Keith Mallinson’s blog in IP Finance 11 May 2011 notes:  However, in the vast majority of cases, the (F)RAND regime and bilateral licensing agreements have enabled the successful deployment and rapid growth of standards-based products and systems. Some notable examples of such successful deployments include the GSM (with four billion users) and WCDMA (with approximately one billion subscribers expected by yearend) wireless telecommunication networks. The flourishing market for mobile phones, which have transformed our business and daily lives, is evidence of the success of the economic incentives created by the IP system and the market-driven FRAND framework for licensing standards-essential IPR

Page 7 notes, “Care should be taken to ensure the right balance between protection of rights and access, i.e. to develop “fair regimes rewarding and incentivizing inventors and creators, whilst ensuring the circulation and dissemination of goods and services, the exercise of other fundamental rights and the promotion and preservation of cultural and linguistic diversity.”  In the standards world we use the term balance to denote the importance of including within the standards discussions the diversity of materially interested parties in the work. The term ‘balance’ is used differently in the Communication; but it is not clear what is meant. Does it suggest reform of the existing balance struck in the patent laws (or merely the copyright rules, as the Communication details further)? The patent laws relate, for good reason to ‘rewarding and incentivizing inventors and creators’. But they do not primarily relate to ‘circulation and dissemination’. If businesses invest now, under the belief that their innovations can be protected under the patent laws, to find that what they had understood to be the legal framework will be changed ex post, this will affect legal and commercial certainty.  The tone of the document, as relates to patents, is inconsistent with this issue of ‘balance’, which has already been struck by the patent laws (disclosure for protection & exclusive use). Nor should we ignore the reference to the balance taking into account the ‘exercise of other fundamental rights and the promotion and preservation of cultural and linguistic diversity’.

Finally, with respect to IP and Competition policy, the Communication states at page 4:  “Strong protection and enforcement of IPR should be accompanied by rigorous application of competition rules in order to prevent the abuse of IPR which can hamper innovation or exclude new entrants, and especially SMEs, from markets”.  But does not the legitimate exercise of IP rights allow for the exclusion of new entrants if the IP holder so wish? Exclusion from the market is precisely what IP does (when the market is defined as the market for the protected technology).  Does this statement mean that antitrust will be used to soften the legitimate exercise of IP rights? Does this sentence in the Communication suggest that EU competition rules will trump intellectual property protection and that competition law will be used to define what IPRs can be legitimately enjoyed? This would seem to be rather revolutionary.

]]> http://www.talkstandards.com/a-single-market-for-intellectual-property-rights-in-a-global-world-of-standards-and-competition-policies/feed/ 4 http://www.talkstandards.com/a-single-market-for-ipr-%e2%80%93-necessary-but-not-comprehensive-enough-to-boost-innovation-and-growth-in-europe/ http://www.talkstandards.com/a-single-market-for-ipr-%e2%80%93-necessary-but-not-comprehensive-enough-to-boost-innovation-and-growth-in-europe/#comments Tue, 07 Jun 2011 14:45:37 +0000 Knut Blind http://www.talkstandards.com/?p=7618 The Communication of the European Commission about a “Single Market for Intellectual Property Rights” provides a comprehensive approach of initiatives covering all relevant Intellectual Property Rights (IPRs).  All proposed initiatives are justified based on the current knowledge about the economic impacts of IPRs and other intangibles on companies’, but also economies’ competitiveness and growth. Furthermore, the current fragmentation of the markets for IPRs in Europe is certainly a disadvantage for European companies especially related to the United States of America, Japan and, meanwhile, also China. However, the approach is not comprehensive enough to boost innovation in Europe.

Innovation is the successful implementation of new products, processes and services in the market. And their wide diffusion is crucial for economic success. Consequently, the Communication references the “development of standards such as GSM and UMTS is a European success story based on diligent management of IPR … due to … Europe’s viable IPR system”.  The success of these cases is only partly due to Europe’s viable IPR system, but more based on the intelligent and strategic management of standardisation processes.  Despite referring to successful cases of European standardisation, the Communication does not contain any proposal to promote a further integration of the European standardisation system with the Single Market for Intellectual Property Rights. However, a recently conducted study by the Fraunhofer Institute of Open Communication Systems FOKUS reveals that US companies are much more successful in positioning their patents in international information and communication technology standards and Asian companies have meanwhile also achieved the technology capacity including the relevant IPRs  to set world standards  (see preliminary results under http://ec.europa.eu/enterprise/policies/european-standards/standardisation-policy/policy-activities/intellectual-property-rights/index_en.htm).

