ANSI - American National Standards Institute

Raising the Stakes for Standard Setting

A wired world adds complexity-as well as support mechanisms-to the association's standard-setting role.
By Carole Schweitzer

For more than 100 years, the National Standards Policy of the United States has been that the private sector will lead in the development of consensus standards, while the government plays a supporting role. This policy is incorporated in the National Technology Transfer and Advancement Act of 1996 (see for details) and continues to hold today.

Clearly, associations have played a key role in this voluntary process, participating in setting standards for product safety, accepted industry practices, and competency-often by way of certification programs. But the dual triggers of technology and globalization have fired off a volley with immense impact on the standardization process-including increased complexities, new capabilities, and greater competition.

Some associations recognized the challenge early on, spearheading their own initiatives-or working with standard-setting bodies-to use technology to ensure that their products and services can compete in international markets, to streamline operations that improve economic performance, and to allow for information sharing. Donald E. Purcell, chairman, The Center for Global Standards Analysis, located at The Catholic University of America, Washington, D.C., says, "For an association to effectively participate in global standards development, the association must clearly define its standards strategy, make a commitment of resources necessary to create the strategy and standardization system-and be prepared to sustain the effort-and accept the fact that a new level of standardization competition exists in today's globalized world economy."

Amy A. Marasco, vice president and general counsel, American National Standards Institute (ANSI), New York City, agrees that "associations seem to share a common vision that standards development must be a global effort, focused on market needs and facilitated by full and open cooperation and collaboration among participants worldwide." A number of associations have responded to the call for such cooperation, some creating accepted practices in their own industries and others building on existing guidelines for more far-reaching goals. Most are realizing increased benefits; all must be wary of the risks of the standard-setting process.

Positioning products for the global market

ANSI serves all standardization efforts in the United States by providing and promoting a process designed to protect the rights and interests of every participant, working with both national and international standards bodies to ensure that American interests are well represented in the global community. "Clearly, in information technology and telecommunication, cross-industry collaboration on standards has been imperative," says Marasco, "and ANSI works with a number of groups to assist in that process."

One such group, the Information Technology Industry Council (ITI), Washington, D.C., sponsors two standards organizations accredited by ANSI, one of which is the InterNational Committee for Information Technology Standards (INCITS).

ITI represents the leading U.S. providers of information technology products and services, with member companies employing more than 1 million people and generating in excess of $668 billion in worldwide revenues in 2000. The organization has committed resources to facilitating trade through new efforts to remove technical and regulatory barriers. A major effort is to seek to reverse an escalating global trend toward duplicative and costly product testing and certification rules for IT products that add to product costs and delay the introduction of new products to the marketplace.

Kathleen McMillan, director of standards operations, explains, "Both the association and the standards committees develop consensus positions among the respective members. Says McMillan, "ITI attempts to streamline product testing and approval so that consumers around the world receive maximum value at minimum cost. At the same time, most of INCITS's standards result in international standards, including those that apply to biometrics, programming languages, coded representation of audio and visual information, and so on."

Adding value to the bottom line

The National Association of Convenience Stores, Alexandria, Virginia, saw technology as a way to take costs out of its systems and drive additional dollars to the bottom line. Representing close to 120,000 convenience stores in the United States, NACS has approximately 2,500 member companies, 60 percent of which have 10 stores or fewer. Along with its supplier members, NACS represents companies that generate $234 billion in annual sales.

John Hervey, chief technology officer, recalls the first meeting for the NACS Technology Standards Project, which took place in 1995 in Chicago. "There was interest on the part of a few retailers who raised the issue with NACS staff that the smaller retailers were being left out of technology innovation because there weren't any standards in the industry, new technology was very costly, and it wasn't moving into our industry as quickly as they had hoped." Since standardization of technology across the industry had implications for taking costs out of doing business, the 1995 meeting attracted 150 people, all of whom not only paid their own way to attend but also paid an attendance fee. "Rather than spending a lot of time developing a comprehensive plan," says Hervey, "we put a short plan together, proposing to the NACS board that we commit to a three-year effort at a cost of $1.5 million to see where this was all going and what it would take to get there." The board approved the plan, which was, says Hervey, "the largest single commitment that the board has ever made."

