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# COMMISSION OF THE EUROPEAN COMMUNITIES

COM(92) 445 final

Brussels,27 October 1992

COMMUNICATION FROM THE COMMISSION

INTELLECTUAL PROPERTY RIGHTS **AND** STANDARDIZATION

TABLE OF CONTENTS

### 1. Introduction 2. Principles of standard,zatlon (2.1) types of standards and obJectives of standardization (2.2) principles used In national and International standards bodies (2.3) use of standards by public authorities 3. Principles of lntel lectual property protection (3.1) general principles (3.2) patents (3.3) copyright (3.4) semi-conductor products and other tntel lectual property rights (3.5) effects of lntel lectual property rights 4. The standard making process (4.1) standards Incorporating no protected material (4.2) de facto standards ( 4. 3) standards created to I ne I ude an I nte 1 1 ectua 1 property right: agreement and refusal to

It cence
### (4.4) late or non-disclosure of rights (4.5) 1 labl 1 lty for hon-dlscloeure ( 4. 6) I dent If I cat ton of rIght ho I ders - I ne I us I on of protected tntel lectual property rights (4.7) avat labl I tty of I lcences (4.8) lndu~try- specific solutions 5. Other pot Icy considerations (5.1) competition aspects (5.2) aval labt t tty of I lcences to third country
## entitles - trade polIcy aspects

6. Conclusions

### (6.1) codes of practtce/guldel lnes/undertaklngs (8.2) general principles (6.3) Community action

_/_

                             - 1 

1,. 0 . I NTRODUCT I ON

### 1. 1. 1. Standard 1 zat 1 on and the protect I on of I nte I I ectua I property serve different obJectives but have to co~exlst

1 n the same 1 ndustr 1 a I and commercIa I envIronment.·
### StandardIzatIon alms at dIffusIng techno I ogy l·n .>the pub 1 1 c 1 nterest, wh I I e I nte I I ectua I property rIghts a I m to secure private property protection. The standardlzatlon process cannot take place effectively If no clear solutions exist to resolve potential confl lets between the obJectives of standardization and the pr 1 ne 1 p 1 es of I nte I 1 ectua I property rIghts. At the same

time, the Incentive to develop new products and processes
### on which to base future standardization wl I I be lost If the standard-makIng process Is carrIed out wIthout due regard for lntel lectual property rights. 1.1.2. In December 1991 the Commission publ lshed Its follow up

to the Green Paper on standards (COM( 91) 521) In wh I eh l;t
### was stated, In paragraph (xl) (other Issues 71), that the Comm 1 ss 1 on wou Id we 1 come the deve I opment by standard~ bodies of clear conditions for the Inclusion.· of lntel lectual property rights In standards, based on practice In the International standardlzat,lon organizations. lt was further Indicated that "In view of

the Importance and complexity of the Issue for
### lntel lectual property rights, standardization, competition and trade pol lcles", the Commission Intended to produce a separate communication on the subJect. 1.1.3. Given the voluntary nature of standard-making, the Commission Is not seeking to regulate standard-making directly by legislative proposals, If certain principles are not respected by standards bodies the Community wl I I not be able to use their standards and even less, to make them mandatory. Certain types of behaviour on the part either of standards bodies, or on the part of holder~ of I nte I I ectua I property rIghts cou Id brIng. t;.hem. t'pto conf I I et wIth the provIsIons of the Treaty, of :Con,mun i ty or national legislation, or of International cori~ent~dns. 1. 1. 4. Therefore In thIs CommunI cat I on the CommIssIon sets ovt a .. number of principles which lt believes should form th6

basIs of any I nterna I ru I es wh I eh standards bodIes may.-.
### wish to elaborate. Standards bodies remain free to structure their membership rules and their Internal organ I zat 1 ona I procedures as they wIsh. The resu Its of their activity, must, however correspond to the standardization needs of the Community and must be made In conform 1 ty wIth the I aws of the Comml:Jn t ty and Its International obl lgatlons.

                                 - 2 

2,.0. PRINCIPLES AND OBJECTIVES OF STANDARDIZATION

2.1. TYPES OF STANDARDS

### 2 . 1 . 1 . A standard I s a t ec h n I c a I spec I f I cat I on re I at I n g to a

product or an operatIon wh I eh Is recognIzed by a I arge
### number of manufacturers and users. Councl I Directive 83/189(1) lays down the fol lowlng definition In Its Article (2) "standard shall mean a technical specification approved by a recognized standardizing body for repeated and contInuous app I I cat I on comp I I ance wIth which Is In principle not compulsory". lt may be the result of a formal consensus-bul ldlng procedure managed by a recognized standardization body In

order to permit a large number of manufacturers to adopt
### Identical solutions. Alternatively, the standard may arise spontaneously by the degree of penetration of the market of a partIcular techn I ea I so I ut I on (a so-ea I I ed "de facto" or "proprietary" standard). 2.1.2. Standards may be developed for a wide variety of purposes, ranging from terminology and testing to detal led technical specifications for products, processes and services. They may be I lmlted to ensuring compatlbl I lty of products or systems at their points of Interconnection, or may extend to detal led specifications In respect of the design, dimensions and materials of the

products themselves. In general terms, the Community
### a I ong wIth other PartIes to the Agreement on Techn 1 ea 1 Barriers to Trade of the GATT ("TBTA") Is committed to specifying technical regulations and standards In terms of per forma nee rather than desIgn or descr 1 pt 1 ve characteristics.

OBJECTIVES OF STANDARDIZATION

2 . 1 . 3 . I n the m a J or I t y of I n dust r I e s, the ob J ec t I ve of the
manufacturer whose product becomes a "de facto" standard
### may not be, at the outset of the commercial lzatlon of the technology, to see lt become an Industry standard. The objective of most manufacturers remains to achieve high I eve Is of market penetratIon and to be compet It 1 ve 1 n those markets In relation to other manufacturers. In certain Industries, where a high degree of standardization Is taking place, manufacturers must now, however, be aware of the posslbl I lty that some of their new technology may eventually form the basis of an

Industry standard.

( 1) ~~83/~~ 189/EEC: Counc I I DIrectIve of 28 March 1983 I ay I ng
down a procedure for the provision of Information In
### the field of technical standards and re~ulatlons.

OJ N° L 109, 26/04/83 p. 08

                                      - 3 

2 ~ 1. 4. 1 f a new product has e I ements protected by I nte I I ectua I
### property legislation, as Is most I lkely to be the case,

the manufacturer w I I I exercIse those I nte I I ectua I
property r 1 ghts v 1 gorous I y, as a means of securIng and
### maintaining his lead and his profitability In a given terr 1 tory. 1 n many hIgh techno I ogy IndustrIes, the highest costs are Incurred In the research and

development phase when the lntel lectual Input )n terms of
### man-hours of work 1 s at Its greatest, the manufacturIng phase being a relatively low-cost operation. The economic value of the lntel lectual property rights In such a product wl 11 therefore constitute an Important factor In price calculations and figures prominently as a company asset. 2.1.5. Once a certain level of penetration of the relevant market for his product has been achieved, the manufacturer wl I I 'de facto' have set the Industry standard for that product and lt will be difficult, If not Impossible, for others whose products must lnteroperate with his, to avoid working to the standard wh I eh he has set. ThIs w I I I be part I cuI ar I y the case

where lnterworklng or networking Is Involved, as In the
### computer, energy distribution, telecommunications and transport Industries. 2.1.6. Once a certain level of market penetration has been

achieved, the manufacturer whose product has become a de
### facto standard may accept that de facto standardization

can be advantageous I y converted Into a forma I standard
### so that the dominance of his technology Is embodied In a more permanent form. His objective wl I I then be to secure the best terms from the conversion of his de facto

standard Into a formal standard.

### 2.1.7. These terms may Include royalty payments for the use of

his lntel lectual property and the grant of I lcences on a
### territorial basis for the exploitation of these I nte I I ectua I property rIghts. These rIghts I ne I ude the rIght to contro I manufacture and the rIght to contro I distribution, Including Importation. 2.1.8. A longer term benefit wl I I probably accrue to the

manufacturer who vo 1 untar I I y I 1 cences hIs techno I ogy to
### become a standard since his market share wl 1 I eventually grow significantly In respect of the rights for which he

receIves roya I ty payments even If he Is no I onger the
### sole manufacturer of the product Itself, and even If the royalty rate which he receives Is less than that which he

would have obtained from a I lcensee on the open market.