Nevertheless, the opportunity for mentioning already started collaborations between the European Patent Office and the European Telecommunication Standardisation Institute ETSI and for making further proposals to integrate the European Single Market for Intellectual Property Rights more effectively with the European Standardisation Organisations has been missed. And even more severely, the upcoming stronger competition from the well known competitors in the US and Japan and the new competitors from the emerging countries, like China and Korea, has been ignored. However, not only the link to the standardisation system has been disregarded, but also the relation between IPRs and open source, especially in the software area. In general, the dimension of the successful diffusion of innovative ideas into global knowledge markets needs to be emphasised much more – in addition to the licensing of IPRs, which is according to the OECD (2009) focusing on patents already well developed.

Finally, the strong focus of the Communication on the Single European Market for Intellectual Property Rights – despite mentioning the international dimension – is already obsolescent for more and more innovative companies being active in global markets trying to exploit the benefits of the new paradigm of open innovation.

Indeed IPRs, including patents, trademarks, design rights and copyrights, can serve as incentives for innovation and can help identify trusted producers. In this context, there is no doubt that the latest Strategy for European Intellectual Property Rights reflects the belief in the IP system as a power-hub for innovation in Europe.

Yet the success of this strategy does not only depend on the EU’s ability to effectively implement this strategy, not least with regard to the registration, protection and enforcement of IPRs in Europe.

In order for this strategy to be truly effective the EU should also consider how if can become more innovative in the first place!

In Putting knowledge into practice: A broad-based innovation strategy for the EU (2006), the European Commission acknowledged the dependence of Europe’s future on innovation. In doing so, it identified how tackling climate change, depleting national resources, sharp demographic changes and emerging security needs were all reliant on Europe’s ability to harness innovation.

Yet despite the ambitious goals that were set in the Lisbon Agenda and the Europe 2020 agenda, the EU is still lagging behind its main trading partners. Indeed several studies have shown that the Union’s competitive innovative edge is potentially waning. Comparative studies are showing that some emerging countries, particularly China, are beginning to close the innovation gap in respect to investment (though not in regards to patents), whilst it seems that no ground is being made by Europe on leading countries, such as the United States and Japan (in both investment and patents). There are also indications from European industry that the financial crisis could have a negative effect on investment on innovation which, considering the arguments laid out earlier, could undermine aspirations for an innovation-led recovery from the financial crisis.

To this extent, a far greater challenge than the implementation of an EU IP strategy is to create the potential and the basis to generate the knowledge assets that can be protected by IPRs in the first place. Without a stronger knowledge-based platform in Europe it is not really clear how significantly the new IP strategy would benefit the current European economy.

In other words, the new IP Strategy is a necessary but insufficient step to step up the level of the innovation in Europe, yet nevertheless it is a step in the right direction.

Meir Pugatch, Director of Research, Stockholm Network

This article is authored by George Willingmyre, President and founder of GTW Associates http://www.talkstandards.com/author/gtwassociates/

This forthcoming article is part of Talkstandards’ upcoming event “A New Strategy for European Intellectual Property Rights” and will be published Tuesday June 7th.

• GMT 15:00
• Europe: CET 17:00 / London 16:00
• US: Eastern 11:00 / Pacific 08:00
• Beijing 23:00
• Sydney 01:00 (7th June)

See here: http://www.talkstandards.com/a-new-strategy-for-european-intellectual-property-rights/

This article is authored by Knut Blind, TU Berlin, Chair of Innovation Economics; Fraunhofer FOKUS, Public Innovation; Rotterdam School of Management, Chair of Standardisation
http://www.talkstandards.com/author/k-blind/

This forthcoming article is part of Talkstandards’ upcoming event “A New Strategy for European Intellectual Property Rights” and will be published Tuesday June 7th.

• GMT 15:00
• Europe: CET 17:00 / London 16:00
• US: Eastern 11:00 / Pacific 08:00
• Beijing 23:00
• Sydney 01:00 (7th June)

See here: http://www.talkstandards.com/a-new-strategy-for-european-intellectual-property-rights/

This article is authored by Meir Pugatch, Director of Research, Stockholm Network
http://www.talkstandards.com/author/meir-pugatch/

This forthcoming article is part of Talkstandards’ upcoming event “A New Strategy for European Intellectual Property Rights” and will be published Tuesday June 7th.

• GMT 15:00
• Europe: CET 17:00 / London 16:00
• US: Eastern 11:00 / Pacific 08:00
• Beijing 23:00
• Sydney 01:00 (7th June)

See here: http://www.talkstandards.com/a-new-strategy-for-european-intellectual-property-rights/

With the same view, CEN and CENELEC believe that standardization has a major role to play in assisting to reach a well functioning Single Market. In the past European standardization has already contributed in essential ways to remove technical barriers for businesses, to promote the spread of new technologies and to foster innovation.

