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108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    108-125

======================================================================



 
       STANDARDS DEVELOPMENT ORGANIZATION ADVANCEMENT ACT OF 2003

                                _______
                                

  May 22, 2003.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1086]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1086) to encourage the development and promulgation 
of voluntary consensus standards by providing relief under the 
antitrust laws to standards development organizations with 
respect to conduct engaged in for the purpose of developing 
voluntary consensus standards, and for other purposes, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     3
Hearings.........................................................     7
Committee Consideration..........................................     7
Vote of the Committee............................................     7
Committee Oversight Findings.....................................     7
Performance Goals and Objectives.................................     7
New Budget Authority and Tax Expenditures........................     8
Congressional Budget Office Cost Estimate........................     8
Constitutional Authority Statement...............................     9
Section-by-Section Analysis and Discussion.......................     9
Changes in Existing Law Made by the Bill, as Reported............    11
Markup Transcript................................................    15

                          Purpose and Summary

    H.R. 1086, the ``National Cooperative Standards Development 
Act of 2003,'' amends the National Cooperative Research Act 
(NCRA) to extend limited antitrust protection to specified 
activities of standard development organizations (``SDOs'') 
relating to the development of voluntary consensus standards. 
These amendments preserve and promote the ability of SDOs to 
issue standards by: (1) codifying the ``rule of reason'' for 
antitrust scrutiny of their activities; (2) eliminating the 
threat of treble damages for specified standards development 
activity if SDOs disclose the scope and nature of this activity 
to the Department of Justice and Federal Trade Commission; and 
(3) providing for the recovery of attorney fees to 
substantially prevailing parties.
    As indicated above, H.R. 1086 is an amendment to the 
underlying NCRA. The NCRA, as originally enacted in 1984 and 
subsequently amended in 1993, has three operative provisions. 
The first is a simple codification of the consensus view found 
in existing law that properly structured joint venture activity 
will be judged under the rule of reason standard--a 
reasonableness test--under the antitrust laws. This provision 
of the NCRA, as further amended by H.R. 1086, would prohibit 
courts from condemning standards development activity without 
first considering its potential competitive benefits. The 
second provision is a voluntary notification system whereby a 
standards development organization may disclose the nature of 
its activities to the antitrust enforcement agencies and 
thereby receive reduced damages exposure from civil suits based 
on the activities disclosed. Compliance with the reporting 
procedures would not result in a ``certification'' that the 
standards development activity is legal under the antitrust 
laws; thus, even with disclosure, standards development 
activity later shown to be anticompetitive could still be 
challenged through the traditional dual system of private and 
public enforcement but would be subject to single damages. The 
third provision awards costs, including a reasonable attorney's 
fee, to the substantial prevailing parties under certain 
conditions.
    The notification procedure developed in the NCRA now has 
the advantage of 19 years of operational experience on the part 
of the antitrust agencies and many private parties. 
Notification also imposes fewer resource burdens on both the 
enforcement agencies and private parties seeking to utilize the 
procedure than would a certification system; unlike 
certification, notification would have a limited scope of 
initial review and no requirement of continuous monitoring by 
the agencies. Additionally, it eliminates the risk of possible 
misapplication of legal standards, since the antitrust agencies 
merely act as enforcement ``screeners'' (as with other business 
review procedures) and not as adjudicators of the legality of 
standards development activity.
    Finally, the NCRA links the disclosure process to a 
limitation on private damages against standards development 
organizations acting within the scope of their disclosure. 
Because the NCRA merely de-trebles (but does not eliminate) 
antitrust damages for injured parties, a private right of 
action is preserved.

                Background and Need for the Legislation

            STANDARD DEVELOPMENT ORGANIZATIONS AND ANTITRUST

Voluntary Consensus Standards and Competition
    Standard development organizations play a pivotal role in 
promoting free market competition. Technical standards promote 
product competition by ensuring a common interface between 
products that may be substituted for one another. ``Voluntary 
consensus standards'' are technical standards written by 
hundreds of non-profit standard developing organizations such 
as the American Society of Mechanical Engineers, the American 
Society for Testing and Materials, and the National Fire 
Protection Association. While in most countries standards are 
promulgated by government agencies, the United States has 
shifted toward a model whereby standard development 
organizations develop voluntary consensus standards for use by 
industry and various levels of government. These standards are 
then codified in industry and government codes. Technical or 
compatibility standards benefit consumers and producers alike. 
As economist Professor David Teece has noted:

        Compatibility standards are essential if products and 
        their complements are to be used in a system. Computers 
        need software, compact disc players need compact discs, 
        televisions need programs, and bolts need nuts. 
        Compatibility standards define the format for the 
        interface between the core and complementary good. . . 
        [i]f products from different manufacturers are 
        compatible, this may intensify rivalry among 
        competitors and make it easier for buyers to compare 
        product attributes. Compatibility standards also ease 
        entry for new and complementary technologies and reduce 
        the risk that a consumer will be ``stranded'' with a 
        product which is incompatible with others [m]oreover, 
        price competition is enhanced when competing 
        manufacturers can supply substitutable products.\1\
---------------------------------------------------------------------------
    \1\ David J. Teece, ``Information Sharing, Innovation and 
Antitrust,'' 62 Antitrust L.J. 465, 475 (1994).

