CHAMBER OF COMMERCE

OF THE

UNITED STATES OF AMERICA

R. BRUCE JOSTEN

EXECUTIVE VICE PRESIDENT

GOVERNMENT AFFAIRS

1615 H STREET, N.W.

WASHINGTON, D.C. 20062-2000

202/463-5310

March 7, 2011

Dr. Patrick Gallagher

Under Secretary of Commerce for Standards and Technology

Director, National Institute of Standards and Technology

100 Bureau Drive, Stop 1000

Gaithersburg, MD 20899-1000

RE: FR Doc. 2010-30864

Effectiveness of Federal Agency Participation in Standardization in Select Technology

Sectors for National Science and Technology Council Subcommittee on Standardization

Dear Director Gallagher:

The U.S. Chamber of Commerce, the world’s largest business federation representing the

interests of more than three million businesses and organizations of every size, sector, and

region, is aware that the federal government has been for some time undertaking a

comprehensive assessment of the U.S. standard setting process. We are pleased that you have

extended this dialogue to now include public participation through this request for information.

In inquiring as to the appropriate role of government in standard setting, the interface

standards can have with intellectual property (IP), competition matters, and finally the challenge

of understanding standardization in a global trade and U.S. competitiveness context, the request

for information accurately captures the current complexity of policy development with regard to

standards. In short, the Chamber strongly believes that the current U.S. approach to standards,

with its hallmarks of being private sector driven, voluntary in nature, and consensus-based, has

served the interests (of regulators, businesses, and consumers alike).

Given the challenges American businesses face internationally and the important role

standards have always played in bringing about convergence, the Chamber firmly believes that

the U.S. approach to standards and the flexibility it brings is a competitive advantage to the

United States, not a handicap.

As a result of this consultation, the Subcommittee on Standards is likely to accrue many

specific comments; however, the Chamber has chosen to make the following general comments

in strong support of the current private sector, voluntary, consensus-based standard setting

system. Our strength, being the largest broad-based business group with international reach,

gives us the understanding needed to directly support the comprehensive nature of the current

interagency exercise.

Private Sector Driven
The critically important, but limited, role for government in standard setting has served

not only the interest of industry and consumers alike, but also the interests of the U.S.

government. A mandate for government to develop government-unique standards has been in

most instances correctly rejected as a result of the National Technology Transfer and

Advancement Act of 1995 and the Office of Management and Budget Circular A-119, which

while encouraging agencies to be active in standard setting, also appropriately directs them to

utilize private-sector standards when using standards as a basis for regulation or other

government purposes.

In a collaborative, private sector driven approach government involvement is both

welcome and essential. In addition, where government has taken an active role in a standard

setting exercise, its presence as a stakeholder is routinely respected to ensure its needs and

concerns are addressed.

There are many instances where government has identified a need for a standard, but no

sufficient standard currently exists. One of the strengths of the U.S. standard setting system is

that government, through its involvement and inclusion in standard setting, can present the need

for a new standard to a standard setting body. The resulting standard not only meets the need of

regulators or other government agencies, but as a result of the collaboration with the private

sector a high-quality, better understood, more easily deployable standard often emerges.

Similarly, conformity assessment (when supplier’s declarations of conformity is not

desirable) carried out by third-party, private sector organizations is a well established and proven

approach to market surveillance. When there is a need for further formal assurance of the

competence of conformity assessment bodies, accreditation by internationally recognized

accreditation bodies should be the preferred means of assurance.

A stronger government hand in standard setting, however, could quickly become

problematic should the government increasingly put itself in the position of setting standards.

While standards that are both designed and mandated by government may have the advantage of

being developed quickly, such a rigid approach also leads to an overall poor quality of standards

as well as any number of unintended consequences, including potential foreclosure of

innovation, for example, in the ICT sector.

A top-down approach to standardization can frustrate normal marketplace outcomes,

resulting in possible trade barriers, fewer competitive outcomes and choices for users, and

decreased incentives to invest in further innovation in impacted technology sectors. The U.S.

government has worked hard internationally to counter such an overly strong foreign government

influence over standard setting processes and outcomes.

