The draft e-Governance Policy and its implications on patent law in India

The Department of Information Technology (DIT), Government of India (GoI) recently came out with a draft (V1.1)  Policy on Open Standards for e-Governance, (POS-e-GOV), available here.

The objective of this Policy is to “promote technology choice, avoid vendor lock-in and aims for reliable long-term accessibility to public documents and information in Indian context.”

There have been prior discussions on the topic at this blog, for example here but those discussions were on a previous version of the  policy.

The current draft of POS-e-GOV contain a six mandatory clauses for an identified standard to be identified as an “Open standard”.  Of the six clauses there are two that may be of greater interest to patent practitioners in India. They are clauses 4.1.2 and 4.1.4  

4.1.2:  The patent claims necessary to implement the Identified Standard shall be available on a Royalty-Free basis for the life time of the Standard. If such Standards are not found feasible then in the wider public interest, Fair, Reasonable and Non Discriminatory terms and conditions (FRAND) or Reasonable and Non Discriminatory terms and conditions (RAND) with no payment could be considered.

4.1.4:  Identified Standard shall be recursively open.

POS-e-GOV defines RAND and FRAND as:

RAND:  Reasonable And Non-Discriminatory.  RAND is a phrase that international standards groups use to describe terms to which a patent contributor to a standard must adhere. If a technology which is part of the standard is to be licensed for a fee, the terms must be (i) non-exorbitant, (ii) published, and (iii) the same for all implementers (rather than subject to individual negotiation).  

FRAND:  Fair Reasonable And Non-Discriminatory.  FRAND is a phrase that international standards groups use to describe terms to which a patent contributor to a standard must adhere. If a technology which is part of the standard is to be licensed for a fee, the terms must be (i) impartial, (ii) non-exorbitant, (iii) published, and (iv) the same for all implementers (rather than subject to individual negotiation). 

There are certain issues with the definitions as provided in POS-e-GOV because they deviate from the generally accepted definitions of these terms.  

RAND terms, in general in the standards area, are a basic commitment for a standard setting organization (SSO) member to agree to license its Necessary/Essential patent claims on reasonable and non-discriminatory (RAND) terms and conditions.  The idea is that in exchange for adopting a standard that includes the patented technology of a SSO member, that member gives up a part of its rights and agrees to offer licenses to all who wish to implement or practice the standard, including the patented technology.  

There are two key variables in a RAND discussion:  The RAND terminology is inherently flexible so that it can be used in varying conditions and business engagements and a RAND term does not mean that two prospective licensees will receive exactly the same patent.  A RAND license may include a royalty free license and any other term or condition that may arise in settling a business arrangement between companies.  In other words, a RAND term is a commitment to negotiate a license – a licensor and prospective licensee must negotiate the actual terms of a license.  Flexibility of terms is a hallmark of a RAND license.  

Note that POS-e-GOV definition states that RAND terms are the “same for all implementers.”  This is not the provided for in the RAND terms. See for example the definition of RAND terms in the patent license policy of World Wide Web Consortium (W3C) available here.  The W3C had initially proposed RAND licensing but later settled for Royalty Free (RF)-RAND terms.

There is considerable debate about RAND terms and POS-e-GOV gives a certain twist to the definition itself.  

Necessary Claims:  Companies that participate in licensing a standard, often like to know the amount of any patent royalties they may have to pay before adoption of a new standard and may ask any member company to provide them with patent claims to disclose the existence of such claims in the belief  that the participants may determine the royalties due to that patentee/owner/assignee.  Accordingly, IP policies generally contain a disclosure requirement of necessary Claims. This is a circular reference problem because there is no apriori knowledge of a necessary claim before a standard is defined.  

But in practice, disclosure of necessary claims is generally done during development of a standard and before its adoption.  See for example, the IP policy of 3GPP working under ETSI available here.  ETSI provides for an Ex-ante disclosure of licensing terms where the disclosure is about committing to licensing terms before the protected technology will be selected as part of a standard or, in other words, a mechanism about submitting anticipated licensing terms for a given standard draft before the contribution is locked-in as a standard.

Note that even now, there cannot be any necessary claims because the patent has not been granted – it is disclosed that there are patent applications that may have significant bearing on the standard.  In other cases, some members may disclose granted claims to the standard body as necessary claims.  This process makes the standard development procedure more transparent and avoids a hold up (a situation where one company slips its patented technology into a standard so it can charge unreasonable license fees from all adopters of the standard or refuses to negotiate a license with parties wishing to implement a standard).

A Royalty-free (RF) approach is one of the suggested ways to eliminate (at least theoretically) the hold-up risk as discussed above.  An example of a RF-RAND license can be seen here.  

There are inherent risks associated with RF-RAND licenses:  standard adoption may be significantly delayed, and key patentees may not participate at all.  When patentees choose not to participate, the overall innovation process may  stall and that standard may not be commercially adopted. Therefore, the concerns against a RF-RAND license is that it may apply to a broad set of claims, it may not provide adequate safeguards against inadvertent licensing commitments, and may even result in an unsuccessful standard.  

A government adopted standard, by definition, would apply to all stakeholders (citizen, businesses, and employees) and as such, the unsuccessful standard risk may not be excessive, but the other two risks are still inherent.  

POS-e-GOV aims to reinvent the wheel; Because technology for use to connect with the citizen, the employees and businesses is available and it may easily be customized to government requirements.   There are a large numbers of vendors both inside and outside the country.  There is no incentive for any vendor to provide their patents to the standard as purported by POS-e-GOV.  For example, document creation, editing and exchange techniques are not new – DOC, PDF, XML, OOXML are just a few of them.  

“Recursively open” (clause 4.1.4 of POS-e-GOV) is not directly explained.  However, a draft policy on Open Standards, released July 2008 provides that “[S]elected Standard should be recursively open; They shall not use unpublished extensions.”

This means that all contributions by members – whether about necessary claims, or other developments, cannot be kept out of public view.  This would mean that a technology inventor risks their respective contribution inadvertently falls into the public domain.  This provision is similar to an Ex-Ante provision as provided by ETSI.   

However, there is a significant debate regarding the benefits conferred by ex ante licensing terms.  Disadvantages of ex ante terms include that it discourages participation from inventors, and decreases license transparency.  Most importantly, Ex Ante disclosures do not mitigate the risk of hold ups.  See for example a letter discussing the effect of such terms in a license.

Leaving aside the applicability of section 3(k) of the Indian Patents act, to patents envisaged under POS-e-GOV, the above two mandatory clauses discourage both publication and participation as discussed. (There has been a recent decision from the highest German Court holding a software patent valid.  See for example, a discussion about the decision of the German Court here.  Suffice to say that the law regarding software patents is still in a flux–and Indian courts will definitely see the decisions rendered in the German case and Bilski case.

There are a large number of patents filed from “software” giants based in India. For example, the Microsoft India Development center (IDC) is Microsoft’s second largest development center in the world, after Redmond, WA.  Infosys, Wipro, TCS and a host of others, are major providers who have a significant presence in the technology area affected by the e-Governance standard. To address such problems, the DIT may be advised to invite specific comments from prospective vendors and from other departments (including the Department of Industrial Policy & Promotion – the patent office) regarding the Policy, to ensure that objectives as provided are met and that the standards are widely adopted.