Director. National Institute of Standards and Technology

100 Bureau Drive Stop 1000

Gaithersburg MD 20899-1000

Re: Standardization Feedback for Sub-Committee on Standards (75 FR 76397)

Dear Dr. Gallagher and Members of the Sub-Committee:

Microsoft appreciates the opportunity to provide comments in response to the Request for

Information (“RFI”) regarding the “Effectiveness of Federal Agency Participation in

Standardization in Select Technology Sectors for National Science and Technology Council’sSub-Committee on Standardization,” dated December 8, 2010.

At their most fundamental, technical standards are tools that promote efficiency and

innovation by making it easier to create products and services that work together — or‘interoperate” — better. This is especially true in the information and communications

technology (“ICY”) environment. With an increasingly diverse and competitive ICT

marketplace, and new ICT solutions, services, and vendors appearing in the market almost daily.

interoperability has become a market imperative. The development and implementation of

standards is one of the ways in which the technology industry is able to meet consumer demandfor interoperability. 1By helping to enhance interoperability among products or services within a

market, and being responsive to real marketplace needs, standards can help promote innovation.fuel market growth, and protect investments in new technologies.

Microsoft plays a dual role in standardization activities. First, we actively contribute

innovative technology to standardization related to computing hardware. software and associated

devices, the Internet and its infrastructure, consumer electronics devices, and

telecommunications systems. Second. we are an active implernenter of standards. Microsoft

supports a very large number of standards that are formulated b a broad diversity of standards

bodies 2in our products. Uhimatel. both of these roles are deeply informed b the market. and

Microsoft’s commitment to standardization to help further interoperahilit is reflected in our

lnteroperabilit Principles, available at hpy\w microsoft.com interop. principlesdefauh.mspx.

Additional information about Microsoft’s standards policies and acti ities can be found at:http:!/\ x m icrosof’tcom/standards’.

2 For example. Microsoft’s Windows 7 operating system supports more than sixty industry standards (bya consenative count). A typical personal computer running Windos 7 will support more than 200

additional standards. facilitating compatibility among hard are components from vaiious vendors andpromoting interoperabilit betvseen PCs and other computers 1 hese standards ssere developed by a
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frames our perspective that a diverse standards ecosystem that supports multiple technologies is

good for the U.S. and global economies.

Our comments in response to the RFI focus on three main topics and can be summarized

as follows:

Standards-setting processes and the benefits of standardization: Standardization

provides many benefits to the ICT industry, which is a driver of economic growth and job

creation in the United States (and abroad). ICT standardization benefits from the freedom toevolve standards-setting approaches and develop competing standards in response to constantlyevolving market forces. Microsoft supports this collaborative approach and believes that

diversity and choice are the best way to develop and Iriaintain a flexible, market-responsive, andeffective standardization ecosystem.

Perspectives on Government’s approach to standards activities: NIST can continue to

play an important convener role in connection with standards frameworks when such

frameworks are truly necessary. With its well-deserved reputation as a science-based

organization that serves as an ‘honest broker”, NIST can also be useful in formulating highquality problem definitions. For Microsoft, this is a key element of a pragmatic scenario, or ‘use

case”, that needs to be defined for a given standard or specification. Whenever possible,

government should avoid mandating adherence to specific standards in order to further

competition and promote investment in related innovation (and avoid single solutions that may

lock the industry into a soon-to-be outdated mode). U.S. Government technical experts should

be adequately resourced so that they can participate in standards-setting activities.

Issues considered during the standards-setting process: Microsoft strongly supports

President Obama’s focus on technology and the promotion of innovation. In looking at issues

relating to the inclusion of intellectual property rights (IPR) in standards, it is critical to preserve

and cultivate incentives to innovate. Government should take an inclusive view of standards

setting organizations’ (“SSOs) diverse IPR policies and not promote one approach over the

other. When evaluating whether there may be IPR issues associated with candidate standards forinitiatives such as Smart Grid, government should consider whether there are valid, serious, and

documented IPR concerns. If the candidate standard has been accepted in the marketplace and is

being widely implemented. then it can often be presumed that there is no IPR-related barrier tobroad range of standards-setting organizations with diverse processes and IPR policy approaches

including those that seek commitments to offer patent licenses on reasonable and non—discriminatory

terms and conditions. whether with compensation or on a royalty-free basis).
I. Standards-Setting Processes, Reasons for Participation, and the Benefits of

