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    <title>FSFE - Analysis on balance - Standardisation and Patents - by Georg Greve</title>
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<p align="right">[ <a href="ps.en.pdf">PDF version (94k)</a> ]</p>

<h1 align="center">Analysis on balance:<br />Standardisation and Patents</h1>

<p class="indent"><em>This paper provides an analysis of the
    interaction of patents and standards and finishes with some
    concrete proposals to address the most pressing issues. It was
    written under the assumption of very little background knowledge,
    and therefore provides some of the background necessary to
    understand the issue. An expert in the field should be able to
    skip the Background section.
</em></p>

<p align="right"><em>
-- <b><a href="/about/greve/">Georg C. F. Greve</a></b>
<br />FSFE, President
<br />2. December 2008
</em></p>

<h2>Introduction</h2>

<p>Software patents have been a hugely controversial debate, with
  lines of battle drawn primarily between large corporations holding
  large patent portfolios and engaged in multiple cross-licensing
  deals, and the Have-Nots, entrepreneurs, small and medium
  enterprises, and software users from the student using GNU/Linux all
  the way to institutional users in governments.</p>

<p>This debate got a lot quieter with the rejection of the software
  patent directive in 2005. Its place in the headlines was taken by
  other debates, such as standardisation. Open Standards have been a
  buzzword for years, but never has this term been discussed more
  intensively.</p>

<p>On Wednesday, 19 November 2008, both debates met in Brussels at a
  workshop titled
  "<a href="http://ec.europa.eu/enterprise/newsroom/cf/itemshortdetail.cfm?item_id=3371">IPR
  in ICT standardisation</a>", although "Patents in ICT
  standardisation" would have been a more suitable name because the
  discussion was exlusively about the interaction of patents and
  ICT standardisation.</p>

<p>Patents and standards are fundamentally at odds, so many people
  call for a balance between patents and standards. This article
  comments upon the workshop and explains why standards should prevail
  over patents at least in the area of software.</p>

<h2>Background: Patents &amp; Standards 101</h2>

<p>The idea of patents is not new. Its roots lie in the royal
  "litterae patentes" that conferred exclusive rights to certain
  people. Democratic governments eventually took the position of the
  monarchs, and patent legislation has evolved over time, but the
  fundamental characteristics of what is a patent have not
  changed.</p>

<p>Succinctly put, a patent is a monopoly granted for a limited time
  by the government on behalf of its citizens.</p>

<p>The term monopoly has many negative connotations, and for good
  reason. A monopoly stifles innovation and increases price due to the
  absence of competition. On these grounds a monopoly is generally
  understood to be to the detriment of economy and society. It is not
  illegal to obtain a monopoly, but society has a legitimate interest
  in limiting abuse of the power that a monopoly confers, and seeks to
  achieve this through antitrust law.</p>

<p>The monopoly right created by a patent brings with it all side
  effects of a monopoly. It is granted by the state because it is
  understood that the absence of patents might prevent publication of
  breakthroughs, which is understood to be more harmful than granting
  the patent monopoly.</p>

<p>This initial patent deal is based upon disclosure, so that others
  can learn from and build upon a new idea. Lack of useful disclosure
  or advancement of public knowledge translates into the granting of a
  monopoly with no return for society.</p>

<p>Like patents, standards are closely related to disclosure. The root
  of the word standard appears to go back to heraldry, where it refers
  to a symbol that is used to make a rallying point visible in
  battle.</p>

<p>Modern use of the term keeps that meaning of publicly visible point
  of reference, although it has been transferred to other areas. So
  among other things it is understood as "<em>something established by
  authority, custom, or general consent as a model or example</em>" or also
  "<em>a structure built for or serving as a base or support.</em>"
  (from <a href="http://www.merriam-webster.com/dictionary/standard">Merriam-Webster
  On-line dictionary</a>).</p>

