Standardization, Open Source, and Innovation: Sketching the Effect of IPR Policies

Abstract

Open Source and standardization can be described as two ‘stewards of innovation’ (Kapos 2017). Although practically two different ecosystems with a diverging set of rules and objectives, they, however, meet in their purpose to push the frontier of innovation. The latest technological developments are increasingly incentivizing firms and individuals participating in these ecosystems to work more closely together. However, under whose rules? And with what consequences for the innovation ecosystem? In this contribution, I try to sketch answers to these and related questions with the focus on IPR policies of two ecosystems. Based on the outlined trade-offs, a number of specific points are offered. First of all, patent and copyright royalties may discourage use of standards within Open Source projects. For patent royalties, these effects can be also addressed outside of the standardization process by means of defensive and licensing patent pools or aggregated individual commitments. It depends on the cost and benefits of a particular project whether such solutions should be in-built ex-ante or created externally ex-post. Second, Open Source licenses with royalty-free patent grants might accelerate diffusion of specifications, especially if done within the reference implementations of SDOs, and encourage a new set of innovators to join the process. At the same time, it might discourage a set of pure R&D firms which heavily rely on royalties to recoup the investment. SDOs steering the process might want to consider the likely pool of innovators on both sides when launching a project. Third, given that we observe that both royalty-free and royalty-bearing layers are able to sustain innovation investments in the ICT, none of two approaches seems inherently superior. However, the choice can influence the make-up of innovators and technological trajectories. From this perspective, they both have their place in the innovation ecosystem. SDOs should, therefore, promote a choice between them on a project basis.