Innovation-Based Technology Standards Are Under Threat

Our world faces challenges more intricate and abstract today than at any previous point in history. As these challenges grow ever more tangled and complex, governments and businesses strive to create innovative technological solutions.

Unfortunately, creativity is not a matter of will. And the need for solutions is not itself sufficient to bring them about. Innovation demands the proper conditions — a balanced mix of flexibility and stability, spontaneity and forethought, risk and return. Increasingly, these conditions are under threat from the very institutions that have come to rely most heavily on the technologies they produce. The patent system and the standards system — two vital contributors to U.S. economic growth and consumer prosperity, that have together kindled a generation of unparalleled technological advancement — are being wrongly targeted by regulators, academics, and special interests as impediments to future progress.

A movement has taken hold in the United States and elsewhere to reduce the benefits of patent protection and to limit royalties available to technology inventors who contribute their innovations to industry standards.1 This movement has gained traction in courts, universities and boardrooms based on the mistaken belief that inventor protections increase the cost of standards-based consumer technologies. In fact, the opposite is true,2 and public policies aimed at weakening the patent and standards systems risk stalling the pace of technological advancement.

It is far from granted that technological progress will continue at recent rates. The social, regulatory, and financial headwinds faced by inventors intensify every year. Absent the legal and economic conditions required to continually foster innovation, there is no reason to believe technological progress will continue at any particular pace, and serious cause for concern that the promises of the fourth industrial revolution will go unfulfilled.

Take the extraordinary potential of 5G wireless systems — steadily moving from the abstract promise of “next-generation” technology to concrete and widespread use — to connect drivers with roads and other vehicles around them, to connect patients with medical practitioners, and to digitize industries across a vast spectrum of commercial endeavors. Shared industry standards are necessary to make these communications instantaneous, reliable and secure, but their future is threatened by an economic and regulatory system that increasingly favors technology implementers to the detriment of technology creators.3 Companies like Ericsson and Nokia,4 leading innovators of 5G technology, have seen their licensing revenues and profits fall dramatically in recent years, due in large part to nonpayments from implementers and various government enforcement actions.5

The future of innovation — of smart, interoperable, and interconnected products — demands a sustainable system of investment, which in turn requires reliable facilitators of capital. Patents and standards are two proven accelerators of industry, and yet each faces growing pressure from regulators and technology implementers. If society is to benefit from a future of economic growth fueled by technological innovation, careful attention is required at the delicate interface between the patent and standards systems. An objective and informed balancing of the true costs and incentives of innovation, coupled with an appreciation for the exceptional opportunities for collaboration and growth made possible by patents and standards, is necessary to ensure that the inventors we have come to rely on have the resources they need to continue delivering on their potential.

Despite the truly profound societal interest in preserving incentives for technological investment, popular discussion of patent rights and standards is limited. This is because consumers are generally unaware of the process of value creation in high technology industries. Device manufacturers are customer-facing, so their contributions are readily recognized. But the inventors who enable device-level innovation through their contributions to underlying technologies go unseen, and their contributions unappreciated. Indeed, consumers often mistakenly attribute the technological achievements of modern devices to the device makers, when much of the credit should go to the inventors who create the foundational technologies from which the devices are built.

Consider the modern smartphone. The brilliant display, high-resolution camera, and full-motion video capability are all attributable not to the device manufacturers, but their upstream suppliers. And these tangible features are, themselves, useless without the profound innovations in cellular communications and processors required to run them — innovations generated by earlier inventors.

The underappreciation of upstream innovation becomes apparent where innovation is brought to market through industry standards. Once products that implement a given standard are put on the market, the only way inventors can receive compensation for the use of their inventions included in the standard — and, therefore, the only way inventors can realize a return on their substantial investments of time and money — is through the receipt of royalty payments. In contributing a technology to a given standard, and thus foregoing patent exclusivity, innovators surrender every other viable revenue opportunity. Unlike companies competing on nonstandardized products, innovators in standards-based industries cannot recoup research and development (R&D) expenses by simply raising the prices of the finished products they sell. This is because standards-based innovators, such as InterDigital and LG, sell in price competition with standards-implementing manufacturers, such as Apple and Samsung, who place comparatively fewer resources at risk to create the standards their products implement. These competitors have a dramatically lower cost basis and do not need to make up for time and money spent innovating. Yet they are able to enjoy and exploit the underlying product improvements resulting from the work of the inventors who created and contributed the standardized technologies.

