EU official wants disclosure to end patent ambush

PARIS (Reuters) - A top European Commission official said on Tuesday the help of international bodies is needed to prevent companies from sneaking patented ideas into industry standards, resulting in higher prices for consumers.

Philip Lowe, director general for competition, said international standards organizations should seek full disclosure during negotiations "so you don't actually open the envelope afterwards and discover some nasty surprise in it."

Lowe said he was not referring to any specific case.

The Commission is investigating chip maker Rambus (RMBS.O) and mobile phone maker Qualcomm (QCOM.O) in separate cases over potential illegal overcharges after their ideas became part of worldwide standards.

Lowe told the Reuters Technology, Media and Telecoms Summit in Paris that everyone must know "not just the technical parameters but also the subsequent cost of licensing any (patents) necessary to implement the standard".

He said by telephone from Brussels that companies must also be clear about what royalty rates they would charge if their patented ideas were adopted.

"We're talking about advocating for this principal to be adopted by standards setting organizations in Europe and worldwide," he said.

"Obviously we'd be interested in a dialogue with any organization which felt that they would be sympathetic to this idea."

Standards have always been an essential part of industry, for everything from the width of railroad tracks to broadcasting specifications. Some of these are worked out by companies, then blessed by standards organizations.

Once standards are in place it becomes impractical and prohibitively expensive to depart from them.

If standards setting groups took Lowe's approach it could prevent future cases like the two now under review by Brussels.

The competition watchdog is investigating Qualcomm to determine if it charges unfair and discriminatory prices for the use of its patented ideas in third generation phones.

Qualcomm's practices have prompted complaints from Ericsson (ERICb.ST), Nokia (NOK1V.HE), Texas Instruments (TXN.N), Broadcom (BRCM.O), NEC (6701.T), Panasonic and other mobile phone and chipset makers.

Qualcomm denies wrongdoing. Lowe said the investigation was active and ongoing.

U.S.-based Rambus designs, develops and licenses microchip connection technologies used in dynamic random access memory (DRAM) semiconductors vital for PCs and other electronic goods.

The Commission said while DRAM standards were hammered out, Rambus deceptively failed to disclose patents. Otherwise Rambus could not have charged high royalties in a "patent ambush".

The Californian company has argued patent abuse can be claimed only under exceptional circumstances and that U.S. industry body JEDEC, which set the DRAM standards, lacked defining detail in its patent policy.

In April, a U.S. appeals court in Washington overturned a Federal Trade Commission order that had accused Rambus of antitrust violations in the case.

(For summit blog: summitnotebook.reuters.com/ )

(Editing by James Regan)