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Licensing Commitments in Standard Setting Organizations

CERNA Working paper

16 Pages Posted: 16 Nov 2007 Last revised: 17 Mar 2017

Francois Leveque

École Nationale Supérieure des Mines de Paris - Centre d'Économie Industrielle (CERNA)

Yann Ménière

Mines ParisTech

Date Written: September 18, 2015

Abstract

Because standard frequently incorporate patented inventions, standard setting organizations have designed ad hoc policies whereby the owners of such "standard essential patents" must commit ex ante to license them on fair reasonable and non-discriminatory terms to manufacturers of standard-compliant products. However, these commitments may not be sufficient to prevent patent hold-up in practice. In this paper, we develop a simple model to analyze the effect of ineffective FRAND commitments, and compare them with binding commitments on a royalty level or a royalty cap. We show that the cap is systematically preferred by the licensor, while it has ambiguous effects on consumers depending on the licensor’s preferred alternative strategy.

Keywords: Patent, Standard, Licence, Holdup, RAND licensing, Royalty cap

JEL Classification: L1, L4

Suggested Citation

Leveque, Francois and Ménière, Yann, Licensing Commitments in Standard Setting Organizations (September 18, 2015). CERNA Working paper. Available at SSRN: https://ssrn.com/abstract=1030520 or http://dx.doi.org/10.2139/ssrn.1030520

Francois Leveque (Contact Author)

École Nationale Supérieure des Mines de Paris - Centre d'Économie Industrielle (CERNA) ( email )

60, boulevard Saint Michel
75272 Paris Cedex 06, 75272
France

Yann Ménière

Mines ParisTech ( email )

60, bd St Michel
Paris, 75006
France

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