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The handle http://hdl.handle.net/1887/50157 holds various files of this Leiden University dissertation.
Author: Mair, C.S.
Title: Taking technological infrastructure seriously
Issue Date: 2017-06-29
TAKING
TECHNOLOGICAL INFRASTRUCTURE SERIOUSLY
Carl Mair
Printed by ProefschriftMaken | Proefschriftmaken.nl ISBN 9789789462957
Copyright © 2017 by C.S. Mair. All rights reserved. No parts of this thesis may be reproduced, stored or transmitted in any way without prior permission of the author.
TAKING TECHNOLOGICAL INFRASTRUCTURE SERIOUSLY
P R O E F S C H R I F T
ter verkrijging van
de graad van Doctor aan de Universiteit Leiden, op gezag van Rector Magnificus prof. mr. C.J.J.M. Stolker,
volgens besluit van het College voor Promoties te verdedigen op donderdag 29 juni 2017
klokke 13.45 uur
door
Carl Stephen Mair geboren te London, United Kingdom
in 1982
Promotores: prof.dr. A.H.J. Schmidt prof.dr. G.J Zwenne
Promotiecommissie: prof. J.L Contreras (University of Utah, Salt Lake City, USA) prof. B.M Frischmann (Yeshiva University, New York City, USA) prof.dr. D.J.G Visser
prof.dr. G.P van Duijvenvoorde dr. R.P Orij
Preface
P R E FAC E
In 970AD the Viking king, Harald Blåtand, united the warring tribes of Denmark and Norway, and ushered in a period of relative stability and flourishing. In 2017, the devices that bear his insignia and anglicised name, ‘Bluetooth’, now stand for a different sort of integration and a new kind of flourishing. The royalty-free, short-range wireless protocol is driving the proliferation of ‘wearables’ and Internet of Things devices. Unlike other standards in the area of wireless connectivity such as 3G and 4G LTE, Bluetooth stands apart by being comparatively unlitigated and open to all implementers at zero cost. The Bluetooth standard is an example par excellence of critical technological infrastructure operating under an open access rule.
But although the technology over Bluetooth is free, it is not public domain. Every time an implementer integrates Bluetooth technology into its devices, it necessarily infringes dozens of patents. Instead of litigating, the technology owners choose to license Bluetooth at zero cost. Why? The team behind another zero cost standard, a royalty-free alternative to MP3, the Opus audio codec, helps explain the reasoning:
Most of the value of a high-quality standard is the innovation and inter-operation provided by the systems built on top of it. When a few parties have monopoly rights to monetize a standard, that infrastructure stops being so common and everyone else has more reason to use their own solution instead, increasing cost and reducing efficiency.
Imagine a road system where each type of car could only drive on its own manufacturer’s pavement. We all benefit from living in a world where all the roads are connected.
There is something convincing about this explanation, but it is an intuition and not a reasoned argument. While zero-cost licensing of technological infrastructure is wide spread, it is still not the norm. Nevertheless, the above intuition comprises a number of important assumptions, which also apply to other models of open access licensing of technological infrastructure, such as the fair, reasonable and non-discriminatory licensing conditions often required by telecommunications standards. These assumptions deserve careful consideration because they seem to cut across ideas central to mainstream economics and IP theory, such as the primacy of private property and exclusive rights in driving innovation. So, what is technological infrastructure and why is it unique? Does it really need special management,
Preface
and if so, how? What is the role of the law and the courts in designing these management regimes, and what aspects give rise to enforceable rights if and when these regimes break down? This dissertation sets out to answer these questions by investigating access problems to essential intellectual property in technological infrastructure, and the institutions which underwrite them.
