Is there an inherent tension between the FRAND, as implemented by many Standard Setting Organizations, and the imperatives of Open Source software development? In one word, no.
Nothing precludes a firm that contributes technology to an open standard under FRAND rules from also committing to give that technology away for free. This might be done via a non-assertion covenant, or, at a few SSOs that have ex ante disclosure policies, by declaring the maximum royalty rate for implementers to be zero. Firms that fail to make that pledge forgo the opportunity to have their standardized technology implemented by the open source community.
The private costs of forgone open source implementation are not, however, the end of the story. There is increasing evidence that the open source community will work to create unencumbered standards for important technologies. Consider the looming standards battle over video codecs. Just as it seemed that H.264 would become the dominant format, the royalty-free VP8 codec entered the fray The VP8 codec is developed by the open-source WebM project, with support from firms like Google, Opera, Mozilla and Adobe.
The key policy issues here revolve around intellectual property rights, as opposed to standards development. All software developers and users face some risk of hold-up. That is, a patent-holder may show up and demand more for the rights to use a piece of technology (perhaps standardized) than anyone would have paid prior to implementation (perhaps in open source). Both SSOs and OSS provide ways to avoid the hold-up problem, but they are not perfect. And to the extent that either approach leads to widespread implementation, the incentives for hold-up only increase.
Better intellectual property policies could mitigate the hold-up problem by strengthening the patent review process, reducing pendency lags, providing for grater price-transparency in licensing and settlement, and clarifying the determination of “reasonable” royalty rates. All of these policies would help both SSOs and OSS developers, and perhaps also reduce the misleading appearance of a conflict between them.
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