Showing posts with label significant market players. Show all posts
Showing posts with label significant market players. Show all posts

Wednesday, July 21, 2010

OpenForum Europe: hypocrites lobby the EU but don't get their own houses in order

The worst thing that can happen to a good cause is to be used as a pretext by blatant hypocrites. The adoption of Free and Open Source Software by governments is definitely a good cause. So is interoperability. But OpenForum Europe and its members -- IBM, Google, Oracle and Red Hat -- should get their own houses in order rather than pressure European politicians and spread dishonest propaganda.

Monday's edition of the New York Times just reported on the tireless efforts of that gang to lobby the EU over a set of guidelines called the European Interoperability Framework (EIF).

They claim that it's all about open source and interoperability. In reality, OpenForum Europe and its members simply pursue their commercial interests. They call themselves "open", but actually they aren't. They demand interoperability when others should open up. They deny it when their own interests are at stake.

Let's go over that bunch of hypocrites one by one.

OpenForum Europe

A notorious fake representative of open source for many years. Its chief executive lobbied European politicians for software patents, falsely claiming to speak on behalf of the open source community while actually just serving his master: IBM. Bruce Perens, the author of the Open Source Definition, wrote an op-ed for The Register to protest against such conduct.

IBM: International Bullying Machines

The biggest patent bully preaches interoperability but practices the exact opposite in its core business.

The mainframe business still generates about half of IBM's profits because customers are locked in and squeezed out. Innovative solutions that provide interoperability, such as the open-source Hercules mainframe emulator, could loosen IBM's stranglehold on the market. So IBM goes for their throat, particularly by using patent warfare.

IBM's aggression against TurboHercules, a French open-source company started by the founder of the Hercules project, is an attack on the very concept of interoperability.

The debate on which the New York Times reported is largely about whether patents related to interoperability should be licensed on a royalty-free or a fair, reasonable and non-discriminatory ("FRAND") basis.

IBM and its OpenForum Europe allies claim that FRAND, which ensures that overcharging can't occur, isn't good enough. They say it has to be royalty-free. But on the mainframe side, IBM doesn't even offer FRAND. Let alone royalty-free. They don't offer anything. They want to shut out competition altogether, which is the most harmful way to use patents.

That discrepancy between using patents as a weapon of total destruction and saying other companies' patents should be made available on a royalty-free basis is inexplicable. If they preach royalty-free, they should offer it. Or they should preach and practice FRAND. Either way they'd be consistent. But demanding one extreme and pursuing the other is hypocrisy at its worst.

When asked about this contradiction, IBM executives refuse to answer.

Oracle

Last time I checked, all of Oracle's money-making products were closed-source. Until that changes, I can't see how such a company can credibly advocate open source interests in Brussels, or elsewhere.

Oracle acquired several open source technologies as part of Sun Microsystems. The deal was closed in late January, and the open source community is upset about Oracle's stewardship of several of those projects. ZDNet's open source blog summarized the situation concerning Java, OpenSolaris and OpenOffice, concluding that "if open source is all about ending vendor lock-in, Larry Ellison is its worst nightmare. And since acquiring its crown jewels, I would argue, that nightmare has slowly come true."

Just last week, the OpenSolaris board launched what CNET calls an "OpenRevolt against Oracle."

The most appalling example of Oracle's hypocrisy about interoperability is this: Sun used to provide a free-of-charge tool to open ODF (Open Document Format) files with Microsoft Office. Oracle decided that this kind of interoperability tool should be monetized. It now costs $90. It wasn't open source before, but it was available for free, and if Oracle is serious about promoting royalty-free standards such as the ODF, then it should encourage the widespread use of such a tool.

They claim interoperability must be royalty-free. But they put it behind a paywall.

Google

Google isn't a software vendor, at least not in the traditional sense of the word. To the extent they make software available to the general public, they do so on open source terms.

But how open is Google where it generates the bulk of its revenues -- meaning its search engine? Not so much, it seems. Open source blogger Dana Blankenhorn made an interesting proposal on ZDNet: an open standard for search engines. He considered this a compromise proposal in light of Google's fight to keep search a secret.

Google should address the "open standards" issue in connection with Internet search before lobbying the EU. And while at it, Google might as well ask itself if its fight against Scroogle, an independent not-for-profit website that delivers Google search results while protecting the privacy of users, fits in with its lobbying for open standards and open interfaces.

