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Open Standard and impact to the industry in China



Wen Gao, Ph.D

Chinese Academy of Sciences




Talking outline


Goal of standardization

Movement of current patent pool

Rebuilding a bridge between standardization and industry

Open standard impact to China




Goal of standardization


Handiwork vs machine manufacture

Any product has a chain in processing, from material, parts, technics, installation, …

If some parts in that chain controlled (can be taken) by few skill people, it is hard to make large volume/low price production, it is a handcraft production

For enable machine manufacture, standard and professional machine/workers are required





Goal of standardization(cnt)


Standardization is try to make mass production with good quality and low price

Easy to produce

Easy to package

Easy to install

Easy to change

Easy to test

Easy to cost down

Not control by few people/process

Parallel engineering





Enable parallel engineering


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Movement of current patent pool


Before understanding current situation, we need look back the patent pool





Patent pool


A patent pool is an agreement between two or more patent owners to license one or more of their patents to one another or third parties






Advantage of patent pool


Reduce transaction fees to obtain technology

Reduce the probability of litigation





Features of a patent pool


A technology standard that is definite and well defined

An evaluator/independent expert to determine which patents are essential, thereby defining a group of EPHs(essential patent holders)

A license drafted and approved by EPHs to allow to license technology on reasonable and nondiscriminatory basis

A patent pool administrator appointed by EPHs handle the administrative tasks

EPHs retaining the right to license the patents outside of the patent pool





History of patent pool


Phase I: 1856-1923, manufacture driven

In 1856, Sewing Machine Combination in US formed a patent pool for sewing machine manufactures

In 1917, a committee organized by Assistant Secretary of Navy, formed an aircraft patent pool for almost all aircraft manufactures in US

Phase II: 1924-2001, standardization driven

In 1924, Radio Corporation of America (early name: Associated Radio Manufactures), merged the interest of multiply companies, leading to the establishment for standardization of radio parts, airways frequency allocation, and TV transmission standard

In 1997, MPEG LA formed MPEG-2 patent pool, approved by DoJ

In 1998, Sony etc formed 3C patent pool for DVD

In 1999, Toshiba etc formed 6C patent pool for DVD

Phase III: date-, standardization & industry parallel driven

AVS starts to form AVS patent pool, by an interest group they are willing to promote technology thru mass production with low price license fees

DMP?





Difference between phase II and III?


Phase II

Standard group is separated from patent pool group

Standard group is hard to decide a technology should be adopted or reject, in term of simple licensing

It is easy to block the usage of standard, unless agree to charge a high license fees




Phase III

Standard group is connected with patent pool group

Standard group can decide to adopt or reject or around or avoid some technology, for making simple

It is hard to block the usage of standard if blocking patent owners all in pool




Voluntary Patent Pool vs Non-Voluntary Patent Pool


Are all patent pool should be voluntary patent pool?

No

US aircraft patent pool

Aids medicine patent pool?

Have you found any patent of nuclear technology in US?





Category of patent holders by intention


Use patent to promote new technology, =>partnership

Big companies who make product

Universities and research institutes who grant by government

Basis of AVS working group

Use patent to make money, =>around/avoid

Pay attention to not infringe their patents

Use patent to protect itself, =>friendship

work with




Problem of current patent pool


A worst case by DVD IP happening

In 2002, a DVD device cost 30$ in China major manufacture

They are asked to charge 19.5$ for IP using, later on into 9.5$

They got order in price of 30$ from US and EU sale channel

They could make balance either pay non-IP or get export-tax return from Chinese government

In 2004, a DVD device cost 20$ in China major manufacture

They are still asked to pay 9.5$ for IP

They are hunted by IP LA company

They decide to away from DVD manufacture

From now, DVD will manufacture by either major EC company(=expensive), or small company in China(=no quality guarantee)





Problem of current patent pool(cn’t)


Should manufacture pay the license?

No, consumer should pay

In above case, why Chinese manufacture pay usage fee for US/EU consumer?

In case manufacture pay, there should be a mechanism to refund that from consumer

Could license fee allow that high?

In 2002, 19.5$/(30+19.5)$=39%

In 2004, 9.5$/(20+9.5)$=32%

It is much higher (5-6 times) than the normal margin of major manufactures

Conclusion

The mechanism of license fee collection is not correct in practice

This mechanism hurt manufacture industry and then finally hurt consumers

It needs to be redesigned





Problem of current patent pool(cn’t)


What is wrong of MPEG-LA pool

The price is too high, comparing with the device cost

Charge to wrong group

Should do to end user

Or do to chip industry and software industry




Can current PLA body have capability to solve the problem?


Also not, reason?

Two separated steps

Make the standard first

Then create a patent pool

After standard fixed, there is a only way to go, determine the license term by all essential patent holder

The worst case is, some of patent holders what to use their patent to make big money, no matter how industry and customs feeling

It is very hard to change from their current way




How to balance between patent holder and consumers


It must give return to patent holder, for engaging continuous innovation

But we must protect manufacture to engage them to make more good and cheap product, to benefit consumers

How to do that?

Reasonable price and term

Right location to charge




Rebuilding a bridge between standardization and industry


Rethink the goal of standardization

Not for making money=>can do in not-profit-organization?

Don’t want to create a bottleneck controlled by someone

Making good quality and low price product to benefit consumers




A case study for new bridge


AVS activity in China

Audio Video coding Standard

Make a simple and low-cost industry standard

Use as more as we can the parts from MPEG, avoid/around disagreement for IPR policy

Co-design on both technology and IP

One-stop-shopping license

Integration of blocking technology from partners




Overview of AVS 1.0 Video


High-efficiency coding

Focused application – initially HDTV

Lower complexity, lower cost

Complete solution:

Video, audio, systems, DRM

This paper concerns video coding

Simple, comprehensive patent licensing




Open standard Impact to China


Organization of standard in China

SAC(Standardization administration of China)

Information standardization committees

AVS Working group

…




Open standard Impact to China(cn’t)


AVS, is a model learning by other standard working groups

Open standard

IPR policy

Manufacture following

Government support

State Commission of Development and reforming

Ministry of Information Industry

Ministry of Science and Technology

Standardization Administration of China

State Administration of Radio Film and Television

Chinese Academy of Sciences





Summery


Bridge?

Design standard and practical IPR policy in same time

Educate people to return the basic principle of standardization

Balance carefully between patent holder and industry




AVS
www.avs.org.cn/en


More info?

Email: [e-mail]

http://www.jdl.ac.cn




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