Carl Mair
May 2017, The Hague
TA B L E O F C O NT E NTS
PREFACE 5
LIST OF ABBREVIATIONS 11
INTRODUCTION 13 CHAPTER 1. TAKING TECHNOLOGICAL INFRASTRUCTURE SERIOUSLY: STANDARDS,
ANTITRUST AND INTELLECTUAL PROPERTY 23
I. INTRODUCTION 25
II. INFRASTRUCTURE THEORY 29
A. ECONOMIC CHARACTERISTICS OF INFRASTRUCTURE 30
B. PRIVATELY-OWNED TECHNOLOGICAL INFRASTRUCTURE 33
III. FROM DE FACTO TO DE JURE STANDARDS 41
A. WHY HIGH TECHNOLOGY MARKETS PREFER DE JURE STANDARDS:
GAME THEORY APPROACH 41
B. SOLVING THE EX POST ‘PRISONER’S DILEMMA’:
THE PURPOSE OF FRAND COMMITMENTS 45
C. LEGAL ANALYSIS OF FRAND COMMITMENT 47
1. Contract or Competition Law Duty? 48
2. Enforcement Issues 50
a) Contractual Approach 50
b) Competition Law Duty? 54
IV. THE DYNAMICS OF BARGAINING UNDER PROPERTY AND LIABILITY RULES 58 A. EU POSITION ON INJUNCTIONS IN FRAND NEGOTIATIONS 58 B. BARGAINING IN THE SHADOW OF LEGAL RULES: ‘PROPERTY’ V ‘LIABILITY RULES’ 64 1. FRAND Bargaining under Injunctions v Liability Rules 64 2. Bargaining in the Shadow of Injunctions: Dynamic Constraints? 65 3. Bargaining in the Shadow of a Liability Rule or Third Party Determination 67 a) Problems of Reverse Holdup; Information-Forcing under a Liability Rule 68
V. INTEGRATING THE INFRASTRUCTURAL APPROACH 70
VI. CONCLUSION 75
CHAPTER 2. TECHNOLOGICAL INFRASTRUCTURE AND THE EU ESSENTIAL FACILITIES DOCTRINE 79
I. INTRODUCTION 81
II. BACKGROUND: LEGAL AND ECONOMIC 83
A. FACTUAL AND LEGAL BACKGROUND 83
1. The origin of the complaint against Microsoft and the Commission Decision 83
2. Microsoft’s action before the GC 83
B. EFD IN THE ABSTRACT: LEGAL AND ECONOMIC FOUNDATIONS 84
1. Legal foundations of the EFD: the EU context 84 a) The EFD in its wider context: function and origin 85 2. Economic foundations of the EFD: the issue of efficiency 86
a) Monopolies: de facto and de jure 88
b) IP as an essential facility 91
c) The EFD as a special case of refusal to supply 93 III. THE COURT’S REASONING: TO WHAT EXTENT WAS THE EFD APPLIED? 94
A. THE STRUCTURE OF THE GC’S REASONING 94
1. Indispensability of the interoperability information and the ‘elimination of
competition’ 95 2. Prevention of the emergence of a ‘new product’ and lack of objective justifications 98
IV. CONCLUSION 102
A. COMMENTARY 102
B. EU COMMISSION’S INVESTIGATION INTO THE ANDROID MOBILE OS 104
C. OVERALL CONCLUSION 106
CHAPTER 3. VISIBLE AND INVISIBLE HANDS:
IP, SUBSIDIES AND OPEN ACCESS IN THE EU INNOVATION SYSTEM 109
I. INTRODUCTION 111
II. GROUNDWORK: ORIENTATING THE ARGUMENT 112
A. INNOVATION INSTITUTIONS AND COMPARATIVE ANALYSIS 112
1. Spillovers 112
2. Uncertainty 114
3. Comparative institutional analysis 115
B. INTELLECTUAL INFRASTRUCTURE 118
1. Background 118
a) Defining Intellectual Infrastructure 118
b) Intellectual infrastructure and open access licensing 120
2. Scientific infrastructure 123
3. Technological infrastructure 125
4. Technological infrastructure arising under a subsidised R&D regime 128
III. THE INSTITUTION OF INTELLECTUAL PROPERTY 131
A. INTELLECTUAL PROPERTY AND SPILLOVERS 132
B. TECHNOLOGY TRANSFER FUNCTION OF IP 136
C. EXPLORING INTELLECTUAL PROPERTY AS PROPERTY 141 1. Game theory and the evolution of property 141
2. Game theory and IP 143
3. Property traps 148
IV. R&D SUBSIDIES AND TECHNOLOGICAL INFRASTRUCTURE 151
A. ECONOMIC JUSTIFICATIONS FOR SUBSIDIES 152
B. SUBSIDY FAILURE 156
C. EU H2020 AND PROXIMITY TO MARKET 157
D. INFRASTRUCTURAL KNOWLEDGE AND OPEN ACCESS 158
1. Basic research 158
2. Technological infrastructure and subsidies 160
V. CONCLUSION 162
CHAPTER 4. OPEN STANDARDS AND THEIR ENEMIES:
THE PUBLIC DEMAND-SIDE APPROACH 165
I. INTRODUCTION 167
II. BACKGROUND 170
A. FORMAL AND INFORMAL SSOS IPR POLICIES 171
B. MEMBER STATE PUBLIC PROCUREMENT IPR POLICIES 172 C. INTEROPERABILITY STANDARDS AND OPEN SOURCE SOFTWARE
IMPLEMENTATION 173
