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ICT Standards and Patents – the public authority and international perspective

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Datum: 24/11/2011
Plats: Brussels, Bedford Hotel and Congress Centre
Rue du Midi 135-137 - 1000 Brussels - (Belgium)
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Throughout the world, public policies increasingly rely on innovative and interoperable ICT solutions to implement major projects for the benefit of society in domains such as eHealth, efficient energy use, cloud computing, integrated transport systems and smart grids.

The effectiveness of the proposed solutions depends to a large extent on the level of interoperability between the various ICT components of the systems which in turn depends on the effectiveness and consistency of the set of ICT standards underpinning the application.

Public authorities also count on interoperable ICT solution to be able to communicate with their stakeholders and counterpart authorities both domestically and internationally. To fulfil their policy and communication tasks the necessary interoperable ICT solutions usually have to be acquired through public procurement.

ICT standards supporting policy objectives are thus technology platforms with a strong public interest dimension. As such, they raise legitimate concerns when technologies covered by Intellectual Property rights (IPR) are included in the standards. The exclusive potential provided by those rights poses the danger that they could become an impediment to the implementation of the technologies and the realisation of the policy objectives.

Simultaneously public authorities care about the development of innovative solutions, including those covered by IPR's. The IPR treatments in ICT standardisation should contribute to the competitiveness of companies while providing equal treatment of business models. Public authorities therefore need to pay particular attention to IPR aspects in ICT standards which may impact on public policy setting. In particular, they need to carefully consider such aspects when undertaking public procurement in order to ensure fair competition between technology solutions and providers.

Furthermore, policy initiatives as well as the procurement of interoperable solutions, often require the integration of standards stemming from various private standardisation organisations. However, such standards setting organisations do not necessarily use compatible IPR policies and therefore efforts may be necessary to ensure adequate transparency, consistency and predictability of IPR treatment in the integrated set of standards.

Against this background, the Commission and the European Patent Office will jointly organise a second public conference aimed at further increasing transparency and predictability in the treatment of IPR in ICT standardisation.

The conference to be held on 24 November 2011 in Brussels will focus on the role, expectations and responsibilities of public authorities in relation to the use of interoperable ICT technologies in support of competitiveness and innovative applications to meet policy objectives. It will have a broad international dimension including representatives of public authorities from Europe and other world regions as well as industry and standardisation organisations with a global reach. Key notes will be provided by the European Commission and then European patent office.

The purpose of the conference on 24 th November 2011 was to focus on the role, expectations and responsibilities of public authorities in relation to the use of interoperable ICT technologies in support of competitiveness and innovative applications to meet policy objectives.

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The conference had a keynote session and three sessions:

  1. Public authorities' strategies for improving competitiveness and innovation using patented technologies in standards
  2. Increasing transparency and predictability at the interface between standardisation and patent system
  3. Public authorities: referencing standards in public procurement of interoperable ICT services and applications.

The main highlights from the conference were:

  • FRAND was recognised by all participants as a general principle in standardisation license agreements.
  • The cooperation between EPO and SDOs on exchange of and access to information is a good example of increasing transparency in standardisation. In particular, the highlevel cooperation between EPO and ETSI, ITU and IEEE-SA can serve as a good practice for other major patent offices and other SDOs.
  • The industry representatives expressed satisfaction with the draft regulation on European Standardisation and supported the principles laid out in the European Interoperability Framework 2.0.
  • Barriers to small and medium-sized enterprises' access to and use of standards still remain
  • The delineation between proponents and opponents of royalty-free standards remains unaltered.

The conference was opened by Michel Catinat, Head of Unit of the EC's DG Enterprise and Industry and responsible for ICT for competitiveness and industrial innovation.

Mr Catinat welcomed the conference delegates to the second joint EC/EPO event. He reminded the audience, that the publication in January of new guidelines for the assessment of horizontal cooperation agreements has reduced the risk of facing actions from competition authorities for SDOs (Standards Developing Organisations) implementing ex ante declaration Brussels in July 2011 made it clear that no further action on this topic is necessary.

