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Patents, Standardization, and the Internet

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Patents, Standardization, and the Internet A TALE OF TWO LAYERS: PATENTS, STANDARDIZATION, AND THE INTERNET † JORGE L. CONTRERAS ABSTRACT In recent years, high-profile lawsuits involving standards-essential patents (SEPs) have made headlines in the United States, Europe, and Asia, leading to a heated public debate regarding the role and impact of patents covering key interoperability standards. Enforcement agencies around the world have investigated and prosecuted alleged violations of competition law and private licensing commitments in connection with SEPs. Yet, while the debate has focused broadly on standardization and patents in the information and communications technology (ICT) sector, commentators have paid little attention to differences among technology layers within ICT. This Article uses both existing and new empirical data to show that patent filing and assertion activity is substantially lower for Internet- related standards than for standards relating to telecommunications and other computing technologies. It analyzes historical and social factors that may have contributed to this divergence focusing on the two princi- pal Internet standards bodies: the Internet Engineering Task Force (IETF) and the World Wide Web Consortium (W3C). It counters the dominant narrative that standards and SEPs are necessarily fraught with litigation and thereby necessitate radical systemic change. Instead, it shows that standards policies that de-emphasize patent monetization have led to lower levels of disputes and litigation. It concludes by placing re- cent discussions of patenting and standards within the broader context of openness in network technologies and urges both industry participants and policy makers to look to the success of Internet standardization in a patent-light environment when considering the adoption of new rules and policies. † Associate Professor, University of Utah S.J. Quinney College of Law and Senior Policy Fellow, American University Washington College of Law. The author thanks Scott Bradner and Wendy Seltzer for their helpful background discussions of IETF and W3C, respectively. The author serves as a legal advisor to IETF, but received no compensation from IETF relating to the prepara- tion of this Article. Support for the preparation of this Article was provided by the Centre for Inter- national Governance Innovation (CIGI) and the Royal Institute of International Affairs (Chatham House). An earlier version of this Article appeared as Jorge L. Contreras, Patents and Internet Standards (Glob. Comm’n on Internet Governance, Paper Series No. 29, Apr. 2016), https://www.cigionline.org/sites/default/files/gcig_no29_web.pdf. 853 Electronic copy available at: http://ssrn.com/abstract=2832538 854 DENVER LAW REVIEW [2016 TABLE OF CONTENTS I. INTRODUCTION .................................................................................. 854 A. Standards and Interoperability ................................................... 854 B. The Architecture of Internet Standardization ............................. 855 II. PATENTS AND STANDARDS .............................................................. 857 A. Standards-Essential Patents ........................................................ 857 B. Patent Concerns: The Debate over Hold-Up and Stacking ........ 858 C. SDO Patent Policies ................................................................... 859 III. SEP DISPUTES: IS THE INTERNET DIFFERENT? ............................... 861 A. Patent Acquisition and Standards ............................................... 861 B. SEP Litigation Today .................................................................. 862 C. Litigation Involving Internet Standards ...................................... 864 IV. WHAT THE INTERNET IS NOT (YET) ............................................... 865 V. THE INTERNET ENGINEERING TASK FORCE (IETF) ......................... 867 A. The Origins and Growth of IETF ................................................ 867 B. Patents at IETF ........................................................................... 869 1. Evolution of the IETF Patent Policy ...................................... 869 2. IETF’s Preference for RF ....................................................... 871 a. RF Policy Preferences ....................................................... 871 b. Working Group Deliberations ........................................... 872 c. Voluntary Licensing Disclosures ...................................... 873 IV. THE WORLDWIDE WEB CONSORTIUM (W3C) ................................ 874 A. The Origins of W3C .................................................................... 874 B. Patents and W3C ......................................................................... 