EC May Soften Antitrust Safe Harbor for Standards-Setting, Official Says

The European Commission, in the final version of guidelines for standards-setting activity, due by year-end, may loosen requirements for safe-harbor protection from competition laws and make clearer that it isn’t the only way to avoid legal trouble, a commission official said Wednesday. The changes will respond to criticisms of the commission’s draft guidelines on standard-setting, issued in May, said the official, Per Hellstrom, the head of the EC’s antitrust unit on information technology, the Internet and consumer electronics. A large number of comments were filed before a June 25 deadline, Hellstrom said.

"There has been a strong response” in the comments, Hellstrom said on an American Bar Association teleconference. “They do point in different directions: ‘Do more’ versus ‘do less.’ It will be difficult to satisfy all.” But many comments were “extremely constructive and therefore likely to influence the formal outcome of the process,” he said. The EC drafters are “reflecting” on “whether the safe harbor could be made more flexible” than in the current version and “whether we could offer more guidance outside the safe harbor,” Hellstrom said.

Several criticisms were advanced on the teleconference by Damien Geradin, a Howrey attorney in Brussels who represented Qualcomm in a four-year commission investigation of allegations of abusing standards-setting. Strongly supporting the draft on the panel was Maurits Dolmans, a Cleary Gottlieb lawyer in Brussels, who has brought competition complaints against Qualcomm, Microsoft and others under European law. “I agree with almost everything in the guidelines,” which “strike a very careful and thoughtful balance,” he said.

The new guidelines would replace ones adopted in 2001 and expiring Dec. 31, speakers said. The new ones have been in the works since 2008, Hellstrom said. They reflect the commission’s work in cases involving Qualcomm, Rambus and other technology companies, said moderator Richard Wolfram, a New York antitrust lawyer. The changes don’t represent “a radical shift in policy,” Hellstrom said.

The guidelines aim to improve handling of the delicate problem under competition law of industry standard-setting in technology, speakers said. They said standards can greatly benefit innovation and market contention. But standards also can promote anti-competitive collusion, and domination by companies that discriminate among licensees or exploit patents that haven’t been disclosed adequately or early enough.

The conditions that the draft guidelines would set to qualify for the safe harbor are openness of standards-setting work to all those that want to take part; disclosure in the process of all material information including about patents; and fair, reasonable and nondiscriminatory licensing terms, Hellstrom said.

The central point of the argument was whether the draft safe-harbor conditions, though framed as a protection from competition-law liability, would in practice serve as prescriptions that would be too rigid. Hellstrom and Dolmans emphasized that the safe harbor will be optional and that European law gives standards bodies and companies other grounds to avoid liability. It’s not “the role of the competition authority to prescribe the specific rules that a standards body must adopt,” Hellstrom said. “There is no one-size-fits-all. … We don’t want to kill the goose that lays the golden egg."

The safe harbor will add a layer of legal protection for standards bodies and companies, Hellstrom said. “It’s difficult for me to see how that would worsen the situation for companies” and “be seen as negative."

But Geradin said the conditions would be de facto requirements. Cautious standard-setting bodies will feel obliged to adhere to the conditions, because the guidelines don’t discuss the other legal outs. The patent-disclosure language should be tightened, he said. The licensing condition “may amount to compulsory licensing, which is actually troubling,” Geradin said. The draft’s flaws could threaten innovation, he said. Hellstrom said the final version of the guidelines probably will add a discussion of the other grounds for avoiding liability.

Another point of criticism in the consultation comments concerned the clarity and strictness of requirements for companies in standards-setting activity to disclose their patent interests, Hellstrom said. “Of course, one could make clearer” what the “good faith, best-efforts disclosure” contemplated in the draft guidelines requires, he acknowledged.