Statement made on 26 Feb 2009

IPR, Standards and Interoperability

Why is Interoperability a key element of the European software market?

Interoperability is the ability of an IT system to communicate and exchange information with other IT systems in a way that all IT systems can use that information. Interoperability is an indispensable tool for individuals, public administrations, non-governmental organisations and enterprises around the world to be able to freely connect and communicate among one another. Interoperability and in particular interchangeability -- the ability of different products to satisfy the same function -- ultimately provide consumers with a wide variety of fully functional choices, which can communicate seamlessly across the world. As a key element of the European software market, interoperability will not only benefit software developers who will be able to create products that work together, but also European consumers and consumers worldwide by providing them with a variety of high quality choices able to perform the same functions.

The role of open standards in achieving Interoperability

Standards play a significant role in enhancing interoperability. ECIS is a firm believer that open standards, if properly defined, enable any vendor of IT equipment or services to implement all standardised technologies necessary to interoperate with all other vendors. In turn, consumers of these products can choose the product that meets their needs and switch at will without fear of losing functionality or control of their data. In contrast, technologies developed on proprietary standards hinder competition and do not allow the entry of new market p layers. A prime example of the key role of open standards in interoperability i s reflected in the draft European Interoperability Framework ("EIF") v2.0 published in July 2008. Open standards have a central role to play in attaining inter alia interoperability within public administrations across Member States. In general, ECIS aligns with the Commission's position on open standards within the European Interoperability Framework and accedes to most of the characteristics o f an open standard listed in the draft EIF v2.0.

According to ECIS, a standard is open inter alia if it is the outcome of a transparent, democratic and collaborative process open to all interested parties. Hence, users should be encouraged to play a more active role in standards setting bodies.

The role of standards setting bodies

ECIS disagrees with the proposal that de facto standardisation can be as effective in the development of interoperable software products as standardisation developed within official national or international standardisation bodies or other informal stakeholder fora and consortia. De facto standards mostly favour dominant market players who tend to be owners of closed proprietary platforms. In th e closed proprietary world, there are restrictions on how other vendors can implement a standardised technology that in turn impacts consumer choice and market competition. The selective disclosure of the documentation of a standardised technology and the costs of reverse engineering utilised in order to determine undisclosed extensions of a proprietary de facto standard are examples of restrictions related to the implementation of closed proprietary platforms.

On the other hand, ECIS strongly supports that global industry fora and consortia like W3C, IETF and OASIS should be treated equivalent to standards developed b y formal standardisation bodies. These global industry fora and consortia have proven to be successful in introducing widely available and generally accepted standards, such as the W3C accessibility standards for which national governments have shown a strong preference.

The interplay of standards and intellectual property rights

An effective standardisation system as a key means to interoperability should not be hindered by uncertainties regarding the influence that owners of intellectual property rights have over the process and the eventual implementation of the standard in question. To that end, any intellectual property rights related to the standard should be made available royalty free or at minimal cost, with other restrictions (such as field of use and defensive suspension) offered on reason able and non-discriminatory terms.

At the same time, ex-ante disclosure of licensing terms and conditions and ex-ante FRAND commitments should be adopted as part of the intellectual property policies of standards organisations to avoid patent hold-ups after the adoption of a standard. The adoption by standards organisations of intellectual property policies that provide for ex-ante disclosures of key terms of conditions and industry-adapted ex-ante FRAND commitments as part of the standardisation process is highly beneficial for both producers of standards-compliant products and the ultimate consumers of those products. Standards organisations should be provided th e legal certainty required to remove any doubt about the legitimacy of such policies under the appropriate conditions.

Some issues to be considered for a balanced intellectual property rights system in the software industry

In general, ECIS strongly believes in a balanced intellectual property rights system which effectively protects any intellectual property rights in the IT sector and which simultaneously strikes the right balance between intellectual property rights and the imperative for interoperability. Legislators have already expressed their intent to provide the right equilibrium between protecting intellectual property rights on software and encouraging the development of interoperable products. A representative example resides in Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs (the "Software Copyright Directive"). Article 6 explicitly provides a limitation to copyright on computer programs for interoperability purposes.

Computer programs "as such" are not protected by patents. However, where patent protection applies in the IT sector, especially in the case of intellectual property rights on standards used in the IT sector, the abusive assertion of patent rights on standardised technologies against users of those technologies should be avoided through appropriate actions by IPR holders, relevant standards setting organisations, competition authorities and, if necessary, legislative authorities. Moreover, ECIS strongly supports the introduction of a voluntary Licenses of Right regime -- which already exists in some Member States -- with respect to a Community patent system that is currently under discussion. ECIS favours introducing a voluntary License of Right system that would ensure wider access to technology essential to achieving software interoperability and that would sufficiently protect access to open standards.

A License of Right to use a patented invention guarantees that any interested party will have legitimate access to the patent to develop interoperable software without fear of patent holders trying to assert their exclusive patent rights to block the development of new products. As a result, the License of Right ensure s that patent protection will not be used strategically to prevent legitimate follow-on innovation in the software industry.

The License of Right regime could help address the problems faced by "innocent infringers" (an "innocent infringer" being an individual or business that did not know or could not reasonably be expected to have known of the patent), given th at they would no longer be vulnerable to injunctions, which is particularly important in the case of individuals or businesses for which the use of patented inventions is essential in order to achieve software interoperability. In addition , Licenses of Right will be a useful tool to SMEs, as under a License of Right t here is certainty that licenses will be available and "innocent infringers" will have less fear when marketing their products.

