Globalization and the Technology Standards Game: Balancing Concerns of Protectionism and Intellectual Property in International Standards

Standards for technology have become a significant factor in international trade. Intellectual property (“IP”) is central to the development of standards, particularly in ICT industries. This article explores the relationship between standards, IP and international trade. I focus, as a test-case, on China’s development of a proprietary encryption standard for wireless communications – the WAPI standard. In May 2003, China approved the WAPI standard and decreed that by December of that year, all wireless devices sold or imported into China would be required to incorporate this technology. This mandatory approach would have fractured the world market for wireless products, raising trade law concerns. Under pressure from the U.S., China later suspended its mandate. An uneasy tension arises from obligations in the WTO’s Agreement on Technical Barriers to Trade (“TBT Agreement”) to use relevant international standards, and the possibility that their adoption will entail payment of royalties to foreign IP owners. The claim against China has been that it is focusing on home-grown standards, to the detriment of existing international standards. China has responded that the mandatory adoption of international standards does not come without cost, particularly for developing countries. It has complained of unfair treatment when seeking to participate in the international standards system, contending that IP rights create obstacles to trade. The WAPI case illustrates standards’ indeterminate nature as trade facilitators and indispensable elements of the ICT industry, on the one hand, or potential measures of protectionism when applied inappropriately, on the other. It also highlights the IP dimension to international standards, identifying a source of friction within the system. How do we balance the rights of IP owners to receive ∗ Associate Professor of Law, Suffolk University Law School. B.A., University of Chicago; M.P.P., Kennedy School of Government, Harvard University; J.D., Boalt Hall, University of California, Berkeley. This article is developed from a paper I presented at a conference sponsored by the Stanford Program in Law, Science and Technology: Standardization and the Law: Developing the Golden Mean for Global Trade (Sept. 2005). I want to thank the participants of that conference. My thanks also go to my wife and family. I benefited from the assistance of research librarian Rick Buckingham and students Terrence Jiang and Erik Zilinek. compensation against the interests of those seeking to achieve harmonization by implementing international standards? My claim is that to balance and achieve these objectives, the framework of the TBT Agreement should be extended so that IP rights are properly addressed in the standards development process. In particular, two basic principles – early disclosure of IP rights and declaration of position concerning licensing of those rights – should be integrated into the TBT Agreement as part of its guidelines for international standards. A balanced policy governing IP rights will strengthen international standards and promote harmonization, while supporting the rights of IP owners to receive reasonable compensation.