Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Petition for Rulemaking and Request for Declaratory Ruling Filed by the
Coalition United to Terminate Financial Abuses of the Television
Transition, LLC
MB Docket No. 09-23
Reply Comments of Public Knowledge, Consumers Union, Free Press,
Media Access Project, and New America Foundation
SUMMARY
The Commission should investigate allegations that existing licenses for
patents essential to the DTV standard are unreasonable or discriminatory.
To that end, the Commission should require disclosure of essential
patents, the grounds by which the patents are essential, and the terms
under which they are licensed.
DISCUSSION
The above-listed organizations submit these Reply Comments to address the
need for increased openness in the process of complying with
federally-mandated technical standards. By requiring manufacturers to
abide by certain standards, the Commission will often also be requiring
that manufacturers obtain licenses for the use of patented technology. To
prevent mandatory standards from encouraging anticompetitive
rent-seeking, the Commission should maintain policies requiring
disclosure of essential patents and reasonable and nondiscriminatory
licensing.
A number of legal commentators have observed complications involving
patents in the technology sector, noting that a prevalence of patents,
often combined with unclear patent scope, leads to patent thickets that
can impede adoption and slow innovation.[1] Under its public interest obligations, the
Commission should attempt to lessen the risk of such holdups by
maximizing the transparency surrounding patents that are essential to
mandatory standards. Therefore, prior to adopting a mandatory standard,
the Commission should require all participants claiming essential patents
in the standard to disclose those patents they believe essential to
implementation and how they are essential. This requirement would not
affect the rights of any patentee in its technology, and would allow
licensees and the Commission to better assess the state of the licensing
market.
The Coalition United to Terminate Financial Abuses of the Television
Transition (CUTFATT) has alleged that the holders of patents essential to
the mandatory digital television (DTV) standard are failing to offer
patent licenses on a reasonable and nondiscriminatory (RAND)
basis.[2] These
allegations merit further investigation by the Commission. As a part of
this inquiry, the Commission should account for the various patents
essential to the DTV standard and royalties charged for their use. Should
the Commission find that licenses issued by standard proponents are
unreasonable or discriminatory, it is well within its inherent authority
under 47 U.S.C. 501 et seq. to enforce the RAND requirements
outlined in the Commission's rules.[3]
CUTFATT's petition asks for a variety of findings and actions in addition
to those set forth in the Fourth Report and Order. First, CUTFATT asks
the Commission to issue a declaratory ruling in five parts: (i) that
royalty rates are presumed non-RAND if they exceed comparable rates by
more than fifty percent; (ii) that any party holding essential patents
had the burden of proving their necessity and compliance with RAND
requirements; (iii) that all essential patentees must disclose the terms
of all licenses lest they be found presumptively discriminatory; (iv)
that the Commission assess forfeitures for unreasonable or discriminatory
licenses; and (v) that the Commission levy fines for the blocking of
imports based on patents that do not offer RAND licensing
terms.[4] Second,
CUTFATT asks for a Notice of Proposed Rulemaking in which the Commission
would require all holders of essential patents to disclose their patents
and licenses, as well as encourage patentees to form a patent
pool.[5]
A number of these proposals could assist the public, manufacturers, and
the Commission in determining whether or not patentees are issuing RAND
licenses. However, the Commission's authority to issue these orders and
rulings differs from one proposal to another, and in many cases, would
vary depending upon the identity of the patentee. For the purposes of
this Reply Comment, we address only the Commission's ability to require
disclosure of patents and licensing agreements.
The Commission has direct authority over patentees who have participated
in the standard setting process. As part of the adoption of the DTV
standard, the Commission required that proponents of the standard were
required to submit a statement that they would comply with ANSI patent
policies, which, among other things, require licensing for free or under
RAND terms.[6] By
virtue of that agreement, and through their participation in the process,
these parties are subject to the Commission's determination that their
licenses are reasonable and nondiscriminatory. To make this
determination, the Commission must necessarily have knowledge of what
patents are claimed, how essential they are to the standard, and what
licensing fees are being charged.
To ensure that licenses remain reasonable and nondiscriminatory, and to
further the public notice function of the patents at issue, the results
of these disclosures should be made public. Open publication of licensing
terms will help to ensure that licensing terms remain RAND as time goes
by, allowing potential licensees to compare the terms they are offered
with the publicly disclosed terms, with the ability to complain to the
Commission should there be substantial differences.