Standardization

Standardization provides many benefits to the ICT industry. As a general matter,

standards are an important part of a dynamic ICT marketplace. By helping to ehhance

interoperability among products or services within a market, and being responsive to real

marketplace needs, standards can help promote innovation, fuel market growth, and protect

investments in new technologies. They can catalyze innovation by encouraging companies to

contribute their innovative technology to collaborative standards-setting activities and to share

their intellectual property with others via the standardization process. Successful standards also

can help create opportunity for further product differentiation and more choices for users andconsumers. This in turn can motivate further innovation and competition among vendors.

Standards are tools that can best support interoperability when they are part of a multi

faceted approach incorporating open standards-setting processes, proactive standards

maintenance, and strong industry effort aimed at ensuring that different implementations of the

same standard will indeed interoperate. 3Even then, interoperability in ICT rarely means the

uniform implementation of a single standard. Users benefit from having choice among different

products, formats, and services that may seek to match unique customer requirements.

Standards are most effective when they are responsive to users’ needs and marketplace

drivers. As reflected in the National Technology Transfer and Advancement Act, Pub. L. 104-

113 (1995) (“NTTAA”), and 0MB Circular A-119, the U.S. Government is a very important

stakeholder in the standards community.

For example, HTML (the standard presentation format for the Web) and related standards such as

Cascading Style Sheets have evolved in response to the need to support increasingly graphically complex

Web pages. As with most complex technical standards, the technical experts developing them cannot

anticipate every implementation differential and the standards often contain ambiguities as a result. Forexample, Web page standards may address the technical requirements to display a dotted border around

text or an image, but the standards do not specif’ what the dots should look like (for instance, round or

square) or precisely where the dots should appear. Developers of Web publishing tools and browsers will

resolve these issues in different ways, which is one of the reasons why a Web page with rich formattingmay look different in different browsers. To the extent that different developers start to individuallyadopt a similar approach, there may be sufficient support for modifying the standard to reflect that

informal, marketplace consensus. But the standard also will be evolving to address new layers of

functionality, and the cycle will continue.
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diversification of business models, and the increased perception of the world as a globalmarketplace, standardization itself became more diversified in response to these dynamic

changes in the marketplace. New SSOs such as fora and consortia were created. Some foundways to work with the formal SSOs and others forged their own path toward internationalacceptance. Because this diversity is helping to address the ICT industry’s needs and enabling it

to be competitive in an increasingly complex and global environment, it has been largely

effective. This ecosystem, and U.S. industry interests, also have benefitted from the U.S.Government’s advocacy and support over the years.

The processes by which ICT standards are created can vary greatly and are constantly

evolving. Formal ICT standards are developed in formal SSOs, industry consortia. professionalassociations, and other industry groups. Many of these different types of organizations haveopen and published processes that allow all relevant stakeholders to participate and help tobalance conflicting interests. Other ICT SSOs are more focused and less formal collaborations,

which can produce needed standards that are very targeted in nature or which can incubatestandards for further standardization at a more formal SSO.

The diversity and breadth of SSOs can seem overwhelming to some, but this is a

beneficial result of market forces. This diversity and breadth provides for flexibility,

competition, and choice. No one process can guarantee that every standard it produces has somelevel of immediate intrinsic value. No one standards body or process necessarily produces

“better” standards; the ultimate test of success and relevance of a standard is the extent to whichit ultimately gets used in the marketplace. (As an example, the IETF TCP/IP standard became

much more widely implemented than the alternative ISO OSI standard despite the fact that ISOhas produced many other very successful ICT standards.) SSOs routinely review their activities,

procedures and policies, and they make improvements (or even “sunset”) as needed.

Standards-setting organizations also have collaborative actions and liaisons between

them, and with other bodies that support related conformance or interoperability testing. business

initiatives, etc. Many standards make references to other standards coming from other SSOs or

have ratification processes that they apply to other S SOs’ work. We support this collaborativeapproach and believe that diversity and choice are the best ways to a flexible, market-responsiveand effective standardization ecosystem.