The problem inventors face in recouping their investment costs is compounded by the fact that, in order for technologies to be included in a standard in the first instance, inventors must both disclose the technologies to industry groups and commit to license them on reasonable and nondiscriminatory terms to anyone manufacturing devices practicing the new standard. Such disclosures and commitments necessarily occur years before any product embodying the new standard will reach the market, meaning that new technologies are available for implementers’ use well in advance of making royalty payments on them. During that period, manufacturers and consumers forget the importance, desirability, and value of the standardized technologies and discount associated patents and compensation accordingly, while economic, judicial, administrative, social, and competitive pressures force inventors to accept royalty rates that are unfair. The current remuneration paradigm thus involves a fragile “give now, get paid much less, much later” dynamic with respect to intellectual property. And as royalties are the only means of compensation for inventors, this dynamic can render inventors unable to access the capital they need to continue inventing, stalling the cycle of innovation.

Leadership in Innovation Requires Incentivizing Innovation-Based Standards

“Innovation-based standards,” such as Wi-Fi, Bluetooth, and 4G LTE, are standards that incorporate truly inventive technological advancements, enabling implementers to build products that do more than simply follow convention. These standards represent technologies unequivocally superior to those previously available. The natural desire of device manufacturers to acquire these technologies at their lowest possible cost is at odds with the sound public policy of incentivizing investments in innovation and the contribution of innovations to standards. It pits a short-term gambit by implementers of standardized technologies to pay less than the value they receive against the inevitable long-term consequence of inventors of standardized technologies disappearing in the face of poor returns on their sizable investments in innovation.

Implementers who would restrict the ability of innovators in standards-reliant industries to recover reasonable royalties are building profitable businesses on a technological foundation to which they made no contribution. For instance, the best empirical research to date6 suggests that royalties on the sales of most mobile phones on the market today are around 3% or 4% — pennies on the R&D dollar. What certain implementers seem to be pushing for are completely royalty-free licenses. They are, in effect, standing on the shoulders of giants while striking them at the knees. And such “short-term win, long-term lose” scenarios rarely make for good public policy.

Companies that make massive investments in R&D to generate the modern wonders of the digital world, then willingly share their hard-won successes through standards for the benefit of all industry participants and consumers, offer prime value in what is perhaps mankind’s most constructive and nuanced form of commercial activity. These innovators should be celebrated, encouraged, and rewarded. They cannot be expected to sacrifice their innovations in return for vanishing economic opportunity. Resolute leadership in championing innovation-based standards requires the careful crafting and honoring of incentives that recognize the critical role, and yet perilous position, of innovators. Leadership in this context means resisting the efforts of standards-implementing manufacturers to take without paying, supporting policies that enable innovators to receive fair compensation for their contributions, and attaching significant consequences for those who fail to pay for the standards-based innovation from which they seek to benefit.

With innovation-based standards bringing unprecedented value to our economy, U.S. policy makers must recognize what makes these standards so valuable: voluntary contributions of technology by innovators who invested much in the creation of that technology. To pursue policies aimed at rewarding and encouraging these innovators is to add impetus to the highest order of human enterprise.


MIT Sloan Management Review

2018 Thales Data Threat Report: 94% of organizations are using cloud, IoT and other transformative technologies

2018 Thales Data Threat Report: 94% of organizations are using cloud, IoT and other transformative technologies

2018 Thales Data Threat Report: 94% of organizations are using cloud, IoT and other transformative technologies

As businesses embrace new environments, data breaches have become the new reality.

Thales announces the results of its 2018 Thales Data Threat Report, Global Edition, issued in conjunction with analyst firm 451 Research.

The report finds digitally transformative technologies are shaping the way organizations do business and moving them to a data-driven world, with 94% of organizations using sensitive data in cloud, big data, IoT, container, blockchain and/or mobile environments.

