Amy MarascoGeneral Manager, Standards StrategyMicrosoft Corporation

Amy MarascoGeneral Manager, Standards StrategyMicrosoft Corporation

Standards-Setting,IPR Policies and

Stakeholder Considerations

Standards-Setting,IPR Policies and

Stakeholder Considerations

2

Stakeholder Considerations ofStandardization Benefits/CostsStakeholder Considerations ofStakeholder Considerations ofStandardization Benefits/CostsStandardization Benefits/Costs

BenefitsFacilitate interoperabilitySimplify development – maximize efficiencies, reducecostsBusiness development opportunities

CostsResource drainIPR licensing considerationsImplementation issues with evolving specificationsLoss of opportunity to differentiate (if over-standardization)Legal obligation and liability

BenefitsFacilitate interoperabilitySimplify development – maximize efficiencies, reducecostsBusiness development opportunities

CostsResource drainIPR licensing considerationsImplementation issues with evolving specificationsLoss of opportunity to differentiate (if over-standardization)Legal obligation and liability

Standards @ MicrosoftStandards @ Microsoft

DHCP

TCP/IP

DNSIPX802.1x

EAP PEAP

PKI

KerberosSSL

RADIUS

L2TPIPSEC VPN

LDAP

UDDI

HTTP

BPEL4WS

ActiveSync

WAP

SMTP

XML

WS-IWBEM

CIM SNMP

WSDL

POP3POP3 FTPFTPSIPSIP NNTPNNTP

LDAP v3LDAP v3

Unicode 3.0

SOCKSSOCKS

IMAP4IMAP4

SMBSMB

AppleTalkAppleTalkSOAP

SQL

•• MS ships >500 productsMS ships >500 products

•• >400 annual engagements>400 annual engagements

•• Thousands of standards supportedThousands of standards supported

•• Hundreds of employees inHundreds of employees instandards setting activitiesstandards setting activities

•• Thousands of employees inThousands of employees instandards implementation activitiesstandards implementation activities

•• Global standards engagements viaGlobal standards engagements viaCountry Offices (character sets,Country Offices (character sets,broadcasting, verticals etc.)broadcasting, verticals etc.)

•• SIGsSIGs, Consortia, National, Consortia, National SSOsSSOs,,InternationalInternational SSOsSSOs

USB

JPEGJPEG

Examples ofStandards BodiesWhere WeParticipate

Examples ofStandards BodiesWhere WeParticipate

Microsoft participates inhundreds of standardsbodiesThe different Microsoftbusiness groups takeresponsibility for thecompany’s participation atstandards bodies thatprimarily impact the workof that particular groupThese are examples ofstandards bodies whereour participation impactsthe company acrossdifferent business groups

Microsoft participates inhundreds of standardsbodiesThe different Microsoftbusiness groups takeresponsibility for thecompany’s participation atstandards bodies thatprimarily impact the workof that particular groupThese are examples ofstandards bodies whereour participation impactsthe company acrossdifferent business groups

Goals of a Successful StandardsDevelopment EffortGoals of a Successful StandardsDevelopment Effort

Sound TechnologySound TechnologyChoicesChoices

MarketMarketAdoptionAdoption

Balanced Processes andBalanced Processes andPoliciesPolicies

IPR Policies Should Promote BroadParticipationIPR Policies Should Promote BroadParticipation

Standards patent policies must balance theinterests of both technical contributors and usersPolicies should promote broad participation bystakeholders

Encourage best technical solutionsEncourage IPR to be made available to allimplementers

Onerous policies inhibit participationOverly broad disclosure/licensing requirementsRequirements for patent searchesMandatory compensation-free licensing commitments

Essential patent claims should be available to allimplementers under reasonable licensing terms

Standards patent policies must balance theinterests of both technical contributors and usersPolicies should promote broad participation bystakeholders

Encourage best technical solutionsEncourage IPR to be made available to allimplementers

Onerous policies inhibit participationOverly broad disclosure/licensing requirementsRequirements for patent searchesMandatory compensation-free licensing commitments

Essential patent claims should be available to allimplementers under reasonable licensing terms

6

7

“Ex Ante” Proposal“Ex Ante” ProposalCompanies always have had opportunity for“ex ante” disclosure of licensing terms onbilateral basisVoluntary “ex ante” disclosure of terms to thestandards body widely supportedProposal is to require disclosure of licensingterms to the standards body and permit groupnegotiations of licensing terms

Goal is to prevent patent holders from “holdingup” implementersBut how often does that occur?

