Approaches to influence
the IPR policies and practices in US and Global standards setting
George T. Willingmyre, P.E.
June14, 2002
Introduction
Standards strategists must trade off the benefits of a standard’s reference to a company’s proprietary technology against possible constraints on exploiting their intellectual property rights (IPRs). Participants in the development of a standard and eventual implementers of a standard deserve some assurance that there will be or are no unreasonable IPR licensing requirements to implement the standard. The sorting out of these conflicting objectives in the Intellectual Property Rights policies and procedures of various standards developing organizations is the current focus of significant private litigation and is receiving highlevel attention in government regulatory circles. FTC is investigating matters similar to the landmark FTC consent agreement with Dell Computer where FTC charged that Dell restricted competition in the personal computer industry and undermined the standard-setting process by threatening to exercise undisclosed patent rights against computer companies. Meanwhile the IPR policies of key global standards setting bodies adapt and evolve to meet the perceived needs of the users of the standards process. This article explores various approaches to influence on a global scale the IPR policies of key standards setting organizations. Two related articles are Intellectual Property Rights Policies of selected standards developers and "CONSIDERATIONS IN ASSESSING A STANDARDS DEVELOPING ORGANIZATION'S INTELLECTUAL PROPERTY RIGHTS POLICIES IN ADVANCE OF PARTICIPATION"
What is the problem? Is there a problem?
A jury in the U.S. District
Court for the Eastern District of Virginia ruled in May 2001
that Rambus committed fraud against Infineon by failing to properly disclose patent
information when required by an industry standards body. Late in 2001 FTC announced IPR and standards
hearings in 2002.
In a paper Standard-Setting Disputes: The Need for FTC Guidelines David A. Balto and Daniel I. Prywes state, "We believe that enforcement actions to prevent the anti-competitive abuse of standard-setting processes are important, and necessary in some situations. However, the business community would benefit from the clearer sort of guidance – touching a broad range of standard-setting disclosure issues -- that could be provided through the issuance of FTC Guidelines"
Richard Holleman countered in A RESPONSE: GOVERNMENT GUIDELINES SHOULD NOT BE ISSUED IN CONNECTION WITH STANDARDS SETTING This is a response to the proposal by David Balto and Daniel Prywes in favor of FTC Guidelines (the "Proposed Guidelines") being issued in connection with using patented technologies in the development of technical standards. Based on my 25 years experience in technical standards development, I believe that, not only are enforcement Guidelines not necessary, but if adopted, they are likely to have the opposite effect than what was intended. Rather than enhancing competition, imposition of government guidelines would more likely stifle competition, inhibit innovation and impede economic growth.
In his presentation at the April 19 hearing IS THERE A NEED FOR GOVERNMENT REGULATION OF THE STANDARD SETTING PROCESS? An Analysis of Underlying Realities, Andrew Updegrove contends, "While the author does not believe that the time is ripe for strict guidelines to be imposed on the standard setting process, he does believe that the government could serve a useful purpose in several ways, both outside as well as within the purview of those agencies of the government which monitor the marketplace for compliance with the antitrust laws: By revising the National Cooperative Research and Production Act to explicitly and broadly cover standard setting activities, and by making guidance readily available relating to its interpretation and applicability to given situations;
During a June 28, 2001 Hearing of the SUBCOMMITTEE ON ENVIRONMENT, TECHNOLOGY AND STANDARDS HOUSE SCIENCE COMMITTEE Standards-Setting and United States Competitiveness Carl Cargill in his submission THE ROLE OF CONSORTIA STANDARDS IN FEDERAL GOVERNMENT PROCUREMENTS IN THE INFORMATION TECHNOLOGY SECTOR: TOWARDS A RE-DEFINITION OF A VOLUNTARY CONSENSUS STANDARDS ORGANIZATION called for amendment to the Public Law 104-113, the ``National Technology Transfer and Advancement Act of 1995" to include criteria for a "legitimate consortia" partly on the basis that Intellectual property rights policies of organizations presented problems
Examination of the intellectual property (IP) regime of the consortium is also necessary. The consortium must have clear IP Rules (IPR) no less rigorous than those of the ISO - since most consortia operate in the international arena. ISO patent policy 22 mandates, as a minimum, commitment to reasonable and non-discriminatory (RAND) licensing by participants. How RAND is implemented is a matter left to the organization, as are any other rules governing IPR. However, the rules must be complete, spelling out the requirements of members, the penalties for non-compliance, and remedies available to members for such non-compliance. Basically, there must be clear assurance that the holder of IPR will not attempt to treat other consortia participants and users of the standard unfairly. Cargill offered a Summary of criteria for a "Good" consortia that included in item 4: The consortium must have a clear and legitimate IPR policy that requires, at a minimum, RAND licensing of all IPR included in its specifications. Cargill proposed other criteria that several several major developers of standards today could not meet. Scott Bradner, Senior Technical Consultant with Harvard University in Boston, MA. and one of the founders of the Internet Engineering Task Force (IETF), observed, " the only note I have on this is that Cargill's criteria would rule out the IETF (its not a legal entity, does not *require* RAND, & does not require reference implementations)" The W3C would also fall short of meeting Cargill's "legal entity" requirement.
Cargill maintains in his testimony at the April 19 Hearing "INTELLECTUAL PROPERTY RIGHTS AND STANDARDS SETTING ORGANIZATIONS: AN OVERVIEW OF FAILED EVOLUTION SUBMITTED TO THE DEPARTMENT OF JUSTICE AND THE FEDERAL TRADE COMMISSION Today's variegated IPR regime is the legacy of a flawed evolutionary process that represents a real and true barrier to standardization. Ambiguity or conflict amongst SSO IPR policies will paralyze the standardization process. Unless some method can be found to create a required framework for SSO IPR policies, there can and will be little progress made in creating a fully functional environment. The lack of a standard - whether it is for IPR, or technology - serves only those who would keep information, and the ability to manage one's own information, under proprietary control.... The weak and inconsistent IPR policies of the SSOs resulted in another complication. Where the SSO IPR policy was silent on an issue, the default was usually to either invoke the laws of the nation in which the SSO was incorporated or the laws of the nation of the SSO member at issue. An examination of national laws on IPR - especially software patent and copyright issues - shows a divergence that is just large enough to cause inconsistent results. Finally, the nature of Internet or Web standardization requires that results of one SSO be usable by another SSO.13 If the IPR regimes of the SSOs don't match (and they don't) and the IPR laws of the various nations don't match, you have a recipe for maximum confusion when complex systems standards are invoked. And, unfortunately, that is exactly where we are today.