The key issue for the European Commission (EC) is to find a balance between all stakeholders' expectations and to increase stability and predictability of IPR (Intellectual Property Rights) treatments in ICT standardisation. The EC sees its primary role as facilitating dialogue to that effect. Mr Catinat emphasised that the EC will not intervene and does not intend to take any legal action on this topic. Still, a number of pressing issues requires the attention of public authorities, including balancing supply and demand in the electricity system, and providing high quality health services to an ageing population at reasonable costs. With this conference, the EC aimed to facilitate dialogue which eventually could lead to a balance between proponents of IPR free or royalty-free IPR treatment in ICT standards and the ones who argue that this approach will stop industry's incentive for innovation.

Session 1: Public authorities strategies for improving competitiveness and innovation using patented technologies in standards

The session was chaired by EPO's Chief Economist Nikolaus Thumm and focussed on the expectations and responsibilities of public authorities using standards to improve competitiveness and innovation.

The session contained four presentations and a panel discussion. The four presentations highlighted experience from Finland, USA and China and contained an EC perspective on the topic.Mikko Huuskonen, Counsellor at the Finnish Ministry of Employment and the Economy, explained that in Finland, standardisation is entirely a private affair. However, recognising the importance of standardisation to competitiveness, the government supports the Finnish Standards Association with a small annual contribution and has a seat on the board. The authorities in the US tend to stay out of the tension between the IPR and standardisation systems, although they recognise the importance of patented technologies in standards for competitiveness. As described by Roger B. Marks from the US based company Consensii LLC there are several court cases under way in the US regarding the interpretation of FRAND (fair, reasonable and non-discriminatory), and a similar trend can be expected in European courtrooms. As opposed to the Finnish and US examples, public bodies wholly administer standardisation in China. Yi Yi Wang, Director of the China National Institute of Standardization recognised this difference in her presentation. She also demonstrated how there is a strong link between innovation and competitiveness on the one side, and IPR and standardisation on the other side in Chinese policy documents. The EC point of view was represented by Benoit Abeloos from DG Information Society and Media. Referring to the recent developments in the area as defined by the Digital Agenda for Europe, i.e. the June a proposal for a regulation on European Standardisation, he introduced a specific user perspective into the discussion. Users in many universities and hospitals that he has spoken to, think that prices for standards are too high and they request a royalty-free licensing model, which would save them money and promote competition. Based on this, Mr Abeloos suggested that simply viewing a standard should be free.

Monica Magnusson from Ericsson, Serge Raes from FranceTelecom - Orange, Rebekka Porathfrom Intel, Claudia Tapia Garcia from RIM and Harald Heiske from Siemens were panellist in Session 1.

Four themes emerged from the discussion:

  1. Free standards
  2. Ex ante declaration of licensing fee in terms of a percentage
  3. The need for different policies for general, publicly used standards and for specific standards.
  4. Support for recent EC policy actions.

Ad 1. Free standards

The issue of royalty-free standards was brought up by several of the panellists, not least sparked by Benoit Abeloos' observation that many users in the health sector favour free standards. He voiced the opinion that it is desirable to favour standards, which are interoperable and affordable to players in a specific sector, but still generate return on investment. Serge Raes gave an example on how France Telecom Orange has developed a tailor-made open source license to a smart grid protocol. This approach was taken in order to use prototypes for demonstration purposes and for interoperability testing. Ms Porath estimated that the number of standards used for smart grid would be at least as complex as a laptop, which can contain more than 250 standards, some of them under RAND IPR regime and some of them using royalty-free IPR. She urged authorities to embrace diversity regarding IPR regimes and sources of standards, and to allow proprietary solutions to compete. Mr Heiske for his part warned against constructing simplistic solutions to complex  problems, and in the same vein, Mr Huuskonen warned against regulating too deeply in this respect. A comment from the audience questioned the universal interest of SMEs in royaltyfree licenses, as it depends on the SMEs (Small and Medium-sized Enterprise's) specific business model.

Ad 2. Ex ante declaration of licensing fee in terms of a percentage

While there was no discussion as such about the use of FRAND, an idea was voiced among the audience to ex ante declare licensing fees expressed as a percentage corresponding to the essential patents held by each right holder. The idea sparked interest and several suggestions emerged on how to construct such a regime, including how to determine the rate as related to investments, and how to construct a distribution mechanism. However, a representative of UEAPME in the audience pointed to the asymmetry in negotiations for SMEs, which usually do not own as many patents as large companies. In addition, a representative of DG Competition noted that all collective rates inevitably would attract the interest of DG Competition.