Digital transformation is driving efficiency and scale as well as making possible new business models that drive growth and profitability. Enterprises are embracing this opportunity by leveraging all that digital technology offers, with adoption at record levels:

  • 42% of organizations use more than 50 SaaS applications, 57% use three or more IaaS vendors, and 53% use three or more PaaS environments
  • 99% are using big data
  • 94% are implementing IoT technologies
  • 91% are working on or using mobile payments

This rush to embrace new environments has created more attack surfaces and new risks for data that need to be offset by data security controls. The extent and impact of increased threats is most clearly shown in levels of data breaches and vulnerability:

  • In 2018, 67% of respondents were breached, with 36% breached in the last year – a marked increase from 2017, which saw 26% breached in the last year
  • Consequently, 44% of respondents feel “very” or “extremely” vulnerable to data threats

While times have changed with respect to technological advancements, security strategies have not– in large part because spending realities do not match up with what works best to protect data:

  • 77% of respondents cite data-at-rest security solutions as being most effective at preventing breaches, with network security (75%) and data-in-motion (75%) following close behind
  • Despite this, 57% of respondents are spending the most on endpoint and mobile security technologies, followed by analysis and correlation tools (50%)
  • When it comes to protecting data, the gap between perception and reality is apparent, with data-at-rest security solutions coming in at the bottom (40%) of IT security spending priorities

This disconnect is also reflected in organizations’ attitude towards encryption, a key technology with a proven track record of protecting data. While spending decisions don’t reflect its popularity, respondents still express a strong interest in deploying encryption technologies:

  • 44% cite encryption as the top tool for increased cloud usage
  • 35% believe encryption is necessary to drive big data adoption – only three points behind the top perceived driver, identity technologies (38%), and one point behind the second (improved monitoring and reporting tools, at 36%)
  • 48% cite encryption as the top tool for protecting IoT deployments, and 41% as the top tool for protecting container deployments
  • In addition, encryption technologies top the list of desired data security purchases in the next year, with 44% citing tokenization capabilities as the number one priority, followed by encryption with “bring your own key” (BYOK) capabilities
  • Encryption is also cited as the top tool (42%) for meeting new privacy requirements such as the European Union General Data Protection Regulation (GDPR)

Garrett Bekker, principal security analyst, information security at 451 Research and author of the report says:

“This year we found that organizations are dealing with massive change as a result of digital transformation, but this change is creating new attack surfaces and new risks that need to be offset by data security controls.”

“But while times have changed, security strategies have not – security spending increases that focus on the data itself are at the bottom of IT security spending priorities, leaving customer data, financial information and intellectual property severely at risk. If security strategies aren’t equally as dynamic in this fast-changing threat environment, the rate of breaches will continue to increase.”

Peter Galvin, chief strategy officer, Thales eSecurity says:
“From cloud computing, to mobile devices, digital payments and emerging IoT applications, organizations are re-shaping how they do business – and this digital transformation is reliant on data. As is borne out by our 2018 Data Threat Report, we’re now at the point where we have to admit that data breaches are the new reality, with over a third of organizations suffering a breach in the past year. In this increasingly data-driven world it is therefore hugely important to take steps to protect that data wherever it is created, shared or stored.”

To offset the data breach trend and take advantage of new technologies and innovations, at minimum organizations should adhere to the following practices:

  • Leverage encryption and access controls as a primary defense for data and consider an “encrypt everything” strategy
  • Select data security platform offerings that address multiple use cases to reduce complexity and costs
  • Implement security analytics and multi-factor authentication solutions to help identify threatening patterns of data use

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IoT Business News

Is the Threat of Digital Disruption Overhyped?

In a recent short essay titled “Survival Skills for a Digital World,” which appeared in our fall 2017 issue, MIT Sloan Management Review editor in chief Paul Michelman wrote that today’s managers need “to embrace the demands of change.” Given the rate of change and the extent to which business environments are shifting as a result of digital technologies, Michelman noted that it’s helpful for businesspeople to accept change as a constant. “The kind of transformation we are experiencing in business today isn’t easy for anyone,” he wrote. “However, once you accept the truth that change is ongoing, change becomes more about opportunity and less about challenge.”

One MIT SMR subscriber had a different view. Responding to Michelman’s essay, reader Tony Pavone, director of process engineering at IHS Markit Ltd., a global information services company, wrote that he wished MIT Sloan Management Review and others would move past what he perceives as an “obsession with radical transformation, chaotic disruption, and lust for digital tools.” Pavone further argued that, “for the most part, organizations that require radical anything are failures to me because they haven’t kept the pulse of their customers, haven’t benchmarked their competitors, and haven’t stayed in tune with the tools that allow [them] to do things better.” Neither capabilities nor deficiencies, he noted, are created or destroyed overnight. Winning companies, Pavone offered, “mind their knitting” and may often do what their competitors do — “but do it measurably better.”