Some commentators contend that the existence of private sector litigation on these matters documents the pressing need for government action. Others take the same fact of on going private sector litigation as proof that "The system works" and there is no need for government action. One of the principal messages of the American National Standards Institute at the April 19 hearing was that "One size does not fit all" and that FTC guidelines would be difficult to write in anticipation of all the many varieties of standards setting foci in different business sectors. GTW Associates in Intellectual Property Rights Policies of selected standards developers documents that there is much diversity in the specific approach to Intellectual property rights policies of standards developers around the world. Don Deutch, Oracle in his presentation at the April 19 hearing offered a point of view that such diversity itself does not equate to a major problem in itself. "The diversity of IPR approaches within standards setting bodies allows these bodies to "compete" for the business of developing standards based on (among many factors) the power of the applicable IPR policy to attract and hold the interest of key stakeholder participants". There is a balance of the level of risks and costs that that will attract participants to the standards table. Lest there be doubt about such competition among standards developers, note the press account ZDnetTech Update April 12 Exercising their options Such a move (creating an alternative standards activity with different IPR rules) may be a continuation of what some Microsoft and IBM competitors see as a response to the W3C's stiffening position on patents and their role with respect to Web standards. Another move was Microsoft and IBM's creation of the Web Services Interoperability Organization (WS-I).
Deutch observed what is critical for such competition is that it occur in full daylight with clarity and transparency. GTW Associates agrees. When the wording and availability of IPR policy and procedure statements is measured against for example the questions at "CONSIDERATIONS IN ASSESSING A STANDARDS DEVELOPING ORGANIZATION'S INTELLECTUAL PROPERTY RIGHTS POLICIES IN ADVANCE OF PARTICIPATION" it is possible to begin to discriminate among various organizations. However in many cases there is insufficient information to make a truly informed decision. Several widely respected, strategic national and international organizations setting global precedents for IPR policy are unable easily to identify their standards with associated IPR claims.
Meanwhile the IPR policies themselves continue to evolve.
An active dialog late in 2001 within the IETF Poisson
reflector concerns the Internet
Standards Process -- Revision 3 RFC 2026 IPR disclosure requirement for contributions in
10.3.1.6 Some contend the text should be
strengthened from a disclosure requirement to an explicit *disclaimer* of trademarks
rights associated with a submission.
What is the situation in the European Union?
Sometimes it is helpful to look at the approach to handling a complex matter taken by another community of interested parties. At the 10th International Conference of Standards Users World Trade and Standardization September 28, 2001 Berlin Didier Herbert, Head of Unit Standardisation Policy., European Commission: presented a paper Standards for a level playing field and competition He Stated, "With regard to the possible restrictions to competition caused by horizontal co- operation agreements between companies operating on the same market level(s). In January 2001, The European Commission finalized Competition Rules relating to horizontal cooperation agreements including standards organizations. In this notice, Guidelines on the applicability of Article 81 of the EC Treaty to horizontal cooperation agreements standardisation is considered to be a type of horizontal co- operation agreement, either concluded between private undertakings or determined under the aegis of public bodies or bodies entrusted with the operation of services of general economic interest, such as the standards organisations recognised under Directive 98/34/EC. Subject to an analysis of the individual case, standards may restrict competition if used as a means of excluding actual or potential competitors. The restriction of competition depends upon the extent to which the parties remain free to develop alternative standards or products that do not comply with the agreed standard. Competition is also restricted if standards grant exclusive rights for compliance testing to certain bodies or if they impose restrictions on conformity marking, unless this is imposed by regulatory provisions. The Commission considered that, in principle, standardisation agreements do not restrict competition if the standards were adopted by the recognised standards organisations, which are based on non-discriminatory, open and transparent procedures. Paragraphs 159 through 178 of the Communication deal specifically with standards
Paragraphs 162 and 163 in the notice have specific interest and are copied below. They essentially conclude that the activities of "recognized standards bodies" would be agreements that do not fall under EU competition rules in Article 81 of the EC Treaty
Paragraph 162 Agreements to set standards may be either concluded between private undertakings or set under the aegis of public bodies or bodies entrusted with the operation of services of general economic interest, such as the standards bodies recognised under Directive 98/34/EC . The involvement of such bodies is subject to the obligations of Member States regarding the preservation of non-distorted competition in the Community.
Paragraph 163 Where participation in standard setting is unrestricted and transparent, standardisation agreements as defined above, which set no obligation to comply with the standard or which are parts of a wider agreement to ensure compatibility of products, do not restrict competition. This normally applies to standards adopted by the recognised standards bodies which are based on non-discriminatory, open and transparent procedures.
Paragraph 174 addresses the case of market dominance and uses the term, "fair, reasonable and non-discriminatory terms" that is the basis of many of IPR policies in current use today.
Paragraph 174 There will clearly be a point at which the specification of a private standard by a group of firms that are jointly dominant is likely to lead to the creation of a de facto industry standard. The main concern will then be to ensure that these standards are as open as possible and applied in a clear non-discriminatory manner. To avoid elimination of competition in the relevant market(s), access to the standard must be possible for third parties on fair, reasonable and non-discriminatory terms.
Another key policy document in the EU is COMMUNICATION FROM THE COMMISSION - INTELLECTUAL PROPERTY RIGHTS AND STANDARDIZATION /* COM/92/445FINAL issued in 1992. It states
a European standards-making body should make sure that :
access to a European standard should be given to all persons wishing to use it,
standards are available for use on fair, reasonable and non-discriminatory terms, regardless of whether the users participate in the work of the standard-making body or not,
a standard-making body should do all possible efforts to identify any IPRs before adopting a standard; furthermore work on standardisation should only continue if all known IPR can be licensed,
fair conditions should be provided to the holders of IPRs.
