The Rise and Limits of Self-Regulation
New Horizons in Competition Law and Economics series
Chapter 6: Unilateral conduct under standards
One of the first 'patent ambush' incidents that came to the authorities' attention with reference to the 'new economy' seems to have been In re Dell. The FTC action against Dell Computers arose out of Dell's membership of the Video Electronics Standards Association (VESA), an SSO comprising computer hardware and software manufacturers. Dell, together with the other members of the SSO, approved a new technology standard for computers (VL-Bus), certifying that the standard did not infringe any of its intellectual property rights. The bus carries information between the computer's central processing unit and the computer's peripheral devices such as a hard-disk drive, a video-display terminal, or a modem. Once the new standard was successfully incorporated and implemented, Dell informed certain VESA members that, by manufacturing computers under the standard, they violated certain patent rights held by Dell. Hence, they needed to enter into a licence agreement with Dell or face the risk of an injunction from the courts. The FTC alleged that Dell's practices constituted unfair competition in violation of Sec. 5 of the FTC Act. Dell entered into a consent order, agreeing not to enforce its patent rights against the standard. In the following Re Union Oil Company of California('Unocal'), the FTC alleged that in communications with the California Air Resources Board (CARB) and private parties, Unocal failed to disclose that it held pending patent applications that could be relevant to the emission standards and requirements it was promoting for adoption.
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