For over thirty years U.S. companies have enjoyed a home court advantage in developing information and communications technology (ICT) standards. Specifically, the overwhelming majority of the more than five hundred consortia founded over the last thirty-five years to develop ICT standards have been formed under U.S. laws and headquartered in the U.S. That’s hardly a surprise because the vast majority of the companies that founded these same consortia were also American companies. Now the times may be a-changing.
The ability to form and maintain standards consortia in the founders’ backyards provides significant advantages. They include convenience, reduced travel costs, predictability of legal results, choice of language, demonstration of national leadership, standardization of governance structures and more. For decades, foreign companies were amenable to this practice, so long as a sufficient percentage of face to face meetings were held outside the U.S.
That tolerance began to erode after 9/11. New security measures made crossing the U.S. border more tedious, sometimes even requiring fingerprinting as a precondition to entry. Some members couldn’t obtain visas at all, an issue that became more critical as Chinese companies became more active in standards development. Privacy concerns also escalated, leading to European objections to hosting the information of its citizens in the U.S. at all. Those concerns were temporarily abated when new rules were put in place, but anxieties have heightened again – this time within the U.S. as well as in Europe – over the privacy policies of the largest U.S. IT companies.
This year, concerns increased again when ZTE, and then Huawei and scores of that Chinese company’s affiliates, were added to the U.S. “Entity List.” Huawei and its affiliates are reportedly members of over 400 ICT standards organizations, each of which was suddenly tasked with figuring out which of its activities, if any, it could now permit the Chinese companies to participate in.
The predictable result of this continuing trend has been disgruntlement by foreign participants in U.S. based collaborative organizations like standards consortia (which generally conduct their development work on a members-only basis, and are therefore usually subject to Entity List concerns) and even open source foundations (which are generally not, because their collaborative activities are almost always publicly visible).
This has led some consortia and open source foundations to consider relocating abroad, and caused some companies intending to form new organizations to consider incorporating outside the U.S. as well. This, despite the fact that operating abroad would not avoid Entity List issues at all, since the concern at issue is the disclosure of U.S. origin technology, and not the geographic location where an actual disclosure occurs.
One organization, at least, has decided it has had enough. The canary in this particular coal mine is the RISC-V Foundation, an open source hardware project which last week announced it was pulling out stakes and moving to Switzerland. The fact that RISC-V operates in the same way as an open source software project (i.e., all of its work in process is publicly visible - meaning it is not subject to Entity List concerns) rather than in the semi-open fashion typical of a standards consortium underscores the degree of pent-up frustration that some non-U.S. companies are feeling. In short, the question involves not just concern over current U.S. policies, but uncertainty about what may happen next.
It remains to be seen whether RISC-V will be an exceptional case, or the beginning of a trend. If the latter, the U.S. government should be concerned, as U.S. companies will lose their home court advantage if the center of ICT standards moves elsewhere. Unfortunately, there are no indications that standards development will be given any special consideration as respects the Entity List, despite a letter from 26 CT consortia urging the Department of Commerce to provide relief. To date, we have received no response from the government other than a suggestion to refer to general (and not helpful) guidance publicly issued after the delivery of our letter.
What the future holds remains to be seen. Thus far, the administration shows no sign of backing down on its 5G technology concerns. Perhaps if a comprehensive trade deal with China is eventually signed there may be some movement on that front, although the two concerns are not logically related. Either way, as the decision of the RISC-V Foundation indicates, international concerns run deeper than this single issue. It would take a change of policy in multiple areas – which seems very unlikely – to level set back to the times when forming a new consortium in the U.S. was an automatic default decision.