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<title>Why is FRAND bad for Free Software?</title>
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<body class="article" microformats="h-entry">
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<p id="category"><a href="/freesoftware/standards/standards.html">Open Standards</a></p>
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<h1 id="why-is-frand-bad-for-free-software">Why is FRAND bad for Free Software?</h1>
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<p>FRAND ("fair, reasonable, and non-discriminatory") is an acronym
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used to refer to a wide array of patent licensing practices
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developed in the context of industry standards.</p>
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<p>Despite a technology being standardised, it is still possible
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for someone to hold a patent over it in some jurisdictions. Since
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commerce is global, this forces everyone to ask the patent holder
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for a licence before implementing the invention, thus granting
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her a broad power over her competitors. To reduce such power,
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the industry resorted to agreements to bind patent holders to
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certain licensing conditions, usually referred as the "fair,
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reasonable and non-discriminatory" (FRAND) terms.</p>
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<p>In most cases, such licences make a proper Free Software implementation
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of the standard impossible, due to numerous incompatibilities
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with the way Free Software functions and is distributed. As a
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consequence, FRAND licences cannot be considered fair, reasonable
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nor non-discriminatory.</p>
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<h3 id="what-is-frand">What is FRAND?</h3>
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<p>A major challenge of FRAND is it is a fuzzy concept, involving
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subjective judgment that can often only be made firm by legal
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action. For example, there is no consensus on what are "fair",
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"reasonable" and "non-discriminatory" terms:</p>
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<ul>
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<li><p><strong>Fair</strong> primarily relates to the underlying
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licensing terms, which should not be anti-competitive nor would
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be considered unlawful if imposed by a dominant firm in their
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relative market.</p></li>
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<li><p><strong>Reasonable</strong> refers mainly to licensing rates.</p></li>
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<li><p><strong>Non-discriminatory</strong> relates to both
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the terms and the rates, requiring similar treatment for each
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licensee.</p></li>
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</ul>
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<h3 id="why-is-frand-incompatible-with-free-software">Why is FRAND incompatible with Free Software?</h3>
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<p>FRAND licence terms are usually negotiated in secret and kept
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confidential by the parties involved. However, FRAND terms seem
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to often require a payment of royalties based on the volume of
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distribution (such as the number of distributed copies). They
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also rarely allow sublicensing to the third parties, in a way
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that requires no further action from the sublicensee to obtain
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the same rights to implement the standard. It is a well established
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fact that such requirements are incompatible with some of the
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most common terms under which Free Software is developed and
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distributed <a href="#fn1" class="fn" id="fnref1">1</a>.</p>
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<p>Free Software gives its user a high level of control over the
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software by granting far-reaching freedoms to inspect the source
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code, and to study and innovate upon that software. It is based
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on the principle that everyone, whether an individual or a company,
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can be a user, developer, distributor, or any combination of the
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above. Only the terms that permit technology to be implemented
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and distributed without violating these conditions will be in
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practice compatible with Free Software <a href="#fn2" class="fn" id="fnref2">2</a>.</p>
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<p>For example, Section 7 of the GPL v2, which is one of the most
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widely used Free Software licences, ensures that the presence of
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any extra restriction preventing users from exercising the freedoms
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in the license -i.e. imposing patent royalties or the requirement
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to obtain an individual licence- revokes the right to continue
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distribution of the software.</p>
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<p>As Free Software gives each user the freedom to redistribute
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the software itself, keeping track and collecting royalties based
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on distributed copies is also, in practice, impossible. This is
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not just a matter of source code licenses; any terms which require
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a developer to seek additional permission beyond the licence in
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order to use, improve or share the software are incompatible with
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the norms of open communities developing Free Software.</p>
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<p>Another incompatibility of FRAND with Free Software lies in
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the requirement of the individual licence that usually cannot be
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automatically transferred to the third parties. This is contradictory
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to Free Software that automatically grants the same rights and
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freedoms to downstream recipients without the necessity to
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sublicense.</p>
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<p>Consequently, it has been estimated that due to modern near-universal
