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  4. <title>FSFE - Analysis on balance - Standardisation and Patents - by Georg Greve</title>
  5. </head>
  6. <body>
  7. <p align="right">[ <a href="ps.en.pdf">PDF version (94k)</a> ]</p>
  8. <h1 align="center">Analysis on balance:<br />Standardisation and Patents</h1>
  9. <p class="indent"><em>This paper provides an analysis of the
  10. interaction of patents and standards and finishes with some
  11. concrete proposals to address the most pressing issues. It was
  12. written under the assumption of very little background knowledge,
  13. and therefore provides some of the background necessary to
  14. understand the issue. An expert in the field should be able to
  15. skip the Background section.
  16. </em></p>
  17. <p align="right"><em>
  18. -- <b><a href="/about/greve/">Georg C. F. Greve</a></b>
  19. <br />FSFE, President
  20. <br />2. December 2008
  21. </em></p>
  22. <h2>Introduction</h2>
  23. <p>Software patents have been a hugely controversial debate, with
  24. lines of battle drawn primarily between large corporations holding
  25. large patent portfolios and engaged in multiple cross-licensing
  26. deals, and the Have-Nots, entrepreneurs, small and medium
  27. enterprises, and software users from the student using GNU/Linux all
  28. the way to institutional users in governments.</p>
  29. <p>This debate got a lot quieter with the rejection of the software
  30. patent directive in 2005. Its place in the headlines was taken by
  31. other debates, such as standardisation. Open Standards have been a
  32. buzzword for years, but never has this term been discussed more
  33. intensively.</p>
  34. <p>On Wednesday, 19 November 2008, both debates met in Brussels at a
  35. workshop titled
  36. "<a href="">IPR
  37. in ICT standardisation</a>", although "Patents in ICT
  38. standardisation" would have been a more suitable name because the
  39. discussion was exlusively about the interaction of patents and
  40. ICT standardisation.</p>
  41. <p>Patents and standards are fundamentally at odds, so many people
  42. call for a balance between patents and standards. This article
  43. comments upon the workshop and explains why standards should prevail
  44. over patents at least in the area of software.</p>
  45. <h2>Background: Patents &amp; Standards 101</h2>
  46. <p>The idea of patents is not new. Its roots lie in the royal
  47. "litterae patentes" that conferred exclusive rights to certain
  48. people. Democratic governments eventually took the position of the
  49. monarchs, and patent legislation has evolved over time, but the
  50. fundamental characteristics of what is a patent have not
  51. changed.</p>
  52. <p>Succinctly put, a patent is a monopoly granted for a limited time
  53. by the government on behalf of its citizens.</p>
  54. <p>The term monopoly has many negative connotations, and for good
  55. reason. A monopoly stifles innovation and increases price due to the
  56. absence of competition. On these grounds a monopoly is generally
  57. understood to be to the detriment of economy and society. It is not
  58. illegal to obtain a monopoly, but society has a legitimate interest
  59. in limiting abuse of the power that a monopoly confers, and seeks to
  60. achieve this through antitrust law.</p>
  61. <p>The monopoly right created by a patent brings with it all side
  62. effects of a monopoly. It is granted by the state because it is
  63. understood that the absence of patents might prevent publication of
  64. breakthroughs, which is understood to be more harmful than granting
  65. the patent monopoly.</p>
  66. <p>This initial patent deal is based upon disclosure, so that others
  67. can learn from and build upon a new idea. Lack of useful disclosure
  68. or advancement of public knowledge translates into the granting of a
  69. monopoly with no return for society.</p>
  70. <p>Like patents, standards are closely related to disclosure. The root
  71. of the word standard appears to go back to heraldry, where it refers
  72. to a symbol that is used to make a rallying point visible in
  73. battle.</p>
  74. <p>Modern use of the term keeps that meaning of publicly visible point
  75. of reference, although it has been transferred to other areas. So
  76. among other things it is understood as "<em>something established by
  77. authority, custom, or general consent as a model or example</em>" or also
  78. "<em>a structure built for or serving as a base or support.</em>"
  79. (from <a href="">Merriam-Webster
  80. On-line dictionary</a>).</p>
  81. <p>In Information and Communication Technologies, a standard has both
