Standard-Essential Patents and Market Power

World Competition Day, Forthcoming

George Mason Law & Economics Research Paper No. 16-47

4 Pages Posted: 19 Nov 2016

See all articles by Anne Layne-Farrar

Anne Layne-Farrar

Charles River Associates; Northwestern University

Koren Wong-Ervin

Antitrust Partner at Axinn, Veltrop, & Harkrider LLP

Date Written: November 18, 2016

Abstract

While most agencies that have addressed the issue recognize that intellectual property rights (IPRs), including standard-essential patents (SEPs), do not necessarily confer market power, there remains much confusion over how to determine the proper relevant market and the issue of whether a particular SEP owner has market power. For example, some agency officials have contended that, while not always the case, SEPs will “generally” or “typically” confer market power absent the existence of substitutes such as competing standards. As an initial matter, empirical research suggests that standardization does not automatically confer market power, but rather frequently “crowns winners,” i.e., more important technologies are natural candidates for inclusion in standards. This is particularly important in jurisdictions such as the United States, in which antitrust laws do not punish extraction of monopoly profits, but reach only exclusionary or predatory conduct. Also flowing from this finding is that the issue of whether a particular SEP holder has market power requires a case-by-case fact-specific inquiry into whether a single SEP (or portfolio of SEPs) constitutes a well-defined relevant market, whether there are potential substitutes, and the degree to which any market power is mitigated by complementarities among technologies used for the same product.

Keywords: antitrust, competition, FRAND, intellectual property, IRPs, standard development organizations, SDOs, standard-essential patents, SEPs

JEL Classification: K21, L4, O34

Suggested Citation

Layne-Farrar, Anne and Wong-Ervin, Koren, Standard-Essential Patents and Market Power (November 18, 2016). World Competition Day, Forthcoming; George Mason Law & Economics Research Paper No. 16-47. Available at SSRN: https://ssrn.com/abstract=2872172 or http://dx.doi.org/10.2139/ssrn.2872172

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

Koren Wong-Ervin (Contact Author)

Antitrust Partner at Axinn, Veltrop, & Harkrider LLP ( email )

950 F Street, N.W.
Washington, DC
United States

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