Red Hat

Red Hat is much smaller than its OpenForum Europe allies. IBM is the key driving force, and Oracle and Google are much more powerful. Compared to them, Red Hat is just another "hanger-on" that will follow IBM anywhere.

Red Hat supports all of IBM's patent initiatives, including the Open Invention Network, which is the opposite of "open". And a Red Hat manager who spends a large part of his time on EU lobbying defended (on Twitter) IBM's aggression against TurboHercules and interoperability.

OpenForum Europe and its members should support the EU's more important interoperability initiative

If OpenForum Europe and its members really cared about interoperability, there would actually be a much bigger opportunity to make headway for the cause. The European Commission is preparing an initiative to ensure that all "significant market players" will open up their products and services. So why don't OpenForum Europe, IBM, Oracle, Google and Red Hat come out loud in support of that plan? Why do they waste their time and that of many other people on a set of public procurement guidelines when there's actually an opportunity for something with really wide-ranging and highly positive effects?

The answer is simple: they aren't sincere about interoperability. That's a fact they prove every day.

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Thursday, July 1, 2010

{Interoperability} Significant market players to face EU interoperability rules

Amid all the brouhaha over the European Commission's approach to open standards, there's been hardly any attention for an exciting initiative that could greatly advance the cause of interoperability (the ability to make different IT products work together efficiently, such as through application programming interfaces and the exchange of data).

The aforementioned new initiative aims to create a legal requirement for interoperability that would affect all "significant market players", not only the ones who fall under the scope of antitrust law.

An oversimplified description of what a fundamental change this would mean is that the kinds of interoperability requirements the European Commission previously imposed on Microsoft with respect to Windows could then also affect others, such as Apple, Nokia and RIM with respect to their smartphones, or Adobe with respect to Flash, PDF and Photoshop. And many others.

"Significant" is the key word. Antitrust law can be used to fight abuse of a "dominant" market position. Dominating a market implies a sizeable gap between a market leader and the rest. That legal test puts many powerful companies beyond reach for antitrust proceedings, but a wider circle of non-dominant companies can clearly be considered significant and it's time to do something about them.

This wouldn't mean an exploding number of antitrust cases. On the contrary, a major design goal is to achieve interoperability without having to go through lengthy antitrust proceedings. At the end of the process there would be a new European law, specific to the subject of interoperability between IT products. It would set out the rules for all significant players in that market.

The legislative process hasn't begun yet. The European Commission is now going to explore the feasibility of this plan, and if there's green light, then the actual lawmaking process will likely begin in 2012. This will take time, but it can have such a profound and highly positive impact that it's worth it.

Free software and open source can gain from this in two ways. One, software that is available under a FOSS license will probably meet all of the criteria set out by the possible new law. Two, a number of proprietary software vendors beyond the reach of antitrust law would be required to make interfaces and data formats available to all competitors, including FOSS-based competitors, on a fair, reasonable and non-discriminatory basis. Short of abolishing software patents, it's hard to imagine a FOSS-friendlier legislative initiative.

I recently heard the European Commission's Vice President for the Digital Agenda, Neelie Kroes, talk about this idea at a Brussels event. It became clear that she's very enthusiastic about this, and rightly so. She said in a recent interview: "Any kind of IT product should be able to communicate with any type of service in the future." This could be great stuff indeed.

You now have the basic idea, and I will report on this initiative when there are new developments. This one is just the first posting in a four-part series on the subject. Click here for the second part, which discusses the regulatory gap that currently exists because many major companies are not dominant in a legal sense. And by the way, you can follow me on Twitter @FOSSpatents.

{Interoperability} Market dominance vs. significance: closing a regulatory gap

This posting is the second one in a four-part series on a legislative initiative for interoperability currently being evaluated by the EU. Click here for the first part of the series (a brief overview of what this is all about).

EU competition law has four main areas: cartels, mergers, state aid, and cases against the abuse of a dominant market position.

The fourth area is the one to leverage if you aim to restrict the way a single powerful company (that doesn't form a cartel with others) uses its patents. That part of the law can only solve a problem if a company (i) dominates its market AND (ii) behaves in a way that is considered anticompetitive (such as refusing to disclose technical information necessary to interoperate with its dominant products, or wielding its patent arsenal to shut down reverse engineering of the same).

