Standards-Setting, IPR Policies, and Open Standards Steve Mutkoski Regional Director, Interoperability & Innovation Microsoft Corporation

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 2

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) Resolution GSC-10/04: (Joint Session) Open Standards – ITU-T - adhoc/openstandards.htmlhttp:// adhoc/openstandards.html – American National Standards Institute (ANSI) - ards%20Activities/Critical%20Issues%20Papers/Griffin %20-%20Open%20Standards%20-% doc ards%20Activities/Critical%20Issues%20Papers/Griffin %20-%20Open%20Standards%20-% doc 5

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? 6

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? 7

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 8

GSC-11 Resolution – Effective IPR Policies 9 … 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 10

Technical standards are not the same as laws Voluntary, consensus standards are developed in response to marketplace needs Voluntary, consensus standards are developed in response to marketplace needs – Standards can and do compete Laws are top-down solutions to address a public safety need or to respond to a substantive marketplace failure Laws are top-down solutions to address a public safety need or to respond to a substantive marketplace failure – May limit choice – May limit innovation 12

Types of Standards Organizations Broad Adoption Narrow Collaborations (Product; Proprietary) Special Interest Groups (Proprietary; Open) Consortia (Open) Umbrella Organizations (Open, De Jure) Influence/ Process Speed ComplexityIncrease Decrease

Characteristics of Organizations Standards Org. & No. of Specs Org. Structure & Legal Rep Characteristics Collaboration Usually focused on 1 Bilateral or multi-party agreement Parties Few parties involved make it easy & inexpensive to set up Few parties involved make it easy & inexpensive to set up Informal & flexible procedures Informal & flexible procedures Easy to reach initial consensus and expedite work, very focused effort Easy to reach initial consensus and expedite work, very focused effort Several options once specs. are developed, effort is finite Several options once specs. are developed, effort is finite Minimal industry momentum Minimal industry momentum Special Interest Group 1 or a few closely related Multi-party agreement including some organizational provisions Legal Working Group (LWG) Few parties make it relatively easy & inexpensive to set up Few parties make it relatively easy & inexpensive to set up Flexible operating procedures Flexible operating procedures Easy to reach initial consensus and expedite work; also very focused effort Easy to reach initial consensus and expedite work; also very focused effort Several levels of participation (Several options once specs are developed; life of effort is finite Several levels of participation (Several options once specs are developed; life of effort is finite Increased industry momentum Increased industry momentum Consortium Multiple specs. closely related Incorporated non-profit Independent Counsel works with LWG Procedures dictated by bylaws and guidelines Procedures dictated by bylaws and guidelines More parties make it costly & more involved to set up More parties make it costly & more involved to set up Effort is larger in scope and longer in duration Effort is larger in scope and longer in duration Work is done in a technology area (IETF, W3C, Bluetooth) Work is done in a technology area (IETF, W3C, Bluetooth) Increased industry momentum Increased industry momentum Umbrella Organization Many loosely related Incorporated non-profit Very formal rules & procedures Very formal rules & procedures Effort is larger in scope and longer in duration Effort is larger in scope and longer in duration Maximum industry momentum and acceptance Maximum industry momentum and acceptance