[A2k] IP-Watch: China Leads Developing Country Push For Balance In IP And Standards

[Thiru Balasubramaniam]

http://ip-watch.org/weblog/wp-trackback.php?p=3D599


24/4/2007
China Leads Developing Country Push For Balance In IP And Standards

posted by William New @ 3:37 pm

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By William New
BEIJING - China=92s rapid development can be seen everywhere in the
capital, where the skyline is perforated by construction cranes in all
directions. But China=92s vigorous effort to update structures does not
stop at its borders. China is one of several leading developing
countries that have become players the global economic stage and now
are demanding a balancing of global governance institutions.

Key developing countries such as China, Brazil, India and South Africa
are increasing their efforts to influence global standards-setting
proportionate to their rising economic might. But this effort may
require substantive changes to the existing structure, changes that
some say are already taking place.

A key focus is on the treatment of standards for technology and the
related intellectual property rights. Xiaozhun Yi, vice-minister of the
Chinese Ministry of Commerce, said at a conference last week that
standards and IP rights are critical for economies such as China=92s that
are basing their development on science and technology. But, he said,
an =93inappropriate convergence=94 between standards and IP rights has
=93caused problems.=94

=93Delayed or inadequate IPR [intellectual property rights] disclosure,
stringent IPR licensing conditions and expensive licensing fees run
counter to fair competition, hinder the promotion and application of
new technologies, obstruct the normal operation of international trade
and impede the harmonious development of global economy and society,=94
Xiaozhun said at an April 17-18 conference cosponsored by the commerce
ministry and other Chinese agencies, as well as Sun Microsystems.
=93Developing countries are the worst hit by such problems which
effectively hinders their greater participation in economic
globalization.=94

Chinese officials such as Xiaozhun say international standards bodies,
which are typically based in western developed countries, have begun to
recognise the imbalance in their policies that insufficiently reflect
the interests of developing countries. =93Standards bodies are mainly
controlled by developed countries,=94 he said. As a result, new standards
putting developing countries in an =93underprivileged position=94 have
=93become new obstacles to international trade.=94

Xiaozhun urged the World Trade Organization to take into account
changes made in the standards bodies. China has argued at the WTO since
2005 for changes to the WTO Agreement on Technical Barriers to Trade,
and officials at the conference vowed to continue the fight.

=93China holds that in order to ensure smooth implementation of the TBT
agreement, attention should be given on the one hand to the efficiency
and quality of setting international standards, and on the other hand
to the difficulties members face in adopting international standards,=94
he said.

A primary concern is that standards in the public interest can be
affected when it turns out that hidden underlying patents give
monopolistic licensing power to companies, usually in the developed
countries that own most of the world=92s patents. Xiaozhun suggested that
consortia, groups of industry experts and others assembled to
accomplish tasks such as a standards change, may use monopoly power to
push their interests in standard-setting. =93We cannot deny that an
international deviation effect arises,=94 he said.

In the speech, Xiaozhun stressed China=92s seriousness about further
increasing efforts to protect and enforce intellectual property rights,
even though =93IPR has created new barriers in the form of standards
which have harmed developing countries.=94

Manuel Lousada Soares, Brazil=92s deputy secretary for industrial
technology at the Ministry of Development, Industry and Foreign Trade,
did not fault companies for protecting their innovations or consortia
for promoting standards. He said the problem is when standards impact
public interest issues.

Soares said the TBT agreement states that a technical regulation should
be =93presumed not to create an unnecessary obstacle to international
trade.=94 He cited efforts by standards bodies to improve early
disclosure of patents in standards. Soares reiterated the concern about
hidden patents getting included in standards, and said standards can be
developed without the technical solutions protected by patents. Brazil
backs standards bodies=92 efforts to find ways enforce early disclosure,
and encourages more cooperative work on the issues, including at the
WTO, WIPO and the standards organisations, he said. This includes
better analysis of the issues as well as better definitions of terms,
he said.

China=92s Strategy for Standards

Ni Guangnan, a fellow at the Chinese Academy of Engineering, criticised
the standards status quo and laid out a strategy for China to gain
influence over standards. He said proprietary standards =93cause unfair
competition.=94

=93In the IT [information technology] field, some technologies or
products prevail and are thus accepted as de facto standards,=94 he said.
=93If these standards are not made open, their intellectual property
right will be owned by companies developing them and then become
proprietary standards, which will further prevent other rivals from
growth and contribute to the monopoly of the companies. For example,
Microsoft=92s Windows, Office and IE browser.=94

Proprietary standards have the negative impact of impeding fair
competition, imposing high costs on users, and are a security risk, he
said. Therefore, =93the adoption of open standards will be promoted,=94 he
said, because they generate fair competition, impose less burden on
users, and provide greater system security.