    While standards are widely viewed to enhance competition, 
standard-setting activities might give rise to legitimate 
antitrust concerns if anti-competitive conduct like output 
restrictions, market divisions, vertical restraints, or other 
forms of exclusionary conduct occur.\2\ As the Supreme Court 
has recognized: ``[] agreement on a product standard is, after 
all, implicitly an agreement not to manufacture, distribute or 
purchase certain types of products Accordingly, private 
standard-setting organizations have traditionally been objects 
of antitrust scrutiny.'' \3\
---------------------------------------------------------------------------
    \2\ Samuel Miller, Antitrust and Standard-Setting, Prac.L. Inst., 
July 21, 2001.
    \3\ Allied Tube and Conduit Corp. v. Indian Head, Inc. 486 U.S. 
492, 500 (1988).
---------------------------------------------------------------------------
    Antitrust challenges to standard-setting activities are 
currently evaluated under the ``rule of reason''--a judicially-
created doctrine that seeks to balance the pro-competitive and 
anti-competitive market effects of a challenged practice before 
determining whether a violation of the antitrust laws has 
occurred.\4\ The rationale for this antitrust standard is that 
SDOs, as non-profits serving a cross-section of an industry, 
are unlikely to engage in anti-competitive conduct creating 
market dominance. Potential anti-competitive conduct is also 
mitigated by the manner in which voluntary consensus standards 
are developed and implemented. In order to be used by Federal 
agencies, the process of developing voluntary standards must 
adhere to principles of openness, voluntariness, balance, 
cooperation, transparency, consensus, and due process. These 
requirements were most recently articulated in OMB Circular A-
119 (February 19, 1998).\5\
---------------------------------------------------------------------------
    \4\ See Northwest Wholesale Stationers, Inc. v. Pacific Stationery 
and Printing Company, 472 U.S. 284 (1985).
    \5\ Federal Participation in the Development and Use of Voluntary 
Consensus Standards and in Conformity Assessment Activities, 63 Fed. 
Reg. 8545 (February 19, 1998); available at: 
.
---------------------------------------------------------------------------
    Notwithstanding these safeguards, treble damages may still 
be awarded against SDOs if their conduct is determined to be 
anti-competitive under the rule of reason. Until recently, 
standard-setting activities were largely directed and managed 
by government entities that were immune from antitrust 
scrutiny. Beginning in the 1990's, Congress concluded that 
government could no longer keep pace with rapid technological 
and market change, and that government-directed standard-
setting activity was often cumbersome, duplicative, and 
inefficient. To address this concern, Congress passed the 
National Technology Transfer and Advancement Act of 1995 
(``NTTAA''). \6\ NTTAA's express goal was to encourage 
government agencies to assist in the development of voluntary 
consensus standards and to adopt such standards in favor of 
often outmoded government standards whenever possible.\7\ While 
the NTTAA succeeded by almost every measure, SDOs continue to 
be vulnerable to litigation even after its passage.
---------------------------------------------------------------------------
    \6\ Pub. L. No. 104-113, 110 Stat. 775 (1995).
    \7\ H.R. Rept. No. 104-390 (1995).
---------------------------------------------------------------------------
Principal Cases
    While SDOs have been subject to various civil claims, the 
experiences of the American Society of Mechanical Engineers 
(``ASME''), the American Society for Testing and Materials 
(``ASTM'') and the National Fire Protection Association 
(``NFPA'') are particularly instructive.
            ASME v. Hydrolevel
    ASME sets standards for a variety of mechanical devices. In 
ASME v. Hydrolevel,\8\ a divided Supreme Court held an SDO 
liable under the treble damages provisions of the Sherman 
Antitrust Act.\9\ Hydrolevel, a water boiler manufacturer, 
alleged that the Chair and Vice Chair of the Subcommittee 
overseeing a section of ASME's Boiler and Pressure Vessel Code 
Committee manipulated an interpretation of ASME's Code in 
furtherance of a conspiracy in restraint of trade. Hydrolevel 
contended that this interpretation prevented it from achieving 
market penetration with a technologically superior low-water-
cut-off device. The interpretation was solicited by McDonnell 
and Miller, long the dominant manufacturer of low-water-cut-off 
devices used on heating boilers. This interpretation was then 
rendered by the Subcommittee Vice Chair, who was also a 
McDonnell and Miller employee, and subsequently transmitted 
over the signature of his employer before being approved by the 
Subcommittee Chair. Approval by the Subcommittee Chair and Vice 
Chair allegedly occurred after a meeting between these two 
individuals and representatives from McDonnell and Miller.
---------------------------------------------------------------------------
    \8\ ASME v. Hyrdolevel, 456 U.S. 556 (1982).
    \9\ 15 USC Sec. Sec. 1-7 (2002).
---------------------------------------------------------------------------
    This seemingly innocuous interpretation of ASME's Code 
addressed the use of a time delay feature which was similar to 
that being offered by Hydrolevel. It was then aggressively used 
by McDonnell and Miller's sales force to assert that 
Hydrolevel's device did not meet Boiler Code requirements. 
These representations were alleged to have thwarted an 
anticipated market breakthrough from Hydrolevel's purportedly 
superior device. Hydrolevel's low-water cut-off device was met 
with stiff market resistance because of the perception that its 
device did not comply with ASME's Boiler Code, which had been 
adopted as a regulatory requirement and given the force of law 
by most States. As a result, Hydrolevel subsequently was forced 
out of the market.
    The initial target of Hyrdolevel's antitrust suit was 
McDonnell and Miller, the purported beneficiary of the alleged 
conspiracy. ASME was perceived as a relevant, but not 
necessary, defendant. However, before trial, McDonnell and 
Miller settled with Hydrolevel, leaving ASME as the sole 
defendant. The trial judge instructed the jury that ASME could 
be found liable only if had ratified or adopted the actions of 
its Subcommittee officers in order to advance ASME's market 
interests. Notwithstanding these instructions, the jury 
returned a verdict against ASME for $3.3 million, prior to 
trebling.\10\
---------------------------------------------------------------------------
    \10\ Supra, note 8.
---------------------------------------------------------------------------
    The appeals court enunciated a novel legal theory to 
support ASME's liability under the antitrust laws by concluding 
that liability could attach if ASME's agents had acted within 
the scope of their ``apparent authority.'' \11\ On appeal, a 
sharply divided Supreme Court affirmed and amplified this view. 
In a strongly written dissent joined by Justices Rehnquist and 
White, Justice Powell stated:
---------------------------------------------------------------------------
    \11\ Id.

