Innography Extended References: Technical Standards
In our latest release, Innography Fall ’10, we have included a feature called Extended References. These are additional data sources that contain references to patents. Innography currently offers three of these reference data sources:
- Technical Standards
- Pharmaceutical Sources
- International Litigation
This article focuses on Technical Standards, how they impact your business, and why patents are a critical component you need to understand for new product development.
What Is a Technical Standard?
A Technical Standard is a specification developed by experts in a particular field for technical systems such as telephony, media encoding and internet communication. The wireless Standard (IEEE 802.11) is the perfect example of a Technical Standard that allows computers to send and receive information wirelessly. By creating a Standard, multiple products can interact and provide a broader market opportunity instead of developing competing proprietary formats such as the classic example of Betamax video tape format vs. VHS.
Sony introduced Betamax with the intention of making it the industry standard to serve Sony VCRs with the hopes of then dominating the industry. Another Japanese company, JVC, attempted to block the move by introducing a different format, VHS. In the end VHS ended up dominating the market but the example demonstrates the importance of Technical Standards.
First, both companies invested heavily in the tooling required to produce video tapes on their proprietary format. Second, it forced consumers to choose between the competing formats when they invested in an entertainment system. The downside for consumers is that both were initially expensive and as the market gravitated to VHS Betamax customers had to reinvest entertainment dollars in the VHS format.
The value of a Technical Standard is therefore enormous because it enables companies to take advantage of economies of scale. That is, when all manufacturers agree to a Technical Standard before production begins, the investment in the Standard has already been made collectively.
Without a standard everyone agrees to, all technical devices and systems would have to be built based on a proprietary standard developed by the manufacturer. The overhead associated with such a manufacturing model would make products much more expensive and discourage competition. Technical Standards are particularly critical to companies in industries such as:
- Electronics, Computers
- Software, Internet Communications
- Media Encoding
- Cellular and Telecommunications
For that reason, companies in industries that heavily rely on Technical Standards donate experts in their field to serve on a standards body, the sole focus of which is an industry standard. One example standards body is the Institute of Electrical and Electronics Engineers (IEEE).
IEEE develops and maintains hundreds of standards, one of which governs the development, manufacture and production of wireless local area networks (WLAN) also known as IEEE 802.11. Because the standard exists, companies can more efficiently develop wireless network devices because they build it to an existing standard rather than developing a proprietary system first. This opens up new product opportunities to complement and interact with other products.
Further, because the standard is publicly available, any company can get into the business of building the devices 802.11 governs. Wireless cards, wireless routers and smart phones can all be inexpensively built by competing companies and they will all work on any WLAN. And with all this technology comes a significant amount of IP, which is almost universally patented. These patents present both an opportunity and a concern for the standards bodies.
How Patents Impact Technical Standards
Standards bodies recognize the very real need for specifying patented technologies. Without patents on the technologies they specify, anyone who adopts the standard is at risk of being sued for infringement. It is common to think about patents in the context of protecting the patent holder by giving them the right to charge for the use of their technology. In this case, though, patents protect users of the technology.
Technical Standards therefore began to reference patents on enabling technologies. If a patented technology is required for the implementation of a standard, that fact is often (but not always) disclosed as part of the standard. Such patented technologies are referred to as essential. Patented technologies that enable the standard but are not required are referred to as non-essential.
Patent brokers then had the opportunity to charge more for licensing the technology than its intrinsic value, which ultimately can hurt consumers. Because representatives of companies who sell to consumers typically serve on and contribute to standards bodies, they had a vested interest in regulating patent pooling practices. The solution they derived is called either FRAND or RAND.
FRAND stands for Fair, Reasonable and non-Discriminatory terms, and RAND stands for Reasonable and non-Discriminatory terms, both of which have the same practical meaning in this context. The objective is to set reasonable licensing terms on essential technologies. Doing so enables the manufacture of products without exorbitant costs — a primary reason for the existence of the standard.
How Patents in Technical Standards Affect Your Company
Given these realities, there are a number of implications for companies participating in or building products in accordance with Technical Standards:
Researcher awareness and standards body participation
Whether researchers are serving on a standards body or are ensuring that products are being designed and manufactured in accordance with the appropriate specification, they must have an understanding of the enabling technologies incorporated into it. As I mentioned, these technologies are typically patented. There is therefore a natural convergence of patented essential technologies and Technical Standards that researchers must understand. Combined with Semantic Searching, this is a must for companies serving on standard committees.
- New product development and marketing launch - With any new product you must understand the existing technology that is required to be built into it. You need to know things like how much will it cost? Is there patented technology on which the technology of interest relies? Is there other technology you can take advantage of to complement the technology of interest that will provide a competitive advantage on market entry?
- Licensing negotiation - In order to negotiate from a position of strength you must understand things like which technology references in the standard are essential and which are nonessential. Looking at the timeline (patent vs. standards drafts) and standards members can help you understand this as well.
- Patent Identification - There is no guarantee that all technologies essential to the standard are referenced in the standards body Intellectual Property Rights (IPR) section. Using analysis of the known disclosures, you can devise methods for finding all essential technologies.
New Analysis Available for the First Time – EVER!
Until now these issues have not been adequately addressed because it has been very difficult and time consuming to do so. Automated tools and methodologies simply didn’t exist to assist with the kind of awareness that people involved in Technical Standards really need. There are thousands of standards and patents associated with them, and many that don’t adequately document the patent associations. Innography is the very first to make this data available in a useable format. Combined with analytics, this presents opportunities to:
- Effectively participate in Standards Bodies, protecting your IP rights both today and tomorrow
- Confidently launch new products, understanding patents associated with the Technical Standards you are implementing
- Manage your licensing programs for patents you in-license and out-license