  82. the above meanings. According to
  83. the <a href="">British
  84. Standards Institution</a> (BSI), a standard is "<em>an agreed, repeatable
  85. way of doing something. It is a published document that contains a
  86. technical specification or other precise criteria designed to be
  87. used consistently as a rule, guideline, or definition. [...] Any
  88. standard is a collective work. Committees of manufacturers, users,
  89. research organizations, government departments and consumers work
  90. together to draw up standards that evolve to meet the demands of
  91. society and technology. [...]</em>"</p>
  92. <p>The underlying idea is that a standard establishes common ground,
  93. it provides the means for interoperability and competition. This is
  94. especially true for ICT due to their strong networking effects. If
  95. all participants in an ICT market adhere to the same standards and
  96. make an effort to guarantee interoperability, not only can customers
  97. choose freely between various products and services, they can also
  98. exchange information with one another without problems.</p>
  99. <p>In contrast, absence or failure of standardisation warps networking
  100. effects in a way that monopolisation becomes almost certain. Users
  101. of one product or service could only interoperate with users of the
  102. same product or service. Over time, one solution would attain such
  103. a large user base that other users are de-facto left with the choice
  104. to join this group, or be unable to communicate fully with the
  105. majority of users. This could for instance be achieved by bundling
  106. software with a predominant hardware platform.</p>
  107. <p>So standards are largely an instrument to enable competition for
  108. the public benefit. The purpose of standards is intrinsicly
  109. anti-monopolistic.</p>
  110. <p>It is also pro-innovative. Since derivation from a standard
  111. automatically breaks it, standardisation and innovation seem opposed
  112. goals, and to some extent they are. But where all changes are done
  113. in consensus between implementors, the result is an updated version
  114. of the standard available to all. The second path is innovation on
  115. top of the standard, using the standard as a base for innovation
  116. rather than innovating inside the standard.</p>
  117. <p>Due to its global, consensus-driven nature, the first process is
  118. comparatively slow. Another problem is the substantial barrier to
  119. entry into the standards process. As a result, large companies are
  120. overrepresented in comparison to small and medium enterprises (SME).</p>
  121. <p>The second path is open to everyone, private person, SME, or large
  122. industry. It is also limited only by the speed of development of the
  123. team making the innovation. If the innovation was made by just one
  124. party, there will be a temporary monopoly. But given a certain
  125. maturity, the innovation is then likely to be formalised into a
  126. standard again, forming the base for the next innovation to be built
  127. on top.</p>
  128. <p>While the first path allows primarily for slow, small improvements,
  129. the second path allows for full participation of the economic
  130. majority and is much better suited for groundbreaking ideas and
  131. arguably the more important to protect for society.</p>
  132. <h2>Conflict: Fundamentally opposed instruments</h2>
  133. <p>The fundamentally different goals for patents and standards
  134. surfaced multiple times during the debate, for instance in the
  135. speech of Mr Karsten Meinhold, chairman of the ETSI IPR Special
  136. Committee, <a href="">who
  137. summarised it</a> as "<em>IPRs and Standards serve different
  138. purposes: IPRs are destined for private exclusive use, Standards are
  139. intended for public, collective use</em>".</p>
  140. <p>Both patents and standards derive their justification from the
  141. public benefit, yet upholding one deprives the other of its
  142. function. Standards seek to counteract monopolies, patents establish
  143. them. Or, as Tomoko Miyamoto, Senior Counsellor of the Patent Law
  144. Section in the World Intellectual Property Organization (WIPO) said
  145. in <a href="">her
  146. presentation</a>: Patent thickets and patent hold-ups may arise from
  147. certain forms of legitimate exploitation of the exclusive rights
  148. conferred by patents.</p>
  149. <p>In other words: Conferring these exclusive rights is the intended
  150. function of the patent system, and legitimate usage of these rights
  151. brings about consequences of patent thickets and patent
