Standards-Setting, IPR Policies, and

“Open Standards”

Steve MutkoskiRegional Director, Interoperability & Innovation

Microsoft Corporationsteve.mutkoski@microsoft.com

Standards Overview• What are standards anyway?– Technical specification which either does or is intended

to provide a common design for a product

• Why are standards important?– Networked world; convergence– One means of fostering interoperability

• How are standards developed?– By a single company– By a few companies– By a large number of companies

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Defining Types of Standards• “Open” standards – technical specifications that have

been approved or ratified through an open consensus based process, publicly available, vendor neutral, licensed under RAND terms (with or without a royalty or fee)

• Proprietary or Industry standards – technical specifications maintained by a private entity or group of cooperating entities, and licensed under commercial terms

Definitions of “Openness”• “Open” is not a legal term• “Open” as an adjective– Can take on many meanings– Can lead to use as a verb, with adverse impact on

IP and innovation • Traditional definition of “open standard”– Standards developed or ratified through an open,

consensus process– Admission open to all– Covered by an open and transparent IPR policy– Contributors license essential IPRs to implementers

on Reasonable and Non-Discriminatory (RAND) terms (with or without royalties/fees) 4

“Open Standard”• Traditional definition reaffirmed by:– Global Standards Collaboration (GSC) -

http://www.itu.int/ITU-T/gsc/gsc10/index.html - Resolution GSC-10/04: (Joint Session) Open Standards

– ITU-T - http://www.itu.int/ITU-T/othergroups/ipr-adhoc/openstandards.html

– American National Standards Institute (ANSI) - http://publicaa.ansi.org/sites/apdl/Documents/Standards%20Activities/Critical%20Issues%20Papers/Griffin%20-%20Open%20Standards%20-%2005-05.doc

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More Recent Definitions…• New uses of the term and confusion• “Free to implement”– Very few standards bodies mandate a RANDZ

approach– All essential patent claims may not be covered by

such a policy • “Free to use freely”– Is there any standards body that mandates such an

approach?

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Implications of new definitions

• If “open” means royalty free…– SSO desire to attract key technology holders– Will they come?– And the rest of the standards world?

• The latest twist… disclosure obligations– How much and when should a participant or

contributor disclose about the existence of patents?

– Requirements for searches? – About specific license terms?

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IPR Policy Approaches• Diversity of approaches is beneficial– Many puts and takes – different impacts– Many have different pro-competitive effects and

impacts on incentives to innovate• RAND– Reasonable and Non-Discriminatory– Flexible and adaptable– History of successful balancing of interests– Encourages sharing of IP while preserving incentives to

innovate

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GSC-11 Resolution – Effective IPR Policies

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• …typically provide incentives to interoperate, innovate and compete by:• respecting intellectual property,• balancing the interests of all stakeholders so that the outcomes are

representative, inclusive and more broadly supported,• being open and transparent for all to review and understand,• promoting the use of the best technical solutions given commercial

requirements,• being consistent with internationally accepted norms such as widely

accepted RAND/FRAND-based intellectual property rights policies,• recognizing the right of intellectual property right holders to receive

reasonable and adequate compensation for the shared use of their technology;

• that such effective intellectual property rights policies(i) encourage participation in standardization and the contribution of valuable technology, (ii) stimulate the sharing and adoption of technological advances that otherwise would be outside the relevant IPR policy, (iii) stimulate innovation, both in terms of the interoperability technology and also additional, non-standard features to accommodate customer needs and consumer choice, and (iv) solve interoperability challenges in effective ways that are focused and well-defined while preventing splintering (which can undermine the primary interoperability objective)

Business Models Drive IPR Policy Debates

• Companies are in business to maximize profits• Different standards activities impact different

business models and IP portfolios differently – IP licensing company – seeking reasonable return

on R&D investment– Product company – monetize IP through products;

defensive approach in standards– Services provider – use loss leader business model

to drive monetization of services– Consulting model – seeking to transfer value

quotient from product/licensed IP to bring value to consultant offerings

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Technical standards are not the same as Technical standards are not the same as lawslaws

• Voluntary, consensus standards are developed Voluntary, consensus standards are developed in response to marketplace needsin response to marketplace needs– Standards can and do competeStandards can and do compete

• Laws are top-down solutions to address a Laws are top-down solutions to address a public safety need or to respond to a public safety need or to respond to a substantive marketplace failuresubstantive marketplace failure– May limit choiceMay limit choice– May limit innovationMay limit innovation

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Types of Standards Organizations

Broad

Ad

op

tio

n

NarrowCollaborations (Product; Proprietary)

Special Interest Groups (Proprietary; Open)

Consortia (Open)

Umbrella Organizations

(Open, De Jure)

Influence/ Process SpeedComplexity Increase

Decrease

Characteristics of OrganizationsStandards Org. &Standards Org. &

No. of SpecsNo. of SpecsOrg. Structure Org. Structure & Legal Rep& Legal Rep

CharacteristicsCharacteristics

Collaboration Collaboration

Usually focused on Usually focused on 11

Bilateral or multi-Bilateral or multi-party agreement party agreement

PartiesParties

Few parties involved make it easy & inexpensive Few parties involved make it easy & inexpensive to set upto set upInformal & flexible proceduresInformal & flexible proceduresEasy to reach initial consensus and expedite Easy to reach initial consensus and expedite work, very focused effortwork, very focused effortSeveral options once specs. are developed, effort Several options once specs. are developed, effort is finiteis finiteMinimal industry momentumMinimal industry momentum

Special Interest Special Interest GroupGroup

1 or a few closely 1 or a few closely relatedrelated

Multi-party Multi-party agreement agreement including some including some organizational organizational provisionsprovisions

Legal Working Legal Working Group (LWG)Group (LWG)

Few parties make it relatively easy & Few parties make it relatively easy & inexpensive to set upinexpensive to set upFlexible operating proceduresFlexible operating proceduresEasy to reach initial consensus and expedite Easy to reach initial consensus and expedite work; also very focused effortwork; also very focused effortSeveral levels of participation (Several options Several levels of participation (Several options once specs are developed; life of effort is finiteonce specs are developed; life of effort is finiteIncreased industry momentumIncreased industry momentum

Consortium Consortium

Multiple specs. Multiple specs. closely relatedclosely related

Incorporated non-Incorporated non-profitprofit

Independent Independent Counsel works Counsel works with LWGwith LWG

Procedures dictated by bylaws and guidelinesProcedures dictated by bylaws and guidelinesMore parties make it costly & more involved to More parties make it costly & more involved to set upset upEffort is larger in scope and longer in durationEffort is larger in scope and longer in durationWork is done in a technology area (IETF, W3C, Work is done in a technology area (IETF, W3C, Bluetooth)Bluetooth)Increased industry momentumIncreased industry momentum

Umbrella Umbrella OrganizationOrganization

Many loosely Many loosely relatedrelated

Incorporated non-Incorporated non-profitprofit

Very formal rules & proceduresVery formal rules & proceduresEffort is larger in scope and longer in durationEffort is larger in scope and longer in durationMaximum industry momentum and acceptanceMaximum industry momentum and acceptance