On the other side, IPRs holders should :
make best efforts to identify any IPR which they hold relevant to a standard under development and to confirm or refuse permission for its incorporation in the standard,
offer fair, reasonable and non-discriminatory monetary or non-monetary terms for the licence to use IPR,
treat their eventual agreement for incorporating an IPR in a standard as irrevocable.
The commission published the results of a Patent investigation made by the European Commission concerning STDMA in relation to international standardisation. in 1997 reconfirming the Commission Communication of 1992 and applying it to a specific situation This attitude of the patent holders does not appear to be in contradiction with the Commission Communication, which as mentioned under § 3, suggests that intellectual property rights holders should "offer fair, reasonable and non-discriminatory monetary and non-monetary terms for the licence to use any IPR". The question to know whether in reality the conditions of access offered do meet theses criteria, cannot be answered in abstracto.
The Way Forward
There are numerous approaches to encourage greater transparency and clarity in the IPR policies of standards developing organizations. The suggestions are intended to explore a range of possibilities. They are not mutually exclusive. Nor do they share equal merit. Some of the approaches are listed for completeness sake not for their desirability in the opinion of GTW Associates.
1) The FTC could, as some have suggested, prepare and issue Guidelines. The Federal Trade Commission has prepared and made available various guidelines for business applicable to activity of standards setting organizations. These documents are listed below and all are available at http://www.ftc.gov/bc/guidelin.htm
Antitrust Guidelines for the Licensing of Intellectual Property http://www.usdoj.gov/atr/public/guidelines/ipguide.htm
Antitrust guidelines for Collaboration among competitors issued jointly by the FTC and US Department of Justice http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf
ANTITRUST ENFORCEMENT GUIDELINES FOR INTERNATIONAL OPERATIONS ISSUED BY THE U.S. DEPARTMENT OF JUSTICE AND THE FEDERAL TRADE COMMISSION http://www.usdoj.gov/atr/public/guidelines/internat.txt
GTW Associates does not believe that FTC preparing Guidelines is the best approach based on many of the reasons stated at the April 19 hearing. An FTC Report "Standards and Certification Final Staff Report April 1983" (GTW Associates thanks David Balto for a copy of this report ) is well worth revisiting with respect to the issues that would accompany any FTC proposal for Guidelines, not even to speak of rulemaking. The report notes on page 8 "The Federal Trade Commission Improvements Act of 1980 affected the rulemaking proceeding (which had been contemplated). Section of the Act removed Commission authority to "develop or promulgate any trade rule or regulation with regard to the regulation of the development and utilization of the standards and certification activities pursuant to this section FTC Act 18. Section 18 governs rulemaking directed at unfair or deceptive acts or practices. As the Conference Report accompanying the Improvements Act specifically stated, the Act left unaffected Commission rulemaking authority over unfair methods of competition under FTC Act 6(g)." Page 9 of "Standards and Certification Final Staff Report April 1983" reports that ANSI and 15 other organizations sued the Commission in Federal District Court alleging that the rulemaking violated constitutional rights. Although the suit was dismissed, it consumed unproductive time and resources of both the Commission and the private sector
In the early 1990s. the National Institute of Standards and Technology (NIST), a branch of the Department of Commerce, suggested the formation of a single government-sponsored Standards Council of the United States of America (SCUSA) that would serve as the official approving body for U.S. standards and certification processes. SCUSA, as originally proposed, would also provide a focal point for standards-related trade negotiations and would finance U.S. representation before international standards bodies. This proposal was widely opposed by existing standards development organizations. During NIST-sponsored public hearings on the proposal, 207 of the 291 commenters endorsed the current process for developing standards. Although many of these commenters welcomed increased government participation, financial support, and technical assistance in the face of new international demands, few individuals supported the introduction of formal government oversight See reference in Regulation, The Cato Institute stated at that time, It seems unwise at this point to overhaul or supplant the existing U.S. standards development system. Rather, the U.S. government should continue to support and cooperate with the system for promulgating voluntary standards
Were FTC to proceed with Guidelines it is very likely that history would repeat itself and there would be contentious and heated debates. Some of the "old timers" would certainly reflect, "Aha, it must be ten years now, time for us to gear up for the 10 year cycle of government proposing to regulate and oversee the voluntary standards process." There are far better options open for FTC.
2) FTC could reply to some request from a standards developing organization and give opinions about a particular process or policy that could have implications and benefits to a larger community. See for example this relevant if dated 1972 opinion letter on standards ANSI 78 FTC1628 (1971).FTC Advisory Opinion letter to ANSI on matters to take in to consideration in certification and standards setting (GTW Associates thanks Robert Skitol for a copy of this opinion) Certain US and global standards bodies serve as the global precedent setters in this regard. The policies set by such "lead domino organizations" become the point of departure for the policies of many other standards setting groups. See Intellectual Property Rights Policies of selected standards developers for an inventory of the policies of key organizations. In particular the policies set by ISO and IEC and ITU have broad global impacts. The policies of ANSI, W3C, IEEE and IETF also set precedents for others to follow. FTC could work within the standards community as a cooperative participant in setting IPR polices. This action would be consistent with the OMB Circular A-119 Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities
3) FTC might reach some conclusions and findings in one or more reported ongoing FTC investigations that while while specific to the case at hand could have broad impacts upon the voluntary standards sector. It is widely reported FTC has ongoing investigations of Rambus, UNOCAL and Sun Microsystems. The FTC consent agreement with Dell Computer significantly affected the voluntary standards community. A new finding could easily have similar ripple effects within the community. Any such ruling must be carefully considered for exactly the reason the impact could be broader than anticipated, expected and desired.
4) Interested parties might work together to explore legislative reform. At the minimum FTC should contemplate any proposed actions in context with laws relevant to the voluntary standards community. See Legislative and Regulatory Underpinnings of US Standards Activity for comprehensive treatment of this subject. Three US Laws directly impact the US standards community: The National Cooperative Research and Production Act ("NCRPA"); the National Technology Transfer and Advancement Act of 1995; and the The Trade Agreements Act of 1979 and revisions of the Uruguay Round Agreements Act of 1994 incorporating the WTO TBT Agreement . While legislation to revise the National Cooperative Research and Production Act is under active consideration in 2002 (HR4849) it seems reasonable to contemplate appropriate text to encourage both consensus standards bodies as well as joint ventures registering under the NCRP to include procedures for Intellectual property rights.
