Standard-Essential Patents

Article in a refereed journal

Josh Lerner and Jean Tirole, "Standard-Essential Patents", Journal of Political Economy, vol. 123, n. 3, June 2015, p. 547-586.[Working paper version]

Abstract

A major policy issue in standard setting is that patents that are ex-ante not that important may, by being included into a standard, become standard-essential patents (SEPs). In an attempt to curb the monopoly power that they create, most standard-setting organizations require the owners of patents covered by the standard to make a loose commitment to grant licenses on reasonable terms. Such commitments unsurprisingly are conducive to intense litigation activity. This paper builds a framework for the analysis of SEPs, identifies several types of inefficiencies attached to the lack of price commitment, shows how structured price commitments restore competition, and analyzes whether price commitments are likely to emerge in the marketplace.

Keywords

Standards
licensing commitments
standard-essential patents
royalty stacking
FRAND
hold ups and reverse hold ups

JEL codes

D43: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
L24: Contracting Out; Joint Ventures; Technology Licensing
L41: Monopolization; Horizontal Anticompetitive Practices
O34: Intellectual Property and Intellectual Capital

IAST Discipline

Economics

Replaces

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