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The Complements Problem within Standard Setting: Assessing the Evidence on Royalty Stacking


Damien Geradin


George Mason University School of Law; Tilburg University - Tilburg Law and Economics Center (TILEC); Covington & Burling LLP

Anne Layne-Farrar


Charles River Associates

Jorge Padilla


Compass Lexecon

January 8, 2008

Boston University Journal of Science and Technology Law, Vol. 14, No. 2, 2008

Abstract:     
Royalty stacking, the most recent incarnation of the complements problem identified in the early 1800s by French engineer Augustine Cournot, has received considerable attention. The potential for royalty stacking within standard setting efforts arises from the fact that downstream manufacturing companies can face multiple upstream gatekeepers, each of whom must grant a license to their "essential" patents before the downstream firms can legally commercialize the standard. Some authors have claimed that in high-tech industries - which are frequently characterized by cumulative innovation, dispersed ownership of patents, and cooperative standard setting efforts - the cost of obtaining all necessary licenses is too high, such that innovation has been thwarted and consumers have been harmed. In this paper, we assess the case for royalty stacking within standards and find the evidentiary support weak at best. We note that the relevant question is not whether royalty stacking is possible, as the theoretical arguments behind it have withstood the test of time, but whether it is common enough and costly enough in actuality to warrant policy changes. The available evidence suggests not, implying that any policy changes aimed at solving royalty stacking are likely to cause more (unintended) harm than they cure.

Number of Pages in PDF File: 35

Keywords: Royalty Stacking, Patent Thicket, Patent Holdup, Anticommons, Innovation, Patent Licensing

JEL Classification: D42, K21, L12, L40, L96

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Date posted: December 6, 2006 ; Last revised: May 25, 2014

Suggested Citation

Geradin, Damien and Layne-Farrar, Anne and Padilla, Jorge, The Complements Problem within Standard Setting: Assessing the Evidence on Royalty Stacking (January 8, 2008). Boston University Journal of Science and Technology Law, Vol. 14, No. 2, 2008. Available at SSRN: http://ssrn.com/abstract=949599

Contact Information

Damien Geradin
George Mason University School of Law
3301 Fairfax Drive
Arlington, VA 22201
United States

George Mason Law School Logo

Tilburg University - Tilburg Law and Economics Center (TILEC) ( email )
Warandelaan 2
Tilburg, 5000 LE
Netherlands
HOME PAGE: http://www.tilburguniversity.nl/tilec/
Covington & Burling LLP ( email )
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004-2401
United States
Anne Layne-Farrar (Contact Author)
Charles River Associates ( email )
1 South Wacker Drive
Suite 3400
Chicago, IL 60606
United States
312-377-9238 (Phone)
HOME PAGE: http://www.crai.com
Jorge Padilla
Compass Lexecon ( email )
Paseo de Recoletos 7-9
Madrid, 28004
Spain
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