<p>In Information and Communication Technologies, a standard has both
  the above meanings. According to
  the <a href="http://www.bsi-global.com/en/Standards-and-Publications/About-standards/What-is-a-standard/">British
  Standards Institution</a> (BSI), a standard is "<em>an agreed, repeatable
  way of doing something. It is a published document that contains a
  technical specification or other precise criteria designed to be
  used consistently as a rule, guideline, or definition. [...] Any
  standard is a collective work. Committees of manufacturers, users,
  research organizations, government departments and consumers work
  together to draw up standards that evolve to meet the demands of
  society and technology. [...]</em>"</p>

<p>The underlying idea is that a standard establishes common ground,
  it provides the means for interoperability and competition. This is
  especially true for ICT due to their strong networking effects. If
  all participants in an ICT market adhere to the same standards and
  make an effort to guarantee interoperability, not only can customers
  choose freely between various products and services, they can also
  exchange information with one another without problems.</p>

<p>In contrast, absence or failure of standardisation warps networking
  effects in a way that monopolisation becomes almost certain. Users
  of one product or service could only interoperate with users of the
  same product or service.  Over time, one solution would attain such
  a large user base that other users are de-facto left with the choice
  to join this group, or be unable to communicate fully with the
  majority of users. This could for instance be achieved by bundling
  software with a predominant hardware platform.</p>

<p>So standards are largely an instrument to enable competition for
  the public benefit. The purpose of standards is intrinsicly
  anti-monopolistic.</p>

<p>It is also pro-innovative. Since derivation from a standard
  automatically breaks it, standardisation and innovation seem opposed
  goals, and to some extent they are. But where all changes are done
  in consensus between implementors, the result is an updated version
  of the standard available to all. The second path is innovation on
  top of the standard, using the standard as a base for innovation
  rather than innovating inside the standard.</p>

<p>Due to its global, consensus-driven nature, the first process is
  comparatively slow. Another problem is the substantial barrier to
  entry into the standards process. As a result, large companies are
  overrepresented in comparison to small and medium enterprises (SME).</p>

<p>The second path is open to everyone, private person, SME, or large
  industry. It is also limited only by the speed of development of the
  team making the innovation. If the innovation was made by just one
  party, there will be a temporary monopoly. But given a certain
  maturity, the innovation is then likely to be formalised into a
  standard again, forming the base for the next innovation to be built
  on top.</p>

<p>While the first path allows primarily for slow, small improvements,
  the second path allows for full participation of the economic
  majority and is much better suited for groundbreaking ideas and
  arguably the more important to protect for society.</p>

<h2>Conflict: Fundamentally opposed instruments</h2>

<p>The fundamentally different goals for patents and standards
  surfaced multiple times during the debate, for instance in the
  speech of Mr Karsten Meinhold, chairman of the ETSI IPR Special
  Committee,
 <a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3635&amp;userservice_id=1&amp;request.id=0">
who summarised it</a> as "<em>IPRs and Standards serve different
  purposes: IPRs are destined for private exclusive use, Standards are
  intended for public, collective use</em>".</p>

<p>Both patents and standards derive their justification from the
  public benefit, yet upholding one deprives the other of its
  function. Standards seek to counteract monopolies, patents establish
  them. Or, as Tomoko Miyamoto, Senior Counsellor of the Patent Law
  Section in the World Intellectual Property Organization (WIPO) said
  in 
<a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3633&amp;userservice_id=1&amp;request.id=0">
her presentation</a>:
  Patent thickets and patent hold-ups may arise from
  certain forms of legitimate exploitation of the exclusive rights
  conferred by patents.</p>

<p>In other words: Conferring these exclusive rights is the intended
  function of the patent system, and legitimate usage of these rights
  brings about consequences of patent thickets and patent
  hold-ups. Allowing patents on standards consequently is an
  intentional act to grant monopolies on standards to certain parties
  that includes the right to block implementation by other
  parties.</p>