It’s true that pressures to change don’t affect every industry with equal force. A recent McKinsey & Co. survey, for example, found that executives of companies in industries such as telecommunications and media and entertainment sensed greater instability than those in, say, basic materials. That seems to suggest that some companies will have more time to adjust to the future than others. Moreover, as Joshua S. Gans, author of a 2016 MIT SMR article titled “Keep Calm and Manage Disruption,” has argued, for many companies, fears of quick disruption are overblown.

So how does this jibe with Michelman’s view? Although the question about how fast companies need to respond to technology-induced change is complicated, we asked Michelman to address Pavone’s comments. Here’s what he wrote:

“At the strategic level, Mr. Pavone’s comments are well taken. Leaders who are truly attuned to their markets, customers, and competitors (both current and potential); who maintain a keen eye on how technological shifts may drive their businesses in new directions; and who are nimble enough to act on that foresight can indeed avoid existential crises. But they cannot avoid change.

Indeed, they are managing it all the time. Even in seemingly stable industries and even within companies producing consistent and predictable returns, pieces are always moving, and the ways we work are evolving. It’s important that we accept and embrace change on a personal level and we recognize that, as with every major technological shift, the nature of work and what it demands from us are far from stable.”


MIT Sloan Management Review

Your online freedoms are under threat – 2017 Freedom on the Net Report

As more people get online everyday, Internet Freedom is facing a global decline for the 7th year in a row.

Today, Freedom House released their 2017 Freedom on the Net report, one of the most comprehensive assessments of countries’ performance regarding online freedoms. The Internet Society is one of the supporters of this report. We think it brings solid and needed evidence-based data in an area that fundamentally impacts user trust.

Looking across 65 countries, the report highlights several worrying trends, including:

  • manipulation of social media in democratic processes
  • restrictions of virtual private networks (VPNs)
  • censoring of mobile connectivity
  • attacks against netizens and online journalists

Elections prove to be particular tension points for online freedoms (see also Freedom House’s new Internet Freedom Election Monitor). Beyond the reported trend towards more sophisticated government attempts to control online discussions, the other side of the coin is an increase in restrictions to Internet access, whether through shutting down networks entirely, or blocking specific communication platforms and services.

These Internet shutdowns are at the risk of becoming the new normal. In addition to their impact on freedom of expression and peaceful assembly, shutdowns generate severe economic costs, affecting entire economies [1] and the livelihood of tech entrepreneurs, often in regions that would benefit the most from digital growth.

We need to build on these numbers as they open a new door to ask governments for accountability. By adopting the U.N. Sustainable Developed Goals (SDGs) last year, governments of the world have committed to leveraging the power of the Internet in areas such as education, health and economic growth. Cutting off entire populations from the Internet sets the path in the wrong direction.

Mindful that there is urgency to address this issue, the Internet Society is releasing today a new policy brief on Internet shutdowns, which provides an entry into this issue, teases various impacts of such measures and offers some preliminary recommendations to governments and other stakeholders.

Of course, this can only be the beginning of any action and we need everyone to get informed and make their voices heard on shutdowns and other issues related to online freedoms.

Here is what you can do:

  • Follow the live video stream of the launch event for Freedom House’s 2017 Freedom on the Net report. The Internet Society’s Vice President of Global Policy Development, Sally Wentworth, is among the panelists. (14 November 2017, 9:30 am EDT)
  • Ask people to spread the word that Internet shutdowns cost everyone.  Governments should stop using Internet shutdowns and other means of denying access as a policy tool: we must keep the Internet on. Tweet using #ShapeTomorrow and #NetFreedom2017. You’ll find more tweets on Internet Society’s Twitter account.

[1] Among other similar studies, Brookings assessed a cost of about USD 2.4 billion resulting from shutdowns across countries evaluated between July 1, 2015 and June 30, 2016.

Image credit: Sara Silva on Unsplash

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Internet Society

Facing the threat: Big Data and crime prevention

Following last week’s horrible attacks in Barcelona, a friend asked me what IoT technology is doing to fight violent crime. While I was hardly surprised by the question, I had to admit that I didn’t know the answer. It got me thinking about the potential of big data analytics to spot patterns and trends and how this information could be used to identify when and where violent crime is most likely to occur. With enough data, and the means to interpret it, it might even be possible to prevent crime before it happens.

The good news is that police departments are beginning to use big data, machine learning and predictive analytics to understand and prevent crime giving them the opportunity to deploy police resources in response to anticipated threats.

