Standards, Patents, and WC3

I finished a paper a couple weeks ago about delayed patent enforcement as a business strategy. There have been a couple of companies lately that have “found” patents that covered a particular widespread technology. These companies have tried, and even succeeded in cashing in on these patents. For example, last year Forgent succeeded in getting substantial licensing revenue for their patent that covers the technology used to create jpeg files.
Of course, part of the reason a particular technology might attain widespread use is the fact that people can use it for free. In the case of jpeg, the technology is especially valuable because it has become a standard. It is recognized by virtually every imaging and browsing application. Would it have been so popular if people had to license it originally? Perhaps not.
In areas where standardization is key (ie communication technologies – we all have to use the same telephone standard for telephones to be effective), standards often come about as the result of standard setting organizations. If a standard setting organization chooses to adopt, and then influences the spread of, a proprietary technology, the technology rights owner (the patent holder) can charge significant licensing fees.
These fees are limited by the standard setting organization’s rules. They may require that member companies charge only “reasonable” fees, or they may require that member organizations relinquish any technology rights (not really – but they agree to a free license). There are advantages and disadvantages to both systems (and I’m not ready to claim that one method is better than the other) but I found it interesting that W3C has recently gone to a royalty-free system. They’ve also explained the decision.