<h2>Ex-Ante Disclosure</h2>

<p>There are multiple attempts through which the standardisation
  community has tried to mitigate these effects over the years. One of
  these mechanisms is called "Ex-Ante Disclosure." The parties working
  on a standard use this mechanism to commit to licensing terms while
  the standard is still being drafted. If these terms are not
  acceptable to the other parties working on the standard, the
  technology that is covered by the patent is not included in the
  standard.</p>

<p>What are acceptable terms is highly subjective. A large corporation
  with big patent portfolio and existing cross-licensing agreement
  with the holder of the relevant patents might consider adding one
  more patent to the agreement a minor inconvenience. The same
  situation looks substantially different from the perspective of a
  small or medium enterprise that typically has at most a small patent
  portfolio and has to expect extortionate licensing.</p>

<p>Since SMEs are strongly underrepresented in standardisation, Ex-Ante
  Disclosure is likely to bring more satisfactory results to large
  corporations with large patent portfolios that compete in the same
  area. The economic majority generally has no say about the
  acceptability of the terms.</p>

<p>Another issue of ex-ante disclosure is difficult enforcement, as
  Suzanne Michel, Assistant Director Office of Policy and Coordination
  of the U.S. Federal Trade Commission
  (FTC) 
<a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3631&amp;userservice_id=1&amp;request.id=0">
pointed out in her presentation</a>.
  The FTC had found that <a href="http://en.wikipedia.org/w/index.php?title=Rambus&amp;oldid=251605519">Rambus
  Incorporated</a> had joined and attended standardisation meetings of
  the <a href="http://en.wikipedia.org/wiki/JEDEC">Joint Electron
  Device Engineering Council (JEDEC)</a> in order to modify their
  patent applications to cover technology that was under discussion
  for inclusion in future standards. In the opinion of the FTC, this
  behaviour was deceptive, violated JEDEC's disclosure policy, and
  illegaly gave Rambus monopoly power.</p>

<p>The <a href="http://en.wikipedia.org/wiki/United_States_Court_of_Appeals_for_the_District_of_Columbia_Circuit">D.C. Circuit
   Court</a> disagreed with the interpretation of the FTC in their
   April 2008 decision. According to Ms Michel, the court said that
   avoiding so-called
   "<a href="http://en.wikipedia.org/wiki/Reasonable_and_Non_Discriminatory_Licensing">Reasonable
   and Non-Discriminatory</a>" (RAND) licensing terms does not
   constitute abuse, and that there is no proof that JEDEC would have
   avoided technologies if it had known that Rambus was planning to
   use its patents to the fullest extent allowed by law. The court
   also expressed reluctance to make patents unenforceable based on
   vague disclosure policies.</p>

<p>Both patents and standards derive their justification from the
  public benefit. There was no additional disclosure of new technology
  provided by the patents that Rambus filed on the standards that were
  about to be published. Giving Rambus monopoly power over standards
  developed by JEDEC is also detrimental to public interest. So it
  seems likely that a full public interest evaluation of this
  situation would give that indeed the public interest did not prevail
  in this case.</p>

<p>So it would appear that the FTC was correct in its evaluation, and
  so was the court, because establishing time-limited monopolies is
  the very purpose and function of patent law. The role of courts does
  not extend to the undoing of laws and most legislators have not
  given the public interest conflict between patents and standards
  consideration.</p>

<p>JEDEC has meanwhile updated its disclosure policy, which may help
  to avoid similar issues in the future. Considering the value that
  patent law has in relation to standardisation for many courts, only
  a future court case can demonstrate whether the issue has been
  resolved in a way that holds up to formal legal review.</p>

<h2>(F)RAND</h2>

<p>This is true for all standardisation bodies that require ex-ante
  disclosure, which most of them don't. Instead the majority of bodies
  appear to rely on purely voluntary disclosure and the assurance that
  patent holders involved in the process will agree to so-called RAND
  or FRAND
  ("<a href="http://en.wikipedia.org/wiki/Fair,_Reasonable_and_Non_Discriminatory_Licensing">Fair,
  Reasonable and Non Discriminatory</a>") terms.</p>

