[A2k] TR : interoperability & technology standards - EU Speech by Kroes

[Anne-Catherine Lorrain]

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FYI

Anne-Catherine Lorrain
TransAtlantic Consumer Dialogue (TACD)
TACD Intellectual Property Expert
Avenue de Tervueren, 36 bte 4
1040 Bruxelles
Tel: +32 2 740 28 17
Mobile: +32 473 99 97 92
Cell (US): +1 (202) 390 6264



-------- Message d'origine--------
De: BEUC - news
Date: mar. 10/06/2008 12:50
=C0: BEUC - legal
Cc: BEUC - communications; BEUC - news; do
Objet : interoperability & technology standards - EU Speech by Kroes

*=09Being open about technology standards - Neelie Kroes outlines the merit=
s
Competition Commissioner Neelie Kroes staked out a new frontline in the deb=
ate about technology standards at a speech today in Brussels. Speaking at a=
n industry forum Kroes praised open standards, saying that standards are mo=
re important than ever and the foundation of interoperability. "Interoperab=
ility encourages competition on the merits between technologies from differ=
ent companies, and helps prevent lock-in... Choosing open standards is a ve=
ry smart business decision...". Kroes said that consumers do not have an in=
terest in the inclusion of proprietary technology in standards "when there =
are no clear and demonstrable benefits over non-proprietary alternatives". =
She said that the emergence of de facto standards in the marketplace throug=
h consumer choice often requires no regulatory intervention, except in case=
s where this power is exploited to lock in customers and exclude competitio=
n. Recognising the commercial pressures on standards bodies, Kroes offered =
her support to any standards body that wanted to improve their rules "to av=
oid being manipulated by narrow commercial interests". She underlined that =
standards bodies are normally entitled to seek ex ante disclosure of patent=
s and of maximum royalty rates for proprietary technologies. Kroes warned a=
gainst the long-term costs of technology lock-in and said the Commission ha=
d to be astute in its position as a purchaser. "Where open alternatives are=
 available, no citizen or company should be forced or encouraged to use a p=
articular company's technology to access government information." See SPEEC=
H/08/317



http://europa.eu/rapid/pressReleasesAction.do?reference=3DSPEECH/08/317&typ=
e=3DHTML&aged=3D0&language=3DEN&guiLanguage=3Den