The current approach to U.S. standard setting provides agencies the necessary policy

tools needed; however, it requires agency engagement to take advantage of those tools. Interagency involvement is important to ensure that high-quality standards are developed to address

agency needs. The Chamber recommends that agencies make participation in standard setting a

greater priority and dedicate the necessary resources to ensure adequate participation.
Leadership and involvement in private sector developed standards should be central to all

agencies’ standards-related strategies. The adoption and adherence of standards, developed in

collaboration with the relevant agencies, helps to manage the government’s need for standards

and creates an environment where standards users enjoy a high degree of confidence in the

standards.

Voluntary & Consensus Based

The voluntary and consensus-based nature of the U.S. standard setting system is key on

several levels as it relates to government involvement in standard setting. An increasing concern

by some in government is the intersection among standards policy, intellectual property policy,

and competition policy. These complicated issues are not only of interest to U.S. government

officials, but also countries that represent our largest trading partners. As a result, it is important

that the U.S. government approach these issues in a consistent manner and remains mindful that

our approach at home is material to our ability to advocate on behalf of U.S. competitiveness and

IP abroad. However, the voluntary and consensus based approach of the U.S. system largely and

adequately addresses the very infrequent IP and competition related concerns that arise.

The Chamber believes that getting the balance right with regard to the interface among

standards, IP, and competition is critical. Owners of intellectual property need to be afforded the

appropriate accompanying rights. Further, governments have a duty to protect and respect those

rights and not undermine them at a later date both to maintain the rule of law as well as to

incentivize future innovation. Finally, markets need competition in order to enhance consumer

welfare, promote efficiencies, and generate economic growth.

Thousands of standards are developed each year without competition concerns or IP-related legal

problems. Further, the private-sector led standards setting organizations are in the best position

to define and evolve IPR policies that meet the needs of the market. IPR policy varies across

sectors – there is no single right answer. While some concerns have been raised, thousands of

standards are developed each year without substantial IPR problems. In brief, the private-sector

led system is working.

It is not surprising that problems in standard setting are statistically rare because standard

setting organizations (SSOs) in general employ good processes adapted to fit particular

circumstances and varying from one another in part because of legitimate differences of opinion

about what is best, which are resolved by market experience according to industry needs.

SSOs typically have broad memberships and thus pro-competitive incentives to find the

optimal balance between the interests of IP holders, who need to be able to seek RAND licensing

terms for use of their innovations; manufacturers, who need access to technology; and customers,

whose patronage is needed by both IP holders and manufacturers. SSOs have developed

practices that have been tested over time and continue to be refined based on how best to achieve

the proper balance among the different stakeholder groups.

Such important governance practices include the need for transparent processes, the

inclusion of all interested stakeholders, and the clear recognition that those stakeholders each are
motivated by their own self-interest. Governance principles for standard-setting bodies also

require that they be unbiased, offer an unrestricted approach, remain open to the adoption of

more than one standard, and remain grounded in a voluntary compliance framework.

Typically in a SSO’s IPR policy, there is a requirement for good faith disclosure with

regard to any underlying intellectual property rights that are essential to the use of a potential

standard and a related licensing commitment statement. In addition, a number of standardsetting bodies have policies that are “participation-based,” where all participants agree in advance

that they will license IPR that is technically essential to practice the final standard that is adopted

on RAND terms (with or without compensation). These approaches are working and there have

been few problems.

The Chamber is aware of two narrow situations where government intervention may

make sense. First, government clearly has a duty to enforce competition laws in to ensure no

collusion occurs among SSO members that could undermine established SSO decision-making

procedures. Such a clear competition violation is exceedingly rare as standards bodies and their

participants are mindful of the fact that price coordination and other similar competition law

violations are subject to aggressive enforcement. In addition, most standard-setting bodies have

rules that (a) do not mandate that IP holders must disclose specific licensing terms and (b)

prohibit group discussion of specific IP-related licensing terms in order to avoid any buyer cartel

or group boycott issues.

Second, to the degree there is outright fraud in the standard-setting process by one of the

IP holders, recourse may be sought through various means including but not limited to exercise

of legal rights through litigation and/or action by an appropriate government agency. While the

SSO may be an effective self-regulator, some standard organizations are not well equipped to

deal with fraud.

With any such additional intervention, the government is highly likely to overly influence

to the point of determining the outcome reached in the chosen standard and the terms by which it

can be used. Such an influence, at best, is unlikely to produce a measurably better outcome than

that which a standards body would have decided independently. At worst, government influence

could produce an outcome inconsistent with the needs of an evolving and competitive global

market.