### 2.1.9. He will also be able to satisfy a second longer term objective which Is to see the technology developed by his

company estab 1 I shed as a wor I dw I de standard wIth
### resulting beneficial publ lclty.

                               - 4 
### 2~1.10. On the other hand, a standard may arise by a process of definition and approval by a recognized national or International standardization body. 2.1.11. The underlying objective of formal standardization Is to generate the economic benefits for society that wl I I result from a more rational organization of .supply and demand and greater competition In the market place. Standard I zat 1 on tends to reduce costs for the supp I I er and purchaser of goods and services and to Increase

transparency of the market. Once the reQuirements of the
### market are ref I ected In a standard, a I I Interested suppl lers are put In a position to meet market needs on a competitive basis. At the same time, purchasers are given common assurances with respect to the performance of the product or servIce agaInst agreed er Iter I a of Qua 1 1 ty, 1 nteroperab I I I ty, and so on. The Importance of

standardIzatIon as 11 an Instrument of economIc and

IndustrIa I IntegratIon wIthIn the European market.. has
### recently been expl lcltly recognized by the Councl I In Its Resolution on the role of European Standardization In the

European Economy of 18 June 1992.(2)

### 2.1.12. These economic objectives can, of course, only be rea I I zed Insofar as standards are made known and ava I I ab I e to the wIdest poss I b I e number of Interested partIes on faIr and reasonab I e terms. ConseQuent 1 y, a standard Is by defInItIon a pub I I c I y-ava 1 1 ab 1 e document(3) and the technical specification which Is not aval lable to al I potential users Is not a standard.

2.1.13. Benefits to purchasers and users accrue from the
### existence of a recognized standard guaranteeing not only lnteroperablllty but also a certain level of Quality, safety and conformity to certain technical norms. A European standard can fInd I tse If 1 n compet 1 t 1 on w 1 th standards set by other major tradIng partners such as

the American or Far Eastern markets.

### 2.1.14. The objectives of standardization can only be met If the technology chosen Is good, up-to-date and readl ly aval lable. The standardization process Is, however, by Its consensus-driven nature, a lengthy one, and when substantial delays In adopting a standard occur, the

technology on which the standard Is based may already be
### out of date. On the other hand, the most InnovatIve

technology may not be the most appropriate for adoption
### as a standard because lt Is not yet stable and sufficiently tested In the market place.

~~(2)~~ ~~OJ~~ no ~~173~~ ~~of~~ 9.7.92, p.1

### .. General terms and their standardization and related

( 3) See ISO/IEC
### definitions act I v 1 t 1 es ...

GuIde 2,
concerning

                                - 5 
### 2 .. 1. 15 Once chosen as a standard, a part I cuI ar techn I ea I solution tends to perpetuate Itself for a period longer than that which lt might have enJoyed on the open market In a free competitive situation and therefore the process of standard 1 zat 1 on may I tse If retard techno I og I ea I Innovation In some areas. 2.1.16 lt Is also the case that too much standardization In a given area at a particular moment In time may create difficulties as that technology changes. Replacing a substantial standardized "platform" such as a main-frame

computer operatIng system wIth a new and more advanced
### standard I zed "pI at form" may prove more cost I y and more difficult than the addition of new layers of system software on to existing products. 2.1.17 A variety of approaches to the Issue of standardization are therefore requIred If the most approprIate form of standardization for a particular Industry Is to be

achieved.

### 2.2. PRINCIPLES USED IN NATIONAL AND INTERNATIONAL STANDARDS

BODIES

### 2.2.1. The three European standards-making bodies recognized by the CommunIty at a European I eve I are CEN, CENELEC and

ETS I . CEN (European CommIttee for StandardIzatIon) and
CENELEC (European Committee for Electro-Technlcal
Standardization) crea~e standards for EC and EFTA
### countries. Their membership Is composed of national standards bodies and national electrotechnlcal committees respectively. ETSI (European Telecommunications Standards InstItute) er ea ted In 1988 fo I I ow 1 ng the recommendat 1 on

made In the Commission's Green Paper on Standards, groups
### together administrations, network operators, users, manufacturers research I nst I tut Ions and prIvate servIce provIders and has the task of draftIng European

Telecommunications Standards.

### 2 . 2 . 2 . At the I n t er n at I on a I I eve I, I SO, I E C and CC 1 TT (I nternat Iona I Te I egraph and Te I ephone Consu I tat 1 ve Committee) are the standard-making organizations. ISO (International Organization for Standardization) draws Its membership from national standards organizations. The IEC (International Electrotechnlcal Commission) has a similar but smaller membership In the field of electronics and electrical engineering. 2.2.3.· The principles appl led to lntel lectual property by ISO/IEC and by CEN/CENELEC are relatively simple.

Subparagraphs b) and c) of Annex A of the ISO document
### (Reference to patented Items IEC/ISO Directives- Part 2 Methodology for the development of 'nternatlonal standards) are appl led by al I four bodies. They read as

fo I I OWS:

                                     - 6 

b) 11 lf the proposal Is accepted on technical grounds,
### the originator shall ask any known patent holder for a statement that he would be wl I I lng to negot 1 ate 1 1 cences under patent and I I ke rIghts

with appl lcants throughout the world on reasonable
terms and conditions. A record of the patent
### holder's statement shal I be placed In t~e fl les of the 1 so Centra I SecretarIat or the I EC Centra I Office, as appropriate, and shal I be referred to

In the relevant International Standard. If the
patent holder does not provide such a statement,
the Technical Committee shal I not proceed with the

1 ne I us 1 on of the patented Item un I ess the
respective Councl I gives permission

### c) Should lt be revealed after publication of the International Standard that I lcences under a patent and I I ke rIghts cannot be obtaIned under

reasonable terms and conditions, the International
### Standard shal I be referred back to the Technical Committee for further consideration." 2.2.4. CCITT In Its Annex 5 Statement on CCITT patent policy

elaborated In June 1988 made the fol lowlng observations .
.. Over the years the CCITT has developed a 11 COde of
## practice" regarding patents ... The rules of this "code of practice .. are rather simple and straight forward ...
### the detal led arrangements being left to the parties Involved, as these arrangements might differ from case to

case ...

### 2.2.5. ETSI has drafted a Pot Icy and Undertaking on lntel lectual Property Rights which sets out more detal led procedural rules and which starts from two premises which differ

from those app I I cab I e In I SO/ I EC/CEN or CENELEC. The
### fIrst premIse Is that membershIp of ETS 1 Is cond 1 t 1 ona 1

on sIgnature of the UndertakIng whereby an I nte I I ectua I
property r lght (I PR) holder agrees to 1 icence his IPRs
### according to certain limitations as to royalties. The second premise Is that ETSI standards are aval table In a specific geographical area as a consequence of the definition of territory contained within the draft Undertaking. Certain conditions are specific to signatories of the Undertaking. This Pot Icy and

Undertaking has not yet been approved by the ETSI
membership.

                                - 7 

2~3. THE USE OF STANDARDS BY PUBLIC AUTHORITIES

### 2.3.1. Because standards represent a voluntary consensus concerning the technical characteristics of goods and servIces, they are common I y used by pub I I c authorItIes within the framework of regulation. This m~y take the form of a direct reference In legislation which makes a given standard mandatory or, as Is normal ty the case In

the Community, of conferring a "presumption of
### conformity" to legislation on any product which compl les with the standard. Directives based on reference to

standards have been adopted In a number of Important
### Industries, Including mechanical engineering, construction, medical devices, telecommunications, gas

appl lances and measuring Instruments.

### 2.3.2. Slml larly, publ le authorities often use standards In theIr procurement. WIthIn the CommunIty, for Instance, the publ le procurement Dlrectlves(4) now al I reQuire purchasing entitles to define technical specifications In their contract documents by reference to European standards where these exIst, In order to ensure that national ly-determlned specifications are not used to restrict access to procurement markets. 2.3.3. Whenever publ le authorities Incorporate standards Into legislation and thereby confer upon them a more binding character than theIr norma I vo I untary status, they must satisfy themselves that:

the standards In Question have been developed In
### accordance with the normal procedures of standardization (I .e. that they represent a consensus based on the views of at I Interested parties); and - the standards In Question are aval table for use by at I Interested parties to whom the legislation appt tes.

