commonly begin with the offer of multiple proposals, each of which could form the basis for the resulting standard, disclosures could be required at the time of submission.

In order to be maximally useful, any SSO that did not already require the disclosure of Necessary Claims would wish to introduce that requirement as well, even if ex ante disclosure of licensing terms was not mandatory.  Absent such a rule, the goal of predictability and the opportunity to make economically efficient choices between technical value and costs would be defeated, and the prospect would remain that a working group member could later assert a Necessary Claim and require payments that would have been avoided had they been disclosed in timely fashion.

For the same reason, it would be highly desirable to have strong assurances that all participants in a standards development working group had, in fact, disclosed all Necessary Claims.  Unfortunately, SSO members have not historically been willing to provide this level of certainty.  For example, patent disclosures and assertions are most often made in SSOs under a fairly lax "to the knowledge of the individual participant" basis.  Tightening this requirement, while still not requiring formal patent searches or imposing penalties for inadvertent failures to disclose, would increase the predictability of the final result.  In fact, the IEEE is currently in the process of finalizing revisions to its standard patent disclosure form (which it calls a "Letter of Assurance for Essential Patent Claims) to accomplish just this result.21

Absent a desire to be more selective, disclosure of Necessary Claims could still be done within the context of the traditional three basic choices (RAND or non-assertion without charge; RAND with right to charge royalties reserved; or no assurance of RAND licensing at all).  By combining a strong Necessary Claim disclosure obligation with the ability to make ex ante disclosure of specific licensing terms, there would be a degree of "social pressure" for all owners of Necessary Claims to announce terms if they had a strong desire that their patent claims be included rather than excluded in the final specification.  Those owners of Necessary Claims that were not highly motivated to have their IPR included could either disclose high royalty requirements, not disclose terms, or decline to license their Necessary Claims at all.  In each of these cases, other working group members would be on notice that inclusion of these claims would be, as appropriate, too expensive, too risky, or not possible at all.
 
Such a system could provide lower costs of implementation, as well as greater certainty in SSOs where there are perceived indirect benefits to owners from inclusion of their Necessary Claims, since a combination of strong disclosure obligations and ex ante disclosure could be expected to lead to a competitive sealed bid environment.  This would be particularly true if all disclosures were required to be made on a simultaneous basis, providing an incentive for an owner of Necessary Claims to put its lowest, best offer forward.  At the same time, no specific disclosure, or indeed any disclosure at all, would be required, easing, although not eliminating, antitrust concerns.

Necessarily, if price and other terms are introduced at a time that collective action can be taken to select among alternatives, or to change the design of a draft specification to avoid infringement (and therefore payment), care would need to be taken in designing the process in such as way as to forbid inappropriate discussion, bargaining or other behavior that could be problematic under the antitrust laws.  The simplest and safest approach would be to prohibit any discussion among working group participants regarding the specific licensing terms disclosed, but permit the knowledge of those terms to inform the voting decisions of individual members. 

            Permitting and enabling disclosure and rebidding:  While a "sealed bid" system would provide real advantages over a merely RAND process, providing Necessary Claim owners with the opportunity to rebid would permit a "reverse auction" dynamic to arise, leading in some cases to yet lower implementation costs and/or less restrictive licensing terms without appreciably increasing antitrust risks.  The best way to minimize antitrust risks would be prohibit all discussions relating to terms among those disclosing Necessary Claims, as well as between other members and those making disclosures, until the bidding process was complete, following which voting would immediately commence.

            Permitting and enabling disclosure, rebidding and discussion:  While permitting ex ante disclosure and rebidding would provide real advantages, it would be unfortunate if this was to be at the cost of permitting working groups to discuss whether specific Necessary Claims could be designed around entirely.  As a result, an optimized process would specify what topics were fair game to discuss, and what topics were off limits, with (at minimum) the refinement of designs to avoid Necessary Claims being on the list of permitted discussion topics.  Working groups could also be allowed to formulate alternative proposals (each with a different mix of Necessary Claims) for member voting, leaving each member to individually decide which alternative provided the best balance between cost and technical result.

            Permitting and enabling disclosure, rebidding, discussion and negotiation:  Adding the ability for working group members, or for a single  representative of a working group or SSO, to actually negotiate licensing terms would be a much more delicate process to police, since the potential exists for a group of members to inappropriately pressure an individual member, opening the way to conspiracy and other charges.  In addition, antitrust regulators in some countries might view such a process unfavorably regardless of any safeguards that were put into place.