NACS developed a plan that focused on four areas: electronic data interchange, common data communication between the back office and the point-of-sale systems, electronic payment systems, and device interfaces with the point-of-sale terminal. "Up to this point," says Hervey, "we've spent $3.4 million on the project." While NACS is just beginning the implementation of its technology standards project, Hervey calculates that "using very conservative numbers, we are looking at a $5 billion return to the industry by implementing these guidelines."

Streamlining an industry

For similar reasons, the Convention Industry Council, McLean, Virginia, is undertaking the Accepted Practices Exchange (APEX) initiative to facilitate the exchange of information across the industry. With 30 member organizations representing more than 81,000 individuals and 13,000 firms and properties in the meeting, convention, and exhibition industries, the biggest single issue, says CIC President Mary E. Power, "is the inordinate amount of time spent rekeying information. The meeting planner will enter specifications into one software format, while the hosting hotel will do it in another. There's no way that they can quickly shoot information over to each other." APEX proposes to solve this problem by applying the tools of XML and the World Wide Web to achieve compatibility of information formats in the areas of terminology, post-event reporting, requests for proposals, resumes and work orders, meeting and site profiles, housing and registration, and contracts. "That [information exchange] is the number one tangible product to come out of our APEX work," says Power. Other expected offshoots of the initiative include boosting the professionalism of the industry and providing consistent training to newcomers to the industry in new, compatible processes.

Maintaining momentum and building consensus

Hervey likens NACS's long-term technology standards project to a "snowball rolling down a hill, gathering momentum. "For example, one of NACS's member companies, Store 24, based in Boston, is working with its back-office solution provider, Professional Data Solutions, Inc., and with the Pepsi-Cola Bottling Group to facilitate an electronic order-to-payment process to replace present paper-intensive systems at their 84 stores. "Once these processes are in place, PDI can roll them out to any customer in the United States. Of course, once Coca-Cola found out that we were doing this with their competitor, they now want to come on board."

To get the message across about the benefits of the project, "we've taken a rather subliminal approach," says Hervey, "using a number of strategies to reinforce our message." Hervey writes a column about the project every couple of weeks for NACS Daily, a news piece delivered to members via e-mail, and conducts one-day seminars. "We also put out press releases, devote at least one workshop at our annual meeting to the topic of technology standards, and have published several manuals on doing business electronically."

While the CIC APEX initiative's original seeds were planted back in 1995 by Mickey Schaefer, CAE, vice president, American Academy of Family Physicians, Leawood, Kansas, while board chair of Professional Convention Management Association, Chicago, the project has since been undertaken by CIC. "It was an idea percolating for a long time looking for a home that had no bias and could provide great support," says Power, and now that CIC has launched the five-year initiative, communication is critical. Power explains, "Our biggest challenge is to get the word out about what we're doing." Along with regular press releases to the industry, e-mail blasts, and articles for publication in organization and chapter newsletters throughout the industry, CIC plans to conduct city discussions in 50-60 U.S. and Canadian cities. "We promote APEX at trade shows and in educational sessions," says Power, "and show organizers have also allowed us to put a small brochure in registration packets."

It doesn't hurt that more than 250 volunteers from CIC's nine industry segments serve on the seven panels-each with several subcommittees-that are working on the various parts of the APEX project. "We feel sometimes like we are building a mini-United Nations," says Power, "but if we don't have consensus, what are we doing this for?"
INCITS has a more formalized process based on its many years in the standard-setting field. When the committee identifies new work it intends to do, it publicizes the effort via press releases, announcements posted to the INCITS Web site, and through an ANSI publication called Standards Action. Says McMillan, "The announcements invite interested parties to participate in the project and always result in new members."
Due to the speed of technology development, INCITS's executive board can also approve what it calls a fast-track initiative in as little as four months. Fast-track proposals involve at least two organizations-the proposer and INCITS-and both announce the joint project to their respective communities.

Footing the bill

Associations adopt differing funding models for their standards-development initiatives. At NACS, for example, Hervey says: "From the beginning, NACS has paid the bill for member companies out of operating revenue, while our suppliers pay their own way." Each year, project leaders go back to the board with a revised work plan. "Funding is not automatic," explains Hervey. "But we've been gradually downsizing our budget requests and by next year we'll be close to maintenance mode-spending a level amount every year on a certain amount of ongoing activity required to stay current with technology."