  152. hold-ups. Allowing patents on standards consequently is an
  153. intentional act to grant monopolies on standards to certain parties
  154. that includes the right to block implementation by other
  155. parties.</p>
  156. <h2>Ex-Ante Disclosure</h2>
  157. <p>There are multiple attempts through which the standardisation
  158. community has tried to mitigate these effects over the years. One of
  159. these mechanisms is called "Ex-Ante Disclosure." The parties working
  160. on a standard use this mechanism to commit to licensing terms while
  161. the standard is still being drafted. If these terms are not
  162. acceptable to the other parties working on the standard, the
  163. technology that is covered by the patent is not included in the
  164. standard.</p>
  165. <p>What are acceptable terms is highly subjective. A large corporation
  166. with big patent portfolio and existing cross-licensing agreement
  167. with the holder of the relevant patents might consider adding one
  168. more patent to the agreement a minor inconvenience. The same
  169. situation looks substantially different from the perspective of a
  170. small or medium enterprise that typically has at most a small patent
  171. portfolio and has to expect extortionate licensing.</p>
  172. <p>Since SMEs are strongly underrepresented in standardisation, Ex-Ante
  173. Disclosure is likely to bring more satisfactory results to large
  174. corporations with large patent portfolios that compete in the same
  175. area. The economic majority generally has no say about the
  176. acceptability of the terms.</p>
  177. <p>Another issue of ex-ante disclosure is difficult enforcement, as
  178. Suzanne Michel, Assistant Director Office of Policy and Coordination
  179. of the U.S. Federal Trade Commission
  180. (FTC) <a href="">pointed
  181. out in her presentation</a>. The FTC had found
  182. that <a href=";oldid=251605519">Rambus
  183. Incorporated</a> had joined and attended standardisation meetings of
  184. the <a href="">Joint Electron
  185. Device Engineering Council (JEDEC)</a> in order to modify their
  186. patent applications to cover technology that was under discussion
  187. for inclusion in future standards. In the opinion of the FTC, this
  188. behaviour was deceptive, violated JEDEC's disclosure policy, and
  189. illegaly gave Rambus monopoly power.</p>
  190. <p>The <a href="">D.C. Circuit
  191. Court</a> disagreed with the interpretation of the FTC in their
  192. April 2008 decision. According to Ms Michel, the court said that
  193. avoiding so-called
  194. "<a href="">Reasonable
  195. and Non-Discriminatory</a>" (RAND) licensing terms does not
  196. constitute abuse, and that there is no proof that JEDEC would have
  197. avoided technologies if it had known that Rambus was planning to
  198. use its patents to the fullest extent allowed by law. The court
  199. also expressed reluctance to make patents unenforceable based on
  200. vague disclosure policies.</p>
  201. <p>Both patents and standards derive their justification from the
  202. public benefit. There was no additional disclosure of new technology
  203. provided by the patents that Rambus filed on the standards that were
  204. about to be published. Giving Rambus monopoly power over standards
  205. developed by JEDEC is also detrimental to public interest. So it
  206. seems likely that a full public interest evaluation of this
  207. situation would give that indeed the public interest did not prevail
  208. in this case.</p>
  209. <p>So it would appear that the FTC was correct in its evaluation, and
  210. so was the court, because establishing time-limited monopolies is
  211. the very purpose and function of patent law. The role of courts does
  212. not extend to the undoing of laws and most legislators have not
  213. given the public interest conflict between patents and standards
  214. consideration.</p>
  215. <p>JEDEC has meanwhile updated its disclosure policy, which may help
  216. to avoid similar issues in the future. Considering the value that
  217. patent law has in relation to standardisation for many courts, only
  218. a future court case can demonstrate whether the issue has been
  219. resolved in a way that holds up to formal legal review.</p>
  220. <h2>(F)RAND</h2>
  221. <p>This is true for all standardisation bodies that require ex-ante
  222. disclosure, which most of them don't. Instead the majority of bodies
  223. appear to rely on purely voluntary disclosure and the assurance that
  224. patent holders involved in the process will agree to so-called RAND
  225. or FRAND
  226. ("<a href=",_Reasonable_and_Non_Discriminatory_Licensing">Fair,