International agreements subscribed to within the
### framework of the GATT (I .e. the TBTA and to a lesser extent the Agreement on Government procurement) extend these rIghts of non-d I scrm I natory treatment to certaIn other GATT contracting parties. 2.3.4. However, providing that the procedures set out below are

fol towed, even In the exceptional circumstances where a
### standard becomes 'non-voluntary', problems can be resolved In relation to lntel lectual property rights. (4) Directives 71/305/EEC, 77/62/EEC, 90/531/EEC

                                 - 8 
### 2~3.5. If the technological solution which Is to be made mandatory 1 s based on proprIetary rIghts, these rIghts must be the subject of negotiation before the standard Is

agreed and the technology Is made mandatory.
### If the negotiations fal I to produce an agreement from the rlghtholder, the rights cannot subsequently be expropriated unless there are over-riding publ.lc Interest or publ le safety considerations to be taken Into account and no other technical solution could be devised. 2.3.6. Therefore the question of the use of standards by publ le authorities does not hinge on the question of whether any lntel lectual property rights which may under I le the

standard can be Incorporated ex post facto Into a
### mandatory standard, since such rights must In al 1 cases be acquired by negotiation and not by legislative expropriation.

                                - 9 

3.0. PRINCIPLES OF INTELLECTUAL PROPERTY PROTECTION

### 3.1. GENERAL PRINCIPLES 3. 1. 1. I nte I I ectua I property rIghts I ne I ude patents, _trademarks, copyright, design rights, semi-conductor topography rights, trade secrets. Works of the lntel lect are created as the resu It of a gIven vo I ume of man-hours of I abour and a return on the financial Investment In that labour cost wl I I be secured only If the creator of the work can control how his work Is to be exploited and where.

### General principles are

lntel lectual property
fo I I owIng :

### app 1 I cab le to protection. They

### all forms

Include

of
the

### others may only use or copy the lntel lectuat creation with his permission and, If the right holder so wishes, he may be paid for that

permission;
### In order to ensure a wider distribution and use of works of the Intellect In society as a whole, I I m Its are set on the scope and duratIon of the lntel lectual property protection; the abusive exercise of lntel lectual property rights by Individuals or companies occupying a dominant position Is subject to the appl lcatlon of

com pet I t I on r u I e s, and I n par t I c u I a r A r t I c I e 8 5
and 86 of the Treaty. Agreements between companies
### regu I at I ng the exercIse of I nte I I ectua I property rights may be subject to the prohibition of Article 85 of the Treaty. 3.2. PATENTS 3.2.1. Specific characteristics apply to each type of Intellectual property right. So In the case of patent rights, the object of the right Is a new creative technical solution to a problem. The .. invention .. must demonstrate novelty and be capable of an Industrial application.

                                    - 10                                     
### 3,.2.2. The patent. right will only be granted If application formal I ties are completed In which the Inventive step Is

described In detal 1. There.may be a. period during which a
### patent appl lcatlon Is subject to examination prior to the gra-nt of a patent. For thIs I I m I ted perIod of tIme the patent appl lcatlon Is not fully disclosed to the publ le, although the existence of an appl lcatlon may be known. Once a patent has been granted, the d I se I osure to the

publ le Is compensated for by the temporary monopoly which
### the patent right gives over the exploitation of the

patented Invention.

### 3.2.3. That monopoly right can be exercised exclusively by the patent ho 1 der If he chooses to commercIa I I se hIs Invention himself. If In certain circumstances he falls to work his patent himself or If he chooses to license others to do so, he may never the I ess be remunerated by others for the right to be a I lcensee of his patent. The rIght Is not subJect to any genera I exceptIons In respect of use by potentially competing third parties but 1 s 1 I m I ted In tIme so that socIety may benefIt free I y from technical progress once the rlghtholder has had the opportunIty to recover hIs or I g I na I Investment In

research.

### 3.2.4. Patents are granted on a territorial basis, that Is to say, that they are valid for the country In which they are Issued, or In the case of a patent Issued by the EPO (European Patent Office) they may be valId for up to 17 countries, I .e. those of the Community plus Austria, Switzerland, Sweden, Monaco and Llchtensteln. Rights

acquired under patent law exhaust only on expiry of the
### term of protect I on In the terrItory for wh I eh they are granted, or, on the non-payment of any renewal fees.

3.3. COPYRIGHT

### 3. 3. 1. CopyrIght, by contrast, protects not nove I ty but original lty. This original lty Is assessed In relation to the expression used by the creator and protection by copyright cannot apply to solutions, principles, Ideas,

or methods as such. There Is no monopoly In the patent
### sense under copyright protection since any second maker Is free to find his own way to express an Idea which he

has taken from the work of another. Even In techn 1 ea 1
### fIe I ds such as computer programs It Is except Iona I for there to be only one possible way to express an Idea.

3.3.2.

3.3.3.

### 3.3.4.

3.3.5.

3.3.6.

### 3.4.

                      - 11                       
### In cases where Idea and expression are Inseparable, there Is generally held to be no copyright In that expression. The on 1 y monopo 1 y under copyrIght I aw Is therefore the right of the author to prohibit the unauthorized exploitation of the expression used In a work, for examp 1 e to prevent the copyIng of I I nes of text from a

book or 1 lnes of code of a computer program.

### A work Is protected under copyright law as soon as lt Is created. Within the Community and according to International copyright conventions there Is no need to complete registration or examination formal ltles. However, 1 n some countrIes, regIstratIon forma I It I es do exist.

The absence of any reQuirement In the Community to
### register a copyright means that only I ltlgatlon can prove conclusively whether a valId copyright exists In relation to a part I cuI ar work. The protect I on exIsts regard I ess

of whether the work has been commercIa I I y exp I o I ted by
### Its creator or not. Copyright Is not therefore a compensation to the author for disclosure as with patent protect I on, and the essence of the copyrIght cannot be reduced to a mere right to remuneration. Copyright protection Is relatively long, at least 50

years fol lowlng the death of the author according to the
### relevant International conventions, and Is a territorial r 1 ght. A work created or pub I I shed In the Commun 1 ty, can be I I censed for exp I o I tat I on on I y wIthIn the Community, the right to exploit the work In, for example, the us, being the object of a separate negotiation by the rlghtholder.

A I lmlted number of exceptions to the exclusive copyright
### rights are provided for In the legislation of the Member States and by the relevant International conventions so that certain acts may be legitimately performed by users.

SEMI -CONDUCTOR PRODUCTS AND OTHER INTELLECTUAL PROPERTY
RIGHTS

### 3.4.1. The protection given In the Community to the topographies of semi-conductor products ("chips") should also be mentIoned< 5 > . ThIs protect I on Is a suI generIs reg 1 me,

I lmlted to chips produced within the Community, although
### protection can be extended, on the basis of reciprocity, to chips produced In third countries. (5) Directive 8 1/54/EC

                             - 12 
### The protection Is I lmlted In time (10 years) and Is restricted In scope by exceptions permitting reproduction of a topography for the purpose of private study and the developing of other topographies, I .e. a form of 'reverse

engineering' exception.

### 3.4.2. Design rights have not yet been harmonized thrQughout the Community and a variety of regimes protecting both functional and non-functional designs exist. Some regimes foresee a registration system. 3.4.3. Other forms of lntel lectual property such as trademarks, trade secrets, unfaIr competItIon do not appear at the present time to cause any specific problems In relation to the Issue of standards and are therefore excluded from the scope of this Communication.

3.5. EFFECTS OF AN INTELLECTUAL PROPERTY RIGHT

### 3.5.1. Some clarification Is necessary as to what acts are

permItted or prohIbIted, In respect of I nte I I ectua I
### property rIghts. In the case of a product or process Incorporating a patented Invention, the part of the

product or process so protected cannot be copied without
### authorization, even by observing the Ideas and principles on which lt Is based, nor can Instructions In written form, such as a specification or patent description, be

used for the purpose of producing a slml lar or Identical
### result. 3.5.2. In the case of a product covered by copyright, the part

of the product so protected may not be cop 1 ed w 1 thout
### authorization but If lt Is accessible to the human

senses, as In the case of a three-dimensional obJect or
other works In a human I y perce I vab I e form, 1 t may be
### studied, and the Ideas and principles derived from that study may be used to create a slml lar or Identical functional lty, providing that the expression of the

copyrighted work Is not reproduced.