Even with a rigorous, transparent, thorough, stakeholder-engaged process, occasionally

standards fail in the market. In an evolving innovative environment, some failures are inevitable

and may be a sign of a healthy and vibrant economy trying new approaches and seeking new

efficiencies. The market itself, in most cases, given a short period of time would further evolve

and an alternative standard would emerge.

In addition, regulators and other U.S. government officials are rarely well-situated to

second-guess licensing terms pertaining to standards involving intellectual property rights

(whether in-bound, out-bound, or cross-licensing obligations) that are the result of arms-length

bilateral negotiations. Therefore, while some stakeholders may not be entirely pleased with the

final negotiated licensing terms painstakingly negotiated, government officials are not likely to
be any better informed to determine the appropriate valuation, market price, or other IP licensing

terms.

Most implementers entering into a license with a holder of essential patent claims want to

negotiate a customized bilateral agreement that covers more than just those essential claims. The

holders of the IP that support the standard have incentives in many cases to license and to do so

on commercially viable terms in order to maximize the number of implementers taking licenses

and therefore the IP holder’s anticipated royalty proceeds.

Finally, as government is encouraged to take an active, but limited role in the standard

setting it is important for participants in the standardization process to believe that there is an

even-handed and unbiased approach on the part of government. The Chamber has members who

have developed business models based on either a royalty-generating or a royalty free approach

to IP in standards, and some members use both depending on circumstances. In a competitive

market, different business models should compete, and consumers should decide what is

preferred. Therefore, governments should remain unbiased and neutral in their approach to

different business models.

Standards and International Trade and U.S. Competitiveness

The Chamber urges the U.S. government to continue to support the current U.S. standard

setting approach not only because it has served the United States well, but in large measure out

of concern for the state of standards development and standards-related policy around the world.

U.S. business increasingly finds divergence in standards approaches around the world that lead

to barriers to trade and undermine U.S. competitiveness.

Standards development around the world is typically more government-driven with strict

limits for private stakeholder participation, particularly with regard to foreign private

stakeholders. In some countries, for some industries, standardization is drafted and mandated

entirely by government. In these cases, standards have become tools for protectionism.

As a result some policy makers have suggested a “join them” mentality which would

require a greater government involvement and control in standards setting. The U.S. should

reject an approach because it would undermine the private sector driven, voluntary, and

consensus approach to standards development. A “join them” mentality would eliminate

standards competition, and leave behind the enormous benefits a voluntary and consensus-based

approach achieves. Instead, the government participation in SSOs should be leverage so that in

international circles, the U.S. government can demonstrate stronger leadership and better support

for the U.S. standard setting approach.

The U.S. government should continue its efforts to aggressively address individual trade

barriers as they arise in international markets – both through advocacy and through trade barrier

enforcement. These efforts not only help companies affected by specific barriers, but also send a

message about the importance of fair and open trade and the U.S. commitment to ensuring that

U.S. trading partners fully implement any relevant trade agreements.
To advance the diverse interests of U.S. stakeholders, the U.S. government should

continue to seek full implementation of the WTO Technical Barriers to Trade (TBT) Agreement

and annexes as well as decisions taken in the WTO TBT Committee.

Further, the Chamber is pleased that the U.S./Korea Free Trade Agreement prohibits the

two parties from restricting foreign participation in their domestic standard setting activities, and

favoring domestic over foreign entities in such participation. We hope the same type of

commitments will be included in the Trans-Pacific Partnership Agreement currently under

negotiation.

Finally, the Chamber also considers it a positive development that, as part of the 21st Joint

Commission on Commerce and Trade (JCCT), the Chinese government agreed to ensure that

processes for developing standards in China will be open and transparent with regard to products

and technologies related to smart grid, and foreign stakeholders will have an opportunity to

participate. China is welcoming opportunities to collaborate with NIST in developing smart grid

standards, which provides a good opportunity for the U.S. government to demonstrate the nature

and limits of its involvement in U.S. standard setting activities.

Cybersecurity

The Chamber believes cybersecurity is a global issue important to governments and

businesses. The U.S. government should pursue the development and enhancement of

cybersecurity standards through engaging global standards bodies and foreign governments.

