Licensing Essential Patents: The Non-Discriminatory Commitment and Hold-Up
Journal of Industrial Economics, Forthcoming
32 Pages Posted: 17 Jul 2018
Date Written: June 23, 2018
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: Suggested Citation