Knowledge is power: insights from big data

We live in a world under constant surveillance. In many countries and across Europe CCTV is on every street corner, shopping mall, and liquor store. While this ubiquitous scrutiny may make citizens uneasy, it does have one big advantage: that those who commit crimes will probably be spotted in the act. But this does little to prevent the crime from happening in the first place.

In the U.S., several police-led initiatives are making the most of surveillance information. With IoT data police can analyze crime patterns and trends. By applying predictive analytics and machine learning to vast sets of data, police departments can more easily forecast where and when violent crime will break out, and ensure that they have the resources in place to prevent it.

Combating crime in Chicago

One such instance of predictive policing, as it’s becoming known, is the ‘pre-crime’ initiative, led by the Chicago Police Department and Chicago University Urban Labs, which the BBC covered in a recent broadcast.

The Chicago Police Department is applying machine learning and predictive analytics to police data sets; including crime incidents, arrests, and weather data. When historical data (like previous arrest records) is combined with real-time IoT data, such as sensor-influenced cameras designed to detect gunshots, it becomes easier to pinpoint problem locations and understand the conditions in which crime can flourish.

Bringing this information together is HunchLab: a geographic prediction tool that uses data modeling to predict risk in specific locations across the city. At-risk areas are highlighted on-screen, while recommendations for evasive action (such as deploying a high visibility police patrol car to take stock of the situation and deter criminals) are displayed alongside. This information is collated into a ‘decision support system’, made available to individual police officers on the beat.

IBM i2 Coplink: connecting police officers

One example of such a decision support system is Coplink, or to give it its full title: IBM i2 Coplink. This tool consolidates disparate data sets (such as arrest records, mugshots, location data and known gang affiliations) into a single dashboard, from which police across different locations can view and share vital information easily and securely. This reduces the risk of information slipping through the cracks in a complex investigation.

Big data gets results in Manchester

Chicago isn’t the only city using big data to support predictive policing. IBM has been working with the police department of Manchester, New Hampshire, to combat crime ahead of time using IBM’s SPSS Modeler software.

So far, this predictive approach has worked best against burglary and contents from parked cars. Manchester, for instance, reported reductions of 12% in robberies, 21% in burglaries, and 32% in theft from vehicles, following the adoption of recommendations for preventive action from statistical analysis.

Part of the reason for the skewed success towards common crimes like these is that they yield plenty of historical data, which can easily be supplemented with other information. Road network maps, for instance, show which areas are easily accessible and can offer a quick getaway, and which are more closed off.

Weather data, too, plays a big part in predicting when robberies will take place. Robbers don’t like rain, apparently, so fair weather days are more likely occasions for crime.

Infographic: predictive policing

How proactive policing can prevent crime

The importance of tone: uncovering threats in social media

Of course, crimes that take place in the open are just one side of the coin. On the other side are those that are harder to anticipate – either because they appear to be random, isolated incidents, or because their perpetrators operate with the protection of larger organizations that can hide them from view.

Some attacks of this nature do share common characteristics, however, which can help flag them up in advance. One of these is the social media brag. Would-be attackers or terrorists who can’t resist showing off on Facebook leave valuable traces for those who would catch them: spot the brag, bag the terrorist, prevent the attack.

There are two challenges, however, to this approach. The first is the sheer volume of social media content. Post numbers run into the billions, and sifting through them all is no mean feat.

The second is that a lot of people say things they don’t mean on social media. Separated from face-to-face contact by a protective and sometimes anonymizing distance, it’s easier to post inflationary, anger-fueled content than it would be to say something of the sort in person. So how can we differentiate between what is dangerous, and what is merely unpleasant? Can technology help make that distinction?

The Tactical Institute, home to specialists in real-time predictive threat detection, may have the answer. The Institute’s job is to identify threats on social media and pre-empt threatening or violent incidents. Among its team of analysts are a number of combat-wounded veterans, who are trained to evaluate posts for criminal intent, and to establish whether the people behind them have the means and opportunity at their disposal to carry it out.

Carrying out this work is a slow process. Watson Analytics for Social Media analyzes the social sentiment of user-generated content, identifying warning signs and flagging problem posts for further review. This means that only pertinent information is passed on to Tactical Institute staff, significantly reducing the time it takes to identify genuine threats.

Learn more

It will never be possible to entirely eliminate threat or crime from our lives. But the IoT can go some way into offering vigilant, dependable tools that support police departments and other organizations as they do their best to keep us safe.

If you’re interested in learning more about these crime prevention tools, take a look at the resources below:

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