### 3.5.3. A special exception to the normal rules of copyright and

which Is of relevance     - In the telecommunications standards
### area has been Introduced In Directive 91/250 EC on the legal protection of computer programs to enable lnteroperable programs to be created by means of deriving and re-using lnf.ormatton from existing programs. A study

of a computer program In machine-readable form may not
### yield at I the Information reQuired In order to create an

lnteroperable program.

                                    - 13                                     
### Acts which would constitute technical violations of copyright rights such as reproducing or translating the program may need to be carried out. The Directive does not exclude the posslbl I lty that payment may be made to

the rlghtholder for such Information as a conseQuence of
negotiation between the rlghtholder and the person
reQuiring Information. The exception does not al tow for
### the copying of protectable expression. 3.5.4. As regards the specification for a standard which Is produced In text form, copyright rules wt I I apply to the express I on of the specIfIcatIon. ThIs does not prevent users of the specIfIcatIon from I np I ement I ng the specification. No part of the product or process which Is subject to lntel lectual property rights should be descrIbed In the specIfIcatIon, un I ess the r I ghtho I der has agreed to the use of his lntel tectual property rights In that standard.

3. 5. 5. Once authorIzatIon has been gIven by the owner of an
### I nte I I ectua I property rIght for the product or process covered by the right to be used as the basis of a

standard, authorIzatIon to descrIbe the standard In a
### technical specification must also have been given, either expl lcltly or lmpl lcltly.

3 . 5 . 6 . Owner s h I p of the copy r I g h t, I f any, I n the w r I t ten form
### of the specIfIcatIon w I I I depend on whether the specification has been provided by the owner of rights In

a de facto standard, or has been provided by a standards
### body fol towing agreement between the parties concerned as to the ownership of the authors' rights In the text. 3.5.7. If the specification of the standard Is drawn up with sufficient accuracy, lt should contain al 1 the Information necessary to ensure a satisfactory Implementation of the standard. lt should not therefore norma I I y be necessary to I ook beyond the specIfIcatIon for additional Information unless this can be done without violating the lntel lectual property rights In the

product or process so described.

                              - 14 

4.0. THE STANDARD-MAKING PROCESS

4.1. STANDARDS INCORPORATING NO PROTECTED MATERIAL

### 4.1.1. lt Is the case In most standardization work that either no lntel lectual property rights exist or are created, or that there Is express consent to free use of the lntel lectual property or waiver of any rights arising or acqu 1 red. 1 t Is a I so poss I b I e that I nte I I ectua I property rights arise but are owned and exercised Jointly by al I

members of the grouping, or according to contractual
### arrangements between the parties. 4.1.2. In these Instances the question of the existence, ownership and exercise of lntel lectual property rights Is normally resolved ab Initio, and no further problems should arise. lt should be stressed that, wherever possible, standards should be devised which avoid taking over proprIetary techno I ogy on wh I eh I nte I I ectua I property rights already exist.

4.2. 'DE FACTO' STANDARDS

### 4.2.1. The opposite situation exists where the product or process developed by one manufacturer becomes, by virtue of Its success on the market, the de facto standard. For examp I e, In the vIdeo cassette/recorder fIe Id, the overwhelming success of the VHS .. standard .. Is a well- known case. In these situations the products or process w I I I a I most certaIn I y embody I nte I I ectua I property rights. 4.2.2. These rights may have been known to others In the Industry If patents are Involved since patent app I teat Ions are a matter of public record once the 18
## months period from first fl ling date Is up, at least as
### far as the CommunIty Is concerned, and It Is un I I ke I y that a de facto standardIzatIon can have occurred In a

period less than 18 monthsi
The manufacturer may even have cone I uded I I cences w 1 th
### third parties In respect of those rights to permit manufacture In certain markets. 4.2.3. If copyright Is Involved the situation Is more ambiguous, as far as those countries are concerned which Impose no registration formal I ties on the copyright holder, as Is the case In al I the Member States. In these circumstances copyright may exist and expire at the end of Its due term without Its val ldlty ever being tested.

                                    - 15                                    
### 4. 2. 4. Never the 1 ess 1 t shou Id a I ways be poss f·b I e for the potent 1 a 1 owner of a copyrIght to IdentIfy the subject

. matter over w h 1 c h he I n ten ciis. to c I a I m a p r I or         - r 1-g ht . A
### -~resumption of ownership wl I I thus be created which will be rebuttable If he Is found not to be the owner or If the subject matter Is held not to be protectable. 4.2.5. If the owner of the lntel lectual property right Is made aware that a standard~maklng body wl·shes to base a standard on his technology, he Is put on notice that a violation of his lntel lectual property rights might

occur.

### 4.2.6. lt Is therefore of relevance to any subseQuent negotiations or I ltlgatlon to establIsh by what means the rlghtholder could be expected to know that a violation of his rights might be proposed. In the ev.ent that the rlghtholder participates himself In the standard making body lt may be assumed that he receives constructive notice by the announcement that a standard Is due to be establ lshed using the technology In

question. In other words, an announcement by the
### standards body must create a presumption that the r 1 ghtho I der has been put on notIce as to the potent I a I use of his rights. 4.2.7. However where the de facto standard concerns a technology created by a manufacturer not belonging to the standards body, the manufacturer cannot be said to be presumptively put on notIce. ThIs sItuatIon w I I I be dea It wIth In

paragraph 4.6 below.

### 4.2.8. Adoption of official standards based on de facto standard solutions has many advantages. De facto standards are by their nature wel 1-trled and tested solutions, stable and technically satisfactory. They have market acceptance and are probably wel 1-documented. 4.2.9. Therefore In spite of the difficulties which the existence of proprietary lntel lectual property rights could potentially create, lt Is unavoidable that de facto

standards w I I I present themse Ives In many Instances as
natural candidates for adaptation Into recognized
standards.

### No cases have been drawn to the attention of the Commission as yet where the owner of lntel lectual property rIghts In a techno I ogy refused to I I cence hIs rights to enable an already agreed standard to be

subsequently Implemented.

                                    - 16                                     
### 4.2.10. Particular attention has to be paid however to the procedures by which this process occurs In order to ensure that the Interests of rlghtholders and standards users are respected. These procedures are dealt with In the fol towing sections.

4.3. STANDARDS CREATED TO INCLUDE AN IPR AGREEMENT AND
REFUSAL TO LICENCE.

### 4.3.1. If there are proprietary lntel lectual property rights

under 1 y 1 ng the techno I ogy on wh I eh a standard Is to be
### based and that fact Is known to the standard makers, then

the agreement of the r I ghtho I der must be sought If the
### work on the standard Is to continue. lt Is obvious that such an agreement should be sought at the earl lest possible opportunity so that, In the event of a refusal to I I cence, a I ternat I ve so I ut Ions may be exp I ored. A

tlme-1 lmlt within which permission must be given or
### refused can a I so assIst In speedIng up the standard
making process.

### 4. 3. 2. Once the I I m It has passed and no agreement has been reached between the parties as to the use of an lntel lectual property right, work on that solution must be ha I ted and an a I ternat I ve techno I ogy cons 1 dered. 1 t

would be Inadvisable for a standard-making body to
### contInue work on a standard If perm I ss I on has not been sought or has not been granted In respect of lntel tectuat property rights. 4.3.3. If agreement Is reached between the rlghtholder and the

standard-making body, the terms for I lcences must be
### faIr, reasonab I e and non-dIscrImInatory. 1 t Is not feasible or appropriate to be more specific as to what constitutes "fairness" or "reasonableness" since these are subjectIve factors determIned by the circumstances surrounding the negotiation. If the rlghtholder Is to be satisfied that his Investment In research and development

can be adequately recovered, he would expect the royalty
### rate to relate In some way to the normal freely- negotiated commercial rate, at towing for the greatly Increased market for his technology which standardization

w I I I brIng.

### 4.3.4. The terms which the rlghtholder offers for the use of his rights should be flexible enough to Include the posslbl I lty, If the parties so agree, of cross-1 lcenslng arrangements. Cases of disputes arising In relation to the terms and conditions offered by the rlghtholder could be resolved If necessary by arbitration.

