Smart City Building — Battle for Standards and Patents

What is city but the people? The great acceleration to urbanize with digital technologies presents alternative futures for cities. Digital platforms empower residents to make smarter choices for a more livable place. Smart City building is illusive but millennials know one when they see one. This is a fictional story of three digital natives watching and latching on a Tech Giant’s Smart City Building efforts in Toronto.

A Bottle of Fabulous Gold Glitter — Photo by Sharon McCutcheon on Unsplash

The Urbanist, Real Estate Lawyer and Data Scientist had created a “Millennial Front” group in WhatsApp after meeting at Sidewalk Toronto’s First Roundtable. They were meant to get-together again but too busy until a text from the Real Estate Lawyer to get this Millennial Front reignited.

MeiLing: My LLP partner Ed forwarded two links on software copyright and cost recovery. Have fun. Altair BASIC Copyright and Bill Gates Letter to Hobbyists. Smithy: Interesting. Did Bill G. actually believe people will pay? They ended up with a private army of attorneys. Angelo, any idea how that would influence Open Standards for our Smart Cities? Angelo: That’s copyright. Take a look here for IEEE 802.11 and their Standards Process. By the way, this is the Open Standard for WiFi. ISO also has a convoluted set of standards for smart cities with limited adoption so far. Smithy: Wow, that’s complicated. But, how do people make money from those Open Standards? MeiLing: Let me ask Ed. MeiLing: I talked to my in house Attorney. It’s complicated. Let’s meet at MaRS Timmy outside lower concourse Auditorium this Saturday at 3:30pm. MeiLing: I have never been inside the MaRS buildings. See you all. Angelo: k Smithy: k

The MaRS buildings complex has three modern towers with 1,380,000-square-foot labs and offices space. The towers are linked to a preserved four-story brick facade heritage building with a glass-roofed Atrium for public thoroughfare. The Atrium, with some modern bohemian decor, has evolved into a well known spot for the new Creative Class to hatch ideas. MeiLing, being a real estate lawyer, has a natural interest on how this Innovation Hub got funded through Private-Public Partnership (3P) scheme during the 2008 Great Recession of Americas. Smithy, a free spirit self-styled urbanist, has actually worked here in one of his gigs. The MaRS Timmy is Angelo’s hangout for coffee breaks. He’s working in this campus as a data scientist developing data hungry bots. The three millennials meet casually over coffee in a hot summer afternoon at MaRS Timmy to discuss Open Standards battles, and how Tech Giants are getting their dues.

Did you guys go to the 2nd and 3rd Sidewalk Toronto Roundtable?” Smithy asked. “Nope.” MeiLing and Angelo both replied. “Good decisions. There’s nothing new. The Sidewalk Toronto website has all the presentations, transcribed comments, post event survey and summary report. You don’t even need to watch their live streams. They were just following their consultation-private-public-partnership script with bigger buzz. All developers do that for variance and zoning by-law amendments in Community Consultation Meetings. The important one is the Plan Development Agreement on the Schedules. I guess that’s a legally binding document.” “Angelo, why don’t you give us a 10-minutes dump on this IEEE 802.11 standard setting process? Is that a Tech Giants monopoly play?” “Just want to make sure. Achieving market domination and monopoly is not illegal. Antitrust is about preventing others from challenging a monopoly.” MeiLing added.

Angelo started talking about open standards, ownership and standards process in his professorial tone. “The IEEE 802.11 standards has very specific rules governing architecture, interfaces and operations of WiFi networks. Under IEEE-Standard Association rules, all standards must be revised or withdrawn within a 10-year window. The initial IEEE 802.11–1997 has been revised and expanded in 2003, 2007, 2012 and 2016. This is one of the fastest pace standards to match the acceleration in communications technologies. Any individual or corporation can propose new standard ideas to IEEE but an IEEE Tech Group has to agree as sponsor. The IEEE Tech Group is responsible to decide and pick technology, do drafts and ballots, until a final draft is ready for sponsor ballot. A final approval is required by the IEEE-SA Standards Board before publication as an IEEE standard. Open standards are free to use but implementation of this WiFi standard requires several hundreds “essential patents” with licensing fees. You pay a fee to the patent owners when you have patented intellectual property in your product. Patents ownership tends to consolidate, or form into pools, over time to simplify administration and avoid sub-optimization on licensing fees.”

“Essential patent owners would have non-stop stream of money for critical technology standards like WiFi networks. The owners are required to make commitments on Reasonable And Non-Discriminatory, or RAND, licensing terms. The what, and how, essential patents are included in a standard have potential antitrust issues. The IEEE-SA actually made a request to the US Department of Justice for a Business Review Letter on antitrust implications when clarifying RAND to include limiting threats of Prohibitive Orders during licensing disputes, meaning of Reasonable Rates for Fairness, and permissible demands for Reciprocal Licensing to allow compliance patent implementation with license grant back provision in 2015. That’s why you see cellphone companies suing each other but no interruption to product shipments.” MeiLing added more background from her LLP partner.

“Propriety standards don’t require external process. Technology selection, patents pool and pricing are much simpler, and set under market conditions, without Fair-RAND commitments. Tech Giants can create fait accompli smart city standards without going through the lengthy IEEE or ISO process. Open standards are publicly available, and mostly meant free to use, but not free to implement. Propriety standards owners can also open their standards for free to use too. The only different is who owns the standard setting process and contents. No one is going to use propriety standards, even open and free to use, unnecessarily with exclusivity and uncertain patents price. There’s a sort of natural selection for survival of completing standards barring monopolistic power forcing challengers out. That’s illegal under antitrust laws but difficult to prove.” Angelo continued.

“Those are gold mines for Tech Giants and lawyers with smart city propriety standards. Open or otherwise. Right?” Exclaimed Smithy. “A Private-Public Partnership (3P) scheme with Tech Giants to prove smart city ideas is daring for a Non-Crown agency with restrictions on borrowing to invest and raising, or sharing, revenue from the gold mine. This partnership will be haunted by unmatched technical know-how, asymmetry information and power imbalance. The whole neighbourhood is essentially a laboratory for social experimentation on the Sidewalk Labs Urban Innovation Platform with Sensors, Map, Model and Accounting digital pillars. Bold vision with significant risks to entrusting second/third industrial revolution era social institutions, city government and arm’s length business entity established by an Act of Provincial Parliament, to manage the outcomes. The Quayside project is a real estate deal with land and far more. Social capitals with residents, superstructure and civic norms are all in for a social experiment, there ought to be significant social dividends on the societal risks. But, who’s to decide on a fair risks adjusted return on those capitals? We need to unlock the value of smart city “Open Standards” and patents developed through this social experiment from our City.” Smithy almost made a speech.

The Urbanist, Data Scientist and Real Estate Lawyer have all agreed the Plan Development Agreement on Schedule G and H — Intellectual Property Terms and Freedom of Information and Confidentiality Terms are keys to protecting public investments and future returns with a new kind of social structure like their “Millennial Front.” MeiLing will talk to Ed, her LLP partner, for more opinions on those Intellectual Property, Copyrights and Patents schedules, and Smithy has also committed to do some work on the business model of Multi-Sided Smart City Platform markets.

Are the Tech Giants really doing a Techno-Marshall Plan for Smart Cities? The Millennial Front will meet again at Smithy’s favorite hangout at the Toronto Distillery District over beers.