CIC is taking a different approach, having launched a campaign to raise $1.9 million to fund the APEX initiative. "The idea behind our fundraising and financing model," says Power, "is that in order to gain support and acceptance for what eventually comes out of this project, we need every key player to participate in the financing and to have a stake in things." What CIC did not want, adds Power, "is for a single entity to have one-sided ownership of the initiative. The key is to have consensus from all interested parties."
At ITI, standards operations are completely self-funded, says McMillan. "The INCITS members pay dues and we've earned royalties from our standards activities as well, but those numbers are decreasing because of reduced pricing on the information that was once sold in hard copy but is now available through our Internet store."

Reducing risk

Standard-setting practices have always held some level of risk, and Marasco recommends doing your legal homework before embarking on new initiatives (see sidebar, "Standards Development: Are You At Risk?"). While Marasco's article focuses on product safety standards, organizations must also be aware of the risk of their activities when it comes to antitrust issues and intellectual property protection.

At NACS, "we made an early determination that we were not going to be a standards maintenance body and that compliance with our technology standards would be strictly voluntary," says Hervey. "We have purposefully referred to our standards as guidelines that will eventually become de facto standards, for which we intend to find a home with an existing standards-maintenance body. For example, our work in point-of-sale, back-office integration will probably migrate to the National Retail Federation."

Hervey also advises to put an intellectual property policy in place from the outset: "If someone holds a patent on something that is being discussed by your planning committee, an articulated policy would likely dictate that the person must disclose this fact so that the committee can evaluate the problem and decide what to do about it."

This year the APEX commission is putting together a legal advisory group to oversee the project and to help the various APEX panels avoid some legal pitfalls. "CIC's general counsel has already looked at our process to make sure that we aren't doing anything that could be viewed as antitrust or antitrade," says Power. "As long as we're talking about whether a rate is commissionable-and not what would be an appropriate commission-that is fine. Panel members and city discussion group leaders have signed a disclosure and confidentiality statement to make sure that all work is open and free from bias." And, like NACS, the APEX initiative will be recommending voluntary accepted practices, rather than enforceable standards.

For ITI and INCITS the largest risks in standards development continue to be potential antitrust activities. "Keeping members informed and careful can be a challenge when the membership is quite fluid, as it is with the IT industry," says McMillan. "Mergers, acquisitions, start-ups, failures, and the ever-evolving product lines serve to keep people coming and going." She also acknowledges that intellectual property issues are more of a challenge for the participants than for the association, because the standards committees follow the ANSI patent policy, which encourages early disclosure.

Recent technological developments clearly have had a dramatic impact on the traditional standards development system, says Marasco, and have created immediate implications for the ongoing operational strategies of U.S. standards-setting bodies. "The need for faster time-to-market for standards, improved access to information, and other issues require enhanced collaboration and cooperation, flexibility, and a focus on the needs of the end user," she says. "These requirements, while challenging, also offer opportunities for positive change for associations and their members."

Carole Schweitzer is executive editor of association management.

Standards Development: Are You At Risk?

By Amy A. Marasco

Standards do everything from solving issues of product compatibility to addressing consumer safety and health concerns. They form fundamental building blocks for international trade that allow for the systemic elimination of non-value-added product differences (thereby increasing a user's ability to compare competing products), cost reduction, and often the simplification of product development.

But standards that have market relevance can attract mischief.

While many participants in the process to develop these globally relevant documents understand that the specified game rules for participation provide for fairness and due process, most are not fully aware of the legal issues that can arise when these rules are not properly followed.

Legal precedence

Claims have been asserted against standards developers-particularly those who develop safety-related standards-on the grounds that a developer promulgated an allegedly unsafe or otherwise insufficient standard.

Courts generally have held that standards developers do not owe a "duty" to a person injured by a product or by a set of circumstances to which the developer's standard applies unless the developer 1) acted in bad faith, 2) the standards were to some degree compulsory, or 3) the developer had the power to control the operations of the companies that manufactured the particular products involved.

Since late 1996, there have been at least three decisions in which the court held that a standards developer does owe a duty of care to those affected by the application of the developer's standards. In the first case (Snyder v. American Association of Blood Banks), the plaintiff alleged that he had contracted the AIDS virus from a transfusion of blood received during open-heart surgery. The plaintiff brought claims of strict liability, breach of warranty, negligence, and consumer fraud against the American Association of Blood Banks, Bethesda, Maryland, which was identified as the governing body of a significantly self-regulated industry.