A potential License of Right regime should, however, provide businesses with adequate financial incentive to opt for the voluntary Licenses of Right regime. Th us, for example, a patent holder filing a written statement with the EPO that Licences of Right are available should receive a significant reduction of the renewal fees for the patent that fall due after the receipt of the statement.

Furthermore, ECIS is highly concerned that the patent litigation system should not allow patent holders to exercise their rights abusively and distort competition. The patent litigation system should provide safeguards ensuring that granted patent rights are not used abusively against other companies in order to prohibit them from accessing essential information to develop new interoperable products and to reduce innovation in the ICT industry. For example, judges should take into account the potential (or actual) distortion of competition when measuring the potential harm for either of the parties in deciding to grant or refuse a n injunction (interim/provision or permanent).

Statement made on 11 Mar 2009

Statement directed against the option to not change anything:

I would like to raise two points: in the exercise of developing a European software strategy that actually makes European software more successful or fulfil more of its potential, "do nothing" in this area is not likely to get much traction and arguably is not an appropriate response - there is quite a lot of evidence that the interface between standards and IPR demands closer attention and could benefit from smarter policies, ideas, methods and approaches. Secondly as regards the European patent system, again though it is "functional" there are increasing pressures on the European patent system as it exists today - patent application backlogs being one of them, and more than one of these pressure points relates to IPR and standards in the ICT industry Alison Brimelow, the EPO president, advocates that change is necessary -see quote here from a recent speech she gave on "the future of IP", whilst if I can interpret her speech, change should be more evolutionary than revolutionary.

The development, indeed establishment, of the IP System has been driven by perceptions deriving from political and societal evolution and the economic doctrines accompanying that evolution. As of now

  1. Rapid pace of economic globalisation and technological developments have turned knowledge into an important tradeable good, with IP laws as commonly respected currency converters;
  2. Extension of the IP System to economies around the world via the TRIPS agreement has led to intense general debates about the legitimacy and justice of the system.
  3. Volumes of IP rights exceed all expectations, as well as the capacities of the authorities entrusted with the management of these rights. The volume, pace and uncertainty characterising the system prompt me to use the analogy of global warming - as another example of disputed change. As the deck heaves under our feet, we must ask whether our vessel is in a fit state for whatever may come next.

The overriding concern is the acceleration with which some developments and their intended - and also unintended? consequences have been occurring:

  1. The explosive success of the present-day IP System has prompted calls for change
  2. "The system cannot go on like this."
  3. Well, in such circumstances I like to recall Mark Twain: "The report of my death was an exaggeration."
  4. If we look more specifically at the patent system now we find an area of conflict where opinions are deeply divided:
  5. Critics of the system mainly claim that the system has gone out of balance: individual profits derived from the IP System outweigh the benefits for society;
  6. Proponents of the system call for even stronger protection of IP in view of increasing competition and risk-taking in the global economy;
  7. - Some economists feel that the patent system fails to do its job properly, which is to support innovation the recently published book "Patent failure" is only the latest in a series of critical surveys - surveys which are in turn criticised;
  8. Some consumer organisations advocate a transition from a proprietary to a non-proprietary innovation culture to better serve the interest of the consumer.
  9. This might result in alternative concepts for the promotion of innovation, but can I comment here that in the end somebody has to pay.
  10. Some civil society organisations engage in emotionally loaded arguments against IP rights in specific areas of technology. "Living matter"
    1. mainly biotechnology and genetics - and "abstract inventions"
    2. mainly software and methods for doing business
    3. are the most prominent examples.

Others are likely to follow. And it is easy to tap into a subliminal anxiety of many that science and government can't be trusted.

This conflation of perceptions and beliefs, not always supported by corresponding factual evidence, in a society which has been called "Kaleidoscope" creates uncertainty about the future of IP. Our scenarios referred to the need for "reflexive navigation" to steer clear of the shallows or uncharted waters.

The "Scenarios for the Future" study of the EPO gives four possible outlines started by recalling that the "worth" of IP has always been debated, or disputed.......

I am sure that in the whole, or on the whole, IP including patents, is justifiable as an effective, probably the most effective, way of sustaining innovation, by making it worthwhile to innovate. I also believe that the patent system has a future. I would like that future to be shaped intentionally, not by accident, or inertia, or drift. That means doing the things I have set out here, or at least most of them. It means chasing off the doubters, as the Rider does in the Auden poem I quoted earlier; it means ensuring our vessel is seaworthy in stormy times. And the failure to master workload is, if you like, the first major sign that we may be shipping too much water. We don't have the option of putting into dry dock. We have to make running repairs. But since, despite the passion of some of our critics, I have no sense that worm has devoured our timbers to the point of no return, I advocate staying with the good ship which I will call "PCT".

We will be accompanied by smaller craft - commons, open source, licence of right, perhaps Soft IP; after all patents themselves were once an innovation. We may also find that a couple of supernumeraries become important to keeping us afloat - one is competition policy, the other public opinion. Both may be viewed with distrust, incomprehension or contempt by our expert hands but both, I believe, are interested in keeping the ship soundly afloat, not in causing it to founder.