  227. Reasonable and Non Discriminatory</a>") terms.</p>
  228. <p>One common criticism of (F)RAND terms is the lack of a definition
  229. of what is reasonable and for whom. During the 2006 Internet
  230. Governance Forum (IGF) in Athens, Susy Struble of Sun Microsystems
  231. <a href="">pointed out</a>
  232. that what is reasonable for one party may not be reasonable to
  233. another.</p>
  234. <p>Licensing practices do indeed vary, and are influenced by various
  235. factors, including, but not limited to, whether or
  236. not a company has a stake in the relevant market, and how
  237. aggressively it pursues its patent revenues.</p>
  238. <p>Additionally, patents can be sold or acquired as part of a business
  239. restructuring or acquisition. A future patent holder may consider
  240. different terms reasonable, so could a patent holder who did not
  241. participate in the standardisation process and never committed even
  242. to RAND terms.</p>
  243. <p>RAND terms generally amount to a vague assurance to license upon
  244. request. Such an assurance does not constitute a perpetual license
  245. on the patent and is not valid for the new holder of a patent. So a
  246. new holder can choose freely how to enforce the patent, including
  247. patent hold-ups on all existing implementations of the standard.</p>
  248. <p>As Ms Miyamoto from WIPO pointed out, a patent hold-up is a
  249. legitimate and intended use of the patent system. So even in a RAND
  250. regime, there is a substantial amount of uncertainty that invariably
  251. favors large companies, which not only have deeper pockets, they
  252. also have larger legal departments and patent portfolios.</p>
  253. <p>It is this uncertainty that has caused great frustration among SMEs,
  254. which Charles Schulz of Ars Aperta summarised as RAND referring to
  255. "RANDom licensing at the sight of competitors."
  256. In <a href="">his
  257. presentation</a>, Mr Schulz also pointed out that (F)RAND terms are
  258. discriminating against Free Software. Even RAND terms linked to zero
  259. royalties, the so called RF-on-RAND ("Royalty Free on RAND"),
  260. RAND-RF ("RAND Royalty Free") or RAND-Z ("RAND with Zero royalties")
  261. terms often exhibit the same problems because they do not permit
  262. sublicensing.</p>
  263. <p>Free Software
  264. (<a href="/documents/freesoftware">a.k.a. Open
  265. Source, FOSS or FLOSS</a>) is based on the principle that every
  266. living person and every legal entity can be a user, developer,
  267. distributor, or any combination of the above. Only conditions which
  268. permit this to take place are acceptable to Free Software, which is
  269. <a href="">estimated</a> to reach 32% of
  270. all IT services and 4% of European GDP by 2010.</p>
  271. <p>In <a href="">her
  272. presentation</a>, Amy Marasco, General Manager Standards Strategy of
  273. Microsoft, emphasised that she does not consider Free Software a
  274. business model. That is true to the same extent that proprietary
  275. software itself is not a business model. Business models are what is
  276. built on top of both Free Software and/or proprietary software.</p>
  277. <p>Ms Marasco continued to point out that all these business models
  278. are legitimate. And while there are strong differences in opinion
  279. about which software model is the better and more sustainable choice
  280. for economy and society, from the perspective of a political
  281. analysis of standards, all business models based upon proprietary
  282. software, Free Software, or a mixture of the two need to be
  283. considered valid and legitimate.</p>
  284. <p>As mentioned before, the Free Software related parts of European
  285. GDP are estimated to reach 4% by 2010. All parties agree that all
  286. business models, including those incorporating Free Software, are
  287. legitimate. This raises the question whether it can be considered
  288. Fair, Reasonable and Non-Discriminatory to exclude this legitimate
  289. part of economy by choice of patent licensing terms.</p>
  290. <h2>Harm from exclusion?</h2>
  291. <p>The situation bears an odd semblance to the situation with
  292. <a href="">counterfeit
  293. pharmaceuticals</a>, where the argument for patent enforcement is
  294. generally accompanied by public health considerations. But only
  295. effective pharmaceuticals that are identical to the patented product
  296. would actually violate the patent. Health risks arise primarily
  297. where the patents are not being violated.</p>
  298. <p>In standards, the situation is somewhat similar. If patents are