IL Perspectives on Government’s Approach to Standards Activities
This is no easy set of challenges to address, and the situation may vary depending on the

specific technology area, key stakeholders, relevant market drivers, and other complexities. In

general, we support the positions articulated by the Information Technology Industry Council(ITI) in its comments in response to the RFI. 4 In particular, we believe that the U.S. Government

technical experts should be adequately resourced so that they can participate in standards-setting

activities and contribute their views and expertise.

ITt makes the following points in its comments:

• “U.S. Government Role: ITT notes that there may be some cases where an additional

government role is justified—when there is a compelling public interest (e.g., health, safety, and

the environment) and markets have failed. Such situations are rare. In such limited

circumstances, it may be appropriate for the US Government to facilitate an appropriate processand outcome that leads to the successful integration of standards. When these situations arise,

the US Government should use a process that:

o Includes all stakeholder interests,o Articulates agreed-upon use cases,

o Seeks to leverage well-established and broadly implemented standards, ando Does not mandate conformance to such standards.

• US Government Participation in Standardization: As reflected in the NTTAA and 0MB

Circular A- 119, the US Government is a very important stakeholder in the standards

community. US Government technical experts should be adequately resourced so that they canparticipate in standards-setting activities and contribute their views and expertise.

• Public/Private Partnership: ITI values the public/private partnership that exists today with

regard to ICT standardization. This balance, as reflected in the National Technology Transfer

and Advancement Act, Pub, U 104-113 (1995) (“NTTAA”), and 0MB Circular A- 119 havebeen effective in supporting a dynamic and diverse ICT standards ecosystem that has benefitted

industry and supported US global competitiveness. We encourage the US Government to

continue its support for the framework and principles currently articulated in the NTTAA and0MB Circular A-I 19.

• Global Standards: ITI members must be able to compete in global markets and address global

supply chains. We encourage the US Government to advocate practices for governments

worldwide that rely on consensus-based, market-led, voluntary global standards and avoid

promulgating and mandating conflicting country-specific standards.”
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before. This new frontier opens up a whole new horizon of possibilities, including new software

investments that will create new business models and opportunities to form and grow new

businesses. For instance, these technologies already enable any small group of creators todevelop content or software and to have it available instantaneously in the marketplace around

the globe. With cloud computing, organizations of any size and in virtually any location can tap

into supercomputing power and software applications that previously were available only to the

largest global companies. And with this new opportunity comes corresponding new

responsibility. This includes the need to protect the privacy of users and security oftheir dataand to enable interoperability between systems—all areas where standards may play animportant role.

Cloud computing is a technology area with broad applicability for the U.S. Government,

not only to increase efficiency and reduce cost, but also for communication between agenciesand as a continuation of efforts to increase citizen participation. As such, cloud technology

represents an ideal opportunity for beneficial participation by NIST. Indeed NIST has alreadymade an important contribution to the advancement of cloud standards, essentially providing theengineering taxonomies that help industry discuss the various aspects of cloud technology anddeployment. NIST also is the ongoing convener of an inclusive and open discussion with

industry and government stakeholders as to how those taxonomies can be extended and the role

of standards in accelerating the progress of cloud adoption. NIST is a key player in the standardsecosystem, and its expertise and involvement is highly valued by the private sector. 5

To focus more specifically on a valuable role that NIST could play, it may be useful to

look at a practical need that we often see in standards development. In our experience focusing

on interoperability for the last several years, effective multi-party engagement requires highquality problem definition. For us, the key element ofthis is the pragmatic scenario, or use case,

that needs to be defined for a given standard or specification. Fundamentally, these scenarios are

the foundation for efficient, effective specification development and engineering work across

multiple parties. They tend to create a solid set of objectives that different players—even players

with somewhat differing agendas—can use effectively to create solid, practical results. As with

Smart Grid and cloud computing, we believe that NIST has the capabilities to play the role of

Among other contributions, NIST’s measurement standards underpin many key technology standards,

including those relating to optical fibers and to a range of electronic devices. NIST also provides key

standards-related services, including the “Notify US” program, and participates in various standardssetting organizations. Equally important is NI ST’s role under the National Transfer and Technology

Advancement Act (“NTTAA”) and 0MB Circular A-i 19 to help coordinate U.S. Government’s interests

in coordinating US, Government interests in standards and conformity assessment systems.
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international policy issues that relate to the standards system and standards themselves. NIST

may be well situated to undertake an expanded role in both areas assuming it has the resources it

needs to do this effectively.