                             - 17 
### In the event of an appeal against an arbitration decision both parties may have recourse to the use of Article 86

EC.

### 4.3.5. The freedom of the rlghtholder to refuse to I lcence Is, at the present time, absolute, since his exclusive Intellectual property rights cannot be $Ubject to

expropriation or compulsory I lcenslng except In
exceptional circumstances such as reasons of national
### security or over-riding publ le Interest. 4.3.6. However a refusal to I lcence by the rlghtholder lmpl les as a consequence that an alternative technical solution

w 1 1 1 probab I y be adopted and w I I I then cha I I enge the
### rlghtholder's potential or de facto dominance In the market. 1 t Is norma I I y therefore not In the rlghtholder's Interest to decl lne to I lcence his patent or his copyright unless the terms offered by the potential users fal 1 wel I short of his commercial

expectations.

### 4.3.7. This factor has to be borne In mind In relationship to the 11 fa 1 r ne ss 11 or 11 reasonab I eness" of the remuneratIon

### the 11 fa 1 r ne ss 11 or 11 reasonab I eness" of the remuneratIon

which the rlghtholder seeks to obtain and balanced
### against the enhanced market opportunities which standardization on his technology might bring.

### 11 fa 1 r ne ss

11 or

### 4.4. LATE OR NON-DISCLOSURE OF RIGHTS 4.4.1. A potential source of difficulties can be Identified where proprietary rights are not disclosed at al I or are d I se I osed I ate In the standard-makIng process. 1 n

theory, an I PR ho I der {havIng been put on notIce by a
### standard-making body that his rights were potentially to be used In the creation of a standard,) would be acting In bad faith If he claimed those rights only once the standard had been adopted, thereby forcing competitors to agree to I lcence royalties higher than those which might have been offered at an earlier stage, or blocking the

Implementation of the standard completely.

### 4.4.2. As has been Indicated In paragraph 4.2.9. above, no such event has yet been notified to the Commission. However,

bad fa 1 th cou 1 d eas 1 I y be demonstrated where a
### presumption of knowledge on the part of the rlghtholder can be establ lshed.

                                     - 18                                      
### lt Is therefore for standards-making bodies to establIsh procedures whereby late disclosure or non-disclosure of rights Is penal lzed once actual or presumed knowledge can be establIshed. The degree to which late disclosure

Inconveniences the standard-making body can be regulated
### by means of the ttme-tlmtt Imposed on rtghtholders to declare an Interest once a standard has been a~nounced. 4.4.3. If there are del lberate acts of bad faith on the part of

the rlghtholder a court might take these Into
consideration In evaluating the extent of any damages for
### copyright or patent violation under civil or criminal

law.

4.5. LIABILITY FOR NON-DISCLOSURE

### 4.5.1. The question arises as to the extent to which the

rlghtholder can and should be held I table for a fal lure
### to d I se I ose an Interest. If pub I I cat I on of future standard-makIng actIvItIes takes pI ace In an effIcIent

manner, the responsab I I I ty for conductIng a search of
### patents and copyrights held by a manufacturer taking part In the standard-making process must rest with that manufacturer. The rlghtholder may be unaware of the fact that he Is In possession of a patent In a given area, or that the subject matter In question might be covered by a copyrIght. The task of IdentIfyIng re I evant rIghts w I I I

of course be more onerous for manufacturers with
### substantial IPR portfolIos and this factor should be

taken Into consideration by the standard-making body,
### perhaps by allocating a longer tlme-1 lmlt for the Identification of rights by manufacturers who can

demonstrate the magnitude of the search procedure to be
### carried out In their particular case.

4. 5. 2. If on the other hand, the standard-makIng body accepts
the responsab I I I ty for conductIng a search of poss 1 b 1 e
### patents In a gIven area, then the I I ab 1 1 1 ty for disclosure must no longer rest with the Individual

r I ghtho I der, a I one. He can no I onger be automat I ea I I y
### presumed to have acted In bad faith by fal 1 lng to disclose his rights.

                                     - 19                                     

4.6. IDENTIFICATION OF RIGHT HOLDERS

### 4.6.1. If a standard-making body bases Its work on a technical

solution which Is not the property of any of those
### participating In Its work, and makes no effort to

1 dent 1 fy and obtaIn authorIzatIon from the proprIetary
### rights holder, then the normal appl lcatlon of lntel lectual property law lmpl les that an Infringement of rights has occurred If no reasonable effort has been made to trace the rlghtholder. Seeking authorization ex post facto will not legitimize the Infringement of rights. Therefore the standard-making body has to ensure that al I reasonable efforts have been made to Identify rights and

to negotiate with the rlghtholder before the subject
### matter of the rIghts Is Incorporated Into the standard even If this means that searches have to be carried out as to the existence of patents.

4. 6. 2. Cuts 1 de the standard-makIng envIronment, a manufacturer
### wishing to launch a new product should ensure that In so doing he wl I I not violate existing patents or copyrights.

The standard making body has a duty to take al I
reasonable precautions to the same end.

4.7. AVAILABILITY OF LICENCES

### 4.7.1. A further question which standard-making bodies must address Is the extent to which proprietary rights should be I lcensed for use. The normal practice Is for standard
makIng bodIes to make standards ava I I ab I e to a 1 I users
### regard I ess of whether they take part In the standard
making process. Terms and conditions appl led to
### participants and non-participants should not significantly discriminate against the latter. A fortiori where the standard-makIng body acts In an off 1 c 1 a 1 or quasi-official standard-making capacity and where Its

standards are recognIzed and even made compu 1 sory by
### virtue of legislation, access to the standard must be

aval lable to al I without a pre-condition of membership of
### any organization. Slml larly, any treatment of non-members

wh I eh wou Id Impose f I nanc I a I or other burdens on them
### which act as a direct Incentive to become a member of a

standard-making organization should be avoided. Different
### conditions might be appl led to different users In re I at I on to theIr contrIbutIons to the standard-mak 1 ng process and the benefits and disadvantages which the parties can demonstrate with regard to their particular

circumstances.

### 4.7.2. The rlghtholder must In all cases retain the Initial right to grant or refuse I lcences on whatever exclusivity or territorial basis he wishes, subJect to the
## appl lcatlon of Articles 30- 36, 59, 66 and 85, 86 of the

Treaty.

                                 - 20                                 

If membership of an Industrial grouping or of a standardmaking body Is conditional upon agreement to a
### recIprocIty arrangement between members and non-members lt Is for the rlghtholder to decide whether those arrangements are accept ab I e to hI m beforp, JoInIng the

grouping or standards body.

### 4.7.3. lt should be borne In mind by Industry groupings and standards bodIes that I nte I I ectua I property rIghts are exclusive rights which are usually exercised territorial ly. A rlghtholder can choose whom he I lcences to reproduce, publIsh, manufacture or distribute copies

of hIs work and may grant exc I us I ve I I cences for one
### specific market, the Member States of the Community being

understood, of course, for such purposes as one sIng I e
market. The Community has taken, within the GATT Uruguay
### Round negotiations, a strong I I ne against the International exhaustion of lntel lectual property rights. lt has to be recognized at the same time that the

standard-making process ental Is an acceptance by the
### rlghtholder of the fact that he Is no longer acting In a totally free and geographically limited market once he has agreed to gIve I I cences as of rIght on faIr and

reasonab I e condItIons to a I I users of a standar-d. The
### International obl lgatlons of the Community In this respect are dealt with In section 5.0 below. 4.8. INDUSTRY SPECIFIC SOLUTIONS 4. 8. 1. It may be the case that In certaIn I ndustr 1 es the use of techn I ea I standards Is more deve 1 oped than 1 n others. The reasons may be historic, for example the Initial overwhe I m I ng success wor I dw I de of a part 1 cu 1 ar product, makIng It attractIve for other manufacturers to adopt slml lar solutions. The reasons may also be purely techn I ea I, for examp I e the need to ensure compat 1 b 1 1 1 ty of International air traffic control and landing guidance systems. They may also be commercial, for example pressure from consumers for hl-fl products of different

manufacturers to be combined Into "sound systems".

### 4.8.2. As a general rule, the more mature a market, the greater the I lkel lhood that non-proprietary standard solutions will be adopted, at least as far as Interfaces between products of different manufacturers are concerned.

