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Rambus Inc. isn’t the only corporation that’s currently in the cross hairs of the Federal Trade Commission for possible antitrust violations. Just months after filing suit against the chip designer for alleged anti-competitive practices, the FTC found another target. In a March 4 complaint against Union Oil Co. of California (Unocal), the FTC accuses the El Segundo, Calif.–based oil refiner of a similar act. The FTC alleges that while Unocal was working openly with competitors to develop a cleaner-burning gasoline (as required under California law), it was secretly patenting the very standard the group was creating. The FTC estimates the cost to consumers could amount to “hundreds of millions of dollars per year.” Unocal denies any wrongdoing. The FTC chest-beating over the last several months is unusual — and potentially worrisome to standards-setting groups. Standards-setting bodies, including both private and government-backed entities, are responsible for determining the makeup of any given product, from drinking water to DVD players. There are about 93,000 standards in use in the United States, slightly more than half of which were government-developed, according to the American National Standards Institute. The groups that develop them are largely self-regulatory, with each body free to choose its own rules and procedures. The only time in recent memory that the FTC has gone after a company for bad standards-setting behavior was in the mid-1990s, when it punished Dell Computer Corp. for allegedly belonging to a group but not disclosing a relevant patent on the technology being developed. So why Rambus and Unocal — and why now? There’s no clear consensus, but industry experts and regulators agree that the pace of technological advances — and the huge financial stakes this involves — has made standards-setting bodies more critical than ever. Richard Dagen, assistant director for the FTC’s anti-competitive practices division, acknowledges that the agency is responding to a noticeable increase in complaints from companies that attend standards-setting meetings and those that then license patented standards. Another theory holds that the FTC is looking to fix problems raised in the Dell case. In 1995 Dell entered into a consent decree where it agreed not to seek royalties on any relevant patents that weren’t disclosed when the company sat on an industry committee. (Dell says it had stopped seeking licenses even before the FTC took action.) But a key issue never got resolved in the case: whether the Dell engineer who participated in the standards-setting body even knew about the patent he was accused of withholding and, if he didn’t, whether the company should be punished for that. The Dell consent decree left companies that sit on these industry bodies, especially businesses with thousands of patents, wondering what their disclosure duties are. There’s also a fundamental debate over whether the standards-setting system itself is the problem. Mark Patterson, a professor at Fordham University School of Law, thinks the rules should be clearer about when a company sitting on these committees should disclose patents, but he says finding a way to do this won’t be easy. For one thing, there are competing interests. Standards-setting bodies worry that companies won’t participate if they have to disclose too much of their IP strategy or that they might be subject to government scrutiny. For another, court cases have exposed standards-setting bodies to their own antitrust risks. Bottom-line, there needs to be a balance between making sure companies behave when working together to develop standards and, at the same time, giving them enough reasons to participate. “There’s got to be a better approach,” says Patterson, “[but everyone's] incentives are distorted.”

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