In connection with interoperability, the Microsoft case has established some helpful principles. In fact, the EU leads the world by example as far as interoperability is concerned, in no small part thanks to Mrs. Kroes's work as competition commissioner in recent years. The most recent example of how companies with an interoperability concern rest their hopes on the EU is a complaint by a US company named Versata against SAP.

However, if a company is not dominant in a competition law sense, then there's simply no case, neither in the EU nor in any other jurisdiction I know (such as the US) on the grounds of an abuse of a market position.

Even many big players can claim not to be dominant

Many companies can escape that part of the law because the legal test for market dominance is a very high hurdle. If a company has a quasi-monopoly and dwarfs its competitors, then it's certainly dominant in the given market. But if it's "only" a clear number one, there could still be enough competition in the market that dominance must be denied.

Let me give you an example for how high a hurdle it is: in my personal opinion, Oracle dominates the market for database software. It has roughly a 50% market share based on revenues, and it acquired MySQL, which is by far and away the most popular open source database. However, if a court of law had to decide whether Oracle is dominant in a legal sense, the counterargument would be that IBM's DB2 and Microsoft SQL Server are competitive forces to be taken into account.

Whether or not a company is dominant heavily depends on how the relevant market is defined: geographically and in terms of product characteristics. In the total worldwide market for mobile phones, Apple would probably not be considered dominant because Nokia still sells more units, the collective volume of Android-based phones is quite high, and RIM (BlackBerry) is also strong. But in a more narrowly defined subset of the market, Apple's market share could be considered to be much higher. Also, Apple could be considered dominant as an online music distributor or as a distributor of iPhone/iPad applications.

The outcome of the dominance test is always binary: there is a case, or there isn't. There can be intervention, or there can't. As a result, there's a huge regulatory gap.

While a few companies are considered dominant in certain markets, such as Microsoft for client PC operating systems or IBM for mainframes, there are many others who are also extremely powerful and have their customers locked in, but under antitrust rules they can't be pursued no matter what they do.

The EU can't and won't try to expand the scope of antitrust law as a whole. But the European Commission has apparently recognized that it shouldn't be required to bear the burden of proof that a company is dominant only to ensure interoperability. There should be a general obligation affecting not only dominant players but also the much wider circle of "significant market players", many of whom could also use their intellectual property rights (especially patents) to limit choice and stifle innovation.

How to define significance, such as in terms of percentage of market share, is one of many things the Commission is now presumably pondering.

For the next (third) posting in this four-part series on legislative initiative for interoperability currently being evaluated by the EU, please click here.

{Interoperability} Procedural framework: an action item in the Digital Agenda

This posting is the third one in a four-part series on a legislative initiative for interoperability currently being evaluated by the EU. Click here for the first part of the series (a brief overview of what this is all about) or here for the previous part, which discusses a regulatory gap that currently exists.

In terms of a legislative process, this one isn't even in its infancy. It's in a prenatal state. I believe there's a pretty good chance that the underlying idea will result in a new law within a couple of years. But if, when and in which form will depend on the process.

Legislative proposals at the EU level don't come as surprises. There's always some deliberation prior to kick-off, and while a lot of meetings are private, the overall direction in which an initiative is heading is written and talked about in public.

The idea of possible legislation on interoperability requirements for significant market players is part of a comprehensive work program called Digital Agenda for Europe. The official working document (HTML, PDF, other languages) was published in the second half of May. It identifies eight "action areas" and 16 "key actions" as well as many items that are called "other actions".

Subsection 2.2.3 of the Digital Agenda talks about ways to enhance interoperability and makes the following statement that I'll quote and explain:
Since not all pervasive technologies are based on standards the benefits of interoperability risk being lost in such areas. The Commission will examine the feasibility of measures that could lead significant market players to license interoperability information while at the same time promoting innovation and competition.
The meaning of this is that in addition to official standards controlled by consortia, there can also be de facto standards (such as data formats or interfaces that are as widely used as official standards) belonging to individual companies. The European Commission would like to ensure that such companies don't monopolize their data formats and interfaces.

The word "license" makes it clear that intellectual property rights are involved. In the interoperability context, patents are particularly relevant, and they are information documents (hence the word "patent"). But the Commission's wording leaves room for additional options.