Though the plaintiff's operation was at a time when the precise cause and mode of transmission of AIDS were still matters of contention among health professionals, the court noted that AABB was recognized as the leader in setting blood-banking standards. A jury found AABB negligent for not recommending that its member blood banks conduct surrogate testing of donated blood for HIV. Further, because a blood bank cannot operate unless it is accredited by AABB and maintains that accreditation by complying with AABB standards, the court based its decision on common-law negligence principles, evaluating the foreseeability of injury, nature of the risk, relationship of the parties, and impact on the public.

Both on appeal and in a subsequent court case, the decisions indicated that AABB owed a duty of care to people receiving blood or blood products from its member blood banks and that it had breached this duty to the plaintiffs.

In 1998, a jury in the Superior Court of the State of Washington heard the case of a plaintiff who became a paraplegic after diving into a backyard pool (Menelly v. S.R. Smith, Inc. et al). In this case, the plaintiff alleged that the standards developer (the National Spa and Pool Institute, Alexandria, Virginia) was negligent in setting its residential pool safety standards. Though during the trial there was a factual debate as to whether the pool and diving board in question were in compliance with any relevant standard, in summary fashion the trial court agreed that NSPI did owe a duty of care in developing standards and disseminating information about them. The plaintiff was awarded $11 million in damages, 60 percent of which was to be paid by the standards developer.

Differing opinions

Several more recent decisions have been issued holding that standards developers do not owe a duty of care to ultimate consumers. In one such case (Commerce and Industry Insurance Co. v. Grinnell Corp.), the plaintiffs asserted that the National Fire Protection Association, Quincy, Massachusetts, was liable for the damage resulting from a warehouse fire. The plaintiffs alleged that NFPA failed to provide sufficient warnings and was negligent in promulgating safety standards relating to the storage of warehouse merchandise.

The court found that the relationship between NFPA and the occupant of the building in question was too remote to warrant the imposition of such a duty. Noting that NFPA does not list, inspect, certify, or approve any products or materials for compliance with its standards, the court found that NFPA has no control over whether or which jurisdictions adopt its voluntary standards. The court also dismissed the plaintiffs' claims that NFPA was negligent in developing the standards in question.

Another decision again involved the American Association of Blood Banks (N.N.V. v. American Association of Blood Banks). In this 1998 California State court suit the plaintiff was a child who contracted AIDS in 1984 from a blood transfusion. The arguments raised were quite similar to those raised in the previous cases.

The lower court's decision to grant summary judgment to AABB, which was upheld by the California Court of Appeals, was based on the ground that AABB did not owe a duty of care to third parties such as the plaintiff when it voluntarily undertook to set blood-bank safety standards. Among other things, the court based its decision on the lack of scientific evidence presented by the plaintiff to show that there was "a close connection between AABB's recommendations and his injury; he presented only speculation that adoption of the particular standards might have prevented his infection." The court further noted that the problem of how best to test blood for the AIDS virus was, at the time in question, still a matter of contested debate in the medical and scientific community. If under then-current medical thinking there were acceptable alternative approaches, it would be unfair in hindsight to require that the medical community always make the correct selection.

In addition to finding the reasoning in AABB's precedent case flawed, the California court further noted that as a matter of public policy, society benefits from the work done by private sector standards developers: "Leaving these matters solely in the hands of government agencies, which is a possible result of imposing liability here, would not further the public's interests nor guarantee the safety of the nation's blood supply. It would limit debate and would deprive medical practitioners, scientists, and governmental agencies of a valuable resource."

Implications for the future

The entire voluntary consensus standards system will be severely hampered in its ability to continue its valuable work if standards developers are forced to incur substantial legal and other costs in defending themselves from antitrust and negligence claims.

It can be argued that courts should not impose on standards developers a duty of care to end users absent some control by the developer over the related manufacturers' or producers' implementation of the standards or else intentional misconduct on the part of the developer.

It is also arguable that the public interest is both served and protected if a standard is developed according to common principles of transparency, openness, balance, relevance, consensus, and coherence. Adherence to these principles during the development process typically provides sufficient evidence that the resulting standard has a substantive reasonable basis for existence and that it meets the needs of producers, users, and other interest groups; standards developers accredited by ANSI are required to meet these requirements for approval of American National Standards. Though due process in itself is not a defense to legal claims, it is a safeguard that prevents mischief from taking hold and improperly influencing the resulting standard.

Amy A. Marasco

ANSI Membership