The Value of Patents in Industry Standards: Avoiding License Arbitrage with Voluntary Rules

Abstract

This Article looks at the role that compulsory compensation rules for patent infringement play in creating patent hold-ups. It argues that patent hold-ups of industry standards can best be avoided by channeling patentees into voluntary negotiations with industry groups. This requires reworking compulsory compensation rules, so that patentees don't have strong incentives to create hold-up situations, which in turn means better defining compulsory compensation rules such that they yield royalties that are in line with what we would expect to see in voluntary negotiation. The paper suggests an initial economic framework and procedural mechanisms to reach this end.

[Winner of Jones Day 2007 Swope Prize Antitrust Writing Competition] [NB: This version may contain non-substantive differences from the version as published]