Does the proposal create more problemsthan it solves?

Different stakeholder views

Companies always have had opportunity for“ex ante” disclosure of licensing terms onbilateral basisVoluntary “ex ante” disclosure of terms to thestandards body widely supportedProposal is to require disclosure of licensingterms to the standards body and permit groupnegotiations of licensing terms

Goal is to prevent patent holders from “holdingup” implementersBut how often does that occur?

Does the proposal create more problemsthan it solves?

Different stakeholder views

“Ex Ante” Proposal“Ex Ante” ProposalMany legal and practical issues

How valuable is the information to thecommittee as a group?

Technical decisions often not based on a choiceamong equal alternativesAlmost no licensees want a license for justessential patent claims

A prospective implementer that has requested a licensewill negotiate on a private bilateral basis with the patentowner to determine whether they can arrive at a mutuallyacceptable agreement on RAND termsUsually will include non-essential patent claims that coverthe implementer’s entire commercial productMay include other business dealings between the parties,such as distribution agreements, co-branding agreements,cross-licenses involving other technologies

Typically no two licenses will be identical

Many legal and practical issuesHow valuable is the information to thecommittee as a group?

Technical decisions often not based on a choiceamong equal alternativesAlmost no licensees want a license for justessential patent claims

A prospective implementer that has requested a licensewill negotiate on a private bilateral basis with the patentowner to determine whether they can arrive at a mutuallyacceptable agreement on RAND termsUsually will include non-essential patent claims that coverthe implementer’s entire commercial productMay include other business dealings between the parties,such as distribution agreements, co-branding agreements,cross-licenses involving other technologies

Typically no two licenses will be identical 8

“Ex Ante” Proposal“Ex Ante” Proposal

Litigation and antitrust concerns?Possible buyer cartel and group boycottconduct

Practical delays?Technical committees make hundreds oftechnical decisionsTechnical committees populated by engineers

Impact on participation and incentives toinnovate?

Litigation and antitrust concerns?Possible buyer cartel and group boycottconduct

Practical delays?Technical committees make hundreds oftechnical decisionsTechnical committees populated by engineers

Impact on participation and incentives toinnovate?

9

Definitions of “Open Standards”Definitions of “Open Standards”Traditional definition of an “open standard”(examples: Global Standards Collaboration, ITU-T, ANSI, TIA)

Standards developed or ratified through an open,consensus process

Covered by an open and transparent IPR policyContributors license essential IPRs toimplementers on Reasonable and Non-Discriminatory (RAND) terms (with or withoutroyalties/fees)

GSCResolution GSC‐12/05: (Opening Session) Open Standards ‐www.gsc.etsi.orgITU‐T –http://www.itu.int/ITU‐T/othergroups/ipr‐adhoc/openstandards.html;American National Standards Institute (ANSI) –http://publicaa.ansi.org/sites/apdl/Documents/Standards%20Activities/Critical%20Issues%20Papers/Griffin%20‐%20Open%20Standards%20‐

%2005‐05.doc

Traditional definition of an “open standard”(examples: Global Standards Collaboration, ITU-T, ANSI, TIA)

Standards developed or ratified through an open,Standards developed or ratified through an open,consensus processconsensus process

Covered by an open and transparent IPR policyContributors license essential IPRs toimplementers on Reasonable and Non-Discriminatory (RAND) terms (with or withoutroyalties/fees)