III. RF INTEROPERABILITY STANDARDS AND INNOVATION 174
A. PARTICIPANTS IN STANDARD-SETTING 175
B. FAST ADOPTION RATES AND NETWORK EFFECTS 176
C. STRATEGIC CONSIDERATIONS 177
D. MANDATORY RF LICENSING IN PRACTICE 178
IV. RISKS FACED BY RF INTEROPERABILITY STANDARDS 180
A. THE CHALLENGE OF IP COMPANIES AND PATENT TROLLS TO RF STANDARDS 181 V. DEALING WITH THE CHALLENGE OF THIRD PARTY IP COMPANIES 183
A. DEFENSIVE PATENTING 183
B. COMPETITION LAW REMEDIES 184
C. PATENT SYSTEM REMEDIES 186
VI. CONCLUSION 187
CHAPTER 5. INTEL, ARM AND PRIVATE ORDERING APPROACHES TO TECHNOLOGICAL INFRASTRUCTURE 189 II. SEMICONDUCTOR INDUSTRY: OVERVIEW AND THEORY OF IP LICENSING 195
A. SEMICONDUCTOR INDUSTRY OVERVIEW 195
B. SURVEY OF IP LICENSING STRATEGIES IN HIGH TECHNOLOGY 199 1. The closed ‘exclusive’ property approach to IP licensing 199
2. Open approaches to IP licensing 202
III. A CLOSER LOOK AT INTEL AND ARM 207
A. INTEL’S HISTORY, BUSINESS MODEL AND IP LICENSING APPROACH 207
1. Intel’s origin story 207
2. Approach to IP Licensing and Establishment of the ‘Walled Garden’ 209 3. Intel’s Experience in the PMD and Nascent IoT markets 211 B. ARM’S HISTORY, BUSINESS MODEL AND IP LICENSING STRATEGY 213
1. History of ARM 213
2. ARM’s open approach to IP licensing and business model 213 3. ARM’s experience in the PMD and nascent IoT spaces 215 IV. MICROPROCESSOR INFRASTRUCTURE AND SOFTWARE PLATFORMS 216 A. THE DOMINANT PMD SOFTWARE PLATFORM: ANDROID 217 B. INTEL X86 AND ANDROID: POSSIBILITY OF ‘PORTING’ 219 C. INTEGRATING THE SOFTWARE AND MICROPROCESSOR PLATFORM
APPROACHES WITH IP LICENSING STRATEGIES 220
V. CONCLUSION 222
CONCLUSION 225
TABLE OF AUTHORITIES 233
SUMMARY 265 SAMENVATTING: TECHNOLOGISCHE INFRASTRUCTUUR SERIEUS NEMEN 273 ACKNOWLEDGEMENTS 281
CURRICULUM VITAE 285
List of abbreviations
L I S T O F A B B R E V I AT I O N S
AG - Advocate General (of the ECJ) API - Application Programming Interface BSA - Business Software Alliance
CDMA/(3G) - Code Division Multiple Access (standard) CJEU - Court of Justice of the European Union CPU - Central Processing Unit
DARPA - Defense Advanced Research Projects Agency EC - European Community (predecessor to the EU) ECIS - European Committee for Interoperable Systems
ECJ - European Court of Justice (a branch of the tripartite CJEU) EFD - Essential Facilities Doctrine
EPC - European Patent Convention
ETSI - European Telecommunications Institute ESS - Evolutionary Stable Strategy (game theory) F(L)OSS - Free, (Libre), and Open Source Software FP7 - Framework Programme 7 (EU subsidy program) FRAND - Fair, Reasonable and Non-Discriminatory (standard) GC - General Court (of the CJEU)
GPL - General Public License (open source) GSC - Global Standards Collaboration
H2020 - Horizon 2020 (EU subsidy program, or Framework Programme 8)
HD - Hawk-Dove (game theory)
IC - Integrated Circuit
ICT - Information and Communication Technologies IEEE - Institute of Electrical and Electronics Engineers IETF - Internet Engineering Task Force
IoT - Internet of Things IPR - Intellectual Property Right ISA - Instruction Set Architecture
ITU - International Telecommunications Union LTE (4G) - Long Term Evolution (mobile telecom standard) NAC - Non-Assertion Clause
NASA - National Aeronautics and Space Agency NE - Nash Equilibrium (game theory) NPE - Non-Practising Entity
OEM - Original Equipment Manufacturer
OS - Operating System
List of abbreviations
PD - Prisoner’s Dilemma (game theory) PMD - Personal Mobile Device
RF - Royalty-free (standard) SEP - Standards-essential patent
SME - Small and Medium-sized Enterprise
SoC - System on a Chip
SSO - Standard Setting Organisation
TFEU - Treaty of the Functioning of the European Union
TRIPS - Trade-Related Aspects of Intellectual Property Rights (treaty)
VM - Virtual Machine
W3C - World Wide Web Consortium