            Requiring disclosure:  Requiring, rather than permitting, the ex ante disclosure of terms by all holders of potential Necessary Claims could be added as an additional term in most of the scenarios discussed above.  Doing so would, of course, increase the completeness of the economic IPR landscape for a give standard under development, but would present its own antitrust issues, as well as perhaps leading to some patent owners deciding not to join the SSO with that policy at all, or not to join in as many working groups, if only direct participants would be become subject to this requirement.

Next Steps: It seems unlikely that the first SSOs to adopt policies with additional ex ante features will choose to implement adventurous alternatives discussed above rather than opting to pursue a more limited and conservative approach.

In any such situation that does not involve actual discussion, it should be possible to design a process that would not require immediate supervision by lawyers.  Even where discussion would be involved, there is no reason to assume that individual members would need to arrive at meetings with lawyers in tow. 

Similarly, in each of the scenarios described that do not allow actual negotiation, all member-related legal and economic decisions could be made at the facilities of individual members by appropriate business and legal personnel, and submitted in writing as part of a clear and controlled process.21

No matter what process an SSO might decide to adopt, the chairs of technical committees and others in charge of the process would need to be carefully instructed regarding which types of behavior would be permissible and which would not, and any existing antitrust policy (typically general rather than specific) would merit revision to provide more helpful and detailed guidance.  Of course, technical chairs should in all cases be well coached on basic antitrust rules, since there are many other situations that are apt to arise that can present equivalent, or greater antitrust risk.
 
III.  Ex Ante Alternatives

As earlier noted, ex ante disclosure represents only one among a number of procedures that may be employed to better flesh out the IPR landscape underlying a given standards development effort.  Each of these alternate procedures has its own advantages (and shortcomings) that may lead it to be a superior technique to use instead of, or a useful tool to use in addition to, ex ante disclosure.  Accordingly, every SSO should consider the entire range of options available to it when considering any change of its process to incorporate ex ante disclosure.

Current disclosure practices in fact vary widely, ranging from IPR policies that forbid disclosure of licensing terms to policies that mandate royalty free licensing, or indeed impose blanket prohibitions on asserting patents at all.  Consequently, the concept of ex ante disclosure does not represent the bleeding edge of IPR policy evolution, but rather a refinement of practice that may overlay an intermediate section of the spectrum of current SSO IPR policy practice.  These disclosure practices (in addition to the widely-used, and already discussed, RAND disclosure regime) and the terms that may attach to them ex post include the following:

            The patent pool:  Nominally the formation of a patent pool should provide relief to the problem of excess royalties, while simultaneously alleviating the burden to implementers of engaging in multiple license negotiations.  In brief, a patent pool imposes a voluntary license cap on all patent owners  that choose to participate, and includes a mutually agreeable formula for allocating royalties received among the patent owners, based upon such data as importance of individual patent claims to the standard remaining life of the patents in which they appear, and similarly relevant criteria.  However, patent pools are difficult to form, can be ineffective unless all owners of Necessary Claims participate, and have their own antitrust sensitivities, among other challenges.  As a result, there usage has not been widespread.

Nevertheless, the patent pool is interesting in the current context, since the formation of such a pool is an exercise not only in complete ex ante disclosure (or ex post, if the standard in question has already been approved), but in ex ante negotiation as well, since all patents are disclosed, each is frequently evaluated by a neutral third party, and all owners then decide whether they will join the patent pool on terms offered or not.

Patent pools are also instructive in the context of other ex ante mechanisms, because they provide something of a model for SSO-imposed license fee caps, a concept that has been reported to be currently under discussion within ETSI.  Patent pools formed in the United States typically obtain a business review or advisory opinion from the antitrust regulators, and there is therefore a degree of public record on how such mechanisms are viewed under applicable law that can be consulted to advantage by not only those that might wish to form their own pool, but by SSOs that are considering adoption of ex ante policies and procedures as well..

