The WiFi takeover

I have a big box of wires under my bed. I’m not sure what most of them go to, and in a few years, I’m not sure how many of them I’ll still need. Our world is becoming increasingly wireless. The prevalence of WiFi access we enjoy today and technologies like wireless charging for toothbrushes and other devices are changing the way we live our everyday lives. And fortunately, industry standardization of emerging technologies is helping facilitate advancements to market more quickly than ever before.

The standards arm of the Institute of Electrical and Electronic Engineers (IEEE-SA) sets technical standards and usage schemes for many of the technologies that we use most. In the past, the IEEE-SA has sought to protect investments in research and development while establishing a system that allows other companies to license these standard essential patents for use in their products under fair, reasonable and non-discriminator (FRAND) terms . This arrangement has long helped incentivize and protect innovation while increasing the quality of life for people around the world.

{mosads}However, despite a long history of practical and mutually beneficial rule-making, the Department of Justice and a small band of companies with close ties to the White House are pressuring IEEE-SA to alter its current usage standards. The changes would unequivocally shift the balance of power away from innovators–imposing price caps and weakening the position of inventors who pursue legal recourse in response to patent infringement.

The most dangerous of the proposed rule changes would burden innovators with very restrictive licensing provisions that drastically reduce the royalties they can collect–far below fair market rates. This move would certainly decrease the value of patents and drastically reduce incentives for new research and development investments. More detrimental, however, it would deter patent owners from contributing their technology for standardization–forcing consumers to live in a world with much less compatibility among the technology they use.

Despite fervent objections by American members of the IEEE-SA, the modifications continue to advance through an opaque process with the behind-the-scenes support of the DOJ. Not only is it inappropriate for the DOJ to involve itself in what is clearly a matter of private enterprise–the administration’s willingness to interject itself on behalf of companies it’s grown increasingly comfortable with demonstrates the highest degree of corporate cronyism. However, unlike giving a one-time contract to a political ally, the administration’s move to could fundamentally change the tech innovation landscape for decades to come.

Additionally, the changes being proposed through the IEEE are very similar to China’s anti-monopoly laws, which are being used to lock our foreign competitors.  As law professor Richard Epstein has pointed out, actions by US officials must be careful to ensure their actions do not “lend cover or support to China’s misuse of its own antitrust law.”  The present course unfortunately may do just that.

In order to appreciate the magnitude of the administration’s encroachment into the affairs of private enterprise, it’s important to understand the make-up of IEEE’s membership. The vast majority of the technological contributions to the IEEE small and mid-size companies who create and design and bring valuable patented technology to the table. In contrast, the members looking to reshape the IEEE patent policies are in large part implementers–the players paying to license the patents.

The former group effectively serves as the R&D arm for the entire industry, while the latter helps bring the technology to market. In order to cut cost and increase profits, the implementers are attempting to shift licensing standards in their favor. If they’re successful, it will certainly provide a short-term boon for their stockholders, but the proposed policy changes would be tremendously harmful to future advancements. Lower licensing fees and weaker patent protects deter expensive and timely research and development.

Consumers shouldn’t lose out on long-term advancements because a small band of greedy licensees with friends in high places decided they want to break a system that has served us well for decades.

Erik Telford is Acting President at the Franklin Center for Government & Public Integrity