  299. part of a standard, only an implementation that is covered by the
  300. patents provides an effective antidote to monopolisation. Having to
  301. circumvent patents will generally break standards compliance and harm the
  302. public benefit that is the driving force behind standardisation.</p>
  303. <p>So patents in standards have the potential to make full
  304. interoperability impossible for legitimate businesses in some
  305. markets. As the aforementioned
  306. BSI <a href="">points
  307. out</a>: "Standards are designed for voluntary use and do not impose
  308. any regulations. However, laws and regulations may refer to certain
  309. standards and make compliance with them compulsory."</p>
  310. <p>Once a technology has been standardised, certain choices are no
  311. longer made for technological quality. Even where a better solution
  312. exists that would have the additional value of not violating a
  313. potential patent on the standard, an implementor would choose to
  314. follow the technologically inferior standard in order to have full
  315. access to the market. Such a case reverts the initial idea of
  316. patenting: The technology is valuable because it is patented, not
  317. patented because it is valuable.</p>
  318. <p>There are also cases where certain standardisation organisations,
  319. e.g. the <a href="">International Organisation for
  320. Standardisation</a> (ISO) have a privileged position with
  321. governments for procurement decisions. Due to patents and
  322. insufficient (F)RAND conditions, not all standards priviledged in
  323. this way can be implemented by all legitimate market participants
  324. that should be able to compete in public tenders.</p>
  325. <p>So through the special priviledge for organisations like ISO which
  326. accept terms insufficient to guarantee competition, the monopoly
  327. right conferred by patents translates into an oligopoly or even a
  328. monopoly for public procurement. This exclusion of competition from
  329. tenders by means of patents on standards is detrimental to the
  330. public benefit because it leads to higher prices and consequently
  331. higher taxes.</p>
  332. <p>Remedies for this situation would have to address the way in which
  333. governments grant procurement preferences to standards, the way in
  334. which patents are handled in standards, the patent system itself, or
  335. a combination of all of the above.</p>
  336. <h2>Attempted remedies</h2>
  337. <p>Good patent research costs around 100.000 EUR per case according to
  338. Rigo Wenning, Legal Counsel &amp; Patent Policy Team Contact of the
  339. W3C/ERCIM who spoke about
  340. "<a href="">Standards,
  341. Patents and the Dynamics of Innovation on the Web</a>." The W3C is
  342. indeed the only Standards Setting Organisation (SSO) that has a
  343. sufficient patent policy for its standards in order to accomodate
  344. all legitimate business models.</p>
  345. <p>From the perspective of most SMEs, 100.000 EUR patent research costs
  346. are prohibitively expensive. But even large companies will find this
  347. cost considerable, which is only one of the cost generators. More
  348. damage can be caused by injunctions against a product, or claims for
  349. damages. In
  350. his <a href="">presentation
  351. of IBM's "SoftIP"</a> concept, Roger Burt, Senior Counsel of IBM
  352. Europe introduces the issues with a quote from a BSA et al. Amicus
  353. brief in eBay v MercExchange. The quote summarises the problems of
  354. large industry rather well:</p>
  355. <quote class="indent"><em>"Technology products typically consist of hundreds or
  356. thousands of patented components. It therefore is impossible for
  357. technology companies to investigate all of the patents, and pending
  358. patent applications that may be relevant to a new invention (product),
  359. notwithstanding their best efforts to do so. When, as frequently
  360. occurs, the claim of infringement is not made until after the new
  361. product is released or the industry standard has been adopted,
  362. designing around the claim is no longer a realistic option. Because an
  363. injunction will issue automatically upon a finding of infringement –
  364. even if the claim relates to an insignificant part of the product –
  365. the target of the claim is forced to pay an extortionate settlement in
  366. order to preserve its business."</em></quote>
  367. <p>Another attempt to keep patents fees from becoming exorbitant even
  368. for the largest corporations was introduced by Tim Frain, Director
  369. IPR regulatory affairs, Nokia in his presentation about
  370. "<a href="">FRAND