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software development practices, hardly any new product on the
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software market is built without containing easily accessible
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Free Software code<a href="#fn3" class="fn" id="fnref3">3</a>,
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which makes Free Software indispensable for innovation and the
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economic growth.</p>
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<p>In this respect, the "non-discriminatory" criterion cannot be
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met, as it excludes substantial number of actors and innovative
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force that work with Free Software from implementing the FRAND
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licensed technology. Subsequently, it follows that a FRAND-licensed
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Standard Essential Patent (SEP) is neither "fair" nor "reasonable".</p>
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<h3 id="can-frand-be-really-frand-for-free-software">Can FRAND be really FRAND for Free Software?</h3>
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<p>Some rare FRAND terms allow payment of a lump sum amount, so
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that the developers can avoid keeping track of the distributed
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copies. This practice might seem like a viable option, but only
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big corporations with a dedicated legal department are capable
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of negotiating such terms, thus excluding individual programmers
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and small and medium enterprises (SMEs). It is essential to
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ensure that different actors can enter the market, especially in
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the ICT sector, where it is not unusual to go from being a start-up
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to a leader company in less than a decade.</p>
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<p>Easier access to standardised technologies will instead contribute
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to competition, as more new players will be allowed to emerge on
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the market and base their ideas on the existing technologies.</p>
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<p>The requirement of royalties-per-copy in FRAND is not the only
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obstacle between standard's implementation in Free Software.
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The inherent incompatibility lies within the fact that FRAND
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completely neutralises the collaborative open model behind Free
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Software, by restricting the exercise of freedoms granted by the
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latter.</p>
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<p>For example, it is common for FRAND to include the requirement
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to contact the SEP holder to obtain an individual licence. This
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is also discriminatory against Free Software, because it would
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require any user willing to redistribute modified versions to
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contact the SEP holder, wasting time and resources and seriously
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impairing the collaborative model that drives Free Software.
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History shows developers avoid technologies licensed in this way.</p>
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<p>The appropriate licensing scheme for Free Software would be
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the one that places no restrictions in exercising rights granted
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by Free Software, so-called "Restrcition free" terms. Similar
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licence terms can be achieved by forcing FRAND to be compatible
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with the GPL by definition. Standard setting organisations (SSOs)
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can require participants to the standardisation process to explicitly
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agree that a licence is FRAND only if it allows the use and distribution
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of the essential patented technology under terms that are not less
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restrictive than the GNU GPL v.2 or any later version.</p>
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<p>Furthermore, to ensure that such a policy is not circumvented,
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SSOs should carefully consider the status of all the components
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of any new standard. It is not uncommon for a new standard to be
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built upon a previous one. If the latter was drafted under
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different rules (e.g. allowing royalty-based FRAND or
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unrestricted patents), the full implementation of the new standard
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may depend on the licensing terms of SEPs included in the older
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standard. Such a situation will undermine the efforts that were
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made to properly address the problem of SEPs.</p>
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<p>It is also not uncommon for companies to place so-called
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"blanket claims", that is to declare that they own SEP without
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specifying any details of such patents.<a href="#fn4" class="fn" id="fnref4">4</a>
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This practice in addition to the policies adopted in several SSOs
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that do not guarantee the accuracy of the information provided,
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place unnecessary and burdensome barriers for the standard implementation
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by any developer wishing to do so. Hence, the final necessary
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complement to this setup is an adequate enforcement system to
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ensure that patent holders are kept to their obligations.</p>
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<h3 id="why-frand-is-not-good-for-software">Why FRAND is not good for software?</h3>
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<p>In the field of standards governing software, internet and web,
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there is a distinct absence of SEPs<a href="#fn5" class="fn" id="fnref5">5</a>.</p>
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<p>This is particularly evident in the policies of several SSOs
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working in these fields: for example the vast majority of standards
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recognised by the Organisation for the Advancement of Structured
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Information Standards (OASIS) requires royalty free terms<a href="#fn6" class="fn" id="fnref6">6</a>
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and although the option of FRAND is included in their policy, OASIS
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recognises its trend towards royalty-free standards<a href="#fn7" class="fn" id="fnref7">7</a>.