<p>One common criticism of (F)RAND terms is the lack of a definition
  of what is reasonable and for whom. During the 2006 Internet
  Governance Forum (IGF) in Athens, Susy Struble of Sun Microsystems
  <a href="http://www.youtube.com/watch?v=CNUdqEqjbOQ">pointed out</a>
  that what is reasonable for one party may not be reasonable to
  another.</p>

<p>Licensing practices do indeed vary, and are influenced by various
  factors, including, but not limited to, whether or
  not a company has a stake in the relevant market, and how
  aggressively it pursues its patent revenues.</p>

<p>Additionally, patents can be sold or acquired as part of a business
  restructuring or acquisition. A future patent holder may consider
  different terms reasonable, so could a patent holder who did not
  participate in the standardisation process and never committed even
  to RAND terms.</p>

<p>RAND terms generally amount to a vague assurance to license upon
  request. Such an assurance does not constitute a perpetual license
  on the patent and is not valid for the new holder of a patent. So a
  new holder can choose freely how to enforce the patent, including
  patent hold-ups on all existing implementations of the standard.</p>

<p>As Ms Miyamoto from WIPO pointed out, a patent hold-up is a
  legitimate and intended use of the patent system. So even in a RAND
  regime, there is a substantial amount of uncertainty that invariably
  favors large companies, which not only have deeper pockets, they
  also have larger legal departments and patent portfolios.</p>

<p>It is this uncertainty that has caused great frustration among SMEs,
  which Charles Schulz of Ars Aperta summarised as RAND referring to
  "RANDom licensing at the sight of competitors."
  In
<a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3639&amp;userservice_id=1&amp;request.id=0">
his presentation</a>,
  Mr Schulz also pointed out that (F)RAND terms are
  discriminating against Free Software. Even RAND terms linked to zero
  royalties, the so called RF-on-RAND ("Royalty Free on RAND"),
  RAND-RF ("RAND Royalty Free") or RAND-Z ("RAND with Zero royalties")
  terms often exhibit the same problems because they do not permit
  sublicensing.</p>

<p>Free Software
  (<a href="/documents/freesoftware">a.k.a. Open
  Source, FOSS or FLOSS</a>) is based on the principle that every
  living person and every legal entity can be a user, developer,
  distributor, or any combination of the above. Only conditions which
  permit this to take place are acceptable to Free Software, which is
  <a href="http://www.flossimpact.eu/">estimated</a> to reach 32% of
  all IT services and 4% of European GDP by 2010.</p>

<p>In
<a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3641&amp;userservice_id=1&amp;request.id=0">
her presentation</a>,
  Amy Marasco, General Manager Standards Strategy of
  Microsoft, emphasised that she does not consider Free Software a
  business model. That is true to the same extent that proprietary
  software itself is not a business model. Business models are what is
  built on top of both Free Software and/or proprietary software.</p>

<p>Ms Marasco continued to point out that all these business models
  are legitimate. And while there are strong differences in opinion
  about which software model is the better and more sustainable choice
  for economy and society, from the perspective of a political
  analysis of standards, all business models based upon proprietary
  software, Free Software, or a mixture of the two need to be
  considered valid and legitimate.</p>

<p>As mentioned before, the Free Software related parts of European
  GDP are estimated to reach 4% by 2010. All parties agree that all
  business models, including those incorporating Free Software, are
  legitimate. This raises the question whether it can be considered
  Fair, Reasonable and Non-Discriminatory to exclude this legitimate
  part of economy by choice of patent licensing terms.</p>

<h2>Harm from exclusion?</h2>

<p>The situation bears an odd semblance to the situation with
  <a href="http://en.wikipedia.org/wiki/Counterfeit_drugs">counterfeit
  pharmaceuticals</a>, where the argument for patent enforcement is
  generally accompanied by public health considerations. But only
  effective pharmaceuticals that are identical to the patented product
  would actually violate the patent. Health risks arise primarily
  where the patents are not being violated.</p>

