Licensing Commitments in Standard Setting Organizations
CERNA Working paper
16 Pages Posted: 16 Nov 2007 Last revised: 17 Mar 2017
Date Written: September 18, 2015
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 licensors preferred alternative strategy.
Keywords: Patent, Standard, Licence, Holdup, RAND licensing, Royalty cap
JEL Classification: L1, L4
Suggested Citation: Suggested Citation