Licensing Policy and Technology Adoption in Standard Setting Organizations

Abstract

The standard setting organizations' decisions on licensing policy and standard's technological specification, and the ensuing implications for social welfare are analyzed. The author finds the conditions under which a licensing rule that grants monopoly power to the licensors whose technology is adopted in the standard can be employed by the members of the consortium (ex-post licensing). Moreover, it is shown that the adoption of ex-post licensing might lead to the inefficient exclusion of an efficient stand-alone licensor. Finally, the author discusses the conditions under which a policy of ex-ante licensing can be less efficient than ex-post licensing. (JEL K21, L15, L24, L42)

Typology of the patent troll business

“…We conclude that the patent troll business can be a solution to enforce unlicensed IPR. In line with the literature, we find that the existence of nonpracticing entities in competing technology markets may disrupt anticompetitive behavior and thus even increase innovative contributions (Diessel, ; Schmalensee, ; Tarantino, ; Geradin et al., ). Especially in the case of Bosch, IPR is now licensed that has been used since decades without any payment of royalties.…”

“…In many cases, enforcement of patents is only applicable when firms have access to a considerable amount of financial resources. Markets for patents are thus a solution to sell rights or license rights of enforcement to third parties with higher financial capabilities (Rubin, ; Schmalensee, ; Shrestha, ; Tarantino, ). Policy makers have given remarkable regard to this topic (e.g.…”

Membership, Governance, and Lobbying in Standard-Setting Organizations

“…These studies suggest that ex-ante licensing leads to more efficient outcomes. However, under certain conditions, ex-ante licensing can be less efficient than ex-post licensing (Tarantino, 2015). 10 Moreover, recently it has been shown that repeated interaction can help make FRAND rates binding such that innovators refrain from charging unreasonably high royalty rates as they expect future interaction within standard-setting (Larouche and Schuett, 2019;Llanes, 2019).…”

Conversation with secrets

“…Second, in our setting the delay of disclosure, and the resulting stronger scope for holdup, does not reduce the total value generated by the process, but only implies a different redistribution of the same value. This outcome can be rationalized by the use of a two‐part tariff scheme in which the patent holder sets the linear component to achieve bilateral efficiency, whereas the value of the fixed component depends on the bargaining power of the patent holder (Tarantino, forthcoming).…”