While there are many instances of successful inter-agency coordination on specific

standards-related policy topics, this tends to be driven on an issue or situation basis and there are

potential benefits from a more structured, proactive approach. Similar to the convening role on

creating a standards framework to support other technology policy roles, a key to successfulcoordination of standards policy efforts across agencies would be identifying what the

coordinating role needs to be, who the appropriate stakeholders are, how information will begathered and disseminated, and which issues are the right topics for coordination.

What tends to contribute to the possible success of these standards planning efforts (and

the current efforts led by NIST regarding Smart Grid) is the open and collaborative approach

taken by the convening party. These efforts are open to all stakeholders, and they bring the

affected community together, which typically crosses industry sectors and affects multiple layers

of scientific and commercial interests. The result is that related needs can be identified and the

framework that is developed is consensus-based. Otherwise there is the risk that some interests,

whether large multi-nationals or smaller companies who have invested heavily in their own

innovative products and systems. will be shut out of the relevant market or otherwise

disadvantaged. One ofthe important challenges to address in going forward on a more

structured basis would be to establish the factors that should initiate one of these planning panel

activities, as they consume large amounts of public and private sector resources, and they maynot always be the best solution to a given technology policy challenge.

Whenever possible, government should avoid mandating adherence to specific

standards. Mandating standards can inhibit further competition and investment in relatedinnovation. ICY SSOs compete in addressing stakeholder needs and provide the opportunity

for new innovation solutions to surface, The ICT marketplace—and the related needs—change

rapidly. As a result, ICT standards must be able to change in response. New standards must be

6 This is not necessarily a new need; ANSI has been convening standards planning panels for almost twodecades (starting with the National Information Infrastructure initiative back in the early 1990’s). ANSI,

often working with NIST and other U.S. Agencies. currently supports standards planning panels relating

to biofuels. identity management. healthcare information technology, homeland security. nanotechnology.

and nuclear energy
JTC 1 notes (lie nature otsrandurdiaiton is to attract innovative ideas from naihipic

sources, choose i/ic best ones. and cod,/i’ them in specitleations that /beilitate widespread

use’

Further, consistent with ISO ‘s and fEC ‘s one standard• principle (for examp!e 7MB ‘s

policy andprinciple sIatcimen/ on Global Relevance), there are times i’hcn one standard

is a/i that is required to mccl the needs oft/ic marketplace, especially in a particular

application area, and there arc 01/icr instances where nniltiple standards make the most

sense to respond to market requirements and to the needs ofour society. ía reducing the

mimber o/ alternatives to a reasonable minimum, JTC 1 and other SDOs have

demonstrated that it is not necessary and mciv not be desirable to choose only one

alternative or opoon for standardization.Further, JTC 1 notes lb at the cycle ofinnovation in time ICT sector has resulted in thecontinuous uitroductwn of new technologies that improve upon existing slamidards.

Any attempt to choose on/v one standard would ignore and II,reaten to mulilbil the ccle

ofinnovation that contin ites to fuel lb is industry.

Therefore, JTC I recognizes its commitment to ISO’s and JEC ‘s ‘one standc’;’d ‘ princilc;

however, it recognizes that neither it nor its SC’s are in a position to mandate either thecreation or the use ofa single standard and that there are times when multiple standards

make the most sense in order to respond to the needs ofthe marketplace and tfsocIety at

Consider, for example. competition among different digital audio formats. MP3 is the mostly widely

used consumer digital audio format. In order to speed delivery of audio files over the internet and to save

storagerelated costs, such format specifications describe a particular way to compress those files, TheMP3 specification requires use of the MP3 compression/decompression (codec) technology. Competition

among implementations of the MP3 codec is largely limited to ways to implement the cocec mostefficiently and at the least cost.