Businesses have been involved in developing internationally accepted cybersecurity

standards, best practices, and international assurance programs for several years. Cybersecurity

standards are routinely written and updated through open and transparent standards-development

processes and organizations, such as the International Organization for Standardization (ISO),

and processes. These efforts are global by design and scope and include active engagement by

people from business enterprises and governments who are typically developers, consumers, and

evaluators of information technology products.

Business and government entities voluntarily adopt international standards, practices, and

assurance programs that best match their unique needs, operational plans, and cultural or

regulatory environments. International standards-development processes are widely embraced

by experienced practitioners who value the openness and credibility that these standards

processes afford participants from multiple countries. Effective policies for improving U.S. and

global cybersecurity products and practices must leverage the existing international standardssetting bodies.

National governments should resist the urge to “put a thumb on the scale” in favor of a

particular country-specific standards. Among the upsides of an international approach to

standards setting, international practices and requirements have the benefit of a global peerreview process. Further, the interoperability of security practices and technologies across

multiple countries allows for an organization’s limited resources to be more efficiently directed

toward cybersecurity rather than encumbered by myriad national standards and mandates.
This is not to say that U.S.-specific standards that are voluntary and consensus based

(e.g., American National Standards via American National Standards Institute-accredited SSOs)

are inappropriate. Indeed, U.S.-specific standards may be appropriate to either address specific

domestic needs, or alternatively, because the United States may be the technology-leader in that

space. In either case, the domestically driven standards must reflect and acknowledge the global

environment and should be developed to leverage, harmonize, or drive the existing international

standards.

The Chamber encourages the Administration to consider taking three actions:

 The U.S. government, through entities such as the Department of Commerce and the

National Institute of Standards and Technology (NIST), should take the lead in

promoting the adoption of international cybersecurity standards and best practices

developed by industry-led and/or public-private standards-development bodies.

 The federal government should collaborate with the private sector to implement,

improve, and expand the Common Criteria for Information Technology Security

Evaluation, generally known as Common Criteria, which is the primary international

standard (ISO 15408) for computer product assurance security certification. This

international standard is recognized under a multilateral agreement (Common Criteria

Recognition Arrangement) by more than 20 countries. Common Criteria is preferred by

many in industry to a hodgepodge of country-specific standards, rules, and required

actions that could unintentionally balkanize cyberspace and security.

 NIST should continue to build its capacity to engage in international standards-setting

efforts that are industry led. NIST may find it useful to leverage its resources by

participating first at the national level, and then through that participation becoming a

much more effective representative of the voluntary, industry-driven position at the

international level.

In sum, the Chamber encourages policymakers in the United States to recognize the

ubiquitous nature of cyberspace, which recognizes no borders. Efforts to enhance cybersecurity

should be rooted in internationally accepted standards, best practices, and international assurance

programs. The U.S. government, in partnership with the private sector, should push against the

initiatives of foreign governments that would mandate cybersecurity standards and requirements

that are not compatible with international practices. International standards, the Cyberspace

Policy Review concludes, are critical to the security and vitality of our digital infrastructure.[1]

Conclusion

The Chamber applauds the Subcommittee for including public consultation with

stakeholders in its effort to take a comprehensive examination of the U.S. standard setting

[1] The White House, Cyberspace Policy Review, May 2009, available at

www.whitehouse.gov/assets/documents/Cyberspace_Policy_Review_final.pdf.
process and the role government plays. The current private-sector driven, voluntary, consensus

approach which provides for an appropriate level of government involvement has served our

country well and will continue to do so.

The built-in flexibility and collaborative nature of the U.S. standard setting process

allows us to most effectively address increasing concerns abroad as other countries take a more

aggressive government-dominated approach. It also encourages innovation, rewards it

appropriately, and deploys standards in the market efficiently.

While there are always opportunities for improvement, at its core the U.S. standards

approach is unquestionably the best in the world. Therefore any recommendations offered as a

result of this notice should only be considered if they further strengthen and are in-line with the

private sector driven, voluntary in nature, consensus approach, and are adopted after further

careful, extensive public consultation.

The Chamber looks forward to working with you and the Subcommittee on standards

policy to ensure standards are optimally produced and that the U.S. is equipped to compete

around the world.

Sincerely,

R. Bruce Josten