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The Internet Engineering Task Force (IETF) discourages encumbered
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patent standards in the general instructions to their working
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groups<a href="#fn8" class="fn" id="fnref8">8</a>. Even better,
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the W3C requires any SEP to be licenced to everyone on royalty
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free basis<a href="#fn9" class="fn" id="fnref9">9</a>.</p>
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<p>SEP and FRAND emanated from telecommunications sector and through
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traditional SSOs, while software, internet and web standards have
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developed in a more collaborative way, i.e. through fora and
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consortia<a href="#fn10" class="fn" id="fnref10">10</a>. This
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difference has to be taken into account while regulating the work
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of SSOs. Applying the model that has been developed for one sector
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to another, which has practically and historically developed in a
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different way, can lead to consequences opposite to the aim of
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standardisation. As such, the approach of 'one size fits all' is
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inappropriate and can stifle innovation instead of encouraging it.</p>
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<h3 id="the-alternative-to-frand">The alternative to FRAND</h3>
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<p>The way to achieve the widest interoperability and competition
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on the market is to adopt Open Standards that are compatible with
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Free Software.<a href="#fn11" class="fn" id="fnref11">11</a></p>
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<p>The rapid development of software, web and internet technology
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has been largely based on Open Standards, which are available
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free of restrictions and royalties. This shows that restriction-free
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standards are crucial in an environment where innovation is rapid
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and accumulative, and where most actors are small and lack the
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resources to engage in sophisticated patent licensing transactions.
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Licensing conditions that pose barriers for such actors to enter
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the market or compete with their large counterparts are
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significantly hampering the competition and as such cannot be
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called fair, reasonable or non-discriminatory. Therefore, only
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licences that are truly Restriction free allow the standard to be
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an Open Standard, i.e. "free from legal or technical clauses
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that limit its utilisation by any party or in any business
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model"<a href="#fn12" class="fn" id="fnref12">12</a>.</p>
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<p>Furthermore, drafting such standards in a minimalistic<a href="#fn13" class="fn" id="fnref13">13</a>
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way will ensure that companies of different size are actually in
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the position to implement them, which will achieve true non-discrimination
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across different business sizes and models. This will also contribute
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to the wider and more effective adoption of standards across industries.
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Non-minimalistic standards are instead cumbersome and require huge
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investments of time and resources to be implemented.</p>
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<p>In addition to Open Standards, the widest adoption of standards
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can be in practice achieved by allowing software to act as as reference
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implementation too. This is particularly important because for
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most software standards the formal specification is insufficient,
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and the actual standard is defined both through the written
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specification and actual implementations. For the implementer
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the reference implementation is more valuable because it allows
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her to avoid the extended phase of trial-and-error in order to
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resolve specification ambiguities. Hence publishing software under
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Free Software licences will contribute to the widest adoption of
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standards in practice.</p>
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<h2 id="conclusion">Conclusion</h2>
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<p>FRAND is not only incompatible with most of Free Software, but
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is not designed to govern software at all.</p>
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<p>In order to overcome this contradiction, it is necessary to
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ensure that SEPs are licensed under terms that are compatible with
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Free Software, e.g. Restriction free. However, this option might
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still place additional obstacles to the implementation of
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innovative technology in Free Software, depending on the actual
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content of the SEP licence and on the enforcing capabilities of
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the standard setting organisation.</p>
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<p>The widest adoption of standards, which is in principle the aim
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of FRAND, can be achieved by developing them as open and minimalistic
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and by requiring a reference implementation released as Free Software.