MP3 is viewed to be a very successful standard. Because it is widely supported, users are abhi to listen tosongs or other audio content on a range of devices. Yet this did not prevent companies from seeking to

develop newer, competing codecs that would enable een greater compression wIiie maintaining audio

quality. While MP3 remains the main Internet audio standard for sharing music. these more ‘dvancedcodecs are also widely used today in other audic formats. such as the Apple “Tunes and Microsoft’s

\Vindows Media audio formats. If MP3 had been dee-med to be “the” single standard fiat digital audiotormats. then companies \ould likel not have invected resources to develop rev’ and mpro’ed solutions

t:mt further competition and choice in the marketolace,
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sufficient need and without support from the impacted industry and relevant stakeholders.

Mandated standards can divert normal marketplace outcomes, lock the industry into a less-thanoptimal solution, and reduce incentives to innovate in that technology area. 8

In NIST Special Publication 1108: “NJST Framework and Roadmap for Smart Grid

Interoperability Standards (Release 1.0)”, the U.S. Government recognized the need to create a

standards framework that will achieve U.S. Government objectives for the Smart Grid while

maintaining sufficient flexibility to accommodate new innovative solutions and the healthy

diversity of standards development approaches that is reflected in the broader standardization

system:

“The objective of the NIST plan, moving forward, is to create a robust, ongoing, ‘builtin’ standards process that supports cycle after cycle of Smart Grid innovation and helps to

transform our economy. The resulting process could lead to new collaborative methods

and vehicles for developing and deploying standards in technology-based markets,especially during the early phases when standards—or the lack of standards—canstrongly influence the course of further technology development and diffusion and thegrowth and competitiveness of industries.”

In addition, NIST has also cautioned against mandating adherence to Smart Grid

standards, especially if they are already being widely deployed in the marketplace. 9If they are

8 This position is broadly supported in the 1CT industry, as reflected in the comments submitted by theInformation Technology industry Council in response to the RFI:

“Use of Standards in Technoloav Re2ulations: Given the dynamic nature of innovation and

ICT standards development, governments should be cautious about mandating adherence to any

particular standard without demonstrating sufficient need and without support from the impacted

industry and relevant stakeholders. because mandated standards can divert normal marketplace

outcomes and stifle innovation. If it is necessary to mandate adherence to an ICT standard. the

government should look to standards that have been wideR implemented in the marketplace as

they have some level of demonstrated effectiveness and acceptance.”

As noted in the NEST Publication, “[ujnder EISA. the Federal Energy Regulatory Commission (FERC)

is charged with instituting rulemaking proceedings, and once sufficient consensus is achieved, adopting

the standards and protocols necessary to ensure Smart Grid functionality and interoperability in interstatetransmission of electric power and in regional and wholesale electricity markets. Not all of the standards

listed in this initial framework are ready or necessary for adoption by regulators at this time. Some of the

individual standards listed require specified revisions or developments within formal standards-setting
(whether in formal international SSOs such as ISO. IEC and the ITU. or through otherglobally-recognized SSOs including mary consortia).

• Articulating U.S. concerns over standards or conformity assessment requirements that

arguably could present trade barrier issues for U.S. industrial interests, and

• Supporting the need to respect intellectual property rights when patented technology

is included in standards.

As noted by ITT in its response to the NIST RFI:

“Global Standards: ITI members must be able to compete in global markets and addressglobal supply chains. We encourage the US Government to advocate practices for

governments worldwide that rely on consensus-based. market-led, xoluntary global

standards and avoid promulgating and mandating conflicting country-specific standards.”

In today’s highly competitive global maiketplace. some governments have developed

national standards that they sought to leverage in order to exclude or discriminate against nondomestic products. It is important that the U.S. Government continue its technology andstandards-setting policies work wherever possible to keep markets open to technology and

products from around the world.