  371. Best Practice</a>." Mr Frain advocates a system based on "Aggregated
  372. Reasonable Terms" &amp; "Proportionality" (ART+P).</p>
  373. <p>The underlying idea of this approach is that if every patent holder
  374. individually charges patent fees they consider Fair, Reasonable and
  375. Non-Discriminatory, the resulting fees may easily add up to 50% or
  376. more of the cost for the end product. So all patent holders should
  377. commit ex-ante that the aggregate licensing cost for all patents
  378. should be reasonable. As an example, Mr Frain cited that in Nokia's
  379. view, the patent licensing fees on the communication technology for
  380. mobile phones should be below 10% per handset.</p>
  381. <p>Both approaches are attempts to control the use of monopolies
  382. granted by patents and as such are trying to get voluntary buy-in
  383. from other parties to not exercise rights that the patent system has
  384. granted them.</p>
  385. <p>Unfortunately they both fall short of the criterion of
  386. non-discrimination against legitimate business models, and the ART+P
  387. approach also has the practical weakness that convergence joins more
  388. than one kind of technology per device, so the total patent
  389. royalties on a smart phone may still reach 50% even if the costs for
  390. GSM &amp; Co are limited to 10%. But even these 10% can be
  391. considerable for laptops with included UMTS modems, or embedded
  392. devices, an area in which the profit margins are typically far below
  393. 10%.</p>
  394. <p>To put it in the form of a controversial question: Is it fair and
  395. reasonable that patent holders receive a higher monopoly rent than
  396. an innovative company stands to gain by bringing out a new product
  397. and bearing all the risk associated with it?</p>
  398. <h2>Cui bono?</h2>
  399. <p>So who benefits? As explained before, patents are designed as a trade-off. Their
  400. benefits are often explained with the lone inventor having a genius
  401. idea. Would it be fair if this inventor published the idea only to
  402. see a large company bring it to market faster than the inventor
  403. could, with no financial reward for the inventor? Most people would
  404. agree this is not fair.</p>
  405. <p>In the absence of patents, such an inventor could only choose
  406. between accepting fate, or keeping the innovation secret for as long
  407. as possible while trying to bring it to market. Patents grant a
  408. temporary monopoly for the inventor in return for publication, such
  409. that the inventor can find investors, set up a company, finish
  410. product development, bring it to market, and enjoy a head start
  411. before others can compete normally.</p>
  412. <p>This mechanism seems to have worked reasonably well for some time
  413. in the past. But some basic parameters have changed, while patents
  414. have been extended in an essentially unreflected way to more
  415. areas. This is particularly true for software, where patents play no
  416. meaningful role in disclosure, breaking the patent deal for society
  417. whereas the time of bringing new innovation to the market and the
  418. time between groundbreaking discoveries has been decreasing.</p>
  419. <p><a href="">Raymond
  420. Kurzweil</a> found an exponential pattern in innovation reaching back
  421. all the way to single-cell organisms. Concluding that this must be
  422. a universal principle, Mr Kurzweil has been
  423. making <a href="">predictions</a>
  424. for the future of which several have turned out to be largely
  425. accurate so far. When applying this principle to patents, from the
  426. constant duration of the monopoly guaranteed follows an
  427. exponential growth of the value of an individual patent.</p>
  428. <p>The price that society is paying for granting patents has been
  429. <a href="">growing
  430. exponentially</a> since the time that the initial patent bargain was
  431. struck. This would explain why the price for the patent system seems
  432. increasingly exorbitant with growing calls for reform, which have
  433. led to the recent announcement of the
  434. "<a href="">First
  435. in Series of Hearings on Evolving Intellectual Property
  436. Marketplace</a>" by the U.S. Federal Trade Commission (FTC).</p>
  437. <p>Remedies to this problem could be to decrease the lifespan of
  438. patents, adapt them to the specific situation in the field, and
  439. exclude fields from patenting in which patents provide no meaningful
  440. disclosure.</p>
  441. <p>When it comes to standards, it was An Baisheng, Deputy Director of
  442. the Division of Technical Regulations Department for WTO Affairs of