            The Royalty Free Commitment:  Some consortia and forums adopt policies that moot the ex ante issue entirely by simply providing that participants agree not to assert royalties at all.  This goal is typically difficult to obtain, however, because the perceived value of participation to each member must outweigh the opportunity of leveraging its patent portfolio against the resulting standard.  For companies with very large patent portfolios, the tradeoff is more difficult to assess absent an expensive and time-consuming review of its patent portfolio, and the danger remains that the SSO may in the future enter technical territory that was not initially anticipated. 23  

As a result, royalty free commitments are most typical in situations where the membership is small, and is made up of highly-committed participants with a well defined goal and (often, but not always) more limited scope of work.  Many of these arrangements are created on an unincorporated "promoter-adopter" model that is closer to a cross license agreement than a by-laws and IPR policy regulated, incorporated SSO.24   Where such a rule is adopted by an SSO, it is typically the result of a conviction that the imposition of royalties (and sometimes the inclusion of other types of licensing terms) would effectively thwart the goals of the SSO.25

Because there is no freedom to charge a royalty in an SSO that has adopted a royalty free policy, ex ante disclosure of specific patent claims is largely unnecessary, although some organizations include a provision that allows a member to either place a patent claim off limits early in the process, or the opportunity to resign as a member to avoid capture of its patent claims by the royalty free obligation.

An increasingly popular variation in practice is the use of the "non-assertion covenant" in place of a commitment to license without a royalty.  This mechanism is elegant in its simplicity: the owner of potential patent claims simply states that it will not assert the patent claims (if any) that it may own against any compliant implementation of the standard in question.  The SSO member therefore need neither search for nor identify any Necessary Claims, and the implementer may have no license agreement to negotiate and accept with the Necessary Claim owners at all.26

The royalty free commitment is a superior and more complete alternative to ex ante disclosure for a variety of reasons.  Notably, there is no recurring need to disclose license terms, to make adoption decisions based in part on price considerations, or any need (or temptation) to engage in price-related negotiations, all of which substantially obviates (absent additional facts) much of the antitrust risk that worries those considering ex ante disclosure.  Instead, there is a single, voluntary, up-front decision by each participant whether or not to agree to a unitary set of licensing terms.

Unfortunately, this mechanism is not suitable for situations in which the participation of a broad array of stakeholders is required, and the value of the standards to be developed has low importance to some of those stakeholders.  Were the same commitment to be required of all, some categories of participants whose input or support is crucial would simply not join.  The result is often that a more lenient, RAND-oriented IPR policy is adopted instead.

            The open source project:  The greatly accelerating popularity of open source software has brought added urgency not only to royalty-free licensing commitments, but also to agreeing to forego a variety of other otherwise acceptable licensing terms.  While originally a commitment to such terms arose only as a result of participating in such a project, the proliferation of open source software has put pressure on software-developing SSOs as well to adopt IPR policies that permit implementation of their standards in open source software.  Once again, adoption of such a policy can remove the need for ex ante disclosure of licensing terms entirely, because if a commitment to provide a license on open source (GPL or other) terms makes patent claims largely irrelevant..

            Permitted or required implementer license terms:  There are a number of specific terms that are commonly explicitly permitted by IPR policies as being consistent with a RAND licensing obligation, and those with Necessary Claims could be required or permitted, as part of an IPR policy, to include such terms in their license agreements.  These terms include:

• Defensive suspension:  Under this term, an implementer that sues another implementer for infringement of its own Necessary Claim(s) may have its implementation license revoked, thus providing a negative incentive to sue, and, if the licensee has sued the owner of another Necessary Claim(s), leveling the playing field between the parties in the infringement litigation.

• Reciprocity:  While less often used than defensive suspension, some SSOs permit the owner of a Necessary Claim to require a license back of any Necessary Claims of an implementer.  Sometimes this license extends to all other implementers (member and non-member alike), resulting in an expanding IPR safety zone of common benefit.

• Detailed assertion forms:  Many consortia require their members (or at least those involved in a specific development working group) to use, uniform, detailed response forms to disclose their licensing commitments prior to the adoption of a standard.  These forms not only require that the member state whether it will or will not license on RAND terms, but whether or not it will require payment of a royalty.  They also typically require identification of the specific claims that the member believes are Necessary Claims (and even, in a more general way, any claims under non-public patent applications), and the section of the draft standard to which each Necessary Claim relates.  As a result, other members can evaluate whether they agree with the infringement assertion, and if so, assess the feasibility of designing around the infringement.  Thus, while the exact amount of any royalty is not disclosed, a member is permitted to disclose that no royalty will be required at all, providing a clear preference for including those Necessary Claims over those of another member that has reserved the right to charge for its patent claims.

