What Purposes do IPRs and Standards Serve?

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“IPRs and Standards serve different purposes: IPRs are destined for private exclusive use, Standards are intended for public, collective use”. Institute (ETSI) IPR Special Committee With the proliferation of network economy, a common design for the products or technology that can be used universally takes a front seat. Standardization does exactly the same. A standard can be defined as a set of technical specifications which seeks to provide a common design for a product or process[1]. Standards improve compatibility and quality of products and services in the market. In the economic market, the consumers prefer to choose a product that is compatible with other services, hence inter-operatability is the key for the interplay between various technologies and that is achieved through the help of standards. Standards influence almost every facet of our lives. Standards are pervasive[2]. We could exchange emails, talk over phones, use a socket plug etc all give an ample support to the "interface" standards, allowing compatibility between products made by different manufacturers. The requirement of standards is not state-of-the-art concept. Carl Shapiro gives an example of the benefits of standardization narrating a Baltimore incident: “during the great Baltimore fire of 1904, fire fighters called in from neighboring cities were unable to fight the blaze effectively because their hoses would not fit the Baltimore hydrants. The following year, national standards for fire hoses were adopted[3].From the government’s outlook, standardization is seen as an instrument that backs varied national public policies, such as public health policy, industry policy and trade policy. In reference to consumers, interoperability helps in better use of a product and gives various options to choose from that results in competition and hence, low prices. The need for developing the standards makes crucial for various firms to get together to develop and promote a standard and also to make products that are compatible with such standard. More often than not, these standards incorporate a technology that is covered by one or two patents. Thus standard setting organizations faced with a situation where companies claim to own proprietary rights over that standard[4]. This restricts the industry to adopt a standard without the permission from patent holder. Thus, if patent holders enforce their rights in such a way that hamper the widest use of standards, some antagonism between the two systems may arise. This is precisely the coverage of my paper. It is to be seen that common thread runs through patents and standards. If the best patented technology is used in standards for the widest use of public at reasonable cost, then they both serve certain common objectives insofar as they both encourage or support innovation as well as the diffusion of technology. However, all is not well between standards and patents. The use of patented technology in industry standards has drawn a meaningful attention. There is an inherent conflict between the two and it has become a contentious topic for the standard setting organizations, consumers and patent holders to now create a balance between the two. This particular tension comes to the surface when the technology used by the standard is covered by one or more patents. Indeed, on the one hand, the objective of a standard setting organization (SSO), which in many cases consists of companies interested in the development of the technology in question, is to establish standardized technology that can be used as widely as possible in the market. On the other hand, patent owners in the relevant area may have an interest in the adoption, in the standard, of their own patented technology in order to benefit, at a later stage, from royalties. This raises important questions for companies that own such protected technology, for individuals and companies involved in the standards-setting process as well as for all those enterprises which will then use or adopt the standard for their products or processes. Obviously, it would not be very productive to adopt a standard if an IPR holder can block the implementation of that standard by either refusing to grant a license or requiring such high royalties as to make it impossible for its dissemination. This is because patent holders have a bargaining chip to attract additional market-power during and after the process of standardization (through deceptive means or otherwise). Such market power can be used to charge unreasonable royalties for standards-essential patents from those who have implemented the standard in their products leading to lock-in[5]. The above perceived problem is important to be resolved and it is necessary to strike a proper balance between:
  • the rights of the patent owner (licensor) to enjoy the full benefits of the patent,
  • the rights of third parties (licensees) to make and sell standard-compliant products, as well as
  • the public interest not to lock users into specific technology platforms, while recognizing that in daily life society benefits enormously from the advanced technology that standards can bring.
In order to mitigate the risks posed by such conflict, Standards-setting bodies come up with their own patent policies that help in smooth and wide dissemination of technologies. SSO’s require the parties taking part in standard setting to disclose the information regarding relevant patents and patent applications and it compels its Members to resort to license their essential patents on reasonable and non-discriminatory (RAND) terms thus ensuring access to essential patents so that the standard is not blocked, but can be implemented in a commercially viable manner by all interested parties, including new entrants. However, there is growing concern in the market whether the standard-setting bodies’ IPR regimes can be potent enough to relieve that tension in the case of an unwilling – or indeed an unreasonable – licensor (or licensee). In any case, they cannot address the situation of patent owners who are not standard body members. This paper is thus an attempt to provide some insights on how patent is treated when standard is set, it illuminates upon the conflict between patent and standards and is centered on the following research questions:
  1. What is the conceptual relationship between standards and patents: complementary or conflict?
  2. How patent policies provided by SSO have failed to solve the dispute between patents and standards?
OBJECTIVE: The paper will provide an overview of the current debate between patent and standards and will bring out the nature of conflict between the two, examining the current SSO’s policies in resolving the conflict. RESEARCH METHODOLOGY: The researcher has examined various online sources to understand the conflict between patents and standards. The researcher has used the doctrinal method of research using various books, articles available in the Justice T.P.S. Chawla Law Library. Further, web based resources have also contributed to the project; including some law based databases and general search engines.
[1] See Herbert Hovenkamp, Mark D. Janis & Mark Lemley, IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law, (2003-04) at 35.1. [2] See Janice M. Mueller, Patent Misuse through the capture of Industry Standards, Berkeley Technology Law Journal, Vol. 17, p. 623, 2002, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1346546, last accessed on 8th January 2014. [3] Carl Shapiro, Setting Compatibility Standards: Cooperation or Collusion? Available at http://faculty.haas.berkeley.edu/shapiro/standards.pdf , last accessed on 8th January 2014. [4] Mark R. Patterson, in his article asserts that patented invention and standards are two different things. Patentee is not allowed to get revenues out of the interoperatability of standards. Patentee is allowed to get revenues only for the invention that is used in the standard, available at http://www.law.berkeley.edu/journals/btlj/articles/vol17/PATTERSON.pdf , last accessed on 8th January 2014. [5] Mark Lemley and Carl Shapiro (2007), discusses how a threat to an injunction enhances the patent holders negotiating power when the patented technology is used in standards leading to royalty stacking and patent hold up, available at http://faculty.haas.berkeley.edu/shapiro/stacking.pdf , last accessed on 8th January 2013.
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