The Internet of Things: Evaluating the Interplay of Interoperability, Industry Standards and Related IP Licensing Approaches

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The financial impact of the Internet of Things on the global economy will be significantly affected by interoperability. A 2015 McKinsey Global Institute report indicated that, “[on] average, interoperability is necessary to create 40 percent of the potential value that can be generated by the IoT in various settings […] Interoperability is required to unlock more than $4 trillion per year in potential economic impact for IoT use in 2025, out of a total impact of $11.1 trillion across the nine settings that McKinsey analyzed.”

However, at present, there is a lack of consensus between standards organizations and industry stakeholders as to even the most basic technical standards and protocols that apply to how devices communicate. Characterized as a “standards war” between technology groups, companies have competing incentives. While all vendors share an interest in aligned standards that promote IoT development and interoperability, individually some companies seek the perceived competitive and economic advantages of building proprietary systems based on proprietary standards and protocols (or so-called “walled-gardens”).

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