        The Court today adopts an unprecedented theory of 
        antitrust liability, one applied specifically to a 
        nonprofit standards-setting association but a theory 
        that could encompass a broad spectrum of our country's 
        nonprofit associations. The theory, based on the agency 
        concept of ``apparent authority,'' would impose the 
        potentially crippling burden of treble damages. In this 
        case, the Court specifically holds that standards-
        setting organizations may be held liable for the acts 
        of their agents even though the organization never 
        ratified, authorized, or derived any benefit whatsoever 
        from the fraudulent activity of the agency. [S]uch an 
        expansive rule of strict liability, at least as applied 
        to nonprofit organizations, is inconsistent with the 
        weight of precedent and the intent of Congress, 
        unsupported by the rules of agency law that the Court 
        purports to apply, and irrelevant to the achievement of 
        the antitrust laws.\12\
---------------------------------------------------------------------------
    \12\ See id. at 597.
---------------------------------------------------------------------------
            ASTM Litigation
    ASTM's recent litigation experience points to the need to 
clarify existing standards of liability for SDOs. The 
litigation, initiated by an ASTM member against ASTM and other 
members, arose after consensus standards were developed in an 
open and balanced process initiated upon the request of the 
Environmental Protection Agency (``EPA''). In particular, the 
EPA requested that ASTM develop alternative assessment 
standards to supplement its own internal inspection process for 
assessing underground storage tanks (``USTs'') more than 10 
years old. This request was issued to help implement an EPA 
regulation mandating that all USTs be upgraded, replaced, or 
eliminated by 1998.\13\ Following transparent voluntary 
standards development procedures, ASTM produced a document 
which incorporated alternative methods of assessment.
---------------------------------------------------------------------------
    \13\ 40 C.F.R. Part 280 (1994).
---------------------------------------------------------------------------
    This process was vigorously opposed by proponents of the 
existing method, tank inspectors, and tank liners. ASTM 
subsequently approved a standard--which received the full 
backing of the EPA--that enhanced competition by expanding the 
number of EPA-approved UST assessment methods from one to four. 
After 6 years of participation in the ASTM process, opponents 
of the standards filed an antitrust suit naming Corrpro 
Companies, WRA/Rogers, and ASTM as defendants. While all 
parties to this suit agreed to a sealed settlement early in 
2002, proponents of H.R. 1086 point to the chilling effect of 
this litigation on standard-setting activities by SDOs.
            Allied Tube & Conduit Corp. v. Indian Head, Inc.
    The NFPA sets and publishes fire protection standards 
through a member voting process. Standards approved by a 
majority of NFPA members are generally adopted as State law and 
codified in the National Electric Code. In 1980, this Code 
permitted the use of steel, but not plastic electrical 
conduits. The defendant was the nation's largest steel conduit 
manufacturer and a NFPA member. Allied Tube, a plastic 
electrical conduit manufacturer, had proposed the inclusion of 
plastic electrical conduits in the 1981 Code and received 
preliminary approval by an NFPA panel. Prior to the 1980 
meeting at which the final NFPA vote occurred, however, the 
defendant and other steel industry and NFPA members agreed to 
``pack'' the NFPA with new members in order to defeat the 
proposal. The proposal was rejected by a membership that 
included 230 such ``new'' members. Allied Tube successfully 
sued in Federal district court, alleging unreasonable 
restraints on trade, in violation of the Sherman Act.
    After that decision was overturned on appeal, the Supreme 
Court held for Allied Tube, rejecting defendant's argument that 
it was immune from the antitrust laws under what is commonly 
referred to as the Noerr-Pennington doctrine (which 
effectively, makes ``concerted efforts to restrain or 
monopolize trade by petitioning government officials'' immune 
from the antitrust laws). In doing so, the Court held that 
while standards development activities, by their nature, may 
provide an opportunity for anti-competitive behaviors, 
``private standard-setting programs can be pro-competitive when 
they are based on the merits of objective expert judgments and 
through procedures that prevent the standard-setting process 
from being biased by members with economic interests in 
stifling competition.'' \14\ Responding to the defendant's 
asserted defense, the Court held that the statutory adoption of 
a private standard does not determine whether that private 
entity's conduct is immune from the antitrust laws. Rather, the 
scope of protection afforded by Noerr-Pennington ``depends on 
the source, context, and nature of the anti-competitive 
restraint at issue.'' \15\
---------------------------------------------------------------------------
    \14\ Supra, note 10, at 509.
    \15\ Id. at 511.
---------------------------------------------------------------------------

