Why Patent Hold-Up Does Not Violate Antitrust Law

34 Pages Posted: 24 Sep 2018

See all articles by Gregory J. Werden

Gregory J. Werden

Independent; George Mason University - Mercatus Center

Luke M. Froeb

Vanderbilt University - Owen Graduate School of Management

Date Written: September 4, 2018

Abstract

Owners of standard essential patents (SEPs) are cast as villains for engaging in “patent hold-up,” i.e., taking advantage of the fact that they negotiate royalties with implementer-licensees that already have made sunk investments in the standard. In contrast to “patent ambush,” patent hold-up involves no standard-setting misconduct or harm to any competitive process, and thus cannot violate antitrust law. Commentators taking a contrary positions confuse the ends of antitrust law with its means. Antitrust law promotes consumer welfare only by protecting competition. Casting aside this core principle would expose business decisions, including ordinary price setting, to judicial oversight. Commitments made by SEP owners in the standard-setting process, however, should be enforced, and they are enforced. Without an antitrust cause of action, implementers invoke the powers of the courts to resolve royalty disputes over SEPs.

Keywords: Antitrust, Patents, Standard Essential Patents, Patent Hold-Up

JEL Classification: K21, L41, O34

Suggested Citation

Werden, Gregory J. and Froeb, Luke M., Why Patent Hold-Up Does Not Violate Antitrust Law (September 4, 2018). Available at SSRN: https://ssrn.com/abstract=3244425 or http://dx.doi.org/10.2139/ssrn.3244425

George Mason University - Mercatus Center ( email )

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Luke M. Froeb

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-322-9057 (Phone)
615-343-7177 (Fax)

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