875 1. The Increasing Relevance of Patents to the Web ................... 875 2. W3C’s Royalty-Free Patent Policy ........................................ 876 VII. CONCLUSION: THE LOGIC OF ROYALTY-FREE .............................. 879 APPENDIX 1 ........................................................................................... 882 We reject: kings, presidents and voting. We believe in: rough consensus and running code. Dave Clark, 19921 I. INTRODUCTION A. Standards and Interoperability Technical interoperability standards are sets of protocols and design parameters that enable products manufactured by different vendors to work together with minimal user intervention. These standards are em- bodied in nearly every electronic and technological device today. Broad- ly adopted interoperability standards can produce significant efficiency- 1. Dave Clark, Senior Research Scientist, Mass. Inst. Tech, A Cloudy Crystal Ball - Visions of the Future, Presentation at the Proceedings of the Twenty-Fourth Internet Engineering Task Force (July 16, 1992), in PROCEEDINGS OF THE TWENTY-FOURTH INTERNET ENGINEERING TASK FORCE 543, slide 19 (Megan Davies et al. eds., 1992), https://www.ietf.org/proceedings/24.pdf. Electronic copy available at: http://ssrn.com/abstract=2832538 2016] PATENTS, STANDARDIZATION, AND THE INTERNET 855 enhancing network effects and other benefits and are integral to the mod- ern technology infrastructure.2 Standards may be developed in a variety of settings. Some health, safety, and environmental standards are developed by governmental agencies. Most interoperability standards, however, are developed in the private sector. Individual firms may develop proprietary technologies that, through broad market adoption, become de facto standards (e.g., Adobe’s “portable document format” (PDF)). In several well-known cases competing firms have engaged in commercial “standards wars” to determine which of their proprietary formats will prevail in the market.3 Over the past two decades, however, most interoperability standards have been developed by groups of market participants that collaborate within voluntary associations known as standards-development organiza- tions (SDOs).4 The standards produced within these organizations are often referred to as “voluntary consensus standards,” as they are devel- oped through consensus-based collaborative processes, and there is no requirement that participants use the resulting standards. B. The Architecture of Internet Standardization Gartner Group estimates that more than six billion devices are con- nected to the Internet in 2016.5 The interconnection and communication of these devices is made possible by hundreds of different standards at many different technological layers. The TCP/IP (Transmission Control Protocol/Internet Protocol) data model provides an abstract representa- tion of the four functional layers of a computing or communications sys- tem and is frequently utilized to conceptualize the different technology layers that comprise the Internet.6 In Table 1 below, the four TCP/IP layers are shown with a set of exemplary standards as well as the SDOs responsible for these standards.7 2. See CARL SHAPIRO & HAL R. VARIAN, INFORMATION RULES: A STRATEGIC GUIDE TO THE NETWORK ECONOMY 186 (1999); see also Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 TEX. L. REV. 1991, 2025–29 (2007). 3. SHAPIRO & VARIAN, supra note 2, at 17 (describing well-known standards wars such as Betamax v. VHS). 4. The alternative term “standards-setting organization” (SSO) is also used in the literature. 5. Press Release, Gartner, Gartner Says 6.4 Billion Connected “Things” Will Be in Use in 2016, up 30 Percent from 2015 (Nov. 10, 2015), http://www.gartner.com/newsroom/id/3165317. 6. See, e.g., ANDREW G. BLANK, TCP/IP FOUNDATIONS 24 (2004). 7. Id. Table 3, of course, grossly oversimplifies the vast array of standards and SDOs in- volved in Internet technologies. In addition to the listed SDOs, at every layer there are numerous smaller consortia and industry collaborations that may compete or cooperate with the listed SDOs. 856 DENVER LAW REVIEW [2016 TABLE 1 INTERNET STANDARDIZATION “STACK” Layer Standards SDOs 4. Application XML (data exchange) W3C, OASIS HTTP, HTML (web) IETF, W3C IMAP, POP, MIME IETF (email) 3. Transport TCP, UDP IETF 2. Internet IPv4, IPv6, ICMP, IETF ARP 1. Network Ethernet, ISDN, DSL, IEEE Wi-Fi, X.25 ETSI 3G/4G As Table 1 illustrates, there are three distinct groups of SDOs in- volved in Internet standardization at different levels of the network archi- tecture.8 The first group focuses on Layer 1, which corresponds to physi- cal transmission and data link technologies.9 These include standards for both wired connections (e.g., Ethernet, DSL, and ISDN) as well as wire-
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