Mature markets may I ead to a correspond 1 ng decrease 1 n
### the market dominance of the de facto standard since the

ear I y market I ead of a sIng I e manufacturer may we 1 1 be
overtaken by competItors of fer I ng sI m I 1 ar but Improved
product ranges.

                             - 21                             
### 1 t 1 s a 1 so often the case that manufacturers of establIshed product types prefer to concentrate on Improvements to qual lty or refinements of style or performance, leaving the standardized aspects of the

product unchanged.

### 4.8.3. The so-called 'black box' standardization described In 2.1.2. above, (which Is I lmlted to ensuring compatlbl I lty at the po 1 nts of connect I on) and wh I eh can be observed for example In the case of consumer electronics, has many benefIts to consumers and manufacturers. It mu It I pI I es

choices aval table on the market but makes few demands on
### the 1 nte 1 1 ectua 1 property rIghts of these manufacturers

already occupying a place In the market.

### 4. 8. 4. 1 n the other areas of standardIzatIon, the process Is driven not by reasons of lnteroperabl I lty or market acceptance, but by reasons of qual lty, safety or conformity to certain technical norms. In these Instances a result to be achieved has to be determined, but a variety of technical means to achieve that result may stl I I be aval table. 4. 8. 5. 1 nte 1 1 ectua I property rIghts may therefore be I ess In confl let with the obJectives of standardization In these circumstances, since the standard Is I lkely to be based on results rather than methods. As a general principle, and for the reasons set out above, standardization based on results to be achieved rather than on a specific design or process technology, Is to be preferred. 4.8.6. In the telecommunications area an argument has been made by some that the advances In technology are so rapid and the degree of Involvement of lntel lectual property rights so great that existing ISO/IEC rules are Inadequate. This Is felt to be especially the case In telecommunications where exact specifications must be respected If publ le networks are to function In an lnteroperable and efficient manner. 4.8.7. lt Is not possible to say that In any specific Industry, be lt pressure vessels, mechanical engineering, aerospace engIneerIng, or te I ecommun I catIons, standardIzation and lntel lectual property rights co-exist with greater or lesser difficulty. Examples may be found, within one and the same Industry, of standardization carried out for a variety of historic, technical, commercial and safety reasons. As a market for a particular product or process

evo Ives, the motIves wh I eh I ead to standardIzatIon may
### also evolve.

                             - 22                             
### 4.8.8. The Importance of the role of governments In determining the precise rules which affect the running of standards
making bodies should be noted. Governments have a
### number of roles to play In this area In that they are the procuring entity and the user of standards, the authority responsible for setting the boundaries for standard- making activities and at the same time encouraging research and development In both the private and publ le

secto~s, and the regulator of competition polIcy.
### ·Therefore the Involvement of the legislator In the

standard-making process and In the mandating of standards
### In specific areas becomes a tool of Industry polIcy. 4.8.9. If a standard to which reference Is made In a legally binding Instrument, such as a Community Directive, Is not specific but Is rather a general reference to unspecified standards In a given field such as those referred to In Article 13 of Directive 90/531/EEc<S>, then Questions may arise as to the role of the private standard making bodies. If this Is the case, a fortiori, lt strengthens the need for uniform rules to apply to standard-making In those areas where legally binding Instruments are I lkely to make reference to such standards or In areas where the use of certain standards made by such Quasi- private or private bodies wl I 1 be mandatory. 4.8.10. lt also re-Inforces the underlying principle that the r I ghtho I der must remaIn, at a I I stages of the process, free to contract with the user of his lntel lectual property rights, since a standard-making body which assumed the role of administrator of such rights on behalf of Its membership In an area where use of standards became mandatory through I eg 1 s 1 at 1 ve act 1 on, wou Id de facto acQuIre a monopo I y power In re 1 at 1 on to

those manufacturers and users who remaIned outs 1 de the
standard-making body.

### 4.8.11. In the view of the Commission, no particular Industries should be singled out as reQuiring specific solutions. Such a polIcy, even If effective In the short term, could not guarantee an appropriate solution In the 'ong term when the Imperatives which drive the move~ towards standardization In that particular Industry ~ay have

changed.

### (6) Article 13 (2) : The technical specifications shall be defIned by reference to European spec If 1 cat 1 ons where these exist. Article 13 (3) In the absence of European specifications, the technical specifications should as far as possible be defined by references to other

standards having currency within the Community.

                                - 23                                 
## 4 . a . 1 2 . 1 f spec 1 a 1 r u I es for the eo- ex I s t e nee of I n t e I I ec tu a I
### property rights and standardization were developed on an Industry specific basis, any resulting lessening of 1 nte 1 I ectua I property rIghts cou Id I ead to a shIft 1 n production by manufacturers away from that Industry, and could disadvantage, rather than stimulate, European

production.

                             - 24                             
### 5.0. OTHER POLICY CONSIDERATIONS 5.1. COMPETITION

5. 1. 1. An Important consIderatIon In the successfu I management
### of standardization Involving lntel lectual property rights must also be the appl lcatlon of the competition rules of the Treaty and spec If I ea I I y the app I I cat I on of Art I c I es 85 and 86. The Issues which arise may be divided Into two categories those which relate to the constitution and

operatIon of the standard-makIng body under Art I c I e 86
### and those which relate to a refusal to grant I lcences to

use an I PR or to the of fer of terms and condItIons for
### such 1 lcences under Article 86. 5.1.2. Standards-making bodies must be mindful of the reQuIrements of Art I c I e 85 regardIng In part I cuI ar the f 1 xI ng of roya I ty rates or other tradIng condItIons In

respect of standards which they make avat lable, and,
### add It Iona I I y must avoId creatIng opportunItIes for exchange of competItIve I y sensItIve InformatIon or for restrictive practices relating to Quantities, prices, customer and territory sharing. 5.1.3. Restrictive agreements falling under Article 85(1) may nevertheless be exempted by the Commission under Article 85(3) where their benefits significantly outwefgh the

antlcompetltlve detrlments. Standard-making bodies may
### therefore seek to notIfy the CommIssIon of agreements which fal I within the ambit of Article 85 with a view to

negative clearance or an Individual exemption under
### Article 85(3). Benefits derived from an exempted agreement must not fa I I on I y on the partIes themse 1 ves but must also be shared by other market participants and

consumers.

### 5.1 .4. The exercise of an within Article 85(7)

I n t e I I ec t ua I

### property right fal Is

the "obJect, means or

### within Article 85(7) If such Is

conseQuence of an agreement"

### 5.1.5. Article 86 Is also of relevance, whether to the standard- makIng body I tse If together w 1 th 1 ts m"mbers as undertakings I lkely to be In a col lectlve dominant position within the common market or In a dominant position In their national markets or to the Individual

undertaking, member or non member, holding an
### lntel lectual property right.

( 7) ~~(Art.~~

cases
1183).

222 case 24/67 Parke Davls [1968] E.C.R. 55;
15 + 16/74 Centrafarm 55 [1774] E.C.R. 1147,

                             - 25                              

5. 1. 6. Abuse of a domInant posIt I on by a standard-makIng body
### and Its members could manifest Itself by the activities of Imposing unfair purchasing prices (I .e. royalty rates to rlghtholders) or sel I lng prices, (rates Including royalties for the use of standards) or other unfair trading conditions. Paragraphs (b)(c) and (d) of Article

86 m 1 ght a I so cover abuse of a domInant pos_l t I on by a
standard-making body.

### 5.1.7. The same test wl I I apply to the Individual undertaking, owner of an lntel lectual property right which the

standard-makIng body wIshes to use as the bas 1 s for a
### standard. However, whereas the definition of product

market and the establ lshment of dominance In the relevant
market are factors on which a considerable Jurisprudence
### now exists at Community level, there have been as yet no decision of the appl lcatlon of Article 86 In the standards field.

