The Standard Dilemma

A. Jose Cortina, of Daniels, Daniels & Verdonik, P.A., points out a dilemma facing technology companies when it comes to participating in standard-setting.  One the one hand, it is beneficial to any company to have it's patented technologies become part of a standard.  This ensures compatibility and requires consumers to purchase other proprietary components from the source company.  Cortina suggests that Microsoft has taken this approach. 

On the other hand, most standard setting organizations require disclosure of all patents existing or pending on technologies submitted for consideration.  Standard-setting organizations (SSO) also require a company whose technology becomes part of a standard to license that technology for a reasonable and non-discriminatory royalty (RAND License). The existence of a RAND license could trigger "most favored nations" clauses in private license agreements.  "Most favored nations" clauses require that the patentee provide the technology to the licensee on terms at least as favorable as the most favorable terms licensed to anyone else.  Meanwhile, Cortina suggests, even without a "most favored nations" clause, a court in an infringement suit may see the terms of a RAND license as a benchmark for damages in a non-standards suit.