<p>In standards, the situation is somewhat similar. If patents are
  part of a standard, only an implementation that is covered by the
  patents provides an effective antidote to monopolisation. Having to
  circumvent patents will generally break standards compliance and harm the
  public benefit that is the driving force behind standardisation.</p>

<p>So patents in standards have the potential to make full
  interoperability impossible for legitimate businesses in some
  markets. As the aforementioned
  BSI <a href="http://www.bsi-global.com/en/Standards-and-Publications/About-standards/What-is-a-standard/">points
  out</a>: "Standards are designed for voluntary use and do not impose
  any regulations. However, laws and regulations may refer to certain
  standards and make compliance with them compulsory."</p>

<p>Once a technology has been standardised, certain choices are no
  longer made for technological quality. Even where a better solution
  exists that would have the additional value of not violating a
  potential patent on the standard, an implementor would choose to
  follow the technologically inferior standard in order to have full
  access to the market. Such a case reverts the initial idea of
  patenting: The technology is valuable because it is patented, not
  patented because it is valuable.</p>

<p>There are also cases where certain standardisation organisations,
  e.g. the <a href="http://www.iso.org">International Organisation for
  Standardisation</a> (ISO) have a privileged position with
  governments for procurement decisions. Due to patents and
  insufficient (F)RAND conditions, not all standards priviledged in
  this way can be implemented by all legitimate market participants
  that should be able to compete in public tenders.</p>

<p>So through the special priviledge for organisations like ISO which
  accept terms insufficient to guarantee competition, the monopoly
  right conferred by patents translates into an oligopoly or even a
  monopoly for public procurement. This exclusion of competition from
  tenders by means of patents on standards is detrimental to the
  public benefit because it leads to higher prices and consequently
  higher taxes.</p>

<p>Remedies for this situation would have to address the way in which
  governments grant procurement preferences to standards, the way in
  which patents are handled in standards, the patent system itself, or
  a combination of all of the above.</p>

<h2>Attempted remedies</h2>

<p>Good patent research costs around 100.000 EUR per case according to
   Rigo Wenning, Legal Counsel &amp; Patent Policy Team Contact of the
   W3C/ERCIM who spoke about
"<a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3636&amp;userservice_id=1&amp;request.id=0">
Standards, Patents and the Dynamics of Innovation on the Web</a>." The W3C is
   indeed the only Standards Setting Organisation (SSO) that has a
   sufficient patent policy for its standards in order to accomodate
   all legitimate business models.</p>

<p>From the perspective of most SMEs, 100.000 EUR patent research costs
  are prohibitively expensive. But even large companies will find this
  cost considerable, which is only one of the cost generators. More
  damage can be caused by injunctions against a product, or claims for
  damages. In
  his 
<a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3646&amp;userservice_id=1&amp;request.id=0">
presentation of IBM's "SoftIP"</a> concept, Roger Burt, Senior Counsel of IBM
  Europe introduces the issues with a quote from a BSA et al. Amicus
  brief in eBay v MercExchange. The quote summarises the problems of
  large industry rather well:</p>

<quote class="indent"><em>"Technology products typically consist of hundreds or
thousands of patented components. It therefore is impossible for
technology companies to investigate all of the patents, and pending
patent applications that may be relevant to a new invention (product),
notwithstanding their best efforts to do so. When, as frequently
occurs, the claim of infringement is not made until after the new
product is released or the industry standard has been adopted,
designing around the claim is no longer a realistic option. Because an
injunction will issue automatically upon a finding of infringement –
even if the claim relates to an insignificant part of the product –
the target of the claim is forced to pay an extortionate settlement in
order to preserve its business."</em></quote>

<p>Another attempt to keep patents fees from becoming exorbitant even
  for the largest corporations was introduced by Tim Frain, Director
  IPR regulatory affairs, Nokia in his presentation about

