1. 1 Slides for Class #6 ASU Technology Standards Seminar March 1, 2010 Brad Biddle

2. 2 IntroductionTaxonomy / “How”Business strategy / “Why”AntitrustIPR: RAND v. RFIPR(+): “Openness”IPR: Patent poolsPolicy: private stnds & lawPolicy: Role of governmentCase study: ChinaStudent presentations * Guest discussion re USB 3/83/223/294/54/124/194/26

3. 3 PATENTS COPYRIGHT ANTITRUST CORPORATE EMPLOYMENT ETHICS TRADE PROCUREMENT CONSUMER PROTECTION Royalty stacking Ambush Hold-up/hold-out F/RAND Pools Ex-ante Attorney-Client Privilege Board member duties WTO/TBT TAX Anti-commons ECPR CONTRACT PUBLIC POLICY Disclosure TRADEMARK

4. 4 STANDARDS LAW INTELLECTUAL PROPERTYANTITRUST / COMPETITION Two primary ingredients

5. 5 PATENT CLAIM A PATENT CLAIM B PATENT CLAIM C PATENT CLAIM D NON-PATENTENED TECHNOLOGY STANDARDS-COMPLIANT PRODUCT

6. 6 400+ 802.11 “Letters of Assurance” at IEEE

7. 7 “RAND”“RF” A promise to license (upon request) on reasonable and non-discriminatory terms License can (but does not have to) include a royalty or other fee “fair, reasonable and non- discriminatory” (“FRAND”) is the term used in Europe for the same concept Precise definition of RAND is a hotly debated topic – more on this later For today, consider these terms essentially equivalent: Royalty Free (RF), Royalty Free RAND (RF-RAND), RAND with zero royalties (RAND-Zero) A “non-assert” is a similar concept Typically a RF policy is a RAND policy that prohibits collection of fee or royalty Occasionally RF policies are conceptualized differently (e.g., as a present license grant, or as circumscribing other, non- royalty terms) Some preliminary vocabulary points

8. 8 Why have patented technology in standards at all? Why allow royalties? Do the benefits really outweigh the costs? Prof. Karjala’s question

9. 9 Innovation policy/ standards quality Patents incentivize innovation We want innovative technology in standards Innovators won’t contribute innovative (patented) technology unless they can get a reasonable ROI Risk of less innovation in standards-focused areas absent ability for ROI Pragmatism If patent owners can’t get reasonable ROI (i.e. via RAND) they’ll lurk outside the standards system and disrupt with unreasonable royalty demands or litigation RAND isn’t necessarily about royalties: it enables companies to participate in standards and keep the value of their patents for broader cross-license deals Experience shows RAND works Balance interests of different biz models Don’t advantage manufacturing firms or vertically integrated firms over “pure R&D” firms “Strong IP” principles Patent owner property rights should trump, absent compelling factors to the contrary WTO rules Forcing RF or reduced-RAND would be an illegal compulsory license Some typical answers to Prof. Karjala’s question

10. 10 Pure R&D firmIntegrated firmPure manufacturing firm Easy: (1)No commitment (2)RAND Easy: RF Recoup R&D costs via product sales, licensing, or both? Business strategy and IP strategy are inexorably linked

11. 11 IT hardwareTelecom Software Content protection Consumer electronics RAND (but licensing programs uncommon) RAND (w/ $ licensing programs) RF (pragmatic and ideological rationales) RF-like “non asserts” Patent Pools “lite” Common models (caution: vastly oversimplifies)

12. 12 “RAND pragmatism.” Experience shows that RAND works, as a practical matter, and best enables a reasonable balance between various stakeholder interests. “RF promotes adoption.” The benefits of RF to promote inexpensive, widespread adoption outweigh other risks/costs (e.g., disincentivized contributors). “Software must be RF.” Software interoperability standards must be RF for a pragmatic reason: the GPL can’t be used for code implementing a standard in cases where a patent is asserted over that standard. Alternatively/additionally: software patents are objectionable in principle, and should not be incorporated into standards. “Balance interests using patent pools.” Patent pools – efforts by several patent holders to agree to 'pool' their patents offering a single license for multiple patents – can be used to enable patent owners some ROI on their contributed technology while still keeping adoption costs low. “RAND promotes R&D/innovation” RAND is necessary in order to enable patent owners to get a return on their R&D investment via patent license revenue. Absent such ability, patent owners will be unwilling to contribute good technology to standards. Patent royalties serve the public interest by creating revenues that are reinvested in more R&D. Some different RAND and RF paradigms “RF promotes innovation” If foundational technologies are made available RF, robust competition and innovation will occur on top of this foundation. “RF promotes social justice.” RF can advance public policy goals in areas such as individual civil liberties, democratic participation, and user choice.

13. 13 Standards Setting Organizations (SSOs) Formal, recognized standards development orgs (SDOs) Consortia (sometimes “SIGs”) “A collaboration of stakeholders with the common goal of the standardization of a specific technology or application” International “Big I” or “FISDOs”: ITU, ISO, IEC, JTC1 [“Little I”: e.g. ASTM, IEEE] Special Interest Groups (SIGs) “focus on a single standard for a specific technology or industry” “[usually] limited to development and possibly promotion” “generally short-lived” Alliances “develop multiple related standards for a technology” “may offer… logo and certification programs, marketing…” “life cycle may be relatively long” Regional e.g. ETSI, COPANT National Coordination bodies: e.g. CESI, ANSI Accredited SSOs: e.g. TIA, INCITS, NEMA, SAE -Based on taxonomy described in IPO Standards Primer (Sept. 2009)  Develop “Specifications”  Develop “Standards” GENERALLY RAND MIXED

14. 14 IP models of the licensing programs, consortia and SDOs we reviewed in Class 2 RAND RF Pool “lite”

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18. 18 Some other, advanced RAND-related topics Determining a “reasonable” royalty –Georgia Pacific factors –Efficient Component Pricing Rule –Shapley value method –Ex ante v. ex post valuation Defensive suspension Reciprocity Relationship to disclosure rules