CEN and CENELEC will continue supporting the consolidation of the European single market as detailed through the 50 proposals of the Single Market Act. Our standards are adopted identically by the 31 member countries of CEN and CENELEC, withdrawing national conflicting standards and therefore ensuring one standard for Europe.

CEN and CENELEC also note that the fragmentation of the single market is a matter of concern for both the European Commission and the Council of the European Union, and that the latter, in its Conclusions on the Single Market Act, calls for careful examination of cross border problems arising in national technical regulations in non-harmonized areas. Special attention is given to services.

The role of standardization in the creation of an Internal Market for services has been recognized by the Directive on Services (2006/123). This Directive encourages the development of European standards in order to facilitate compatibility between services, information to the recipient and quality of service provision. The need for further standardization in this area is also one of the issues already mentioned in the EC Communication on Industrial Policy of October 2010 in relation to business related services.

Transparency and a level playing field are as important for services and processes as for products. Nevertheless, although standardization is increasingly being used in the field of services, the number of service standards is still very small in comparison with standards in the field of goods.

Nevertheless, CEN has already developed/is developing European standards in business-related services, such as: facility management, management and engineering consultancy or logistics. More can be consulted on our website.  This process is expected to accelerate in future, notably to avoid the creation of new barriers to trade in services through different approaches in different Member States.  The forthcoming EU Commission standards package will almost certainly ensure the same treatment of service standardization in the EU as applies currently to product standardization, including the obligation to notify new national standards activities to the Commission and CEN-CENELEC.

With regards the question of internationalization of services, in a globalized world, the need for international standards simply makes sense in many cases. The Vienna Agreement − signed by CEN in 1991 with ISO (International Organization for Standardization) its international counterpart − ensures technical cooperation by correspondence and through meetings, and where possible adoption of the same text, as both an ISO Standard and a European Standard.

On the international level, CENELEC has worked hand-in-hand with the IEC since the signature of the Dresden Agreement in 1996 (previously the Lugano Agreement since 1991). This agreement organizes CENELEC’s offer of standards issued in Europe to its international counterpart.

The engagement from CEN and CENELEC in such international dialogues has already been translated into open dialogue with key international partners and various cooperation arrangements with third-country organizations in different area of the world, such as Russia, Japan, Korea, China, US, the Gulf Cooperation Council and the members of the MERCOSUR.

John Ketchell

Due to the different modes of service trade, European standards for services do not only promote the traditional trade of services, but also the other forms like foreign direct investments in service companies. This removal of barriers will increase the competition in service markets. However, the full potential of service standards for the promotion of trade, competition and employment will only be exploited if a sufficient number of service standards are available.

So far only a very small share of the total stock of both European and national standards in the member states is focused on services. Obviously, the driving forces to produce service standards are not yet strong enough. A reason is certainly the heterogeneity of services necessary for the development of critical masses of common interest to develop standards might be lower compared to the manufacturing sector on the one hand. On the other hand, the share of small and medium, but also of micro enterprises is even larger in the service sectors, aggravating the resource and incentive problem of small entities related to the involvement in standardization. In addition, the “export” propensity of small, but also medium sized service companies is rather low, which limits the interest in European or international service standards.

However, the strong bias toward small and even micro enterprises in many service industries requires the strong involvement of their industry associations in standardization activities, because their direct involvement is in most cases impossible and ineffective despite the various supportive solutions offered by national standardization bodies and the European standardization organizations. Finally, the extension of the New Approach to services is also a chance for the European Union to harmonise the rather heterogeneous national regulatory frameworks relevant for service industries via harmonsied European standards.

Revision of the legislation on the European standardisation system is to extend it to services and make standardisation procedures more effective, efficient and inclusive. Standardisation is a primary tool for the free movement of goods whilst ensuring product interoperability, safety and quality. It is also increasingly used in the services sector, although mainly at national level. This can hinder the integration of the single market for services.

In order to avoid the emergence of new barriers and to facilitate the cross-border provision of services, particularly business-to-business services, such as logistics or facility management services, services standardisation should be developed at European level, taking full account of market needs. This will be a major objective of the review of the European standardization system. Another major objective will be to establish a more effective, efficient and inclusive system. It should be possible for the standardisation system to enable standards to be adopted rapidly and to be adapted to new technologies (not least in the area of information and communication technologies), to enable SMEs and other interested parties to become more extensively involved and to ensure that standards remain accessible to all interested users.