Other prospective options:  In addition to those alternatives that have already been implemented, there are others that could be imagined that could be deployed in order to increase certainty and lower implementation costs. 

            Overall royalty caps:  One mechanism that is currently under discussion (in addition to ex ante alternatives) is the imposition of a cap on the total royalties that a standard could bear, as determined by the SSO in which a standard is developed.  In effect, this would represent the merging of the concept of a patent pool with the development process itself, with the total royalty being set in advance, rather than as a result of an agreement reached outside of an SSO during, or after, the standards development process is complete.

Nominally, such a procedure would solve all of the same problems that ex ante disclosure and negotiations could achieve, and with greater up-front certainty.  If the mechanics of a patent pool were also to be implemented (whether within or outside the SSO), implementers would also benefit from needing to enter into a single license covering all Necessary Claims, rather than negotiating and entering into multiple, unique licenses with each Necessary Claim owner.  Finally, non-discriminatory licensing would be far easier to ensure.

Conceivably, such a plan would also increase the likelihood that more owners of Necessary Claims would enter the patent pool, since only by participation could a patent owner influence the inclusion of its patent in the resulting standard.

There are, inevitably, disadvantages to such an approach as well.  First, the owners of likely Necessary Claims would need to not only be members (or independently agree to the same conditions), but would also need to conclude that they would in fact be better off being bound by the royalty cap obligation than staying outside the process, in order to retain the right to levy a higher tax on implementation.  Further, managing a patent pool-like situation requires a far greater degree of attention to antitrust risks than would providing for a simple voluntary ex ante disclosure option, in addition to ongoing administrative tasks (although these can be outsourced).  As a result, the degree of infrastructure, management, legal attention and other requirements occasioned by adopting a royalty cap process may mean that few SSOs will have the appetite to be innovators in this regard.

In fact, a proposal for some type of royalty cap mechanism was proposed last year by a group of mobile operator members in ETSI, in reaction to their perception that royalty demands had gotten out of hand.  However, as of this writing it appears that discussion within ETSI is focusing now on the possible adoption of rules that would permit ex ante disclosure rather than the imposition of royalty caps.27

Nevertheless, such a concept does have merit, and in some respects would involve less risk than would novel ex ante mechanisms, given the fact that antitrust regulators have issued advisory opinions in the past on the structure and operations of patent pools, providing a useful reservoir of guidance upon which SSOs could draw in designing their own procedures.

            Defining reasonability:  Another alternative would be for an SSO to define what "reasonable" means in the context of a patent royalty.  While not offering the security of a total royalty cap for all Necessary Claims on a single standard, members could agree on a standard formula to value Necessary Claims that would then operate automatically, thus ensuring a maximum economic burden per claim without the requirement of discussion.  Such a formula could also take into account the total number of claims asserted, automatically decreasing the maximum allowed per claim as the number of claims increased.  As there would be no requirement that any patent owner would be required to become a member, or if a member, to actually participate in a given working group, antitrust concerns would be reduced, although (once again) not eliminated. 

            Establishing terms:  An SSO could also further define the non-economic terms that an implementer license could include, or even mandate the exact language of a set of terms that such a license would be required to use if the Necessary Claims owner wished to include those types of terms generically.

Conclusions:  The current debate over ex ante alternatives has suffered to a degree from being addressed in a vacuum, without regard (on the one hand) to all of the existing issues outside of the standard setting process itself that it could help resolve, or (on the other hand) to the other methods that could also be considered to achieve similar ends.  Similarly, proponents of ex ante process additions have not always appreciated some of the complexity and risk that could be involved with ex ante disclosure and/ornegotiations, while the opponents have painted an unduly dire picture of the risks of even simple disclosure proposals, and ignored the fact that more challenging programs, such as patent pools, already exist and operate without frequent calamitous antitrust consequences.

It is to be hoped that one or more SSOs will in fact implement an ex ante disclosure program in the near future, and obtain a business review letter or advisory opinion from the antitrust regulators to provide a degree of comfort, not only for their members, but for the standard setting community at large.  Once SSOs and their members gain experience with designing and operating such programs, confidence will grow, and the benefits of this logical and innovative concept, conjoined with other existing and new techniques, will presumably spread.