Patentees who were not privy to the standard setting process
(non-proponent patentees) may be asked to make disclosures under the
Commission's authority as granted in subsections (g) and (s) of section
303 of the Communications Act.[7] The Commission's section 303(g) mandate to encourage
the larger and more effective uses of spectrum in the public interest
allow it to regulate to prevent competitive restraint.[8] Subsection (s) grants the
Commission authority to ensure that devices can adequately receive
television signals, which are directly at issue in this case. If the
standard reads upon any patent, any user of the standard could be
enjoined by the patentee from receiving a DTV signal. Rules ensuring that
users of the standard are not so caught unawares would function directly
in service of the goal of 303(s).
Ancillary authority also allows the Commission to require patent and
license disclosure of non-proponent patentees. Ancillary jurisdiction
applies when (1) the regulated subject matter is covered by the general
jurisdictional grant of Title I, and (2) the regulations are reasonably
ancillary to the Commission's performance of its statutorily mandated
responsibilities.[9]
Regulation of broadcast signals, and the apparatus receiving those
signals, is clearly within Title I jurisdiction. Ensuring that previously
undisclosed patents or non-RAND licenses do not prevent the transmission
of the DTV signal (or its reception by devices) implicates the
Commission's duties. Requiring disclosure would thus be reasonably
ancillary to this objective.
This presents a situation distinct from that in ALA, in which
the Commission sought to regulate not the quality of a signal, but what a
device could later do with the information contained within that signal.
In ALA, the Commission's rules attempted to regulate the
operation of devices after they had received the DTV broadcast
signals.[10] Such
a rule reached far beyond the delegated authority of the Commission. By
contrast, rules on patent disclosure apply directly to the standard for
transmission, and are extremely limited in scope.
CONCLUSION
The public interest requires that the scope and cost of any mandatory
standards be clear to those who would adhere to them. When patent
royalties can be openly investigated and compared against known
benchmarks, manufacturers and consumers can be assured that licenses, and
the costs that go with them, are reasonable and non-discriminatory. Not
only does disclosure prevent cost-raising abuses, but ensuring that
essential patents are known and disclosed will prevent users of the DTV
standard from being drawn into disputes over patent scope and validity.
The time, uncertainty, and cost involved in navigating unanticipated
patent disputes would also be minimized by further transparency and
disclosure.
Respectfully submitted,
CONSUMERS UNION
FREE PRESS
MEDIA ACCESS PROJECT
NEW AMERICA FOUNDATION
PUBLIC KNOWLEDGE
Sherwin Siy
Staff Attorney
PUBLIC KNOWLEDGE
1875 Connecticut Ave., NW, Suite 650
Washington, DC 20009
(202) 518-0020
ssiy@publicknowledge.org
[1] Carl Shapiro,
Navigating the Patent Thicket: Cross Licensing, Patent Pools, and
Standard Setting, in 1 Innovation Policy and the Economy 119, 120-21
(Adam B. Jaffe et al. eds., 2001); James Bessen, Patent
Thickets: Strategic Patenting of Complex Technologies (2003)
available at http://www.researchoninnovation.org/thicket.pdf;
Dan L. Burk & Mark A. Lemley, Policy Levers in Patent Law,
89 Va. L. Rev. 1575, 1614 (2003).
[2] CUTFATT Petition for Rulemaking and Request for Declaratory Ruling
(Petition).
[3] In adopting the DTV
standard, the Commission noted:
We reiterate that adoption of this standard is premised on reasonable and
nondiscriminatory licensing of relevant patents, but believe that greater
regulatory involvement is not necessary at this time. We remain committed
to this principle and if a future problem is brought to our attention, we
will consider it and take appropriate action.
In the Matter of Advanced Television Systems and Their Impact Upon
the Existing Television Broadcast Service, Fourth Report and Order,
11 FCC Rcd. 17771 (1996) ("Fourth Report and Order") at ¶
55.
[4] Petition at 12.
[5] Petition at 15.
[6] Fourth Report and
Order at ¶ 54 (citing Notice of Proposed Rule Making
in MM Docket No. 87-268, 6 FCC Rcd 7024, 7035 (1991); Second Report
and Order/Further Notice of Proposed Rule Making in MM Docket No.
87-268, 7 FCC Rcd 3340, 3358 (1992); Memorandum Opinion and
Order/Third Report and Order/Third Further Notice of Proposed Rule
Making in MM Docket No. 87-268, 7 FCC Rcd 6924, 6982-83 (1992)).
[7] 47 U.S.C. § 303.
[8] See Metropolitan
Television Co. v. F.C.C., 289 F.2d 874 (D.C. Cir. 1961).
[9] American Library
Association v. F.C.C., 406 F.3d 689, 691-92 (D.C. Cir. 2005)
(ALA).
[10] 406 F.3d at 700.
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