In a case closely watched by intellectual property holders, in April the U.S. Court of Appeals for the D.C. Circuit provided new guidance on the potential antitrust consequences of the failure to disclose patent rights during a standard-setting proceeding. In Rambus Inc. v. Federal Trade Commission, the court held that the intentional nondisclosure of patent rights on technology eventually incorporated into an industry-wide standard by a standard-setting organization (SSO), even if it prevents up-front royalty negotiations, does not harm competition. Consequently, it does not constitute a violation of the Sherman Act.
Surprisingly, the D.C. Circuit’s opinion appears to endorse the strategic nondisclosure of IP to an SSO. Many IP holders will find this approach extremely tempting given that, as a business strategy, it has many virtues. However, both conflicting opinions in other jurisdictions and the zeal with which the FTC has prosecuted the Rambus case suggest that it may be premature to follow this direction with gusto. The potential legal risks of such an approach are still substantial.
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