Licensing Essential Patents: The Non-Discriminatory Commitment and Hold-Up

Journal of Industrial Economics, Forthcoming

32 Pages Posted: 17 Jul 2018

See all articles by Youping Li

Youping Li

East China University of Science and Technology (ECUST)

Jie Shuai

Zhongnan University of Economics and Law

Date Written: June 23, 2018

Abstract

Licensors of patents essential to a standard are often required to license on reasonable and non-discriminatory (RAND) terms. Using a model with owners of essential patents and licensees who invest into standard-conforming technologies, this paper demonstrates that the non-discriminatory commitment alleviates the hold-up problem. Moreover, it improves consumer and social welfare, and promotes upstream innovation as licensing revenue is increased. In an extended model with each licensor independently choosing whether to make the commitment, all licensors voluntarily commit in the unique equilibrium.

Keywords: Standard-essential Patents, RAND, Hold-up, Welfare

JEL Classification: L1, O3, D4

Suggested Citation

Li, Youping and Shuai, Jie, Licensing Essential Patents: The Non-Discriminatory Commitment and Hold-Up (June 23, 2018). Journal of Industrial Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3203397

Youping Li

East China University of Science and Technology (ECUST) ( email )

Shanghai
China

Jie Shuai (Contact Author)

Zhongnan University of Economics and Law ( email )

182 Nanhu Ave.
East Lake High-tech Development Zone
Wuhan, Hubei 430073
China

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