Stroock Special Bulletin
“Standards Capture: A Threat to Standard Setting Organizations?”
How would you react if your company participated in a Standard Setting Organization (an “SSO”) with your competitors and developed your products based on the adopted standards, only to find that one of the participants in the SSO, who influenced the SSO to select a standard requiring the use of that member’s intellectual property, has taken legal action to enforce its patents against (and extract excessive royalties from) your company and anyone else in the industry who has conformed their products to the standards adopted by the SSO.
This scenario, known as “standards capture,” has occurred all too frequently in recent years. A standard is captured when a rogue member of an SSO influences the SSO to select a standard requiring the use of that member’s intellectual property, with the intention of extracting excessive royalty payments from the industry once the standard is adopted industry-wide. Once the standard is widely adopted, the rogue member may assert its patent rights against industry participants, thus “holding up” the industry that adopted the standard. This can be a no-win situation for the industry: agree to arguably excessive royalty payments, incur the cost and delay of adopting a new standard, or face costly patent litigation.