The National Cooperative Research and Production Act ("NCRPA"), 15 U.S.C. §§ 430106, clarifies the substantive application of the U.S. antitrust laws to joint research and development ("R&D") activities and joint production activities. Originally drafted to encourage research and development by providing a special antitrust regime for research and development joint ventures, the NCRPA requires U.S. courts to judge the competitive effects of a challenged joint R&D or joint production venture, or a combination of the two, in properly defined relevant markets and under a rule-of-reason standard. Standards Development activity may be construed as covered under the Act. The statute specifies that the conduct "shall be judged on the basis of its reasonableness, taking into account all relevant factors affecting competition, including, but not limited to, effects on competition in properly defined, relevant research, development, product, process, and service markets." The NCRPA also establishes a voluntary procedure pursuant to which the Attorney General and the FTC may be notified of a joint R&D or production venture.
- Applicants for protection must disclose the nature and scope of their collaboration (what is the activity and who are the participants to the Department of Justice (DOJ))
- DoJ reviews the information, publishes it, may ask questions and may object
Many US consortia file under the National Cooperative Research and Production Act of 1993 in order to limit their penalties and liabilities for costs for standards activities. The statute limits the monetary relief that may be obtained in private civil suits against the participants in a notified venture to actual rather than treble damages, if the challenged conduct is within the scope of the notification. With respect to joint production ventures, the National Cooperative Research and Production Act of 1993 provides that the benefits of the limitation on recoverable damages for claims resulting from conduct within the scope of a notification are not available unless (1) the principal facilities for the production are located within the United States or its territories, and (2) "each person who controls any party to such venture (including such party itself) is a United States person, or a foreign person from a country whose law accords antitrust treatment no less favorable to United States persons than to such country's domestic persons with respect to participation in joint ventures for production."
There was an attempt to include SDO’s and standards
development activity under the 1993 revisions of the NCRP but it came up late in the
process and failed .James Turner, Chief Democratic Counsel, U.S. House of Representatives,
Committee on Science. reported at an ANSI meeting last year there was legislative draft text in circulation to revise the National Cooperative
Research and Production Act so as to extend the antitrust shelter offered to
consortia to include standards organizations
DRAFT legislative text in circulation last year proposed new sections to make explicit the coverage of the law to standards development activity engaged in by a standards development organization (See here how the proposed amendments would revise the current NCRP) .
On May 23, 2002 Mr. SENSENBRENNER (for himself, Mr. CONYERS, Mr. BOEHLERT, Mr. HALL of Texas, Mr. SMITH of Texas, Mr. FRANK, Mrs. MORELLA, Mr. MEEHAN, Mr. BARR of Georgia, Mr. DELAHUNT, Mr. GUTKNECHT, Mr. GREEN of Wisconsin, Mr. ISSA, and Mr. BERMAN): Introduced H.R. 4849. A bill to encourage the development and promulgation of voluntary consensus standards by providing relief under the antitrust laws to standards development organizations with respect to conduct engaged in for the purpose of developing voluntary consensus standards, and for other purposes; to the Committee on the Judiciary.
The bill cites the benefits of Voluntary Consensus Standards (VCS) to the government as provided under the National Technology Transfer and Advancement Act (NTTAA), which calls for increased federal agency use of VCS, and states as rationale for the amendments, "if relief from the threat of liability anti-trust laws is not granted to voluntary consensus bodies, both regarding development new standards and efforts to keep existing standards current, such bodies could be forced to cut back on standards development activities at great financial cost to both the government and to the national economy."
7) The term ‘‘standards development activity’’ means any action taken by a standards development organization for the purpose of developing, promulgating, revising, amending, reissuing, interpreting, or otherwise maintaining a voluntary consensus standard, or using such standard in conformity assessment activities.
(8) The term ‘‘standards development organization’’ has the same meaning as the terms ‘‘voluntary consensus standards body’’ and ‘voluntary, private sector consensus standards body’ as such term are used in section 12(d) of the National Technology Transfer and Advancement Act of 1995 and in Circular Number A–119, as revised February 10, 1998, of the Office of Management and Budget.
(9) The term ‘‘technical standard’’ has the meaning given such term in section 12(d)(4) of the National Technology Transfer and Advancement Act of 1995.
(10) The term ‘‘voluntary consensus standard’’ has the meaning given such term in Circular Number A-119, as revised February 10, 1998, of the Office of Management and Budget.
The bill characterizes principles which govern the development of technical standards by "voluntary consensus standards bodies as:
(A) notice to all parties known to be affected by the particular standards development activity,
(B) the opportunity to participate in standards development or modification,
(C) balancing interests so that standards development activities are not dominated by any single group of interested persons,
(D) readily available access to essential information regarding proposed and final standards,
(E) the requirement that substantial agreement be reached on all material points after the consideration of all views and objections, and
(F) the right to express a position, to have it considered, and to appeal an adverse decision.
There is no mention of the positive role of intellectual property rights polices within the voluntary consensus standards community in the proposed amendments, nor is there any relevant reference to intellectual property rights policies or procedures in the present National Cooperative Research and Production Act . While legislation is under active consideration in 2002 to revise the NCRP, it seems reasonable to contemplate appropriate text to encourage both consensus standards bodies as well as joint ventures registering under the NCRP to include procedures for Intellectual property rights.
The National Technology Transfer and Advancement Act of 1995
Public Law 104-113, the National Technology Transfer
and Advancement Act of 1995, directs federal agencies to use standards developed by
voluntary consensus bodies. Congress
passed and the President signed Public Law 104-113 on March 7, 1996. Section 12 of
the “National Technology Transfer and Advancement Act of 1995” addresses standards conformity. Section 12 (a) gives NIST responsibility to
compare private sector standards with Federally-adopted or recognized standards and to
coordinate Federal agency use of private sector standards, emphasizing those private
sector standards developed by consensus organizations.
Section 12(b) gives NIST the role of coordinating Federal, state and local
technical standards and conformity assessment activities with private sector activities. Section 12 (d)
(See below) requires federal agencies and departments to use standards that are
developed or adopted by voluntary consensus bodies except when that would be inconsistent
with applicable law or otherwise impractical.
