FAX from Patrice Lyons - Excerpt from The Computer Law Association Bulletin Volume 8 No.2, pages 41 & 42 EUROPE Intellectual Property Rights and Standardization Source: Vanessa Marsland and Gillian Andrews, Clifford Chance, London On October 27, 1992, the EC Commission presented a communication on the subject of intellectual property rights and standardisation. This arrives at a time when there has been heated debate - particularly in the context of telecommunications - on this issue. The communication is a follow up to the December 1991 Green Paper on Standards (COM(91)521). The Commission is not presently seeking to legislate, given the voluntary nature of standards-making. However, the communication sets out certain principles and indicates that, if standards bodies do not follow them, the Community will not be able to adopt them and, even less, to make them mandatory. It further indicates that certain types of behavior by rightholders could bring them into conflict with the provisions of the EC Treaty (in particular Articles 30-36, 59, and 85 and 86, the competition provisions), of Community or national legislation, or of international conventions (including the GATT Agreement on Technical Barriers to Trade (TBTA)). Among the principles: A. For standard-making bodies: o freedom of access to the standards to all wishing to use them o fair, reasonable and non-discriminatory terms on which users may use the standards, whether or not they participate in the standards making body o the requirement to secure terms on which users may manufacture to the standard within the Community and import into the Community goods manufactured in compliaince with the standard elsewhere o the requirement to use best efforts to identify relevant rightholders before adopting a standard, and not to continue to work on the standard if all known rights are not available to be licensed o fair treatment of the rightholders, including reasonable time to identify themselves and their rights, and arbitration mechanisms as to royalty rates. B. For rightholders: o the obligation timely to identify themselves and their rights and promptly to confirm or refuse permission for the subject matter of those rights to be included in the standard o the obligation to offer fair, reasonable and non-discriminatory licence terms if they agree to license o the obligation to treat agreement to license as irrevocable without exceptional cause. The communication points out that standards may be developed for a wide variety of purposes, being limited in some cases to compatibility/ interconnection standards, and in others covering detailed specifications of design, dimensions and materials. However, under TBTA, the EC is committed to specifying technical regulations and standards in terms of performance rather than design or descriptive characteristics. The report singles out both the computer and telecommunication industries as industries in which standards and interoperability play a key role (while declining to single out specific industries as requiring specific solutions). It attempts to identify benefits to rightholders of agreeing to license technologies which have acquired standard or near standard status through market penetration, as well as considering standards which have arisen as a result of definition and approval by industry bodies. The communication refers to the activities and work of various standards making bodies: at the EC level, CEN (European Committee for Standardization), CENELEC (European Committee for Electro-Technical Standardization) and ETSI (European Telecommunications Standards Institute); at the international level ISO (International Organisation for Standards), IEC (International Electrotechnical Commission) and CCITT (International telegraph and Telephone Consultative Committee). The first two principles for standards making bodies clearly build on principles already adopted by ISO and applied by ISO, IEC, CEN and CENELEC. In the telecommunications field, the position is more complex. CCITT made a brief statement of policy in June 1988, while ETSI has hotly debated the issue in numerous ETSI meetings in recent months, contending that special considerations apply in the field of public networks. ETSI was due to adopt a new policy and various undertakings on intellectual property rights during a November 1992 general assembly, but has deferred this in light of the Commission communication. The proposed ETSI policy and undertakings would have required ETSI members to agree to license their intellectual property rights, if deemed "essential" by ETSI, as a condition of membership. These licenses would be irrevocable, and granted on fair, reasonable and non-discriminatory terms and conditions. A revised draft policy is expected shortly. It appears ETSI may formally adopt a revised policy at its General Assembly scheduled for January or February, 1993. The communication points out that, until now, the European Court of Justice has held that refusal to license an intellectual property right, absent other instances of abusive behaviour, will not be actionable under Article 86*(see below). It asserts that Article 86 cannot permit the expropriation of rights for the purpose of using technology as a basis for a standard where no other circumstances establish abuse of a dominant position. Rightholders have the absolute freedom to refuse to license except in exceptional cases such as national security or overriding public interest. However, the principles proposed may have the effect of sidelining rightholders who decline to license their technology on fair reasonable and non-discriminatory terms, particularly in areas where the standard is to be imposed by an industry body, rather than established through market penetration. The communication expresses the view that cases where technical necessity dictate adoption of a particular technology by a standards-making body will be relatively rare, and, in any cases which do arise, it will be necessary to balance any arguments in favour of enabling competition under Article 86 against the policy objective of maintaining the Community's strength in research and development. As to cases where the standard has arisin de facto, through market penetration, the communication reports that the Commission has not yet been faced with a case in which an owner of intellectual property rights has prevented compliance with a standard by refusing to licence technoloyg. However, this is an area to which particular attention will be paid. Implementation of the Software Source: Vanessa Marsland, International Editor The deadline for Member States to implement the EC Directive on the legal protection of software is January 1, 1993. As at mid December, 1992, Denmark and the United Kingdom had adopted implementing legislation, and Belgium, France, Germany, Greece and the Netherlands had published draft legislation. The EC Commission has closely monitored the implementation of this directive, and Member States potentially face action by the Commission if their national implementation fails to comply with the requirements of the Directive as those are interpreted by the Commission. Industry groups have pressed for verbatim implementation wherever possible, in view of the protracted debate over the terms of the Directive itself. This has influenced implementation in various countries, particularly with regard to the issue of decompilation (Article 6) which is novel in most Member States' laws. On other areas which are already addressed by the national copyright laws, the method of implementation varies. *However, this position awaits the European Court's decision in Magill (C241/91), expected in the first half of 1993 - see note below on Thomas C. Vinje's article "Magill: its impact on the information technology industry." (additional footnote not included in this fax)