The Copyright Challenge to Europe’s Software Industry – audio of entire seminar

Case C-406/10: Advocate General’s Opinion

Professor P. Samuelson Presentation – ECIS Event – 1 December 2011

Cecilio Madero speech for ECIS 1 Dec 2011

Professor W. Cornish Presentation – ECIS Event – 1 December 2011

The European Commission has taken steps for important changes in information and communications technology (ICT) designed to make it quicker and easier for businesses and individuals to obtain government services, benefits, and documents across the European Union. ECIS believes these positive steps will foster new freedom of movement by its citizens, and new opportunities for businesses.

The ambitious plan is complemented by new guidelines to help private groups as they set standards for use in the production of goods or services. The goal is to allow broader participation in standards setting, and to lower barriers to entry for market participants who need those standards

ECIS believes the ultimate winners are European citizens, who will be able to access documents and services from government and private entities without being required to use a particular vendor’s software.

The Commission approved these new approaches after long consideration. It has taken on the responsibility of carrying out its newly enunciated goals over the next four years. The Commission’s innovative approach is contained in three documents approved in December: Guidelines for standards setting, plans for eGovernment, and an outline for ways that software should inter-operate smoothly. This represents an important departure from the fragmented approach that has marked the past.

There have long been voices within the Commission with a vision for change. Eighteen months before the Commission acted, Commissioner Neelie Kroes announced that the Commission was committed to procurement practices that would “promote the use of products that support open, well-documented standards. Interoperability is a critical issue for the Commission.”

Kroes, who at the time was competition commissioner and is now commissioner for the digital agenda, said in her 2008 speech that governments should stay away from software built to proprietary standards unless there were “clear and demonstrable benefits.” She said that otherwise government faced the prospect of being locked into a single proprietary approach

Of course open access provides an immediate benefit for citizens, who can read government documents or complete on-line forms without being forced to purchase a specific vendor’s software. Beyond that, if government specifies interoperable software built to open standards, that will help promote its use in broader society.

“These democratic principles are important. And an argument is particularly
compelling when it is supported both by democratic principles and by sound
economics,” she said at the time.

On 14 December, The Commission approved the “Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements.” The next day it released the timetable for adoption of its digital initiatives, “The European eGovernment Action Plan 2011-2015.” And finally, on 16 December, it approved the final version of the long-debated “European Interoperability Framework.”

It’s worth taking these one at a time to better understand the Commission’s accomplishment.

The Horizontal Guidelines on Article 101

(See the press release)

The Horizontal Guidelines are designed to help companies avoid acts which could violate Article 101 of the Treaty on the Functioning of the European Union (TFEU) , which prohibits agreements that have “as their object or effect the prevention, restriction or distortion of competition within the internal market.”

We’ll focus on Chapter 7, which deals with standardisation agreements and sets out suggestions for methods which foster competition instead of retarding it. Such guidelines are often followed closely by companies, and are sometimes cited in court cases.

One of the most important sections is 7.3.3. Its detailed suggestions for companies are not mandatory, but those who choose a different path must do a self-assessment to demonstrate that their agreements are not anti-competitive.

The Commission suggests that access to any standards be available on fair, reasonable and non-discriminatory (FRAND) terms, that all competitors in a market be allowed to participate in the process for setting the standard, and that stakeholders have timely information as each stage of standard setting takes place.

A sticking point has proved to be whether companies will disclose patents covering particular technologies before they are irrevocably adopted as part of a standard. Without such disclosure, an intellectual property rights (IPR) holder may engage in “patent ambush,” in which it surprises others by informing them that use of a standard infringes a patent and requires royalty payments. The guidelines lay out a comprehensive approach to address this problem.

The guidelines say that before a standard is adopted participants must provide “an irrevocable commitment in writing” to offer their essential patents on FRAND terms, and such a commitment must convey with the patent if rights are sold or transferred. Companies may exclude their patents from standards, but that exclusion should happen early in the development of a standard. Companies must disclose patents they possess which might be necessary to implement a standard under development. However, this is not necessary for patents which are royalty free.

In situations where companies could impose fees, they should reveal their most restrictive licensing terms before a standard is adopted. If standards-setting groups learn the potential costs of IPR, they can make an informed choice to move to alternative technologies if need be.

When a standard has a large market impact it is important that a wide range of companies be permitted to participate in its adoption. This is far less important where there are competing standards.

Standards setting has the potential to be pro-competitive and helpful. In section 7.4, the guidelines cite the examples of standards for quality, safety and environmental aspects of a product which “may also facilitate consumer choice and can lead to increased product quality. Standards also play an important role for innovation.”

The European eGovernment Action Plan 2011-2015

(See the press release)

The eGovernment Action Plan sets out specific goals and timetables to streamline methods citizens and businesses use in their dealings with public agencies, in everything from obtaining birth certificates across borders to freely choosing a place for retirement, to getting the permits that businesses need to establish themselves.

The plan will help entrepreneurs compete with each other for business from governments across the European Union, by letting them “perform the full public procurement cycle online, from ordering to invoicing and access to catalogues.” (section 2.2.1) The Commission anticipates large cost savings. Starting this year, the Commission will run and assess pilot projects for this program.

For individuals, the goal is to make it easier for them to study work, live, and obtain health care and retirement benefits anywhere in the EU (section 2.2.2).

The basis for this will be open standards and interoperable systems within and among governments that are based on the most modern technology. To achieve that, the Commission will look to the European Interoperability Framework.(section 2.4.1)

European Interoperability Framework (EIF)

(See the Press Release)

The EIF is a wide-ranging document that sets out a Commission finding that European public services should create equal access opportunities for all citizens and businesses, and should be publicly accessible without discrimination (section 2.4). Such access requires that citizens have the right of access independent on any specific technology or product (section 2.12).

To help achieve these goals, the document encourages public administrations look closely at the interoperability specifications for software. The heart of this is in Section 5.2.1 of the EIF, which highlights the Internet as a showcase for the positive effect of open specifications. The Internet allows anyone to build on it, with a thoroughly open specification which requires no royalty payments. This has led to a revolution in commerce that has changed the way we get our news, listen to our music, look at images, and it has created new forms of communication, such as social networking.

The Commission urges public bodies to follow three principles in evaluating software standards so that the public bodies may apply in full what it calls “the openness principle.” (It makes an exception to this principle for software which is still experimental or immature.)

First, all stakeholders should be able to contribute to the setting of specifications, and development of the specifications should be open to public review.

Second, specifications must be publicly available.

Third, specifications must be available for licensing using FRAND terms, or on a royalty-free basis, but either way the specification should be available for use in both proprietary and open source software. In a footnote, the EIF says providers who work under both proprietary and open source business models should be able to compete in the delivery of products, technologies and services. Some open source business models require that their products may not be encumbered with royalty payments.

Looking to the future

The Commission has laid down a marker for the use of open standards in software. It will have far-reaching consequences for the growth and efficiency of business in Europe, and will facilitate citizens’ interaction with public bodies. ECIS is encouraged by what the Commission has done, and has every reason to believe the Commission will be vigilant as it monitors progress, explains the importance of changes that public bodies must make, and takes corrective action should it become necessary. As time passes, these changes will help further European integration, without having to bridge cultural or language differences.

ECIS will continue to support the Commission as it helps foster measures for the economic advantage of Europe and its citizens.

 ECIS, Brussels, March 2011

A statement made on behalf of ECIS is available here.

ECIS member Opera has recently released a video explaining the importance of choice of web browsers and why Microsoft has an artificial competitive advantage over other browsers like Opera and Firefox. For more information click here.