SPEECH/08/317
Neelie Kroes

European Commissioner for Competition Policy




Being open about standards


OpenForum Europe - Breakfast seminar
Brussels, 10th June 2008
Ladies and Gentlemen,
Credible competition policy requires competition law enforcement. Cartel ca=
ses, merger cases, abuse of dominance cases.
But competition policy is not only about cases.
It is about putting in place the conditions for companies to deliver better=
 goods and services to consumers. So it must be informed by more than the i=
ndividual cases.
If markets are not delivering as they should, then I want to understand the=
 problems, and find solutions. That may mean enforcement, advocacy, or spec=
ific Commission or national government policy initiatives.
In technology markets, I think it means all three.
We all know that the Commission has found competition problems in at least =
some technology markets. The Commission has never before had to issue two p=
eriodic penalty payments in a competition case... And there are other cases=
 of alleged unlawful conduct pending.
As an enforcer, I act only where there is a proven breach of the competitio=
n rules. But as a policy maker I take the knowledge I gain as an enforcer, =
and apply that more generally. If the proposals I come up with are grounded=
 in the reality of markets, they will help to make markets work better, whe=
ther or not there is a breach of the competition rules in the particular ca=
se.
What does that mean in the technology sector? Standards are clearly more im=
portant than ever. They often facilitate economies of scale but their real =
impact on technology markets is with interoperability.
The development of electronic communications networks has seen a rise in th=
e importance of interoperability between equipment used, between services p=
rovided, and between data exchanged. Interoperability encourages competitio=
n on the merits between technologies from different companies, and helps pr=
event lock-in.
Standards are the foundation of interoperability.
Standards may, of course, be proprietary or non-proprietary. Much excellent=
 technical development has been driven by non-proprietary standards - the i=
nternet is awash with acronyms for non-proprietary standards: HTTP, HTML an=
d XML.
Many standards bodies express a preference for non-proprietary standards. N=
on-proprietary standards avoid the need for licence agreements and royaltie=
s. They avoid the need to ask permission if you want to use or develop the =
technology - follow-on innovation may be easier. They avoid subjecting the =
future development of the standard and the technology to the commercial int=
erests of the technology's originator.
Of course, proprietary technology development is vital to reward R&D invest=
ment and innovation that would otherwise not be made. The patent system is =
a tremendously effective mechanism to create incentives to innovate, and re=
ward successful innovation.
Proprietary technology is at the heart of Europe's success in second and th=
ird generation mobile technologies, for example. Intellectual property prot=
ection for technology will always be necessary to give just rewards for inv=
estment in R&D. There will always be an important place for proprietary tec=
hnology and formal proprietary standards.
Standards may also emerge, de facto, from markets: a particular operating s=
ystem for example, or a particular document format.
Standards emerging from the market can be a good thing if they emerge as a =
response to consumers' expressed preferences. But they may also be problema=
tic, having none of the safeguards of disclosure that standards bodies typi=
cally require.
The patent system, too, has some inherent safeguards:
*=09Disclosure: helps avoid unintentional infringements, and makes it easie=
r to innovate around the patent.
*=09In some exceptional circumstances, patent systems even provide for comp=
ulsory licensing.
*=09And of course, patents are limited in time.
However, it is now common to hear criticism of how the patent system is use=
d:
*=09There are so many patents, whose scope is sometimes less than crystal c=
lear, that it can be harder to know what patents read on a particular techn=
ology.
*=09There are also concerns that patents are now often used strategically a=
nd no longer primarily to protect innovation.
In addition, the growing importance of software means that copyright and, i=
n particular, trade secret protection is often just as important as patents=
, if not more so, in technology markets. But:
*=09Laws on copyright and trade secrets rightly do not require disclosure o=
f software source code before protection is granted.
*=09Trade secrets are not limited in time - and in effect, as far as techno=
logy is concerned, neither is copyright.
*=09And of course copyrights and trade secrets may not be technologically i=
nnovative.
Where interoperability information is protected as a trade secret, there ma=
y be a lot of truth in the saying that the information is valuable because =
it is secret, rather than being secret because it is valuable.
This raises the possibility of perpetual exclusion, based on technology whi=
ch is not even innovative.
Clearly we can do better.
Having worked in business for much of my life, in government for part of it=
, and now serving as the Commissioner for Competition, these considerations=
 draw me to a simple conclusion.
We need an approach to standards that is based:
*=09on evidence;
*=09on economics; and
*=09on experience.
It is simplistic to assume that because some intellectual property protecti=
on is good, that such protection should therefore be absolute in all circum=
stances.
It is simplistic to assume that because standardisation sometimes brings be=
nefits, more standardisation will bring more benefits.
It is simplistic to assume that if the best approach is sometimes to base a=
 standard on proprietary technology, then that is always the best approach.
And it is simplistic to assume that we can fix on a standard today, without=
 paying attention to the risk of being locked-in tomorrow.
So what does this mean in practice?
First, we should only standardise when there are demonstrable benefits, and=
 we should not rush to standardise on a particular technology too early.
Second, I fail to see the interest of customers in including proprietary te=
chnology in standards when there are no clear and demonstrable benefits ove=
r non-proprietary alternatives.
Third, standardisation agreements should be based on the merits of the tech=
nologies involved. Allowing companies to sit around a table and agree techn=
ical developments for their industry is not something that the competition =
rules would usually allow. So when it is allowed we have to look carefully =
at how it is done.
If voting in the standard-setting context is influenced less by the technic=
al merits of the technology but rather by side agreements, inducements, pac=
