Thursday, February 9, 2012

Google tells European Commission on 'open standards': do as I say, not as I do

More than a year ago, I blogged a few times about the European Interoperability Framework 2.0, a set of IT procurement guidelines that was adopted in December 2010. The most controversial item, which delayed adoption by many months, was a passage that some stakeholders wanted to turn into a ringing endorsement of royalty-free (and generally restriction-free) standards. Ultimately, the relevant statement simply recognized that both FRAND-based as well as royalty-free standards can be implemented in open source, depending on their specific terms. That was a sensible acceptance of reality: both kinds of standards can be compatible or incompatible with different open source licenses.

Throughout and beyond that decision-making process, there was a group of companies that advocated royalty-free (and generally restriction-free) standards quite aggressively. And guess who was part of that small group? Google.

That same Google sent a letter to various standard-setting bodies yesterday according to which there's nothing wrong with demanding royalties of 2.25% of the "relevant end product", or with seeking injunctions against those who refuse to accede to those prohibitive terms.

This is quite a stretch.

There are basically three kinds of positions on industry standards (and, of course, any number of in-betweens):

  1. On one end of the spectrum, there's the position that Google took yesterday: ask for the moon, request injunctions, view patents on standards as a license to kill.

  2. On the opposite end, you have the royalty-free "open standards" movement, which includes Google and its lobbying fronts like OpenForum Europe. They claim that even moderate FRAND rates are totally unacceptable, and governments should discourage such standards altogether.

  3. In between those two extremes, there's a middle ground consisting of companies like Apple, Cisco and Microsoft (as well as many others) who are not against FRAND standards at all but do want the concept of FRAND to be applied in consistent, transparent and commercially reasonable ways.

    Looking at the trend in recent months, it appears that this group in the political center is the one that's growing while those advocating the two extremes are, slowly but surely, losing support.

It really strikes me that Google presents to the European Commission two diametrically opposed visions for open standards. When it addresses the institution as a policymaker (such as in connection with the European Interoperability Framework), it advocates a zero royalties/zero restrictions policy. When it issues a public statement concerning the post-acquisition use of patents in order to address regulatory concerns over FRAND abuse, Google promotes the other extreme. Why can't Google just join all the others who are already in the center of the spectrum? It would avoid contradicting itself, and enhance its credibility.

One thing can be ruled out as a credible explanation for the aforementioned contradiction: the $12.5 billion purchase price Google is offering for Motorola Mobility. If Google believes it needs royalties to generate a return on that investment, others can say the very same thing about the research and development expenditures related to, or acquisition costs of, their patents.

Everyone needs to recognize that holders of standard-essential patents wield a huge stick only as a result of a patent being included in a standard. It doesn't have to be particularly innovative: it just has to cover a mandatory part of a standard.

Some rent-seeking related to patents on standards is acceptable, but overcharging and injunctions are not.

In its "open standards" lobbying efforts, Google would disagree on the first part. As a party that wants to get a major acquisition cleared, Google disagrees on the second part.

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