"<a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3649&amp;userservice_id=1&amp;request.id=0">
FRAND Best Practice</a>."
  Mr Frain advocates a system based on "Aggregated
  Reasonable Terms" &amp; "Proportionality" (ART+P).</p>

<p>The underlying idea of this approach is that if every patent holder
  individually charges patent fees they consider Fair, Reasonable and
  Non-Discriminatory, the resulting fees may easily add up to 50% or
  more of the cost for the end product. So all patent holders should
  commit ex-ante that the aggregate licensing cost for all patents
  should be reasonable. As an example, Mr Frain cited that in Nokia's
  view, the patent licensing fees on the communication technology for
  mobile phones should be below 10% per handset.</p>

<p>Both approaches are attempts to control the use of monopolies
  granted by patents and as such are trying to get voluntary buy-in
  from other parties to not exercise rights that the patent system has
  granted them.</p>

<p>Unfortunately they both fall short of the criterion of
  non-discrimination against legitimate business models, and the ART+P
  approach also has the practical weakness that convergence joins more
  than one kind of technology per device, so the total patent
  royalties on a smart phone may still reach 50% even if the costs for
  GSM &amp; Co are limited to 10%. But even these 10% can be
  considerable for laptops with included UMTS modems, or embedded
  devices, an area in which the profit margins are typically far below
  10%.</p>

<p>To put it in the form of a controversial question: Is it fair and
  reasonable that patent holders receive a higher monopoly rent than
  an innovative company stands to gain by bringing out a new product
  and bearing all the risk associated with it?</p>

<h2>Cui bono?</h2>

<p>So who benefits? As explained before, patents are designed as a trade-off. Their
  benefits are often explained with the lone inventor having a genius
  idea. Would it be fair if this inventor published the idea only to
  see a large company bring it to market faster than the inventor
  could, with no financial reward for the inventor? Most people would
  agree this is not fair.</p>

<p>In the absence of patents, such an inventor could only choose
  between accepting fate, or keeping the innovation secret for as long
  as possible while trying to bring it to market. Patents grant a
  temporary monopoly for the inventor in return for publication, such
  that the inventor can find investors, set up a company, finish
  product development, bring it to market, and enjoy a head start
  before others can compete normally.</p>

<p>This mechanism seems to have worked reasonably well for some time
  in the past. But some basic parameters have changed, while patents
  have been extended in an essentially unreflected way to more
  areas. This is particularly true for software, where patents play no
  meaningful role in disclosure, breaking the patent deal for society
  whereas the time of bringing new innovation to the market and the
  time between groundbreaking discoveries has been decreasing.</p>

<p><a href="http://en.wikipedia.org/wiki/Ray_Kurzweil">Raymond
    Kurzweil</a> found an exponential pattern in innovation reaching back
    all the way to single-cell organisms. Concluding that this must be
    a universal principle, Mr Kurzweil has been
    making <a href="http://en.wikipedia.org/wiki/Predictions_made_by_Raymond_Kurzweil">predictions</a>
    for the future of which several have turned out to be largely
    accurate so far. When applying this principle to patents, from the
    constant duration of the monopoly guaranteed follows an
    exponential growth of the value of an individual patent.</p>

<p>The price that society is paying for granting patents has been
  <a href="http://en.wikipedia.org/wiki/Exponential_growth">growing
  exponentially</a> since the time that the initial patent bargain was
  struck. This would explain why the price for the patent system seems
  increasingly exorbitant with growing calls for reform, which have
  led to the recent announcement of the
  "<a href="http://www.ftc.gov/opa/2008/11/ipmarketplace.shtm">First
  in Series of Hearings on Evolving Intellectual Property
  Marketplace</a>" by the U.S. Federal Trade Commission (FTC).</p>

<p>Remedies to this problem could be to decrease the lifespan of
  patents, adapt them to the specific situation in the field, and
  exclude fields from patenting in which patents provide no meaningful
  disclosure.</p>