            H.R. 1086, THE ``NATIONAL COOPERATIVE STANDARDS 
                       DEVELOPMENT ACT OF 2003''

    H.R. 1086 clarifies the antitrust status of qualifying 
standards developers to facilitate the development and 
promulgation of voluntary consensus standards. H.R. 1086 
eliminates the threat of treble damages, codifies the rule of 
reason for antitrust claims against these organizations, and 
provides for the recovery of attorney fees for substantially 
prevailing parties.

                                Hearings

    The Committee's Task Force on Antitrust held a hearing on 
H.R. 1086 on April 9, 2003. The following witnesses testified: 
James M. Shannon, President, National Fire Protection 
Association; David Karmol, Vice President, Public Affairs, 
American National Standards Institute; Earl Everett, Director, 
Division of Safety Engineering, Department of Labor, State of 
Georgia. Each witness affirmed the important role played by 
standards developers and expressed strong support for the bill.

                        Committee Consideration

    On May 7, 2003, the Committee met in open session and 
ordered favorably reported the bill H.R. 1086, without 
amendment by voice vote, a quorum being present.

                         Vote of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee notes that during 
the full Committee consideration of H.R. 1086 the Committee 
took no rollcall votes.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                    Performance Goals and Objectives

    H.R. 1086 does not authorize funding. Therefore, clause 
3(c)(4) of rule XIII of the Rules of the House of 
Representatives is inapplicable.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to H.R. 1086, the following estimate and comparison 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 19, 2003.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1086, the 
Standards Development Organization Advancement Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Lanette J. 
Walker (for Federal costs), who can be reached at 226-2860, and 
Victoria Heid Hall (for the state and local government impact), 
who can be reached at 225-3220.
            Sincerely,
                                       Douglas Holtz-Eakin.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 1086--Standards Development Organization Advancement Act of 2003.
    H.R. 1086 would provide certain protections from antitrust 
laws to standards development organizations (SDOs) if they 
disclose the scope and nature of the organization's activity to 
the Department of Justice and the Federal Trade Commission. 
(SDOs are nonprofit organizations that plan, develop, 
establish, or coordinate voluntary consensus standards for use 
by industry and Government.) Under antitrust laws, the 
Department of Justice and the Federal Trade Commission are 
required to publish notices of SDO activities in the Federal 
Register. CBO estimates, however, that the cost of publishing 
such routine notifications would not be significant in any year 
over the 2004-2008 period because of the small number of 
notices that are likely to be filed.
    H.R. 1086 would expand the scope of an existing preemption 
of state antitrust laws to apply to SDOs. Such a preemption is 
an intergovernmental mandate as defined in the Unfunded 
Mandates Reform Act (UMRA). However, CBO estimates that this 
mandate would impose no costs on state, local, or tribal 
governments and would not, therefore, exceed the threshold in 
UMRA ($59 million in 2003, adjusted for inflation). This bill 
contains no new private-sector mandates as defined in UMRA.
    The CBO staff contacts for this estimate are Lanette J. 
Walker (for Federal costs), who can be reached at 226-2860, and 
Victoria Heid Hall (for the state and local government impact), 
who can be reached at 225-3220. This estimate was approved by 
Peter H. Fontaine, Deputy Assistant Director for Budget 
Analysis.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8 of the Constitution.