kage deals, reciprocal agreements, or commercial pressure ... then these ri=
sk falling foul of the competition rules.
In addition, if we are to include proprietary technology in a standard, the=
n ex ante disclosure may help those involved make a properly informed decis=
ion. Competition law should not stand in the way.
This will almost always entail ex ante disclosure of the existence of essen=
tial patents. And it may increasingly entail ex ante disclosure of maximum =
royalty rates. Both can increase the effectiveness of the standard setting =
process, lead to more competitive solutions and reduce the risk of later an=
titrust problems. Standards bodies could very often require disclosure with=
out fear of competition law intervention.
Standards bodies do important work in difficult circumstances. But like all=
 of us their rules need to keep pace with the changing commercial environme=
nt. If they need help in tightening up their rules to avoid being manipulat=
ed by narrow commercial interests, or to design the right ex ante rules, th=
en they have my support. My door is always open.
Fourth, if we extend intellectual property protection for technology, then =
we should only do so when it is justified under intellectual property princ=
iples, i.e. on the basis of evidence that such extension will lead to more =
innovations and will therefore promote consumer welfare.
Finally, if standards develop through customer preferences, most of the tim=
e, we should do nothing.
That stance may surprise you. But it is often wise to resist the impulse to=
 regulate. If the proprietary technology initially appears to harm consumer=
s more than it helps them, often the market will find a way out of the prob=
lem.
Of course, although I am a great believer in the market finding the right r=
esult, I am not na=EFve. Sometimes intervention will be necessary.
When a market develops in such a way that a particular proprietary technolo=
gy becomes a de facto standard, then the owner of that technology may have =
such power over the market that it can lock-in its customers and exclude it=
s competitors.
Where a technology owner exploits that power, then a competition authority =
or a regulator may need to intervene. It is far from an ideal situation, bu=
t that it is less than ideal does not absolve a competition authority of it=
s obligations to protect the competitive process and consumers.
In essence the competition authority has to recreate the conditions of comp=
etition that would have emerged from a properly carried out standardisation=
 process.
There seem to me to be two possibilities and, depending on the case, either=
 or both may be necessary.
First, the de facto standard could be subject to the same requirements as m=
ore formal standards:
*=09ensuring the disclosure of necessary information allowing interoperabil=
ity with the standard;
*=09ensuring that other market participants get some assurance that the inf=
ormation is complete and accurate, and providing them with some means of re=
dress if it is not;
*=09ensuring that the rates charged for such information are fair, and are =
based on the inherent value of the interoperability information (rather tha=
n the information's value as a gatekeeper).
In addition, where equivalent open standards exist, we could also consider =
requiring the dominant company to support those too.
Better, much better, than trying to sort out these problems, is preventing =
them from arising. And we all have a responsibility to ensure that this typ=
e of perpetual lock-in does not happen, and, where it does happen, we have =
a responsibility to minimise the damage.
Here I am not speaking of my role as the Competition Commissioner, but as a=
 purchaser of technology.
What can purchasers do? Quite a lot.
Look at Apple. Over the last couple of years there have been some calls to =
regulate Apple - in particular to ensure some interoperability between comp=
eting music stores and its iPod music players, and between competing music =
players and music from the iTunes store.
The issue arose because first, the music labels insisted that Apple used di=
gital rights management technology, and then second, Apple's iPod was a tre=
mendous success. But now the major labels have licensed other music stores =
to provide music in MP3 format, a format that can play on the iPod and on o=
ther players. So pressure from consumers, and possibly concern from the maj=
or labels about over-reliance on Apple, looks to have led to a timely marke=
t-based solution.
This is important. If consumers can avoid lock-in to a single vendor, by ex=
ercising influence through purchasing behaviour, they may be wise to do so.
As purchasers, we need to be smart when we buy technology. We need to be aw=
are of the long term costs of lock-in: you are often locked-in to subsequen=
t generations of that technology. There can also be spill-over effects wher=
e you get locked in to other products and services provided by that vendor.
That is just bad purchasing.
And that is why the Commission has committed that:
*=09for all future IT developments and procurement procedures, the Commissi=
on shall promote the use of products that support open, well-documented sta=
ndards. Interoperability is a critical issue for the Commission, and usage =
of well-established open standards is a key factor to achieve and endorse i=
t.
This policy, adopted last year, needs to be implemented with vigour.
There is much to learn from other public bodies such as Munich - and I am d=
elighted to have the Mayor of Munich here this morning to tell us about his=
 experience. But Munich is not alone: there is also the German Foreign Mini=
stry, and the French Gendarmerie. The Dutch Government and Parliament are a=
lso moving towards open standards.
The Commission must do its part. It must not rely on one vendor, it must no=
t accept closed standards, and it must refuse to become locked into a parti=
cular technology - jeopardizing maintenance of full control over the inform=
ation in its possession.
This view is born from a hard headed understanding of how markets work - it=
 is not a call for revolution, but for an intelligent and achievable evolut=
ion.
But there is more to this than ensuring our commercial decisions are taken =
in full knowledge of their long term effects. There is a democratic issue a=
s well.
When open alternatives are available, no citizen or company should be force=
d or encouraged to use a particular company's technology to access governme=
nt information.
No citizen or company should be forced or encouraged to choose a closed tec=
hnology over an open one, through a government having made that choice firs=
t.
These democratic principles are important. And an argument is particularly =
compelling when it is supported both by democratic principles and by sound =
economics.
I know a smart business decision when I see one - choosing open standards i=
s a very smart business decision indeed.