Excerpts
from the National Technology Transfer
and Advancement Act of 1995 SECTION 12 (d) UTILIZATION OF CONSENSUS TECHNICAL
STANDARDS BY FEDERAL AGENCIES; REPORTS (1) IN GENERAL- Except
as provided in paragraph (3) of this subsection, all Federal agencies and departments
shall use technical standards that are
developed or adopted by voluntary consensus
standards bodies, using such technical standards as a
means to carry out policy objectives or activities determined by the agencies and departments. (2) CONSULTATION;
PARTICIPATION- In carrying out paragraph (1)
of this subsection, Federal agencies and departments shall
consult with voluntary, private sector, consensus standards bodies and shall, when
such participation is in the public interest
and is compatible with agency and departmental missions, authorities, priorities, and budget resources,
participate with such bodies in the development
of technical standards, EXCEPTION- If compliance with paragraph (1) of this subsection is inconsistent with applicable law or otherwise impractical, a Federal agency or department may elect to use technical standards that are not developed or adopted by voluntary consensus standards bodies if the head of each such agency or department transmits to the Office of Management and Budget an explanation of the reasons for using such standards. Each year, beginning with fiscal year 1997, the Office of Management and Budget shall transmit to Congress and its committees a report summarizing all explanations received in the preceding year under this paragraph. |
It has long been administration policy to substitute private sector standards whenever possible for government development and promulgation of regulatory or procurement standards. In the past, some agencies used the relevant OMB Circular A-119 to justify significant support for voluntary standards activities. The NTTA has the potential to significantly advance the close cooperation of the government and private sector voluntary standards system. A current study seeks to better define these benefits if any of this cooperation and to estimate the magnitude of their impact on federal agencies in economic and other ways. Assessing the Nature, Extent, and Impact Of The National Technology Transfer and Advancement Act on Compliant Federal Agencies.
The Trade Agreements Act of 1979 and revisions of the Uruguay Round Agreements Act of 1994 incorporating the WTO TBT Agreement
The underlying goal of the WTO Agreement on Technical Barriers to Trade (TBT Agreement or TBT) is to promote trade through international agreements on rules for how the marketplace should and should not work. A basic principle running throughout the agreements is that of "National Treatment." "National Treatment" is the concept that governments and markets should treat products and services produced or supplied from other parts of the world no differently than products and services offered to the government or market from local industries. Standards can be very effective "Non-Tariff Barriers to Trade (NTBTs)." Bureaucrats can devise laws or regulations more easily met by local producers than by foreign firms; markets can depend upon "voluntary" standards that are controlled by the local industries; governments can issue procurement specifications that favor individual suppliers. The TBT is an international attempt to remove "unfairly discriminatory" standards as a factor in free trade. These agreements are the results of many years of multilateral government negotiations known as the "Uruguay Round" of trade negotiations. The Office of the US Trade Representative has the responsibility to negotiate these agreements on behalf of the United States and Congress must vote them "up" or "down" with no changes at the conclusion of the negotiations.
The TBT Agreement contains in Annex 3 a "Code of Good Practice for the Preparation, Adoption and Application of Standards" and states in Article 4.1:Members shall ensure that their central government standardizing bodies accept and comply with the Code of Good Practice for the Preparation, Adoption and Application of Standards in Annex 3 to this Agreement (referred to in this Agreement as the "Code of Good Practice"). They shall take such reasonable measures as may be available to them to ensure that local government and non-governmental standardizing bodies within their territories, as well as regional standardizing bodies of which they or one or more bodies within their territories are members, accept and comply with this Code of Good Practice. In addition, Members shall not take measures which have the effect of, directly or indirectly, requiring or encouraging such standardizing bodies to act in a manner inconsistent with the Code of Good Practice. The obligations of Members with respect to compliance of standardizing bodies with the provisions of the Code of Good Practice shall apply irrespective of whether or not a standardizing body has accepted the Code of Good Practice
In 1998
ANSI accepted the WTO TBT Code of Good Practice on behalf of more
than 200 standards developing organizations in the United States.
The formal text for the applicable implementation of the WTO and TBT agreements in US law is found at United States Code Title 19 Chapter 13 Subchapter 11 Technical Barriers to Trade. The US implementation of the TBT obligation for national treatment may be found in Section 2532 (1). There is no specific US legislative implementation for the encouragement of use of the code by the private sector.
Thus there is a foundation of existing international trade agreement that could be used to to encourage both governments and private sector organizations to meet what the WTO considers good standards development practices as reflected in the "Code of Good Practice for the Preparation, Adoption and Application of Standards" Regrettably, as elaborated below, the code includes no reference to IPR practices.
5) FTC might work with interested
parties to explore reform in key administrative practice documents and codes of
practice for standard setting with global impacts. At the minimum FTC should
contemplate any proposed actions in context with such administrative practice and
codes. The key documents and codes are the OMB Circular A119; ISO Guide 59 Code of
good practice for standardization ; Annex 3 Code of Good Practice WTO TBT Agreement ; DECISION OF THE COMMITTEE ON PRINCIPLES FOR THE
DEVELOPMENT OF INTERNATIONAL STANDARDS, GUIDES
AND RECOMMENDATIONS
In the February
19, 1998 Federal Register, The Office of Management and Budget (OMB) issued their Circular OMB A-119 Federal Participation in the Development and Use of
Voluntary Consensus Standards and in Conformity Assessment Activities.
The OMB Circular A119
interprets the language of the "National Technology Transfer and Advancement
Act of 1995" which in section 12(d)
requires federal agencies and departments to use standards that are developed or adopted
by voluntary consensus standards bodies except where that would be inconsistent with
applicable law or otherwise impractical.
The document defines the nature of standards that government agencies are obligated to consider before developing their own procurement or regulatory standards. The Circular states:
Clause
6 What Is The Policy For Federal Use Of Standards?
All federal agencies must use voluntary consensus standards in lieu of government-unique
standards in their procurement and regulatory activities, except where inconsistent with
law or otherwise impractical
IPR is specifically mentioned in the definition for "voluntary consensus standard"
clause 4 a. For purposes of this policy, "voluntary consensus standards" are standards developed or adopted by voluntary consensus standards bodies, both domestic and international. These standards include provisions requiring that owners of relevant intellectual property have agreed to make that intellectual property available on a non-discriminatory, royalty-free or reasonable royalty basis to all interested parties
Later however in clause 6g) the policy steps back from giving a "preference" to consensus standards over "non-consensus standards" Clause 6h states similarly there is no preference between domestic and international voluntary standards
Clause 6g) Does this policy establish a preference
between consensus and non-consensus standards that are developed in the private sector?
