Abstract

http://ssrn.com/abstract=2222592
 


 



Standard Essential Patents: Who is Really Holding Up (and When)?


Gregor Langus


Charles River Associates

Vilen Lipatov


Goethe University Frankfurt - Faculty of Economics and Business Administration; University of Siegen - Department of Economics

Damien Neven


Graduate Institute of International and Development Studies (HEI)

February 22, 2013


Abstract:     
This paper analyzes the effect of injunctions on royalty negotiations for standard essential patents. We develop a model in which courts grant injunctions only when they have sufficient evidence that the prospective licensee is unwilling, in line with the way we understand Courts to operate in Europe. In such a framework the prospective licensee has a powerful strategic tool: the offers that he makes to the patent holder will affect the royalty rate that the Court may adopt as well as the probability of being subject to injunctions (and the liability for litigation costs). We find that despite the availability of injunctions, the holder of a sufficiently weak patent will end up accepting below FRAND rates, in particular when litigation cost are high. We also find that the prospective licensee will sometimes prefer to litigate and the holder of a suciently strong patent will always end up in litigation by rejecting offers below FRAND. This arises in particular when the prospective licensee has little to fear from being found unwilling, namely when the trial takes time (so that the threat of injunctions is less powerful), and when litigation costs are low. Importantly, we thus find that hold up (royalties above the fair rate) as well as reverse hold up (royalties below the fair rate) may arise in equilibrium.

Number of Pages in PDF File: 34

Keywords: standard essential patent, injunctions, hold up, reverse hold up

JEL Classification: K41, L49, O34

working papers series


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Date posted: February 23, 2013  

Suggested Citation

Langus, Gregor and Lipatov, Vilen and Neven, Damien, Standard Essential Patents: Who is Really Holding Up (and When)? (February 22, 2013). Available at SSRN: http://ssrn.com/abstract=2222592 or http://dx.doi.org/10.2139/ssrn.2222592

Contact Information

Gregor Langus
Charles River Associates ( email )
81 Avenue Louise
B-1050 Brussels
Belgium
Vilen Lipatov (Contact Author)
Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )
Grüneburgplatz 1
Frankfurt am Main, D-60323
Germany
University of Siegen - Department of Economics ( email )
Department of Economics
Hoelderlinstr. 3
Siegen, 57068
Germany
Damien Neven
Graduate Institute of International and Development Studies (HEI)
Rue de Lausanne 132
P.O. Box 136
Geneva, 1211
Switzerland
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