More generally, a Single Market in services which functions well is a prerequisite for generating growth and employment in Europe. Whereas the growth of the European economy was on average 2.1% per annum between 1998 and 2008, the services sector grew on average by 2.8% per annum. Employment in this sector increased by 2% per annum, compared with 1% for the economy as a whole.

To create a Single Market in services, the immediate priority is the full and complete implementation of the Services Directive in all Member States, including the establishment of Points of Single Contact. Beyond the implementation of the Directive, and in accordance with the European Council Conclusions of 24/25 March 2011, the Commission – together with the Member States – will carry out “performance checks” aimed at closer scrutiny of the practical functioning of the EU regulatory framework applicable to certain growth sectors such as business services, construction and tourism. It will carry out further assessments on reserved activities, requirements as regards capital ownership and legal form, and insurance obligations, all of which are persistent obstacles to better integration of the markets in services. On the basis of the outcome of these various initiatives, the Commission will decide in 2012 on the subsequent steps.

Particular attention should also be devoted to the retail and wholesale sectors on account of their important contribution to growth and job creation. An initiative will be launched to combat unfair business-to-business commercial practices, in order to identify the nature and scale of the problems associated with unfair commercial practices between professional operators throughout the supply chain, list current regulations within the Member States, to assess their implementation and, finally, identify the various possible options. The goal will be to put an end to unfair practices which jeopardise the viability of businesses and stimulate the competitiveness of the various operators in the supply chains in the context of a fairer and more effective single market in the retail and wholesale sectors, while at the same time meeting consumers’ and producers’ expectations with regard to competitive prices.

Given the importance of business services, the Commission will set up a High-Level Group to study the shortcomings of this particular market. Finally, and without prejudice to the recognition of qualifications, the question of how to safeguard the quality of education provided in the context of the freedom to provide services, given the increasing use of franchising in education, will need to be examined.

Nevertheless, that does not mean we should not try to build a better standards framework for Europe. And, indeed, it is important that the focus on completing the single market includes the digital agenda as a fully integrated component of the future. The knowledge economy is central to Europe’s ability to foster new growth and create new jobs, at a time when the struggling Eurozone needs more help than ever. Last week, a new piece of research from McKinsey examined the Internet economies of the G8 nations (Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States), as well as Brazil, China, India, South Korea, and Sweden. It found that the internet now accounts for a significant and growing portion of global GDP. And of course, added to this we have other growing markets such as telecommunications, entertainments and so on.

We need a flexible and fully functioning market for digital services as much as we do for goods and, if we want Europe to improve its competitiveness, we also need standards which work globally as well as simply being designed to be compatible for European systems.

In short, the future for standards is not standard. It must be designed to be as adaptable and flexible as possible, to keep pace with our ever changing world and to make sure that consumers can benefit from the many exciting new products and services which have not yet even been invented.

The overall goals can be summarised as:

1) Free movement of Goods: Product interoperability, safety, quality

2) Services: inclusive services, ensuring growth

3) Standards – accessible, inclusion of SMEs

But behind these overarching goals, there are deeper issues.

Next month, I am at the Digital agenda summit in the workshop on standards and there are two sessions of interest:

Action 23 how can public authorities ensure that best use is made of existing standards in public procurement in order to avoid lock-in into proprietary technology and enhance interoperability:

This relates to the issue of varying specifications for tenders on public procurement. i.e. from the outline of the panel – Public authorities should make the best use of available standards when commissioning hardware, software and IT services from external suppliers. Yet, the practices of public authorities across the EU vary greatly when it comes to writing tender specifications for public procurement. In some cases, public authorities find themselves unintentionally locked into particular IT solutions for decades, simply because they failed to draft sufficiently flexible tender specifications allowing for open choices in technological evolution. And

Action 25 how to boost interoperability (and innovation) in the absence of formal standards, e.g. through the licensing of interoperability information:

Companies which dominate the ICT sector achieve wide market penetration of their products and services. If their products are incompatible with those of other brands, users feel locked into the dominant company’s product range, for fear that any new devices they purchase will not be compatible with their existing equipment.

Re Action 25, the discussion goes further that: Companies should provide interoperability information about their devices and applications. With this information available, smaller enterprises have the opportunity to develop applications and services compatible with those offered by dominant market players. The end result will be an extremely competitive market and a happy consumer.

Thus, behind the single market goals, we have a more complex set of issues and I would like to debate these on talkstandards. I was trying to think of a parallel, ie any other instance when similar initiatives were undertaken – but I cannot! Would be interesting to see what views we capture at talkstandards.