In particular, in the area of cybersecuritv, many countries are exploring or developing

policies relating to product “supply chain” assurance that have the potential effect of creatingpreferences for domestic suppliers. Should the U.S. adopt such a policy, it could set a precedent

for reciprocal measures by other governments. In addition, any such U.S. action would beineffective at improving the security of U.S. ICT systems because product security depends

much more on the care and diligence exercised during the development process than the location

where the development takes place. The U.S. Government. and NIST in particular, can play a

organizations. Additionally, some foundational standards and specifications listed are already in

wide use by industry on a voluntary basis and, thus, regulatory adoption may not be necessary.NIST intends to coordinate the development of additional technicai infOrmation on individual standards

and specifications to support their evaluation and potential use for regulator\ purposes (Emphasisadded.)
encourage NIST to collaborate with the National Security Agency and U.S. stakeholders toimprove the effectiveness of ISO 15408 (“the Common Criteria”), using the Common Criteria as

the basis for globally-recognized international assurance ofsupply chain security.

ilL Issues Considered During the Standards Setting Process

In looking at issues relating to the inclusion of intellectual pjyin standards, it

is critical to ensure that incentives to innovate are preserved. We strongly support PresidentObama and his Administration’s focus on technology and the promotion of

innovation. 10Innovation historically has been a catalyst for economic growth and the creation of

jobs. The United States, in recognizing the need to preserve incentives for innovation through a

healthy patent system and marketplace competition, has been and remains a global technology

leader. It is therefore important to ensure that the treatment of patented technology in standards

does not undermine incentives to continue to invest in innovation in standardized technologyareas.

This need to seek to minimize any loss of competition and innovation that can result from

standardization when competitors essentially “agree” to do things all one way can be explainedin terms of economic efficiencies. As the Antitrust Division of the U.S. Department of Justice

has observed:

“The goal of policies involving IP, licensing, and standards should be to

promote efficiency, just as it is with antitrust policy. . . . Static efficiency

occurs when firms compete within an existing technology to streamline theirmethods, cut costs, and drive the price of a product embodying thattechnology down to something close to the cost of unit production. Staticefficiency is a powerful force for increasing consumer welfare, but aneven greater driver of consumer welfare is dynamic efficiency, which

results from entirely new ways of doing business. Economists now

recognize that the gains from dynamic efficiency, also called “leapfrog”

°

See p//vvv.whitehouse.gov/winning-the-future/innovation: “President Obama’s Strategy for

American Innovation seeks to harness the ingenuity ofthe American people to ensure economic growththat is rapid, broad-based, and sustained. This economic growth will bring greater income, higher quality

jobs, and improved quality of life to all Americans,”
develop entirely new approaches, whether standardized or not.

Government should take an inclusive view towards SSOs’ diverse IPR policies and

not promote one approach over another. When evaluating whether there may be IPRissues associated with candidate standards for initiatives such as Smart Grid, governmentshould consider whether there are valid, serious, and documented IPR concerns, or

whether the standard has been accepted in the marketplace and is being widely

implemented. Most SS0s have an IPR or patent policy that seeks to balance the rights andinterests of their stakeholders by seeking commitments from participating patent holders that

they will offer patent licenses for their necessary patent claims on reasonable and non

discriminatory (“RAND”) terms and conditions. Currently there is significant diversity withregard to how these policies are articulated in detail at different S SOs. This diversity is healthyand should be encouraged, and any articulation by the government of one or more preferred

approaches should be avoided. This view is widely supported by the ICT industry.

In connection with the Smart Grid initiative, NIST has recognized the RAND principle as

an appropriate and inclusive underpinning for standards-related IPR approaches. In Special

Publication 1108, NIST specifies that Smart Grid interoperability standards should be “open”and adhere to the IPR requirements set forth in 0MB Circular A- 119:

“Also, in this document. NIST uses the definition of voluntary consensus standards givenin 0MB Circular A-i 19, on Federal Participation in the Development and Use of

Voluntary Consensus Standards and in Conformity Assessment Activities, where such

standards are defined as developed and adopted by voluntary consensus standards bodies.

In these standards, there are provisions that require that the relevant intellectual property

owners have agreed to make that intellectual property available on a nondiscriminatory,royalty-free, or reasonable royalty basis to all interested parties.”

“As a general rule. however. NIST believes that Smart Grid interoperability standards

should be open; that is. developed and maintained through a collaborative, consensus—

driven process thcit is open to participation by all relevant and material/v afJctedparties

and nor dominated or under the control ofa single organization or group oforganizations, and recidi/v and reasonably available to all Jr Smart Grid applications.

