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<html>  <head>    <title>FSFE - Analysis on balance - Standardisation and Patents - by Georg Greve</title>  </head>
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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 orthousands of patented components. It therefore is impossible fortechnology companies to investigate all of the patents, and pendingpatent applications that may be relevant to a new invention (product),notwithstanding their best efforts to do so. When, as frequentlyoccurs, the claim of infringement is not made until after the newproduct is released or the industry standard has been adopted,designing around the claim is no longer a realistic option. Because aninjunction 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 inorder 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>
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<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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