GSCResolution GSC‐12/05: (Opening Session) Open Standards ‐www.gsc.etsi.orgITU‐T –http://www.itu.int/ITU‐T/othergroups/ipr‐adhoc/openstandards.html;American National Standards Institute (ANSI) –http://publicaa.ansi.org/sites/apdl/Documents/Standards%20Activities/Critical%20Issues%20Papers/Griffin%20‐%20Open%20Standards%20‐

%2005‐05.doc 10

“Open Standards”“Open Standards”ISO, IEC, ITU approved a joint patent policy inFebruary, 2007

Requests patent holders to disclose whether theywill license their essential patent claims on RAND(with or without royalties/fees) or whether they arenot willing to provide RAND licenses

New possible definitions are causing confusion“Free to implement” – no royalty

Very few standards bodies mandate a RAND-Z(RAND terms but with zero royalty) approachAll essential patent claims may not be covered bysuch a policy

“Free to use freely”No standards meet this definition

No standards organization today requires that patentholders must waive most RAND terms

ISO, IEC, ITU approved a joint patent policy inFebruary, 2007

Requests patent holders to disclose whether theywill license their essential patent claims on RAND(with or without royalties/fees) or whether they arenot willing to provide RAND licenses

New possible definitions are causing confusion“Free to implement” – no royalty

Very few standards bodies mandate a RAND-Z(RAND terms but with zero royalty) approachAll essential patent claims may not be covered bysuch a policy

“Free to use freely”No standards meet this definition

No standards organization today requires that patentholders must waive most RAND terms 11

“Open Standard”“Open Standard”Possible negative effects of new definitions:

Fewer contributions to standards bodiesLess innovation in technology areas subject tostandardization

Confusion between “open standards” with“open source software” should be avoided

See TIA paper athttp://www.tiaonline.org/standards/about/documents/TIA-IPR_20080620-003_TIA_OPEN_STANDARDS-CLEAN_R4.pdf

Possible negative effects of new definitions:Fewer contributions to standards bodiesLess innovation in technology areas subject tostandardization

Confusion between “open standards” with“open source software” should be avoided

See TIA paper athttp://www.tiaonline.org/standards/about/documents/TIA-IPR_20080620-003_TIA_OPEN_STANDARDS-CLEAN_R4.pdf

12

Business Models Impact IPR PositionBusiness Models Impact IPR Position

More incentive forIPR to be morefreely available

More incentive tohave IPR respected

Components orProducts

Components orProducts

Services orConsultingServices orConsulting

Open Source is not a Business ModelOpen Source is not a Business Model

“Open source is not a business model. It is a development anddistribution model that is enabled by a licensing tactic. Vendors thatbuild revenue streams around open source software for the most partdo not choose between open source and proprietary development andlicensing; they choose business strategies that attempt to make the

best use of both open source and proprietary development andlicensing models in order to maximize their opportunities for

generating revenue and profit.”

“Open source is not a business model. It is a development anddistribution model that is enabled by a licensing tactic. Vendors thatbuild revenue streams around open source software for the most partdo not choose between open source and proprietary development andlicensing; they choose business strategies that attempt to make the

best use of both open source and proprietary development andlicensing models in order to maximize their opportunities for

generating revenue and profit.”

The 451 Group Report: Open Source is Not a Business Modelhttp://451group.com

“Customers must ensure that they are aware of vendors’strategies so they can understand and predict the behavior

of vendors encouraging them to become payingcustomers.”

ConclusionConclusionAs a stakeholder:

There are many different factors to weigh whendeciding whether to participate in a standardsactivity

Some are:Scope of workImportance of the activity to the business groupStandards body procedures and policiesCosts and resources required

Broader policy issues may impact decisionOnce a decision is made to participate, then theparticipation itself must be staffed

Appropriate internal coordination must beconsidered

As a stakeholder:There are many different factors to weigh whendeciding whether to participate in a standardsactivity

Some are:Scope of workImportance of the activity to the business groupStandards body procedures and policiesCosts and resources required

Broader policy issues may impact decisionOnce a decision is made to participate, then theparticipation itself must be staffed

Appropriate internal coordination must beconsidered 15