The National Cooperative Research and Production Act as amended by the Standards Development Organization Advancement Act of 2004
The National Cooperative Research and Production Act (NCRP) 15 U.S.C. §§ 4301-4305 as amended by the Standards Development Organization Advancement Act of 2004 clarifies the substantive application of the U.S. antitrust laws to joint research and development activities and joint production activities and standards developing organizations.
Originally drafted to encourage research and development by providing a special antitrust regime for research and development joint ventures, the NCRPA requires U.S. courts to judge the competitive effects of a challenged joint R&D or joint production venture, or a combination of the two, in properly defined relevant markets and under a rule-of-reason standard. The NCRPA also provides degree of antitrust shelter to consortia and standards developing organizations who follow the NCRP notification procedures.
The National Cooperative Research and Production Act of 1993 ("NCRP" or "Act"), 15 U.S.C. §§ 4301-06, is designed to promote innovation, facilitate trade, and strengthen the competitiveness of the United States in world markets by
(1) clarifying the applicability of the rule of reason standard to the antitrust analysis of joint ventures and standards development organizations ("SDOs") while engaged in a standards development activity,
(The statute specifies that the conduct "shall be judged on the basis of its reasonableness, taking into account all relevant factors affecting competition, including, but not limited to, effects on competition in properly defined, relevant research, development, product, process, and service markets.")
(2) providing for the possible recovery of attorneys fees by joint ventures and SDOs that are prevailing parties in damage actions brought against them under the antitrust laws, and
3) establishing a procedure under which joint ventures and SDOs that notify the Department of Justice and Federal Trade Commission ("FTC") of their cooperative ventures and standards development activities are liable for actual, rather than treble, antitrust damages. However, this damage limitation provision does not apply to a joint venture's production of a product, process, or service unless (1) the principal facilities for such production are located in the United States or its territories, and (2) each person who controls any party to such venture (including such party itself) is a United States person or a foreign person from a country whose law accords antitrust treatment no less favorable to United States persons than to such country's domestic persons with respect to participation in joint ventures for production. Many US consortia filed under the National Cooperative Research and Production Act of 1993 in order to limit their penalties and liabilities for costs for standards activities. See Notifications under the NCRP
The statute limits the monetary relief that may be obtained in private civil suits against the participants in a notified venture to actual rather than treble damages, if the challenged conduct is within the scope of the notification. With respect to joint production ventures, the National Cooperative Production Amendments of 1993 provide that the benefits of the limitation on recoverable damages for claims resulting from conduct within the scope of a notification are not available unless (1) the principal facilities for the production are located within the United States or its territories, and (2) "each person who controls any party to such venture (including such party itself) is a United States person, or a foreign person from a country whose law accords antitrust treatment no less favorable to United States persons than to such country's domestic persons with respect to participation in joint ventures for production."
The legislative history of the NCRP indicates that the phrase "whose law" is intended to include "not only a country's domestic antitrust law but also all international agreements and other binding obligations to which that country and the United States are parties." Thus, a country that is a party to certain international agreements with the United States such as treaties of Friendship, Commerce and Navigation, Bilateral Investment Treaties, Free Trade Agreements, and various OECD instruments, satisfies the requirements of the Act. This includes most countries.
The Standards Development Organization Advancement Act of 2004 (the Act) amended provisions of the National Cooperative Research and Production Act of 1993, to extend the same antitrust protections to standards development organizations (SDOs) while those organizations are engaged in standards development activity. The Act states that the term SDO does not include parties participating in the SDO.
The Act provides that the antitrust rule of reason applies to SDOs while they are engaged in standards development activities, and provides special rules for attorneys' fees in any antitrust case challenging a SDOs standards development activity. The rule of reason and attorneys' fees provisions of the Act automatically apply to all SDOs covered by the Act.
The Act also provides SDOs with the opportunity to limit their antitrust liability for standards development activities to actual, as opposed to treble, damages. SDOs must file a proper notification with the Federal Trade Commission (FTC) and the Department of Justice (DOJ) to obtain the liability limiting protections provided by the Act. Proper notifications should:Be filed not later than 90 days after the date of the enactment of the Act, or 90 days after commencing a standards development activity engaged in for the purpose of developing or promulgating voluntary consensus standards;
Disclose the name of the SDO and its principal place of business;Provide documents showing the nature and scope of the standards development activity;