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These standards will ensure the widest competition of different
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Free Software and proprietary actors on the market, without excluding
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one or the other.</p>
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<h2 id="fn">Footnotes</h2>
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<ol>
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<li id="fn1"><p>Ian Mitchell, Stephen Mason, <a href="http://www.ifosslr.org/ifosslr/article/view/57">"Compatibility Of The Licensing Of Embedded Patents With Open Source Licensing Terms""</a>, IFOSSLR, 2011.<a href="#fnref1" class="ref">↩</a></p></li>
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<li id="fn2"><p>Georg Greve, <a href="/freesoftware/standards/ps.html">"Analysis on balance: Standardisation and Patents"</a>, 2008.<a href="#fnref2" class="ref">↩</a></p></li>
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<li id="fn3"><p>Björn Lundell et al., <a href="http://his.diva-portal.org/smash/get/diva2:925474/FULLTEXT01.pdf">"On Implementation of Open Standards in Software: To What Extent Can ISO Standards be Implemented in Open Source Software"</a>, International Journal of Standardization Research,Vol. 13, no 1, 47-73 p, 2015.<a href="#fnref3" class="ref">↩</a></p></li>
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<li id="fn4"><p>Rudi Bekkers, Joel West, <a href="http://home.tm.tue.nl/rbekkers/Bekkers%20West%20%28forthcoming%20Jan%2009%29%20Telecommunications%20Policy.pdf">"The Limits to IPR Standardization Policies as Evidenced by Strategic Patenting in UMTS"</a>,Telecommunications Policy, 2009.<a href="#fnref4" class="ref">↩</a></p></li>
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<li id="fn5"><p>Mark Bohhanon, <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2477533">"Out of the Murky Lagoon and into… Is there a Emerging Consistent US Government Policy on Standard Essential Patents?"</a>, 2014.<a href="#fnref5" class="ref">↩</a></p></li>
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<li id="fn6"><p>OASIS, <a href="https://www.oasis-open.org/org/faq">FAQ section</a>, question No. 7. “What are the IPR Policies of OASIS?”.<a href="#fnref6" class="ref">↩</a></p></li>
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<li id="fn7"><p><a href="http://www.nist.gov/standardsgov/upload/OASIS.pdf">“OASIS response to NSTC request for feedback on standard practices”</a>, 75 FR 76397 (2011).<a href="#fnref7" class="ref">↩</a></p></li>
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<li id="fn8"><p>IETF, <a href="https://tools.ietf.org/html/rfc3979">RFC 3979</a>.<a href="#fnref8" class="ref">↩</a></p></li>
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<li id="fn9"><p><a href="http://www.w3.org/Consortium/Patent-Policy-20040205/#sec-Requirements">W3C patent policy</a>.<a href="#fnref9" class="ref">↩</a></p></li>
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<li id="fn10"><p>Mark Bohhanon, <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2477533">“Out of the Murky Lagoon and into… Is there a Emerging Consistent US Government Policy on Standard Essential Patents?”</a>, 2014-08-08.<a href="#fnref10" class="ref">↩</a></p></li>
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<li id="fn11"><p>Rishab Gosh, <a href="http://www.flosspols.org/deliverables/FLOSSPOLS-D04-openstandards-v6.pdf">“An Economic Basis for Open Standards”</a>, Policy Report of FLOSSPOLS Project managed by the European Commission, University of Maastricht, 2005.<a href="#fnref11" class="ref">↩</a></p></li>
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<li id="fn12"><p><a href="/freesoftware/standards/def.html">Open standard definition</a>.<a href="#fnref12" class="ref">↩</a></p></li>
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<li id="fn13"><p>Bernhard Reiter, <a href="/freesoftware/standards/minimalisticstandards.html">“The minimal principle: because being an open standard is not enough”</a>.<a href="#fnref13" class="ref">↩</a></p></li>
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</ol>
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</body>
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<date>
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<original content="2016-06-20"/>
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</date>
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<sidebar promo="our-work">
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<h2>Table of Contents</h2>
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<ul>
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<li><a href="#what-is-frand">What is FRAND?</a></li>
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<li><a href="#why-is-frand-incompatible-with-free-software">Why is FRAND incompatible with Free Software?</a></li>
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<li><a href="#can-frand-be-really-frand-for-free-software">Can FRAND be really FRAND for Free Software?</a></li>
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<li><a href="#why-frand-is-not-good-for-software">Why FRAND is not good for software?</a></li>
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<li><a href="#the-alternative-to-frand">The alternative to FRAND</a></li>
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<li><a href="#conclusion">Conclusion</a></li>
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</ul>
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<h2>Related links</h2>
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<ul>
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<li><a href="/freesoftware/standards/standards.html">More on Open Standards</a></li>
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<li><a href="/activities/swpat/swpat.html">Software patents in Europe</a></li>
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</ul>
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</sidebar>
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<tags>
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</tags>
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</html>
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