               Section-by-Section Analysis and Discussion

Section 1. Short Title.
    Section 1 titles the bill the ``National Cooperative 
Standards Development Act of 2003.''
Section 2. Findings.
    Section 2 sets forth the findings and purposes of the bill 
as they relate to standard-developing activities and SDOs. The 
findings explain why the NCRA was originally enacted and 
amended. This section also discusses how passage of the NTTAA 
(which replaced many government-written standards with 
voluntary consensus standards) inadvertently increased the 
vulnerability of these organizations to antitrust litigation. 
This section concludes by affirming the critical importance of 
SDOs to the competitiveness of the national economy.
Section 3. Definitions.
    Section 3 amends the definitions section of the NCRA to 
include the terms: ``standards developments activity;'' 
``standard development organization;'' ``technical standard;'' 
and ``voluntary consensus standard'' (as defined in OMB 
Circular Number A-119).
    In addition, this section specifically excludes antitrust 
protections for standards development activity that involves: 
(1) the exchange of cost, sales, or pricing information not 
reasonably required for the purpose of developing a voluntary 
consensus standard, or (2) any anti-competitive activity for a 
for-profit entity that stands to financially benefit from 
participating in any standards development activity.
    The definition of ``standards development activity,'' as 
set forth in section 3(7), is broad enough to encompass any 
action taken by an SDO in ``developing, promulgating--or 
otherwise maintaining a voluntary consensus standard--including 
actions related to the intellectual property policies'' of the 
SDO. The Standards Development Organization Advancement Act is 
not intended to change or influence existing intellectual 
property policies currently utilized by various SDOs 
(including, but not limited to, patent searches), nor to affect 
or influence new intellectual property policies that may be 
developed in the future. Such policies are vitally important to 
ensuring a level playing field among all users of a standard 
that incorporates patented technology. In addition, the 
legislation is not intended to change or alter the application 
of existing antitrust laws with respect to intellectual 
property.
    The Act seeks to encourage disclosure by owners of 
intellectual property owners of relevant intellectual property 
owners and proposed licensing terms. It further encourages 
discussion among intellectual property owners and other 
interested standards participants regarding the terms under 
which relevant intellectual property owners would be made 
available for use in conjunction with the standard or proposed 
standard.
Section 4. Rule of Reason Standard.
    Section 4 amends the NCRA to extend application of the rule 
of reason to specified standards development activity. Under 
existing antitrust law, the rule of reason standard requires a 
balancing of the pro-competitive effects of alleged misconduct 
against the anti-competitive effects of particular conduct in 
determining whether a violation of the antitrust laws has 
occurred.
Section 5. Limitation of Recovery.
    Section 5 amends the NCRA to limit recovery of antitrust 
damages against SDOs if such organizations pre-disclose the 
nature and scope of the standards development activity to 
antitrust authorities. SDOs remain liable for treble damages 
under the antitrust laws if they fail to pre-disclose the 
nature and scope of standards setting activity.
Section 6. Attorneys' Fees.
    Section 6 amends the NCRA to include SDOs within the 
existing NCRA framework for awarding reasonable attorneys' fees 
to the substantially prevailing party.
Section 7. Disclosure of Standards Developments Activity.
    Section 7 amends the NCRA to require SDOs to adhere to the 
pre-disclosure framework set out in the NCRA. The pre-
disclosure model embraced by the NCRA permits defined joint 
venture activity to be disclosed to the Department of Justice 
and the Federal Trade Commission in exchange for limited 
antitrust protections. To be within the ambit of these 
protections, SDOs must disclose the scope and nature of 
standards setting activity within 90 days of the commencement 
of this activity or 90 days of enactment of this legislation, 
whichever is later. Additional disclosures of new collaborative 
activities can be submitted to the antitrust agencies to extend 
the liability protections--but such disclosures will not 
protect activity that encompasses per se violations of the 
antitrust laws. This section also states that an SDO's decision 
not to avail itself of pre-disclosure requirements will not 
create a negative inference that the SDO is engaged in anti-
competitive conduct.
Section 8. Rule of Construction.
    Section 8 states that this legislation shall not be 
construed to alter or modify the antitrust treatment of parties 
participating in standards development activity of SDOs within 
the scope of the legislation or other organizations and parties 
engaged in standard-setting processes not within the scope of 
this legislation.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