The fIndIng of domInance depends heav I I y on the
defInItIon of the re I evant product market. Obv 1 ous I y,
the narrower the relevant product market Is the greater
the I lkel I hood of dominance being establ lshed. The
### concept of the relevant product market Imp I les that there can be effective competition between the products which form part of It and thIs presupposes that there 1 s a suff lclent degree of Interchangeability between all products formIng part of the same market In so far as specific use of such products Is concerned. This must be assessed Inter a I I a In the I I ght of the structure of

demand and supply for each product and can lead to
### holding an undertaking dominant In the market for Its own

products.(8)

5.1 .8. The question Is the extent to which a refusal by a
rlghtholder to allow his technology to become the basis
for a standard wou Id be ant I compet 1 t 1 ve. 1 n order to
demonstrate abuse of a domInant posIt I on 1 t wou 1 d be
### necessary to establIsh that the relevant market was the technological solution In question and that the owner of rights In that technology occupied a position of dominance In relation to that market.

(8) Hugln/Commlsslon Judgment of 31 May 1979 In Case 22/78
(1979) ECR 1869; BBC/Commlsslon (Magi 1 I) Judgment of 10
### July 1991 In Case T-70/89 of the Court of First

Instance; HI lti/Commlsslon Judgment of 12 December 1991
### In Case T-30/89 of the Court of First Instance.

5. 1. 9

                      - 26                      
### If the criteria for establ ishlng relevant market and dominance were met the next step would be to evaluate the

be ha v 1 our of the r I g h t h o I de r I n re f us I n g to a I I ow h I s
### technology to become the basis for a standard.

5 . 1 . 1 o . u n t 1 1 r~ ow, the eo u r t of Just I c e has a I ways maIntaIned
### that a mere refusa I to I I cence an IPR, absent other 1 nstances of abusIve behavIour, w I I I not be act I onab I e under Article as(9). 1 nte I I ectua I property rIghts are by theIr nature exclusive property rights, and except In very I lmlted and specific circumstances, as laid down In national legislation or International conventions, do not have to be made aval lable to others by means of compulsory 1 lcences unless lt can be demonstrated that the exercise of the right Involves certain abusive conduct. 5.1.11. Therefore Article 86 cannot permit the expropriation of rights for the purposes of using the technology as the basis of a standard where no other circumstances establIsh abuse of a dominant position, and taking Into account particularly whether there are other viable

technologies aval table.

### The problem should therefore be addressed before the

technology on which to base the standard has been
### defInItIve I y se I ected. If the standard In Quest I on had

been adopted, Implemented, and made mandatory by a
CommunIty Instrument, refusa I to I I cence the techno 1 ogy
### necessary to use the standard would, a fortiori, create

d I f f I cu I t I es .

### 5.1.12. A main objective of Article 86 Is to ensure that dominant companIes do not create condItIons of trad 1 ng 1 n wh 1 eh
## they are able to stifle or el lmlnate competition.

### If no standard exists, the IPR holder cannot be dominant In respect of the standard. If competition exists on the

market for the product whose techno I ogy the standardmakers seek to use, the standard-maker Is mere 1 y
### prevented from exercising a particular choice as regards the solution which he wishes to adopt to a specific

problem.

(9) ~~Volvo:~~ Veng [1988] ECR Ground 8

                                   - 27                                    
### 5.1.13. The situation where the standard-maker Is not able to choose an alternative technology must be examined. The circumstances In which this Is the case wl I I be unusual.

Nevertheless, for technical or for financial reasons the
standard-maker could attempt to demonstrate the absolute
necess 1 ty of 1 1 cences beIng ava I I ab I e for the use of a
### particular technology. lt could also be cl~lmed that alternative technologies produced Inferior results. In the case of technical necessity, objective evaluation of

the scope of the patent In question should reveal whether
### the patent Is so broad as to render al I other substitute technologies not viable. lt Is relatively rare for a patent to cover such a broad Innovative area that a 1 ternat 1 ve means to achIeve the same resu It cannot be

found.

### 5.1.14. As to financial necessity, excessive pricing of Its

technology by the dominant company could be Indicative
### of abusive behaviour but this factor Is not of relevance In a case of mere refusal to I lcence. lt should be noted however that excessIve prIces a~ked for by a domInant

company could amount to a de facto refusal to I lcense.

### 5. 1. 15. 1 f 1 t were demonstrab I e that no other vI ab I e techno I ogy existed, lt would fal I to be resolved whether the standard-making body, or potential users of the standard, would be placed at a competitive disadvantage vls-6-vls the owner of the lntel lectual property right by the fact that no standard could be made In that area, or that the standard adopted was less efficient than the proprietary techno 1 ogy. A I though It cou Id be argued that consumers would benefit In the short term If lntel lectual property rights were compulsively I lcensed to serve as the basis

of standards, In the I ong-term, Investment In research
### and deve I opment In the standard I zed IndustrIa I sectors would dry up within the Community. Non-Community entitles with extensive research activities would be encouraged to keep theIr techno I ogy out of CommunIty markets, wh I I e low-cost manufacturing centres outside the Community would benefit from cheap I lcences to use Community

technology.

### 5.1.16. Therefore, any appl lcatlon of Article 86 In the field of publ le standardization must be balanced against the polIcy objective of maintaining the Community's strength

In research and development.

- 28 

5.2.

EXTERNAL RELATIONS ASPECTS

AVAILABILITY OF LICENCES

COUNTRIES

FOR PRODUCTS FROM THIRD

5.2.1. From a polIcy point of view the Community Is committed to
the widest possible geographical aval labl I lty.and use of
standards In the Interest of economies of scale and

enhanced International trade.

5.2.2. Under the Agreement on Technical Barriers to Trade (TBTA)
concluded under the auspices of the General Agreement on
Tariffs and Trade (~ATT) In 1979 th~ Community has
### accepted several obl lgatlons vis a vis the other parties

to the TBTA (practically al I Industrial lsed countries and
a number of developing countries) In relation to the
preparatIon, adopt I on and app I I cat I on of techn I ea I
regulations and standards.

The level of compulsion varies according to whether the
standard or technical regulation Is prepared, ado~ted or
appl led by a central government body (Art. 2 TBTA) or a
non-government body (Art. 4 TBTA).

5.2.3. Under Art.2 TBTA the Community has to ensure that
standards are not prepared, adopted or app I I ed wIth a
vIew to er eatIng obstac I es to I nternat Iona I trade and
### that products Imported from the territory of any party to

the TBTA shal I be accorded treatment no less favourable
than that accorded to like products of natlor"'al origin
and to I lke products originating In any other country.

Under Art.4 TBTA the Community, as regards st~~dards by
non-governmenta I bodIes, has to take such, -·asonab I e
measures as may be ava I I ab I e to achIeve the ot) ject 1 ves
pointed out In Art.2 TBTA.

5.2.4. Standards which are given a mandatory status by Community
legislation by requiring that contracting authorities In
publ le procurement Dlrectlves<10) refer to European
### standards must be aval lable to entitles In the Community at fair, reasonable and non-discriminatory terms.

5. 2. 5. Standards wh I eh provIde a presumptIon of conformIty to
the essent I a I requIrements of CommunIty _I_ New Approach _I_
### Dlrectlves<11) must be aval lable to entitles In the Community at fair, reasonable and non-discriminatory

terms.

(10) ~~Directives~~ 71/305/EEC [OJ N° L185 16.8.1979, p.5],
77/62/EEC [OJ N° L13, 15.1.1977], 90/531/EEC [OJ N°L
297, 29. 10. 1 990, p. 1 ]
(11) Directives 87/404/EEC [OJ N° L 220, 08.08.1987,p.48],
88/378/EEC [OJ N° L 187, 16.07.1988, p.1],
89/106/EEC [OJ N° L 40, 11.02.1989, p. 12], 89/336/EEC

[OJ N° L 139, 23.05.1989, p.19],
89/392/EEC [OJ N° L 183, 29.06.1989, p. 29], 89/689/EEC

[OJ N° L 399, 30.12.1989, p.18],
90/384/EEC [OJ N° L 189, 20.07. 1990, p. 1], 90/385/EEC

[OJ No L 189, 20.07.1990, p. 17],
90/396/EEC [OJ N° L 196, 26.07.1990, p.15], 91/263/EEC

[OJ N° L 128, 23.05.1991, p.1]

                                    - 29                                     
### 5.2.6. For the standards described In 5.2.4. and 5.2.5. above, national treatment (Art.2} requires that products originating In a Party to the TBTA be treated In the same

manner. If these standards contain lntel lectual property
### r 1 ghts, th 1 s means that the CommunIty must ensure that

the Importer from a country party to the TBTA can obtain

1 lcences from the IPR holder for lmportatlon,.marketlng,
### sa 1 e and use 1 n the CommunIty on faIr, reasonab I e and

non-discriminatory terms. For other standards the level
### of compulsion to reach this result Is limited to the

adoption of reasonable measures.

