Selling Out on Standards

Computerworld - Thirty-two years ago, IEEE participants hammered out one of the most successful standards ever developed. Ethernet succeeded in part because the big players involved at the time, including Xerox, Intel and Digital Equipment, donated intellectual property (IP) to the specification. Those vendors weren't motivated by altruism but by enlightened self-interest: Each realized that a common standard would expand the market and provide more opportunities to sell Ethernet-based products.
Today, many vendors view the process that created Ethernet as a quaint relic of the past. The rules have changed, middlemen have been added, and it's users who will pay the price.
Now, rather than being content to recoup IP development costs indirectly by selling products based on new standards, vendors increasingly expect to be paid for the IP that they contribute. And a class of companies has emerged that doesn't produce products at all. Their business model is to develop IP, patent it and license it to others who then build the IT products and services you buy. The IP vendors participate vigorously in the standards process in order to ensure that the final specification includes IP covered by their patents. In this way, any manufacturer that builds a product based on that standard will need to buy a license from the vendors.
Standards organizations have had to relax the rules to accommodate pressure from vendors. At the IEEE, dealing with IP issues is now its biggest challenge. The World Wide Web Consortium, which insists on a royalty-free IP policy, has seen standards initiatives move to more flexible consortia, such as OASIS.
The concept of the royalty-free specification is being supplanted by "reasonable and nondiscriminatory" licensing terms, also known as RAND. In some cases, there are so many IP owners to pay off that building a product to conform with a standard has become onerous. To facilitate that process, a layer of infrastructure has emerged: the licensing agency, whose sole purpose is to act as a consolidator -- a bill-payment service for the IP owners behind a given standard.
The most obvious example of this development has taken place in the digital rights management (DRM) arena. Here, the specification for the ISO standard MPEG REL, a rights expression language used in DRM implementations, is derived from IP owned by ContentGuard, a spin-off from Xerox. (MPEG REL is based on ContentGuard's XrML rights expression language.) What's unusual in this case is that the IP reflected in the standard is wholly owned by a single vendor, says Trent Henry, an analyst at Burton