This policy does not establish a preference among standards developed in the private
sector.
Clause 6h). Does this policy establish a preference between domestic and international voluntary consensus standards?
This policy does not establish a preference between domestic and international voluntary consensus standards. However, in the interests of promoting trade and implementing the provisions of international treaty agreements, your agency should consider international standards in procurement and regulatory applications.
Thus while the definition of consensus standards body includes IPR considerations the policy does not establish a preference for such standards over those of non consensus standards bodies whose definition includes no mention of IPR. The apparent preference for "consensus" standards in the NTTA and some of the text of the circular which seemed to disadvantage "consortia" standards over consensus standards was the main point of the testimony of Carl Cargill "INTELLECTUAL PROPERTY RIGHTS AND STANDARDS SETTING ORGANIZATIONS: AN OVERVIEW OF FAILED EVOLUTION SUBMITTED TO THE DEPARTMENT OF JUSTICE AND THE FEDERAL TRADE COMMISSION during the June 28, 2001 Hearing of the SUBCOMMITTEE ON ENVIRONMENT, TECHNOLOGY AND STANDARDS HOUSE SCIENCE COMMITTEE Standards-Setting and United States Competitiveness Following the hearing in correspondence between the House and OMB it was clarified that Cargill's concern about a government preference for consensus standards was unwarranted. This clarification is (in one way of thinking) helpful not to exclude from government preference a class of standards that have market relevance. But (in another way of thinking) unhelpful in promoting the adoption of IPR policies in a consortia class of standards setting organization unless some definitions for such groups included as Cargill suggested some criteria that would include the requirement for an IPR policy.
OMB asks that Circulars be reviewed internally approximately every five years. There is, however, no requirement to modify a circular at five year intervals. In 2001, the Interagency Committee on Standards Policy chaired by NIST carefully reviewed the existing version of the A119 circular and came to the conclusion that there were no substantive issues that required the extensive amount of work required for a revision. There was no public notice or comment, since no change was contemplated. OMB concurred with these recommendations.
ISO/IEC Guide 59 Code of good practice for standardization.
During the negotiation of the Uruguay Round Agreements Act of 1994 incorporating the WTO TBT Agreement there was concern within elements of the private sector that the text in the TBT Agreement article 4.1 might be used to impose government regulation of the private sector voluntary standards process.
The obligations of Members with respect to compliance of standardizing bodies with the provisions of the Code of Good Practice shall apply irrespective of whether or not a standardizing body has accepted the Code of Good Practice
There is no specific US legislative implementation for the encouragement of use of the Code of Good Practice by the private sector nor elaboration of the above in US law
During this process the ISO prepared its own Guide 59 Code of good practice for standardization. It has many characteristics similar to the TBT Code of Good practice. It was and is however a product of the international consensus process itself...having evolved from ISO procedures for development of such guides and is not like the Code of Good Practice a product of government negotiations. The ISO Guide 59 includes specific IPR requirements. See further excerpts of Guide 59.
Clause 3 General Provisions This code is intended for use by any standardizing body, whether governmental regional, national or sub-national level.
Clause 5.8 Standards should not be drafted in terms that include the use of a patented item unless the use of such item is justifiable for technical reasons and the rights holder agrees to negotiate licenses with interested applicants wherever located on reasonable terms and conditions
Some national standard bodies (see for example the Standards Council of Canada) use both the TBT Code of good practice and the ISO Guide 59 as a template model for their procedures for the approval of standards. There is not a similar specific reference to either the Guide 59 nor the TBT Code of Good Practice in the procedures of US standards developers or ANSI. ANSI in 1998 however accepted the TBT code on behalf of approximately 200 standardizing bodies in the United States (G/TBT/CS/N/83), for the ANSI accredited standards committees listed at http://web.ansi.org/public/db_list/sdolist.pdf
Annex 3 TBT Code of good practice for the preparation, adoption and application of standards
The TBT Agreement includes text that governments should " shall take such reasonable measures as may be available to them to ensure that local government and non-governmental standardizing bodies within their territories, as well as regional standardizing bodies of which they or one or more bodies within their territories are members, accept and comply with this Code of Good Practice. In addition, Members shall not take measures which have the effect of, directly or indirectly, requiring or encouraging such standardizing bodies to act in a manner inconsistent with the Code of Good Practice. The Code of Good practice is open to acceptance by any standardizing body within the territory of a Member of the WTO, whether a central government body, a local government body, or a non-governmental body; to any governmental regional standardizing body one or more members of which are Members of the WTO; and to any non-governmental regional standardizing body Standardizing bodies that have accepted or withdrawn from this Code notify this fact to the ISO/IEC Information Centre in Geneva.
The code states many principles of good practice such as the following in clause E. The standardizing body shall ensure that standards are not prepared, adopted or applied with a view to, or with the effect of, creating unnecessary obstacles to international trade.
Regrettably there is no specific mention of treatment of intellectual property rights considerations in the code. This is a serious weakness that could be addressed in continuing international discussions of the TBT committee. In this respect the text of the ISO Code 59 is to be preferred
DECISION OF THE COMMITTEE ON PRINCIPLES FOR THE DEVELOPMENT OF
INTERNATIONAL STANDARDS, GUIDES AND
RECOMMENDATIONS
In the Spring of 1998 The United States submitted a document TRANSPARENCY IN INTERNATIONAL STANDARDS DEVELOPMENT to the TBT committee which stated, "the Committee could articulate a set of principles and procedures it considered desirable for international bodies which develop standards" . Such a set of principles would become the equivalent set of principles for International Organizations much like the Code of practice applies to other standards developers on a regional, national or local basis.