Ni said China, in order to help its companies which have been
struggling with the high royalty payments charged by patent-holders
whose technologies were accepted in standards, plans to a series of
actions. They will form their own patent pools, and will gain the
support of international standards development organisations, and will
participate in the drafting of standards favourable to China.
Government agencies will assist companies in responding to intellectual
property rights disputes.

Another plan is to back ex ante RAND terms, meaning disclosure of
intellectual property rights before the establishment of a standard,
and standards on a reasonable and non-discriminatory basis, which has
gained support of the US Justice Department. Also, China will support
open-source code in software =93because its use, copying, modification
and re-issuance don=92t require royalty,=94 he said. China also will
support open standards for critical areas, he said. De facto standards
for Microsoft=92s Office have been the dominant document format, which Ni
said =93has hindered fair competition and prevented manufacturers from
getting access to public and important information.=94

Richard Suttmeier, a political science professor at the University of
Oregon (US), suggested that the rise of =93fragmenting=94 free-trade
agreements might have implications for standardisation. He also said
the rise of large new economies voicing dissatisfaction raises the
question of how much existing economies are interested in reforming
organisations or replacing them with something else, as well as to what
extent it would be possible to raise coalitions to bring about change.

Zhang Naigen, law professor and director of the international law and
intellectual property study centers at Fudan University (China), said
the US and the European Union emphasized private rights of intellectual
property rights but that they differ on antitrust law. China is still
working on its antitrust law, he said.

Andrew Updegrove, an attorney at Gesmer Updegrove in Boston who
represents standards coalitions, said patent holders might be the =93new
colonialists=94 and said that those who can control standards can control
markets. He said a danger is if newly large economies who make their
own standards. He encouraged policymakers to seek standards that are in
the best interest of all.

Rishob Ghosh, senior researcher at the Maastricht (Netherlands) United
Nations University, cited examples of standards that became
institutionalised through heavey popular use even though better
technologies followed, such as keyboards.

Patrick Rata of the World Trade Organization trade and environment
division said the 2005 WTO report on trade showed the application of
standards can have beneficial and negative effects on trade. He said
the WTO TBT Agreement is flexible on the measures governments take, but
says they should not unnecessarily restrict trade. The agreement
contains encouragements to harmonise, and says standards should be
developed in a transparent and indiscriminate way. Rata also said it
would be up to China to decide whether to pursue its concerns about the
TBT and standards and to =93gauge the interest of other governments=94 in
changing the agreement. China brought it up again in March, he said.

US Officials Busy in China

A number of US officials have been busy in Beijing in recent weeks for
a variety of reasons. These include talks on innovation, intellectual
property rights and standards, with officials such as Mark Lewis, a US
standards expert. Last week, Mark Adams, soon to be the new USTR
official in Beijing, was in town with fellow USTR officials Tim
Stratford, assistant USTR for China Affairs, and Audrey Winter, his
deputy. Last week officials from the two governments met on the Joint
Commission on Commerce and Trade (on structural issues and trade
remedies), and this week a planning meeting was expected to held in
Beijing for the Strategic Economic Dialogue, an event led by Treasury
Secretary Henry Paulson in late May. The JCCT involves USTR and the US
Commerce Department together.

Audrey Winter, deputy assistant US trade representative on China
affairs, speaking on her own behalf, said in the United States, the
government generally leaves standards-setting to private organisations
as government might not know what is best for consumers or business.
China is considering its anti-monopoly law, and Winter said recent
legal cases and statements by US antitrust authorities have set
boundaries for action in the area in the US. International trade rules,
she said, are aimed at getting government out of the market.

Speaking at a separate 19 April conference at Beijing (Peking)
University, Mark Cohen, the US Patent and Trademark Office
representative in Beijing, highlighted the debate in China over whether
intellectual property rights are a private right, as in the west, or a
public right. He referred to Chinese government subsidies for domestic
patent applications and said treating IP rights as a private right
encourages =93robust=94 innovation, and would lead China to become =93a tru=
ly
innovative economy.=94 Cohen also downplayed the role of foreign firms in
the Chinese IP market as very small.

Also at the 19 April conference, Sun Microsystems Chief Standards
Officer Carl Cargill said a lack of research into how standards related
to information and communications technology are made makes it an
=93uncharted area=94 made up of side deals=94 consisting of =93whispers=94 =
and
=93hopes.=94 He said no one coordinates consortia and that there are more
than 500 standards organisations with few changes since the 1970s.
=93They never die,=94 he said.

Cargill also said that standards organisations are unwilling to take
full responsibility for identifying who owns the intellectual property
rights underneath standards, so the costs of standards are unknown but
there is no way to avoid the rights. If one doesn=92t pay for them, it=92s
illegal, if they don=92t use them they=92re out of the competition, and
nations that try to make their own standards as China did with mobile
standard WAPI are stopped, he said.

William New may be reached at info@ip-watch.ch.


---------------------------------
Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org