        NATIONAL COOPERATIVE RESEARCH AND PRODUCTION ACT OF 1993



           *       *       *       *       *       *       *
                              DEFINITIONS

    Sec. 2. (a) For purposes of this Act:
            (1) * * *

           *       *       *       *       *       *       *

            (7) The term ``standards development activity'' 
        means any action taken by a standards development 
        organization for the purpose of developing, 
        promulgating, revising, amending, reissuing, 
        interpreting, or otherwise maintaining a voluntary 
        consensus standard, or using such standard in 
        conformity assessment activities, including actions 
        relating to the intellectual property policies of the 
        standards development organization.
            (8) The term ``standards development organization'' 
        means a domestic or international organization that 
        plans, develops, establishes, or coordinates voluntary 
        consensus standards using procedures that incorporate 
        the attributes of openness, balance of interests, due 
        process, an appeals process, and consensus in a manner 
        consistent with the Office of Management and Budget 
        Circular Number A-119, as revised February 10, 1998.
            (9) The term ``technical standard'' has the meaning 
        given such term in section 12(d)(4) of the National 
        Technology Transfer and Advancement Act of 1995.
            (10) The term ``voluntary consensus standard'' has 
        the meaning given such term in Office of Management and 
        Budget Circular Number A-119, as revised February 10, 
        1998.

           *       *       *       *       *       *       *

    (c) The term ``standards development activity'' excludes 
the following activities:
            (1) Exchanging information among competitors 
        relating to cost, sales, profitability, prices, 
        marketing, or distribution of any product, process, or 
        service that is not reasonably required for the purpose 
        of developing or promulgating a voluntary consensus 
        standard, or using such standard in conformity 
        assessment activities.
            (2) Entering into any agreement or engaging in any 
        other conduct that would allocate a market with a 
        competitor.
            (3) Entering into any agreement or conspiracy that 
        would set or restrain prices of any good or service.

                        RULE OF REASON STANDARD

    Sec. 3. In any action under the antitrust laws, or under 
any State law similar to the antitrust laws, the conduct [of 
any person in making or performing a contract to carry out a 
joint venture shall] of--
            (1) any person in making or performing a contract 
        to carry out a joint venture, or
            (2) a standards development organization while 
        engaged in a standards development activity,
shall not be deemed illegal per se; such 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. For the purpose of determining a properly defined, 
relevant market, worldwide capacity shall be considered to the 
extent that it may be appropriate in the circumstances.

                         LIMITATION ON RECOVERY

    Sec. 4. (a) Notwithstanding section 4 of the Clayton Act 
(15 U.S.C. 15) and in lieu of the relief specified in such 
section, any person who is entitled to recovery on a claim 
under such section shall recover the actual damages sustained 
by such person, interest calculated at the rate specified in 
section 1961 of title 28, United States Code, on such actual 
damages as specified in subsection (d) of this section, and the 
cost of suit attributable to such claim, including a reasonable 
attorney's fee pursuant to section 5 of this Act if such 
claim--
            (1) results from conduct that is within the scope 
        of a notification that has been filed under section 
        6(a) of this Act for a joint venture, for a standards 
        development activity engaged in by a standards 
        development organization against which such claim is 
        made, and

           *       *       *       *       *       *       *

    (b) Notwithstanding section 4C of the Clayton Act (15 
U.S.C. 15c), and in lieu of the relief specified in such 
section, any State that is entitled to monetary relief on a 
claim under such section shall recover the total damage 
sustained as described in subsection (a)(1) of such section, 
interest calculated at the rate specified in section 1961 of 
title 28, United States Code, on such total damage as specified 
in subsection (d) of this section, and the cost of suit 
attributable to such claim, including a reasonable attorney's 
fee pursuant to section 4C of the Clayton Act if such claim--
            (1) results from conduct that is within the scope 
        of a notification that has been filed under section 
        6(a) of this Act for a joint venture, for a standards 
        development activity engaged in by a standards 
        development organization against which such claim is 
        made, and

           *       *       *       *       *       *       *

    (c) Notwithstanding any provision of any State law 
providing damages for conduct similar to that forbidden by the 
antitrust laws, any person who is entitled to recovery on a 
claim under such provision shall not recover in excess of the 
actual damages sustained by such person, interest calculated at 
the rate specified in section 1961 of title 28, United States 
Code, on such actual damages as specified in subsection (d) of 
this section, and the cost of suit attributable to such claim, 
including a reasonable attorney's fee pursuant to section 5 of 
this Act if such claim--
            (1) results from conduct that is within the scope 
        of a notification that has been filed under section 
        6(a) of this Act for a joint venture, for a standards 
        development activity engaged in by a standards 
        development organization against which such claim is 
        made, and