Paragraph 20 of the Second Triennial review of the Agreement explains the outcome of the US proposal., “In order to improve the quality of international standards and to ensure the effective application of the Agreement, the Committee agreed that there was a need to develop principles concerning transparency, openness, impartiality and consensus, relevance and effectiveness, coherence and developing country interests that would clarify and strengthen the concept of international standards under the Agreement”
The Text of the PRINCIPLES FOR THE DEVELOPMENT OF INTERNATIONAL STANDARDS, GUIDES AND RECOMMENDATIONS is much like the Code of Good practice but intended to apply to "international organizations."
Article 8 states, "All relevant bodies of WTO Members should be provided with meaningful opportunities to contribute to the elaboration of an international standard so that the standard development process will not give privilege to, or favour the interests of, a particular supplier/s, country/ies or region/s. Consensus procedures should be established that seek to take into account the views of all parties concerned and to reconcile any conflicting arguments.
Regrettably as in the case of the TBT Code of Good Practice for the Preparation, Adoption and Application of Standards above there is no specific mention of treatment of intellectual property rights considerations in the PRINCIPLES FOR THE DEVELOPMENT OF INTERNATIONAL STANDARDS, GUIDES AND RECOMMENDATIONS. This is a serious weakness that could be addressed in continuing international discussions of the TBT committee. In this respect the text of ISO Code 59 is to be preferred
5) FTC could make a positive contribution by assembling its research and findings in a factual report that could have considerable and long lasting positive impact within the Voluntary Standards Community. Such a report could be the focus document of a national meeting of informed and materially interested parties. Such a report could be the stimulus for appropriate evolution of administrative reform in global standards policy, There have been numerous meetings addressing issues of IPR policies and practices of standards organizations. There has not yet been assembled in a single meeting the critical mass of knowledge and practical experience in these matters.
The Open Group and CEN Information Society Standardization System (CEN/ISSS convened a meeting in London April 11/12, 2000 entitled The Information & Communication Technologies Standards IPR Forum The stated objective was, to create a single cohesive global IPR policy for standardization and specification purposes in the Information and Communication Technologies sectors". One of the outputs from the meeting was an initial matrix of IPR policies of various standards organizations. GTW adopted and updated this approach in Intellectual Property Rights Policies of selected standards developers in May 2002. This Open Group/CEN meeting concluded From this exercise, it appeared that there are not so many different opinions, but that newly established consortia may not have thought through these things yet. The Open Group continued this initiative in convening a workshop Intellectual Property Rights Wednesday, October 24, 2000 Andy Updegrove summarized the main points of the day:
- A standard should be something that facilitates things happening.
- We need a structure that should create a process that avoids Government stepping in.
- An IPR policy shouldn’t make unreasonable demands on a submitter, it needs to not demand more of the market than is commensurate with the market adopting the standard, and it needs to result in reasonably clean IPR.
- We shouldn’t overemphasize the need for companies to do patent searches, because it doesn’t protect you from the ones you aren’t asking.
- There should be a best practices initiative, a getting together to agree on common tools.
- A further initiative should be taken to progress further these discussions, to be jointly organized by Carl Cargill and The Open Group
Following the ANSI patent group meeting of June 28, 2001 The law firm Drinker Biddle & Reath LLP hosted an evening discussion in Washington entitled ANTITRUST AND INTELLECTUAL PROPERTY RIGHTS IN INTEROPERABILITY STANDARDS SETTING. The June 28, 2001 Hearing of the SUBCOMMITTEE ON ENVIRONMENT, TECHNOLOGY AND STANDARDS HOUSE SCIENCE COMMITTEE Standards-Setting and United States Competitiveness treated among many matters, the questions surrounding Antitrust and standards setting. From the web cast at minute 60, this exchange between Representative Mark Udall, Colorado and Ollie Smoot and Scott Bradner highlights the importance of well documented procedures in avoiding antitrust difficulties and problems. The Chairman of the subcommittee wrote to NIST shortly afterwards requesting NIST to convening a national workshop that might cover these matters. NIST welcomed the opportunity. NIST ANSI and others will convene such meeting to July 9/10 Challenges for IT Standardization. The meeting brings together many of the interested parties. But the meeting agenda does not focus on the IPR policy topic.
Other recent relevant meetings have included
those of ANSI's SDO Legal Issues Forum July 20, 2001 to track legal issues
including IPR considerations in standards setting; The November 15th Washington
meeting of the American Bar Association Section of Antitrust Law the 6th
Meeting of the Committee on IPRs January 9, 2002 - January 10, 2002 of the National Academy Board on Science
Technology and Economic Policy (STEP) Project
Intellectual Property in the Knowledge-based Economy: Phase Two
the FTC/DOJ IPR hearings on
April 20 and the Oracle/ANSI/GWU April 19 Symposium on Patent and
Related Issues in Standard Setting
Conclusions
Having completed a survey of the " Intellectual Property Rights Policies of selected standards developers and having reviewed those policies according to "CONSIDERATIONS IN ASSESSING A STANDARDS DEVELOPING ORGANIZATION'S INTELLECTUAL PROPERTY RIGHTS POLICIES IN ADVANCE OF PARTICIPATION" GTW concludes there is diversity in the specific approach to Intellectual property rights policies of standards developers around the world. GTW Associates agrees with the position of Don Deutch, Oracle in his presentation at the April 19 hearings that such diversity itself does not equate to a major problem. The diversity of IPR approaches within standards setting bodies allows these bodies to "compete" for the business of developing standards based on (among many factors) the power of the applicable IPR policy to attract and hold the interest of key stakeholder participants. There is a balance of the level of risks and costs that that will attract participants to the standards table.. At present, it is possible to begin to discriminate among various organizations. However in many cases there is insufficient information to make a truly informed decision. What is critical for such competition is that it occur in full daylight with clarity and transparency. Several widely respected, strategic national and international organizations setting global precedents for IPR policy are unable easily to identify their standards with associated IPR claims.
After exploring a number of alternative paths for moving forward, GTW concludes that FTC could make the greatest positive contribution by assembling its research and findings in a factual report that could have considerable and long lasting positive impact within the Voluntary Standards Community.
Such a report could be the focus document of a national meeting of informed and materially interested parties. Such a report could be the stimulus for appropriate evolution of administrative reform in global standards policy and procedures. There have been numerous meetings addressing issues of IPR policies and practices of standards organizations. There has not yet been assembled in a single meeting the critical mass of knowledge and practical experience in these matters.