  443. the Chinese Ministry of Commerce who raised the question of public
  444. vs private benefit in his presentation titled
  445. "<a href="">Strike
  446. the Right Balance between Public and Private Interests in IPR in ICT
  447. Standardization</a>".</p>
  448. <p>Taking our "lone inventor" scenario above, the question that we'd
  449. have to ask for patents on standards is: Would it be fair if our
  450. inventor could prevent someone else from bringing to market an
  451. innovation of their own that somehow interacts with the initial
  452. invention? To make it less abstract: Should a patent on a typewriter
  453. extend to carbon copy paper that has the right size to be used in
  454. that typewriter? Most people would agree this goes too far.</p>
  455. <h2>Potential Remedies</h2>
  456. <h3>1. Interoperability trumps patent</h3>
  457. <p>During the software patent debate in the European Union there was
  458. consensus among SME, Free Software and big businesses
  459. representatives from companies such as IBM or Sun Microsystems that
  460. patents which limit or prevent interoperability should be unenforceable.</p>
  461. <p>In the European Union, this could be introduced into the ongoing
  462. Community Patent debate. On a global level, WIPO should consider
  463. this as part of its ongoing Development Agenda discussions.</p>
  464. <p>Once implemented, this would solve the most harmful side-effects
  465. for all legitimate business models and give interoperability and
  466. competition preference over monopoly rights. Considering the
  467. extraordinary networking effects that exist in this market, such a
  468. preference seems justified.</p>
  469. <h3>2. Update policy in SSOs</h3>
  470. <p>Secondly, Standard Setting Organisations (SSOs) could update their
  471. patent policies to ensure that their standards are usable in all
  472. business models. Many SSO representatives in the meeting maintained
  473. that it was not their place to mandate certain patent policies. At
  474. the same time,
  475. the <a href="">Common
  476. Patent Policy</a> of ITU-T, ITU-R, ISO and IEC already states the
  477. principle that "<em>a patent embodied fully or partly in a
  478. Recommendation | Deliverable must be accessible to everybody without
  479. undue constraints.</em>" As this analysis demonstrates, current
  480. application of RAND falls short of that principle.</p>
  481. <p>There is additional precedence supplied by the common way in which
  482. SSOs protect standards against potential later claims from Copyright
  483. holders by requiring all participants to a standardisation process
  484. to assign their copyright to the SSO. Applying appropriate similar
  485. measures on patents for similar reasons seems justified.</p>
  486. <h3>3. Provide intermediate and migration possibilities</h3>
  487. <p>Many patent-encumbered standards already exist, and even if WIPO
  488. ends up agreeing on a general interoperability preference, it will
  489. take decades for this to become local law.</p>
  490. <p>As an intermediate solution, (F)RAND needs to be enforced in a way
  491. that the license terms do not discriminate against any valid business
  492. model, as is still common today. A potential solution could be to
  493. tie (F)RAND royalties to the downstream licensing revenue.</p>
  494. <p>Business models that are based on proprietary licensing based on
  495. copyright or patents for revenue would continue to operate as they
  496. do today. Business models that do not rely on such licensing revenue
  497. would be enabled to interoperate and compete.</p>
  498. <p>Taking this step would also realign ITU-T, ITU-R, ISO and IEC again
  499. with their declared Common Patent Policy.</p>
  500. <h3>4. Update governmental procurement guidelines</h3>
  501. <p>Governments and Inter-Governmental Organisations should update
  502. their procurement guidelines to procure only products based upon
  503. standards that do not discriminate against any legitimate business
  504. model. This means a review of blanket approval for certain standard
  505. setting organisations, and only a limited approval for organisations
  506. that have not updated their patent policies appropriately by the
  507. time of the review.</p>
  508. <hr />
  509. <p><em>DISCLAIMER: This paper was written from the
  510. perspective of an expert in the field of software. The conclusions
  511. may apply in their entirety, partially, or not at all to areas
  512. other than software.
  513. </em></p>
  514. </body>
  515. <timestamp>$Date$ $Author$</timestamp>
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