“

See Gerald F. Masoudi, Deputy Assistant Attorney Gen., Antitrust Div.. U.S. Dep’t of Justice, Address

at the High-Level Workshop on Standardization, IP Licensing. and Antitrust, Tilburg Law & Economic

Center, Tilburg University: Efficiency in Analysis of Antitrust. Standard Setting, and Intellectual Property

2—3 (Jan. 1 8. 2007), available at http://www.justice.gov/atr/publ ic/speeches/220972.pdf.
(

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available on fair, reasonable, and nondiscriminatory terms and conditions, which may

include monetary compensation.”

Accordingly. before including a standard in a standards framework, the U.S. Government

(or its designee) may -ant to complete a “health checklist” to verify that the relevant SSO has an

IPR policy consistent with the umbrella requirements of 0MB Circular A-l 19. The purpose of

such a review would be to reduce the likelihood that a standard would be included in a regulation

where patented technology that is necessary to implement the standard is not available to

implementers on reasonable and non-discriminatory terms and conditions. (For many reasons,

SSOs’ IPR policies cannot guarantee this result for all necessary patented technology. For

example. such policies generally do not apply to non-participants in the standardization process.)

Accordingly. when a standard is being considered for inclusion in a standards framework,

the U.S. Government should request that the relevant SSO answer all of the following questions

in writing:

• Does the SSO have an IPR policy? If so, is it publicly available?

• For disclosure-based SSOs 12that receive individual patent declarations or patent

licensing statements from patent holders, would the SSO be willing to provide copies of

any such IPR-related statements that it has received (or a pointer to the relevant place in

its IPR-related database, if it has one) with regard to the standard in question? Has the

SSO received any statements to the effect that a patent holder is not willing to provide

such a licensing commitment? If so. is the SSO willing to provide such information to

the U.S. Government?

There are hundreds of different SSO IPR policies and they vary significantly As a general matter, the

IPR policies of most formal SSOs and many consortia are “disclosure-based”. Under these types of IPR

policies, participating companies generally are either required or encouraged to disclose either (a) patents

they hold that are likely to contain patent claims that will be essential to implementing the final standard

(“Essential Claims”), or (b) the fact that they likely hold such patents (but without identifying specific

patents). The disclosing participant is then typically requested to declare its intention with regard to

hcencing such F ssennil Claims RuLh s RAND RAND \Ithout i iovalt\ oi ill not agiLe to offer

RANF) licenses”).
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or requiring conformance with the standard. If the standard is being widely implemented on a

voluntary basis, then that is a good indicator that the standard can be included in a standardsframework with minimal risks from an IPR perspective.

Proposals for the U.S. Government to promote a mandatory “ex ante” IPR policy

approach are not supported by the broader ICT industry because such an approach is

viewed as (a) being of little value, (b) creating many practical inefficiencies and possible

legal challenges, and (c) something that could be used internationally to possibly

undermine the value of patented technology that is included in standards.

We noted these two sets of questions in the RFI:

o Are there particular obstacles that either prevent intellectual property ownersfrom

obtaining reasonable returns or cause intellectual properti’ owners to make IF available

on terms resulting in unreasonable returns when their IF is included in the standard?

o What strategies have been effective in mitigating risks, i/any, associated with hold-up

or buyers cartels?

Almost all standards bodies have a patent policy that addresses (a) the degree to which

patent holders have to disclose whether they have any patent claims necessary to implement the

standard under development and/or (b) the choices such patent holders have with regard to thelicensing commitment they can make vis-à-vis those claims (such as a commitment to licenseunder RAND terms and conditions).

If a patent holder makes a disclosure about its necessary patent claims, potential

implementers can decide when (or even whether) to contact the patent holder to obtain

information about actual license terms. Depending on when the patent holder makes such a

patent disclosure, this may occur cx ante (before the standard is finalized). Any negotiationstypically are conducted bilaterally and outside the SSO.

Some SSOs have adopted participation-based” IPR policies. Under this type of [PR policy, a

participating company undertakes a RAND (with or without a royalty) licensing commitment for anyEssential Claims it may have vis-à-vis the final standard just by joining the SSO or by joining a technical

committee of’ the SSO. Participation-based policies, however, often include safeguards for participants toopt out or exclude certain Essential Claims by disclosing the patents containing those Essential Claims

and stating that the automatic commitment will not apply to them.
terms after the standard is completed and everyone is attempting to implement the standard as

written. Opponents highlight that “hold up” occurs rarely when viewed across thousands of ICT

standards, and such policies would unduly burden the standardization process and create many

unnecessary practical inefficiencies and potential legal problems.