Such a national meeting might include further exploration of some of the alternative approaches ...such as legislative reform of the National Cooperative Research and Production Act; exploration of the role of the OMB circular and its seeming conflicting advice about consensus standards processes ... and the treatment of IPR practice in various global codes of practice for standards setting. NIST seems well suited as a neutral party in this regard to help FTC facilitate such such a meeting, much similar to one currently planned for July 9/10, but focusing specifically on the IPR issue.
FTC should work within the standards community as a cooperative participant in reforming any IPR policies that may be appropriately revised WITHIN this system. This action would be consistent with the OMB Circular A-119 Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities While legislation to revise the National Cooperative Research and Production Act is under active consideration in 2002 (HR4849) it also seems reasonable to contemplate appropriate text to encourage both consensus standards bodies as well as joint ventures registering under the NCRP to include procedures for Intellectual property rights.
Appendices
ANNEX
4
1. The following principles and procedures should be observed, when international standards, guides and recommendations (as mentioned under Articles 2, 5 and Annex 3 of the TBT Agreement for the preparation of mandatory technical regulations, conformity assessment procedures and voluntary standards) are elaborated, to ensure transparency, openness, impartiality and consensus, effectiveness and relevance, coherence, and to address the concerns of developing countries.
2. The same principles should also be observed when technical work or a part of the international standard development is delegated under agreements or contracts by international standardizing bodies to other relevant organizations, including regional bodies.
A. Transparency
3. All essential information regarding current work programmes, as well as on proposals for standards, guides and recommendations under consideration and on the final results should be made easily accessible to at least all interested parties in the territories of at least all WTO Members Procedures should be established so that adequate time and opportunities are provided for written comments. The information on these procedures should be effectively disseminated.
4. In providing the essential information, the transparency procedures should, at a minimum, include:
- The publication of a notice at an early appropriate stage, in such a manner as to enable interested parties to become acquainted with it, that the international standardizing body proposes to develop a particular standard;
- the notification or other communication through established mechanisms to members of the international standardizing body, providing a brief description of the scope of the draft standard, including its objective and rationale. Such communications shall take place at an early appropriate stage, when amendments can still be introduced and comments taken into account;
- upon request, the prompt provision to members of the international standardizing body of the text of the draft standard;
- the provision of an adequate period of time for interested parties in the territory of at least all members of the international standardizing body to make comments in writing and take these written comments into account in the further consideration of the standard;
- the prompt publication of a standard upon adoption; and
- to publish periodically a work programme containing information on the standards currently being prepared and adopted.
5. It is
recognized that the publication and communication of notices, notifications, draft
standards, comments, adopted standards or work programmes electronically, via the
internet, where feasible, can provide a useful means of ensuring the timely provision of
information. At the same time, it is also
recognized that the requisite technical means may not be available in some cases,
particularly with regard to developing countries. Accordingly,
it is important that procedures are in place to enable hard copies of such documents to be
made available upon request.
A. Openness
6. Membership of an international standardizing body should be open on a non-discriminatory basis to relevant bodies of at least all WTO Members. This would include openness without discrimination with respect to the participation at the policy development level and at every stage of standards development, such as the:
- proposal and acceptance of new work items;
- technical discussion on proposals;
- submission of comments on drafts in order that they can be taken into account;
- reviewing existing standards;
- voting and adoption of standards; and
- dissemination of the adopted standards.
7.
Any interested member of the international standardizing body, including especially
developing country members, with an interest in a specific standardization activity should
be provided with meaningful opportunities to participate at all stages of standard
development. It is noted that with respect to standardizing bodies within the territory of
a WTO Member that have accepted the Code of Good Practice for the Preparation, Adoption
and Application of Standards by Standardizing Bodies (Annex 3 of the TBT Agreement)
participation in a particular international standardization activity takes place, wherever
possible, through one delegation representing all standardizing bodies in the territory
that have adopted, or expected to adopt, standards for the subject-matter to which the
international standardization activity relates. This
is illustrative of the importance of participation in the international standardizing
process accommodating all relevant interests
B. impartiality and consensus
8. All relevant bodies of WTO Members should be provided with meaningful opportunities to contribute to the elaboration of an international standard so that the standard development process will not give privilege to, or favour the interests of, a particular supplier/s, country/ies or region/s. Consensus procedures should be established that seek to take into account the views of all parties concerned and to reconcile any conflicting arguments.
9. Impartiality should be accorded throughout all the standards development process with respect to, among other things:
C. effectiveness and relevance
10. In order to serve the interests of the WTO membership in facilitating international trade and preventing unnecessary trade barriers, international standards need to be relevant and to effectively respond to regulatory and market needs, as well as scientific and technological developments in various countries. They should not distort the global market, have adverse effects on fair competition, or stifle innovation and technological development. In addition, they should not give preference to the characteristics or requirements of specific countries or regions when different needs or interests exist in other countries or regions. Whenever possible, international standards should be performance based rather than based on design or descriptive characteristics.
D. coherence
12. In order to avoid the development of conflicting international standards, it is important that international standardizing bodies avoid duplication of, or overlap with, the work of other international standardizing bodies. In this respect, cooperation and coordination with other relevant international bodies is essential.
E. development dimension
13. Constraints on developing countries, in particular, to effectively participate in standards development, should be taken into consideration in the standards development process. Tangible ways of facilitating developing countries participation in international standards development should be sought. The impartiality and openness of any international standardization process requires that developing countries are not excluded de facto from the process. With respect to improving participation by developing countries, it may be appropriate to use technical assistance, in line with Article 11 of the TBT Agreement. Provisions for capacity building and technical assistance within international standardizing bodies are important in this context.
Summary of criteria for a "Good" consortia according to Cargill
In summary, the criteria for a "good" consortium, for the purposes of this paper, includes:
1. The consortium must develop technical specifications.
2. The consortium must be some type of legal entity.
3. The consortium must have a well-defined, legally acceptable set of procedures and processes.
4. The consortium must have a clear and legitimate IPR policy that requires, at a minimum, RAND licensing of all IPR included in its specifications.
5. The membership of the consortium must not be arbitrarily restricted. The consortium must not restrict participation based on non-economic criteria (e.g. competitors, organizational origin, or purpose for joining).
6. There should be