<p>When it comes to standards, it was An Baisheng, Deputy Director of
  the Division of Technical Regulations Department for WTO Affairs of
  the Chinese Ministry of Commerce who raised the question of public
  vs private benefit in his presentation titled
"<a href="http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&amp;doc_id=3632&amp;userservice_id=1&amp;request.id=0">
Strike the Right Balance between Public and Private Interests in IPR in ICT
  Standardization</a>".</p>

<p>Taking our "lone inventor" scenario above, the question that we'd
  have to ask for patents on standards is: Would it be fair if our
  inventor could prevent someone else from bringing to market an
  innovation of their own that somehow interacts with the initial
  invention? To make it less abstract: Should a patent on a typewriter
  extend to carbon copy paper that has the right size to be used in
  that typewriter? Most people would agree this goes too far.</p>

<h2>Potential Remedies</h2>

<h3>1. Interoperability trumps patent</h3>

<p>During the software patent debate in the European Union there was
  consensus among SME, Free Software and big businesses
  representatives from companies such as IBM or Sun Microsystems that
  patents which limit or prevent interoperability should be unenforceable.</p>

<p>In the European Union, this could be introduced into the ongoing
  Community Patent debate. On a global level, WIPO should consider
  this as part of its ongoing Development Agenda discussions.</p>

<p>Once implemented, this would solve the most harmful side-effects
  for all legitimate business models and give interoperability and
  competition preference over monopoly rights. Considering the
  extraordinary networking effects that exist in this market, such a
  preference seems justified.</p>

<h3>2. Update policy in SSOs</h3>

<p>Secondly, Standard Setting Organisations (SSOs) could update their
  patent policies to ensure that their standards are usable in all
  business models. Many SSO representatives in the meeting maintained
  that it was not their place to mandate certain patent policies. At
  the same time,
  the <a href="http://www.itu.int/ITU-T/dbase/patent/patent-policy.html">Common
  Patent Policy</a> of ITU-T, ITU-R, ISO and IEC already states the
  principle that "<em>a patent embodied fully or partly in a
  Recommendation | Deliverable must be accessible to everybody without
  undue constraints.</em>" As this analysis demonstrates, current
  application of RAND falls short of that principle.</p>

<p>There is additional precedence supplied by the common way in which
  SSOs protect standards against potential later claims from Copyright
  holders by requiring all participants to a standardisation process
  to assign their copyright to the SSO. Applying appropriate similar
  measures on patents for similar reasons seems justified.</p>

<h3>3. Provide intermediate and migration possibilities</h3>

<p>Many patent-encumbered standards already exist, and even if WIPO
  ends up agreeing on a general interoperability preference, it will
  take decades for this to become local law.</p>

<p>As an intermediate solution, (F)RAND needs to be enforced in a way
  that the license terms do not discriminate against any valid business
  model, as is still common today. A potential solution could be to
  tie (F)RAND royalties to the downstream licensing revenue.</p>

<p>Business models that are based on proprietary licensing based on
  copyright or patents for revenue would continue to operate as they
  do today. Business models that do not rely on such licensing revenue
  would be enabled to interoperate and compete.</p>

<p>Taking this step would also realign ITU-T, ITU-R, ISO and IEC again
  with their declared Common Patent Policy.</p>

<h3>4. Update governmental procurement guidelines</h3>

<p>Governments and Inter-Governmental Organisations should update
  their procurement guidelines to procure only products based upon
  standards that do not discriminate against any legitimate business
  model. This means a review of blanket approval for certain standard
  setting organisations, and only a limited approval for organisations
  that have not updated their patent policies appropriately by the
  time of the review.</p>

<hr />

<p><em>DISCLAIMER: This paper was written from the
    perspective of an expert in the field of software. The conclusions
    may apply in their entirety, partially, or not at all to areas
    other than software.
</em></p>

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