Bundling of RAND-Committed Patents

23 Pages Posted: 5 Dec 2015 Last revised: 26 Feb 2016

See all articles by Anne Layne-Farrar

Anne Layne-Farrar

Charles River Associates; Northwestern University

Michael A. Salinger

Boston University - Questrom School of Business

Date Written: February 26, 2016

Abstract

Gilbert and Katz (2006) (GK) show that allowing (pure) patent bundling increases the incentives for patent owners to enter into “long-term” patent licensing that commits them not to expropriate licensees’ sunk costs in complementary assets with opportunistic licensing terms. We interpret RAND commitments as a form of long-term contracting, and extend their framework to analyze the tying of non-RAND-committed patents to RAND-committed patents. Pure patent bundling/tying is common and often has sound efficiency justifications, so we caution against prohibiting the pure bundling of RAND-committed and non-RAND-committed patents. Whether such a license honors a RAND commitment turns, however, on the licensing terms. We argue that including a non-RAND-committed patent (patent 2) in a bundle with a RAND-committed patent (patent 1) does not increase the license fee that honors the RAND commitment. If, however, the patent owner offers patent 1 separately at a RAND rate, its RAND commitment does not restrict what it charges for a bundle of patent 1 and patent 2.

Keywords: patents, licensing, bundling, tying, RAND, FRAND, intellectual property

JEL Classification: O3, K21

Suggested Citation

Layne-Farrar, Anne and Salinger, Michael A., Bundling of RAND-Committed Patents (February 26, 2016). Available at SSRN: https://ssrn.com/abstract=2698904 or http://dx.doi.org/10.2139/ssrn.2698904

Anne Layne-Farrar

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

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Michael A. Salinger (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617-353-4408 (Phone)

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