Vice President of the European Commission responsible for Competition Policy Industrial policy and Competition Joaquín Almunia just gave an interesting speech in Paris that mentioned the current thinking on the interaction of standards and patents.
Readers in past years may remember a posting almost four years ago (2008) Neelie Kroes gets it: "Standards are the foundation of interoperability". I thought at the time it was a good step forward, because All Interface Technologies by Market Dominators should be QA-ed, RAND-z Standards!
Here is the relevant portion of Almunia's speech
I am notably thinking of the surge in the strategic use of patents that confer market power to their holders.
The potential abuses around standard-essential patents are a specific illustration of this concern.
Standards are the best tool to promote interoperability of devices or to define safety or quality benchmarks. In the communications technologies, standards are key for a universal interconnection and seamless communication.
Once a standard is adopted, it becomes the norm and the underlying patents are indispensable.
Owners of such standard essential patents are conferred a power on the market that they cannot be allowed to misuse.
Standardisation processes must be fair and transparent, so that they are not in the hands of established firms willing to impose their technologies. But it is not enough. We must also ensure that, once they hold standard essential patents, companies give effective access on fair, reasonable and non discriminatory terms.
This is crucial if we want industries and businesses relying on such patents to develop freely to their utmost potential.
I am determined to use antitrust enforcement to prevent the misuse of patent rights to the detriment of a vigorous and accessible market. I have initiated investigations on this issue in several sectors and we will see the results in due time.
When we think of the technological reality, of what the bedrock of innovation and deployment is, I think a respectable case could be made that standards dwarf patents in their importance to the economy. This is especially true once patents become stockpiled weapons in arsenals suitable for cross-licensing deals by the big players, which like cold-war nuclear arsenals would risk mutually assured destruction if actually used for their intended purpose. However, regulators and legal systems have been slow to let this sink in: fostering and protecting the standards system has not been a traditional focus of competition regulators.
I'll repeat from this blog in 2007:
My key point is that once a company's success in an area brings it to the point of market domination (or long-term super-profit-taker) then anti-trust regulators need to ensure that their interface technologies are open enough for the usual level-playing field concerns to be addressed.
Almunia goes very close to this: addressing the RAND aspects. The more that there is clarity and determination in this kind of area, the better. The policy also needs to figure out what to do about boutique standards organizations: as well as the national and international standards bodies like ANSI and ISO, and the industrial standards bodies like ECMA and OASIS, there are a crop of single-standard organizations, set up to shepherd particular standards. For any standards body, particular standards will have champions, usually corporations. When the corporate champion starts up their own boutique standards body in order to dominate its early stages, its competitors may feel disinclined to participate in what they see as a rigged venture. It may be that standards from bespoke standards bodies need to be translated into ISO standards, to allow the extra quality control measures and openness to national contribution.
But even though Almunia's speech think this represents a good advance, I think it still does not go far enough. To some extent is sees standardization as an escape hatch, so that when—whoops— a company finds itself in a market-dominating position, including through its patents, the company can free itself from entanglement by opening up with standards after a few years. But what we need is for clear regulatory requirements that as a technology gets into a market-dominating position, it must be a cost of business that it gets standardized in some form and made available RAND-z: the onus should be on the corporation as its technology breaks though not the watchdog acting in retrospect.
This would also create a much-needed balance in the actions of patents: the monopoly on a technology granted by a patent may be enough to bring a company success but not to the point of becoming a market-dominating monopoly where the patent (singly or in combination as a suite of patents) effectively hinders competition.
I think it still gets it the wrong way round. The regulators are clearly heading in the direction that market-dominating technologies should be standardized and RAND-z. But my call is more: that every interface technology by a market dominator should be standardized: these things form ecosystem and can reappear unexpectedly. The market-dominating position gained by one technology provides a boost to other technologies—playing catch-up is not good enough.
For a practical case of this in the headlines, I read today that in recent the Apple/Google/Samsung/Oracle kerfuffles on IP relating to tablets and portable devices, Oracle was lifting its litigational eyebrows that Android's API was too much like the Java API. Java was never standardized though a non-boutique body: there were two attempts at ECMA and ISO but IMMSMC Sun pulled out both times near the end. A market dominating technology like Java (for some technological segments) from one generation should be available RAND-z to inspire the next generation: most innovation is adaptation.