The bold-face passage is very broad and vague. To "lead significant market players to [...]" could per se mean anything from politely asking to soft pressure to the creation of legal obligations. Below that paragraph, there's a list of action items. The last one of them is:
Examine the feasibility of measures that could lead significant market players to license interoperability information to report by 2012.
This is still very broad. It adds specificity in the sense that the Commission wants to know by 2012 which options it has. But a speech provided clarification.

A legislative initiative is the preferred course of action

A recent speech by the European Commission's Vice President for the Digital Agenda, Neelie Kroes, made it perfectly clear that the measure she wants to take is to create a new piece of legislation:
Whereas in ex-post investigations we have all sorts of case-specific evidence and economic analysis on which to base our decisions, we are forced to look at more general data and arguments when assessing the impact of ex-ante legislation. Just to be clear, while it is still early days, it is certainly possible that I will go for a legislative proposal.
Not only was the preferred way forward clarified but also that the envisaged measure will be far-reaching:
This could have a profound impact on the industry concerned so it is not a decision taken lightly. Many of you work for companies that could be concerned by such a measure. I invite you all to let me have your views.
This invitation for stakeholders to communicate their positions to the Commission suggests that a formal consultation process will take place sooner or later. That's the usual approach taken by the Commission.

At this stage, many key aspects of the future proposal have not yet been determined. Here's another quote from Mrs. Kroes speech that underscores the need for consultation and deliberation:
We are thinking very hard about how this could be achieved. Any such initiative would probably be limited to certain types of IT products. And it would likely involve some form of pricing constraints.
I have seen other legislative initiatives where it was fairly predictable at a comparable stage what the Commission had in mind to do. In this case, it appears that there actually are a lot of questions, including some fundamental ones, that have not yet been answered. That's why those of us who like the basic idea of this should make our contributions to the thought process sooner rather than later.

For the next (and final) posting in this four-part series on legislative initiative for interoperability currently being evaluated by the EU, please click here.

{Interoperability} FOSS-related opportunities and priorities

This posting is the fourth (and final one) in a four-part series on a legislative initiative for interoperability currently being evaluated by the EU. Click here for the first part of the series (a brief overview of what this is all about) or here for the previous part, which discusses procedures.

Like I wrote in the first part of this series of postings, I regard the initiative to impose interoperability requirements on significant market players as a first-rate opportunity for free software and open source.

Beneficial with or without software patents

There's no question that the number one item on the political wishlists of most community members is -- and will continue to be -- the abolition of software patents. I'm also aware that many in the community would prefer for interoperability-related patents to be available on a royalty-free basis. The last quote above from Mrs. Kroes's speech indicates "pricing constraints" as a likely option, which makes it pretty clear that patent holders won't be required to grant licenses on a royalty-free basis.

But even if some of us fear the initiative might not go far enough, we should at least support the parts we like and get as much mileage out of it as possible.

The FOSS community should embrace and support this interoperability initiative. There really is the chance to make some important headway. Everyone who opposes software patents (and patent royalties) altogether can continue to advocate that position. Even if we achieved the abolition of software patents one day against the odds, this interoperability initiative would still have value because it will very likely deal with more than just patents. For an example, undocumented interfaces are a problem with or without patents, but the future interoperability law could solve it.

Looking at Mrs. Kroes's track record, I'm sure she will make the most open-source-friendly proposal she can under the legal parameters and political circumstances that exist. Even if she may prefer royalty-free interoperability, it's not only politically but also legally impossible for a government to expropriate right holders without adequate compensation.

Politics is the art of the possible

The potential benefits of a European IT interoperability law are huge. Let's try to achieve as much as feasible. Politics is the art of the possible, and progress has to be made one step at a time. I don't see any other legislative idea in Europe (and this one would certainly have repercussions around the globe) that offers such an attractive combination of being potentially helpful and politically achievable in the near to mid term.

I believe SMEs (small and medium-sized enterprises) could be important allies to make this happen. We should work with them to give Mrs. Kroes the input and political support that will be needed to overcome whatever resistance some may try to mount (including some who demanded interoperability in the past, when other companies' intellectual property was concerned, but don't want to provide it with their own products and will therefore try to get the bill diluted if not derailed).

We can still be against software patents in general and explore ever more ways to achieve that goal. But that shouldn't preclude us from seizing what looks like a wonderful opportunity on the interoperability front.

If you are also excited about this initiative, please stay in touch by bookmarking this blog, emailing me via the contact form, or following me on Twitter @FOSSpatents.