By William New
BEIJING – Open-source software is receiving a rapid uptake in key developing countries and users, local industries and governments say it offers them market opening, flexibility and lower costs. China, perhaps the biggest potential market, showed last week how much open source is part of its plans.

The adoption of open-source software is also related to rising interest in open standards, which stems from emerging economies’ effort to make global standards-making more favourable to them. Governments and technology companies say that a change in standards which involve underlying patents can mean monopoly markets for patent-holding companies, most of which are usually based in developed countries.

A key issue is whether companies should be required to disclose early in the process of setting standards any related patents they have. China and others say sometimes the standard is established and then afterward it becomes clear that a company or companies own hidden patents and can gain by charging high prices for licenses.

The issue was discussed at a 17-18 April event in Beijing, originally billed as part of a series called “The Standards Edge,” www.thebolingroup.com, cosponsored by the Chinese Ministry of Commerce and several other agencies, as well as US technology company Sun Microsystems.

The Chinese government appeared to take control of the event. The name of the conference was said by organisers to change overnight to “WTO: IPRs Issues in Standardization,” similar to the title of a 2005 paper China submitted at the WTO to push for changes to the WTO Agreement on Technical Barriers to Trade.

There were very few question and answer opportunities during the event. Several senior Chinese government officials were unwilling to discuss policy with a foreign journalist, and a “press briefing” with Sun Microsystems Chairman Scott McNealy and Chinese officials was limited to local Chinese media, most of whom are considered to be affiliated with the government, sources said.

Speaking at the event, Hu Caiyong, CEO of Beijing Redflag Chinese 2000 Software Technology, an open-source software company, said international standards have not been fair to China and should be ignored, at least for now. “There’s no level playground,” he said. Countries present in international organisations like the World Trade Organization are there “to profit their own interests.”

“To establish an intellectual property protection system conforming to Chinese characteristics, protecting independent innovation: Avoid resorting to international usual practice blindly,” one of his slides read. He said Microsoft uses a less-precise western-based system.

Hu’s company’s Linux-based open source software, RedOffice, has been adopted by more than 200 local governments in China. “We are now in a position to compete with Microsoft,” he said, adding that his company has received regular legal threats from foreign technology and telecommunications firms. But he said he has support from the Chinese government as open-source software is essential for China’s development of competing and independent tools.

“Open source software is the gift to the whole of humankind from the open source community, and will be an opportunity for developing Chinese domestic software,” he said.

Joining of Open Document Format and Chinese Format?

Several speakers, including Hu, noted China’s development of its own open document format, referred to as UOF (Uniform Office Format), which could compete with Open Document Format, which has been recognised as a standard by the International Standardization Organization, and a competing format from Microsoft. Overtures were made by proponents of the ODF standard, including Sun Microsystems, to combine UOF with ODF. The UOF format was developed based on ODF, one source said.

ODF is a standard of the Organization for the Advancement of Structured Information Standards (OASIS), a global consortium on “e-business and web service” standards, as well as the ISO.

Goh Seow Hiong, director for software policy for Asia at the US-based Business Software Alliance, urged the audience to consider the risks of open-source software and open document standards and to support patents, attempting to cast doubt on arguments made before him. For instance, he said if it were decided to grant royalty-free standards, meaning patent-holders do not get paid for licensing of their patent that falls under a standard, “you would have kind of a little bit of a problem,” he said.

Goh also downplayed the usefulness of interoperability, and argued against the notion that a high degree of usage of a technology can lock in a standard, hindering technological evolution. BSA’s membership includes companies favouring proprietary models, such as Microsoft. At least one representative from Microsoft, Wen Lanling from the Beijing office, was in attendance, but no company representatives made public comments at the event.

In a reflection of the battle for China’s market, Microsoft also made a splash in Beijing during the week with events such as its Government Leaders Forum Asia, which creates a limited-access opportunity for “a thoughtful dialogue about policy, technology issues, etc.,” a company spokesperson said. Officials from Oracle also were on hand at the standards conference, and separately, Intel held its Developer Forum in Beijing during the week (http://www.intel.com/idf).

On the first day of the Microsoft leaders forum, a joint innovation centre between Microsoft and Chinese computer maker Lenovo in Beijing was announced, and Microsoft Chairman Bill Gates was in China from Thursday to Saturday. Gates also addressed students at Tsinghua University where he will receive an honorary doctorate, and was to participate in China’s Imagination Festival, which has an educational focus, according to another spokesperson. During one public appearance, a person ran in front of the stage with a sign hailing open source software, according to a photograph in China Daily. The partnership between Microsoft and Lenovo has grown over the past year or so, giving Microsoft a boost to entry into the Chinese market, according to reports. But Lenovo also has contracted with Sun Microsystems to “run” the logistics systems for the 2008 Olympics in Beijing, according to a Sun official.

Patent Pools and Standards

At back-to-back conferences, Zhan Ping, a Beijing University Law School professor, explained her dogged efforts to bring about improvements to patent pools, which she said are an arrangement in which two or more patent holders give licenses to each other or a third party and typically grant patents cooperatively. License fees are distributed to members based on their arrangement. She said patent pools help address increased decentralisation of patent rights which interferes with technology development, but problems can arise, for instance in the setting of license fees or anti-competitive activities. Undesired results can be inflated licensing prices and harm to the public domain, she said. Zhang described a lengthy case she and others brought against Philips electronics company that led to the invalidation of one its patents in China. She said the case could have an impact on other patent pools involving popular global technologies, in part by subjecting them to closer analysis under antitrust laws.

The Chinese government is stepping up its intensive focus on international policymaking bodies, officials said. At the standards conference, an official from China’s information technology agency gave numerous statistics, such as that the agency increased its submissions to the International Telecommunication Union by 54 percent last year to 655, and that China now has 1.5 million patents, 30 percent of which are related to information and communications technology.

International standards bodies were on the defensive as speakers from China suggested that the bodies, usually located in western countries, over-represent western developed countries. Representatives speaking in defence of western-based organisations came from the European Telecommunications Standards Institute, the BSI Group (an independent United Kingdom standards body), and the International Electrotechnical Commission (IEC), who also spoke on behalf of the International Standards Organization and the International Telecommunication Union.

The latter, IEC Standardisation Strategy Manager Jack Sheldon, described the new patent rights policy jointly issued by the three organisations in recent weeks, which raises the stakes on patent disclosure. He said if the policy forces the technical body to reconsider standards if previously undisclosed patents come to light later.

Sun Microsystems’ McNealy and other speakers said some standards are in the public interest and should not involve patents, such as language. He highlighted Sun’s open-source business model and took a shot at competitor Microsoft, saying Windows is a standard but is not open. “There’s almost no reason anymore to go proprietary,” he said, asserting that it hurts technology “migration paths” as “the barriers to exit [from use of proprietary technologies] are stunning.” He called on governments and standards bodies to address the problem.

David Vivas Eugui, programme manager for intellectual property at the International Centre for Trade and Sustainable Development in Geneva, discussed how development and the progression of IP is related. But he said developing countries are being pushed from the initial imitation stage to implementation to innovation more quickly than the developed countries went through in their IP system evolution some 100 years ago. He noted that new actors are influencing the policy process, and said the debate over patents and standards is “just the beginning … part of the reform and rebalancing of the IP system” that will inexorably take place.

William New may be reached at info@ip-watch.ch.