### From a polIcy point of view lt would be desirable to make sure If I I cences for I PRs wh I eh are requIred for manufacture for export to the Community are aval lable on fair, reasonable and non-discriminatory terms In order not to create obstacles to International trade. 5.2.7. This Issue does not raise any confl let with lntel lectual property rights Incorporated Into a standard provided that the holder of such rights has consented to their Inclusion. lt would become of direct relevance If the

r I ghtho I der subsequent I y refused to grant I I cences for
the manufacture of products In the Commun 1 ty or
### Importation of products originating In a TBTA signatory

country or If the existence of the rlghtholder was only
revealed once the standard had been made mandatory.

### 5.2.8. In both the above situations, a number of solutions exist. The standard could be withdrawn or modified. Alternatively In exceptional circumstances the Community Instrument Itself might have to be modified and the standard made non-mandatory. However, It Is essent I a 1

for standard-making bodies to recognize the need to
### Identify any lntel lectual property rights before adopting

a techn I ea I so I ut I on and for the r 1 ghtho 1 der to
understand and accept the terms and conditions under
### which his rights wl I I subsequently be I lcensed, both In

respect of manufacturing and Importation 1 lcences.

                                   - 30                                   

6.0. CONCLUSIONS

6.1. CODES OF PRACTICE _I_ GUIDELINES _I_ "UNDERTAKINGS"

### 6.1.1. If, In spite of the apparent lack of evidence of system at I c d I f f I c u I t I e s a r I s I n g at present I n the maJor 1 ty of standard-makIng bodIes, there are concerns that further codification of procedures for the treatment of I nte I I ectua I property rIghts In the standards field Is required, then consideration should be given to the nature of such codified procedures. 6.1.2. As stated In paragraph 5.2.5. above, the posslbl I lty that

a European standard may be made mandatory or gIven a
### particular status through Community legal Instruments

p 1 aces a burden of responsab I I I ty on the CommunIty and
### the standard-makIng body to ensure that democratIc and pro-competitive processes exist for the drafting of

standard.

6.1.3. Therefore, the standard-making process should remain
### voluntary and should respect existing national and Community legislation, and International obl lgatlons. If changes to Community legislation or obl lgatlons are

required In order to achieve the legitimate obJectives of
### standardIzatIon, such changes shou Id be effected by a I I

relevant means Including proposals to the Councl I by the
### Commission for legislative action. If existing provisions of the Treaty, or of Community legislation are to be given effect In the standard making area In ways wh I eh are dIfferent from the ef feet norma 1 I y g 1 ven 1 n other areas, such extensIons or InterpretatIons shou 1 d conveyed with the Industries concerned In a fully transparent manner.

6.1.4. As Indicated In paragraph 1.1.4, If standard-making
### bodIes choose to e I aborate codes of practIce or undertakIngs for sIgnature by partIcIpants In the standard making process, care should be taken to distinguish those private procedural obl lgatlons arising

from membership of a standard-making body and the
### obl Jgatlons under publ le law which the body or Its

members may Incur.

6. 1 • 5. The CommIssIon has examIned a number of the codes or
guldel lnes appl led by International and national
standards-makIng bodIes. GIven the vo I untary nature of
### the standard-makIng process, the common character 1st 1 cs of most such codes or guldel lnes are that they are non - bIndIng and remaIn genera I In theIr approach. However, at least one standard-making body has attempted to create a bIndIng and deta I I ed UndertakIng wh i eh sets out the

mechanisms for regulating the making of standards.

                                     - 31                                     
### 6.1.6. lt can be argued that the complexity of the relationship

between standard-making and exclusive lntel lectual
### property r 1 ghts reQuIres a set of ru I es wh I eh foresees al 1 possible eventual ltles. lt can eQually be argued that w 1 thout constra 1 nts on the membershIp of the standard- mak 1 ng body, the potent I a I I y conf I I et I ng Interests of those taking part In the process cannot be rec9ncl led.

6.1.7. On the other hand, proponents of the general and
voluntary approach favoured untl I now by most
### International standardization bodies argue that

unnecessary detal I In such guldel lnes renders the process
### more complex than lt need be, and argue that no evidence

of a need to depart from the voluntary approach has been
produced.

### 6.1.8. lt Is not for the Commission to favour one approach rather than another, providing the reQuirements set out In paragraph 6.2.1. below are met. To the extent that standards-makIng bodIes are prIvate and voluntary organisations, they are free, within the limits Imposed by Articles 85 and 86 of the Treaty, to organize their actlvltes In the way which seems to them to be most appropriate. However, In Imposing constraints

on members, standards bodies should take Into
consideration the need to encourage the voluntary
### contribution by Industry of Its best technology toward

the standard-making process. The Commission has
### therefore a preference for a system based on trIed and proven pr I ne I pIes, but wh I eh ba I ances In a transparent and eQuitable way the Interests of those concerned.

                                - 32                                 

6.2. GENERAL PRINCIPLES

### 6.2.1. The Commission suggests that rights and obl lgatlons arise

for both standards makers and lntel lectual property
### right holders. The principles on which standardization takes p 1 ace shou Id therefore recognIze that partnershIp

as fo 1 I ows :

### European standard-making bodies should ensure that:

1. al 1 persons wishing to use European standards must
be given access to those standards;

### 2. standards are ava I I ab I e for use on faIr,

reasonable and non-discriminatory terms,
### regardless of whether the users participate In the

work of the standard-making body or not, but
taking Into account the circumstances of the use;

### 3. users are able to use the above standards to

manufacture In conformIty wIth the standards 1 n
the CommunIty, and to Import Into the CommunIty
### goods legitimately manufactured In third countries

In conformity with the standards;

### 4. best efforts are made to Identify holders of any lntel lectual property rights
## -by conducting searches -by publ lcatlon of adequate Information and where
### appropriate by holding publ le enquiries, before adoptIng a standard, work on a part 1 cu 1 ar solution only continuing If al I known lntel lectual property rIghts can be I I censed for use 1 n the

standard;

### 5. faIr condItIons are provIded to the ho I ders of lntel lectual property rights, especially with

regard to the time I lmlts for Identifying IPRs and
### agreeIng to theIr use, and 1 n respect of arbitration mechanisms as to royalty rates; lntel lectual property right holders should: 6. use best efforts to Identify In a timely manner any IPR which they hold which Is relevant to a standard wh I eh Is beIng deve I oped and to conf 1 rm or refuse permission for Its Incorporation In that

standard promptly;

                             - 33                             
### 7. offer fair, reasonable and non-discriminatory

monetary or non-monetary terms for the I lcence to
use any IPR;

## a. regard agreement to the Incorporation of an IPR In

a standard as Irrevocable unless the exceptional
### circumstances Justify withdrawal of I l~ences once

the standard Is adopted.

### 6.3. COMMUNITY ACTION 6.3.1. The Commission may find Itself obl lged to consider whether Articles 30-36, 59, 66, 85 and 86 of the Treaty are appl lcable In certain cases. Arbitration procedures set up by standard bod 1 es, wh I I st usefu I In reso 1 vI ng dIsputes In certaIn areas, cannot be regarded as f I na I and binding upon all parties If questions arise which fall to be decided by application of provisions of the

Treaty.

### 6.3.2. As Indicated earl ler In this Communication, the Commission must ensure that where compl lance with a standard or part of a standard Is referred to In Community legislation, either as a mandatory requirement or as one which confers a particular status under CommunIty I aw, the contents of that standard are made aval lable to al I Interested parties on a fair, reasonable and non-discriminatory basis. This obl lgatlon derives

from both Community and International law.

### 6.3.3. Where the Commission has reason to bel leve that a standard or part of It Is not beIng made ava 1 I ab 1 e on these terms lt wl I I have to take steps to withhold or to

withdraw recognition under Community law of the standard.

This could be done In respect of Individual standards on
### an ad hoc basIs, for Instance, by the pub I I cat I on of notices In the Official Journal. However, If a European standardIzatIon body consIstent I y fa I I ed to ensure non-dIscrImInatory access to 1 ts standards, the status of the standardization body Itself

under Community law would have to be reviewed.