Ad 3. The need for different policies for general, publicly used standards and for specific standards

When asked about the need for differing policies depending on a special public interest in a particular area such as smart grid, Mr Huuskonen replied that the issue could be compared to the discussion about public interest in the patent area, for instance regarding "green patents" and compulsory licensing. In his opinion, it would be difficult to see how standardisation would impact national security or emergency.

Ad 4 Support for recent EC policy actions

Across the board, the panellists supported recent EC policy actions, i.e. the Guidelines for the assessment of horizontal cooperation agreements, the proposed regulation on European standardisation and the European Interoperability Framework for European Public Services 2.0. What matters for industry players, as formulated by Mr Heiske, is to reduce unpredictability about the future. With these initiatives, this seems to have been achieved so far.

The chair summed up the session and pointed to the fact that in the US and in Europe standardisation is headed by the private sector, while in China standardisation is vested in a public agency. When it comes to FRAND, he concluded that the term should not be very harshly defined, as it depends on many factors such as the specific industry sector. With regard to the role of patent offices, he emphasised that quality in examination is very important and called for other major offices to join the cooperation with standardisation organisations.

Key note session

Heinz Zourek, Director General, DG Enterprise and Industry
Mr Zourek first of all welcomed the professionalism of the debate seen so far at the conference. The EC wants to establish a fair and level playing field and reinforce the competitiveness of the ICT sector in order for the users to get access to the best solutions in eHealth, cloud computing and smart grid. So while the EC tries to give incentives to produce and invent, it has a strong interest in interoperability, which does not distort competition. A tangible aim of EC policy is to reinforce EPO and other patent offices as well as SDOs. The cooperation on a database between EPO and ETSI as well as the push for a unitary patent both lead in this direction. The Guidelines on horizontal cooperation agreements as well as a workshop in July 2011 settled the issue of ex ante declaration of licensing terms, and Mr Zourek reassured the delegates that the EC will not make ex ante declaration of licensing terms mandatory.

Wim van der Eijk, Chairman of EPO's Enlarged Board of Appeals and Vice-President elect of EPO's DG3-Appeals
The primary role of EPO in standardisation is to ensure that rights are solid. In this respect, not only access to Asian, Russian and Indian patent literature constitutes a challenge. It is equally important to have access to standard organisations' information in order to conduct prior art searches. Mr van der Eijk noted how fragmented the patent system is, leading for instance to US patents being part of a global standard, while not being valid or granted in Europe.

Session II
Increasing transparency and predictability at the interface between standardisation and patent system

The session was chaired by Konstantinos Karachallos from EPO's Public Policy Issues and included an update on the unitary patent and a panel with four presenters on cooperation between standardisation and patent authorities.

Simona Selkyte of EC's DG Markt summed up the current state of the unitary patent process and its implication for standards-related patents. She assessed that there is a chance of agreement on the two necessary regulations on the unitary patent by end of the year. If so, it can be formally signed in the first half of 2012. Ratification in member state parliaments is expected after a few years.

Panel: How is cooperation between standardisation and patent authorities improving transparency around patented technologies included in ICT standards

The panel included presentations from the patent office perspective (Michael Goudelis, Director Telecoms, EPO) and from the SDO perspective, represented by ETSI, ITU and IEEE. (Dirk Weiler, ETSI General Assembly and IPR Special Committee Chairman, Antoine Dore, Senior Legal Officer, ITU and David Law, Member of the IEEE Standards)

The session showed that transparency and cooperation between patent offices and SDOs is in the interest of both types of organisations. From a patent office perspective, high quality patents in the ICT area can best be obtained by giving patent examiners access to standardisation information from Standards Developing Organisations (SDOs). EPO estimates that 1/3 of the important documents in relation to telecom patent applications come from standardisation literature. SDOs can benefit from cooperation with patent offices by gaining access to data from patent registers to automatically identify patent families and to keep the patent information in the declaration register updated. The recently launched ETSI IPR database offers a good practice example of how declarations of essential patents are automatically updated with data from EPOs Esp@cenet database.

Other examples of enhanced cooperation include the provision of advanced patent searches to SDOs and joint training of staff.