           *       *       *       *       *       *       *

    (e) Subsections (a), (b), and (c) shall not be construed to 
modify the liability under the antitrust laws of any person 
(other than a standards development organization) who--
            (1) directly (or through an employee or agent) 
        participates in a standards development activity with 
        respect to which a violation of any of the antitrust 
        laws is found,
            (2) is not a fulltime employee of the standards 
        development organization that engaged in such activity, 
        and
            (3) is, or is an employee or agent of a person who 
        is, engaged in a line of commerce that is likely to 
        benefit directly from the operation of the standards 
        development activity with respect to which such 
        violation is found.
    [(e)] (f) This section shall be applicable only if the 
challenged conduct of a person defending against a claim is not 
in violation of any decree or order, entered or issued after 
October 11, 1984,, in any case or proceeding under the 
antitrust laws or any State law similar to the antitrust laws 
challenging such conduct as part of a joint venture, or of a 
standards development activity engaged in by a standards 
development organization.

                            ATTORNEY'S FEES

    Sec. 5. (a) Notwithstanding sections 4 and 16 of the 
Clayton Act, in any claim under the antitrust laws, or any 
State law similar to the antitrust laws, based on the 
conducting of a joint venture, or of a standards development 
activity engaged in by a standards development organization, 
the court shall, at the conclusion of the action--
            (1) * * *

           *       *       *       *       *       *       *

    (c) Subsections (a) and (b) shall not apply with respect to 
any person who--
            (1) directly participates in a standards 
        development activity with respect to which a violation 
        of any of the antitrust laws is found,
            (2) is not a fulltime employee of a standards 
        development organization that engaged in such activity, 
        and
            (3) is, or is an employee or agent of a person who 
        is, engaged in a line of commerce that is likely to 
        benefit directly from the operation of the standards 
        development activity with respect to which such 
        violation is found.

                      DISCLOSURE OF JOINT VENTURE

    Sec. 6. (a)(1) Any party to a joint venture, acting on such 
venture's behalf, may, not later than 90 days after entering 
into a written agreement to form such venture or not later than 
90 days after October 11, 1984, whichever is later, file 
simultaneously with the Attorney General and the Commission a 
written notification disclosing--
            [(1)] (A) the identities of the parties to such 
        venture,
            [(2)] (B) the nature and objectives of such 
        venture, and
            [(3)] (C) if a purpose of such venture is the 
        production of a product, process, or service, as 
        referred to in section 2(a)(6)(D), the identity and 
        nationality of any person who is a party to such 
        venture, or who controls any party to such venture 
        whether separately or with one or more other persons 
        acting as a group for the purpose of controlling such 
        party.
Any party to such venture, acting on such venture's behalf, may 
file additional disclosure notifications pursuant to this 
section as are appropriate to extend the protections of section 
4. In order to maintain the protections of section 4, such 
venture shall, not later than 90 days after a change in its 
membership, file simultaneously with the Attorney General and 
the Commission a written notification disclosing such change.
    (2) A standards development organization may, not later 
than 90 days after commencing a standards development activity 
engaged in for the purpose of developing or promulgating a 
voluntary consensus standards or not later than 90 days after 
the date of the enactment of the Standards Development 
Organization Advancement Act of 2003, whichever is later, file 
simultaneously with the Attorney General and the Commission, a 
written notification disclosing--
            (A) the name and principal place of business of the 
        standards development organization, and
            (B) documents showing the nature and scope of such 
        activity.
Any standards development organization may file additional 
disclosure notifications pursuant to this section as are 
appropriate to extend the protections of section 4 to standards 
development activities that are not covered by the initial 
filing or that have changed significantly since the initial 
filing.
    (b) Except as provided in subsection (e), not later than 30 
days after receiving a notification filed under subsection (a), 
the Attorney General or the Commission shall publish in the 
Federal Register a notice with respect to such venture that 
identifies the parties to such venture and that describes in 
general terms the area of planned activity of such venture, or 
a notice with respect to such standards development activity 
that identifies the standards development organization engaged 
in such activity and that describes such activity in general 
terms. Prior to its publication, the contents of such notice 
shall be made available to the parties to such venture or 
available to such organization, as the case may be.

           *       *       *       *       *       *       *

    (d) Except with respect to the information published 
pursuant to subsection (b)--
            (1) * * *
            (2) all other information obtained by the Attorney 
        General or the Commission in the course of any 
        investigation, administrative proceeding, or case, with 
        respect to a potential violation of the antitrust laws 
        by the joint venture, or the standards development 
        activity, with respect to which such notification was 
        filed,
shall be exempt from disclosure under section 552 of title 5, 
United States Code, and shall not be made publicly available by 
any agency of the United States to which such section applies 
except in a judicial or administrative proceeding in which such 
information and material is subject to any protective order.
    (e) Any [person who] person or standards development 
organization that files a notification pursuant to this section 
may withdraw such notification before notice of the joint 
venture involved is published under subsection (b). Any 
notification so withdrawn shall not be subject to subsection 
(b) and shall not confer the protections of section 4 on any 
person or any standards development organization with respect 
to whom such notification was filed.