There are literally thousands of ICT standards in existence today. Hundreds of these

standards have been referenced in eGovernment Interoperability Frameworks, 14with no apparent

documented problems relating to IPR issues. There have been a relatively small number of

noteworthy litigations that have been filed when two parties have been unable to agree onwhether proffered licensing terms were RAND and/or otherwise met the requirements oftheapplicable SSO’s IPR policy. These are very much the exception, not the rule. Most SSOs

review and regularly update their IPR policy to address broad issues, but they often are reluctantto add substantial burdens to the process to address relatively rare, potential “one-off’ disputes

that are fact-specific and can be litigated if the two parties cannot come to an agreement.

The debate over mandatory “cx ante” IPR policies is not new; it has been underway for

more than a decade. During this timeframe, many ICT SSOs and their members with disclosurebased IPR policy approaches have thoughtfully considered whether to adopt such a policy, andwith the exception of the VITA standards body. they largely have rejected adopting such anapproach. The principle reasons often include the following considerations:

A mandatory “cx ante” IPR policy would require patent holders to discloseproposed licensing terms for their essential or necessary patent claims. Moststakeholders have observed that, for various reasons, such a disclosure is of little

practical value. When a patent holder discloses to a SSO that it likely holdsessential patent claims, a prospective implementer makes a decision whether toapproach this patent holder to discuss possible licensing terms (and that decisionis dependent on a number of factors). Any implementer actually deciding to

negotiate a license will almost always not want a license for just the patentholdefs essential patent claims in connection with that standard. An

implernenter seeking a license likely will want to negotiate a bi-lateral,

customized agreement that will include other IPR (including related patent claims

that it may be infringing) that impact its entire product. The license also likelywill reflect a range of possible trade-offs between the two parties based on their

14 See “c-Government Interoperability: A comparative analysis of 30 countries” by CSTransform at

http:/’wwx .cstransform .com/white papers/lnteropAnalvsisV2.0.pdf,

The existence of competing standards also can help reduce the threat of possible patent “hold up”.
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noted that injecting licensing terms into the standardization process willinevitable delay the process further still without improving the technical value of

the standard.

• Some patent holders make RAND licensing commitments largely for defensive

purposes to further their own freedom of action, such as seeking to protect their

products that implement standards from patent infringement claims asserted by

others. As a result, quite often they will not proactively seek to obtain licenses

from implementers. It has been observed during stakeholder debates on the “exante” issue that requiring these patent holders to prepare patent licensing terms

unnecessarily creates burdens and complications for them without adding any

value to the standardization effort.

• There is little evidence that “patent hold-up” in the standards context is a real

problem. Most patent holders also are implementers. whether with regard to the

same standard or in terms ofthe broader ICT standards landscape, and this

ecosystem generates very few IPR-related disputes as a result.

• Under a mandatory “cx ante” IPR policy, there is a risk of possible buyer cartel

andlor group boycott behaviors taking place. The technical committee members

may explicitly or implicitly pressure a disclosing patent holder to modify itsproposed licensing terms or risk not having its technology included in the

standard. For this reason, mandatory ‘ex ante” IPR policy approaches also may

discourage key patent holders from participating in the process and contributingtheir valuable patented technology. They also could create disincentives to invest

further in innovation in that technology area.

Most of the SSOs and their stakeholders that have considered these proposals over the

years have determined that there are only a limited number of situations where patent hold-up”

takes place in the context of standards-setting. The industry has determined that those situations

generally are best addressed through bi-lateral negotiation (and. in rare cases. litigation) as

opposed to modifying the SSOs IPR policy and arguably unnecessarily burdening thestandardization process for the many ICT standards that are being widely implemented in the

marketplace with no apparent IPR-related challenges.

Accordingly, we support the majority of ICT companies who believe that SSOs should

develop their IPR policies based on a consensus of their stakeholders, and that governments
Respectfully submitted.

7 -- . - - // . :- -•

David Heiner

Vice President and Deputy General Counsel