In conclusion, this session underlined the importance of accessible and reliable information:

  • From SDOs to patent offices about their work in order to ensure high quality of the granted patent.
  • From the patent offices to the SDOs in order to update the patent declarations

The session chair encouraged the delegates to deepen and expand the existing activities.

Session III
Public Authorities: Referencing standards in public procurement of interoperable ICT services and applications

The session included presentations by representatives of WIPO (Tomoko Miyamoto), India (Ramjee Prasad from GISFI), the Netherlands (Nico Westpalm van Hoorn from Standardisation Forum), Denmark (Frederik Nelsson from the Agency for Digitisation) and Austria (Kai Erenli from University of Applied Sciences bfi Vienna).

The panel was composed of an SME representative (Friedrich Kofler from Atix), a lawyer (Tomas Vinjefrom Clifford Chance), as well as representatives of five major international ICT companies: Amy Marasco from Microsoft, Emmanuel Darmois from Alcatel Lucent, Andreas Tegge from SAP, Jonathan Sagefrom IBM, and Ding Jianxinfrom Huawei.

Karel de Vriendt, adviser at the EC's DG for Informatics, chaired the session. Mr de Vriendt opened the session by outlining the main issues in the area of public procurement and interoperability. Public procurement must necessarily be conducted in smaller calls for tenders, so in order to ensure that the relevant systems can work together, interoperability standards are necessary. The procurement directive states, that public authorities cannot favour one standard or vendor over the other through choice of standard. So for public authorities the issue remains how to choose those standards.

No clear answers were given to this question in the presentations in this session, but the presentations from Denmark and the Netherlands demonstrated how a more activist approach has been taken from the side of some governments. In Denmark, a parliament decision from 2006 instructs the government to ensure the use of open standards in order to promote competition and interoperability. To support this effort a "comply or explain" List of Standards has been established, which currently comprises 7 standards. A similar list with 21 standards exists in the Netherlands, as well as an additional common reference list with 41 standards. Before accepted into the lists, experts review the standards on the basis of four criteria: Open consultation process, interoperability, market or user support, and acceptance.

The panel debate highlighted different interests of smaller companies with limited financial and human resources as opposed to larger corporations. Smaller companies need access to free and open standards, since RAND conditions are generally beyond the scope of small companies. Larger companies generally oppose the idea of establishing open source as mandatory in public procurement, pointing to the fact that governments should consider not only the licensing fee, but also lifetime costs including costs of related services. No solution was reached regarding the barriers experienced by SMEs in using standards.

Discussions evolved around the distinction between licensing terms in hardware and software standards, where some argued, that governments should choose royalty-free software, while others pointed to the fact that royalty-free IPR in standards would lead to unfair competition from the players that do not invest in R&D. No final agreement between stakeholders seems imminent on this point.

Several panellists expressed support for the European Interoperability Framework 2.0 as well as for annex 2 of the draft regulation on European standardisation, describing the requirements for the recognition of technical specifications in the field of ICT.

Conclusions

The session chairs concluded from their respective sessions.

On the question of innovation and competition policy in relation to ICT patents and standardisation, Mr Thumm noted the apparent differences between US and Europe, where the standardisation processes is done in the private sector, and China where public bodies are in charge of the process. He stressed that FRAND is the best principle there exists and he warned against defining it too harshly.

Mr Karachalios concluded that it is absolutely essential for SDOs and patent offices to work together to improve transparency around patented technologies included in ICT standards. On the one hand, the quality of patent examination is enhanced by access to standardisation literature, on the other hand patent declarations can be updated and completed with access to patent office data as it is demonstrated with the linking of ETSI's declaration database with EPO's public register. He urged SDOs and patent offices to deepen and expand their cooperation, and called on other major patent offices to join in this work.

Mr de Vriendt closed the conference with noting that EIF 2.0 seems to be broadly accepted along with annex two of the draft regulation. He observed, that the discussions on FRAND, on royalty-free, and on the differences between hardware and software did not contribute with any entirely new insights. He also noted that the list of standards in the Netherlands and Denmark appear to work according to their intention. As regards openness, he emphasised that this is an important concept in the patent system, in the standard system as well as in public procurement, but that integrating openness in these processes is not necessarily smooth. In Mr de Vriendt's point of view, the barriers for SMEs remain in public procurement and in the access to and use of standards in the ICT area.

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