           *       *       *       *       *       *       *

    (g)(1) Except as provided in paragraph (2), for the sole 
purpose of establishing that a person or standards development 
organization is entitled to the protections of section 4, the 
fact of disclosure of conduct under section 6(a) and the fact 
of publication of a notice under section 6(b) shall be 
admissible into evidence in any judicial or administrative 
proceeding.

           *       *       *       *       *       *       *


                           Markup Transcript


                            BUSINESS MEETING

                         WEDNESDAY, MAY 7, 2003

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:00 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
    Chairman Sensenbrenner. The Committee will be in order. A 
quorum is present. Pursuant to notice, I now call up the bill, 
H.R. 1086, the ``Standards Development Organization Advancement 
Act of 2003'' for purposes of markup and move its favorable 
recommendation to the full House. Without objection, the bill 
will be considered as read and open for amendment at any point.
    [The bill, H.R. 1086, follows:]
      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


    Chairman Sensenbrenner. The Chair recognizes himself for 
purposes of an explanation. This bill fosters the critical role 
of standards development while strongly reaffirming the central 
role of our Nation's antitrust statutes and preserving and 
promoting free market competition. Standards development 
organizations play a pivotal role in promoting this 
competition. Seven years ago, the Congress passed legislation 
requiring the use of voluntary consensus standards in Federal 
procurement and regulatory activities.
    While this legislation has encouraged Government use of 
private development standards, it also has increased the 
vulnerability of private standard developers of the antitrust 
litigation.
    This bill addresses this problem, and it simply limits 
recovery against standard developments organizations, the 
actual economic damages, while codifying the rule of reason for 
antitrust scrutiny of their activities.
    I am pleased that the legislation has attracted the 
cosponsorship of the Ranking Member, Mr. Conyers, as well as 12 
Members of the Committee.
    I yield the balance of my time now to Mr. Forbes, who 
chaired the Antitrust Task Force hearing on this legislation 
for any comments he wishes to make.
    Mr. Forbes. Thank you, Mr. Chairman, and I am pleased also 
to lend my support to H.R. 1086, the ``National Cooperative 
Standards Development Act of 2003.'' Standards developing 
organizations play critical but sometimes overlooked roles in 
promoting market-based competition. Without technical product 
standards, there would be no compatibility or substitutability 
among competing consumer products and public health and safety 
would be severely compromised.
    Until recently, standards were often developed by the 
Federal Government; however, the rapid pace of technological 
innovation makes nongovernment standard setting activity more 
efficient and more effective. It is important to stress that 
this legislation does not create an antitrust exemption for 
standards developers.
    The bill is a narrowly tailored commonsense approach to 
promoting activity that enhances product choice and consumer 
welfare.
    Mr. Chairman, I commend you for your leadership on this 
issue, and I urge my colleagues to support this bipartisan 
legislation.
    I yield back the balance of my time.
    Chairman Sensenbrenner. The Chair yields back the balance 
of his time.
    Without objection, all Members may include opening 
statements in the record at this point.
    The gentleman from Virginia has an opening statement?
    Mr. Scott. Mr. Chairman, apparently I didn't get the word 
about attendance. I had a question, Mr. Chairman. If someone 
would respond, it seems to me that if you have got a group 
setting standards, that there would be much less likelihood for 
antitrust behavior than if they didn't form standards that 
everybody could comply with. I guess my question is: How, if 
this group is actually doing its job, how would there be any 
liability?
    Chairman Sensenbrenner. Well, people who don't like the 
standards that the group comes up with, I guess, would possibly 
have a cause of action, and what this bill does is simply limit 
the plaintiffs to the actual economic damages that they could 
prove, rather than all of the punitive measures for antitrust 
violations.
    Mr. Scott. Reclaiming my time. That is, if they can prove 
anything?
    Chairman Sensenbrenner. Yes.
    Are there amendments? Are there amendments? If there are no 
amendments, without objection, the previous question is 
ordered. A reporting quorum not being present, we will vote on 
reporting this bill when a reporting quorum appears.
    [Intervening business.]
    Because we now have a reporting quorum present, the Chair 
will put the questions on the bills that have been marked up 
previously on which the previous question has been ordered 
relative to a motion to report.
    The first motion is on reporting favorably H.R. 1086, the 
``Standards Development Organization Advancement Act of 2003.'' 
The Chair notes the presence of a reporting quorum. The 
question occurs on the motion to report the bill favorably.
    Those in favor will say aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it. The motion to 
report favorably is adopted.
    Without objection, the Chairman is authorized to move to go 
to conference pursuant to House rules. Without objection, the 
staff is directed to make any technical and conforming changes, 
and all Members will be given 2 days, as provided by the rules, 
in which to submit additional dissenting, supplemental or 
minority views.