Strategic Behavior in Standards Development Organizations in Times of Crisis

Abstract

Recent cases such as Continental v. Avanci and FTC v. Qualcomm drew attention to the limits of protecting intellectual property rights (IPR) in the standardization ecosystem. While conflicting interests in standard setting abound, considerations regarding the inclusion and subsequent treatment of proprietary elements in a technical standard hold the lion’s share of concerns that Standards Development Organizations (SDOs) have to deal with. To balance the interests at stake, SDOs adopt patent policies that members have to observe in order to participate in SDOs’ activities. Similar to other rules governing the work of SDOs, patent policies may be modified following the prescribed procedures. However, any subsequent changes to an organization’s operational framework, including its intellectual property (IP) rules, may distort prior expectations and “lock in” members to rules that they never intended to abide by. Against this backdrop, this Article seeks to explore how SDO members respond to IP-rule amendments by offering a taxonomy of strategies that are adopted by members opposing modifications. Drawing upon the example of the Institute of Electrical and Electronics Engineers (IEEE) revised Patent Policy of 2015, this Article studies how IEEE members responded to instances of organizational distress such as an update of IP policies within an SDO, by using stakeholders’ willingness to commit to the new licensing rules and previous examples of strategies in other SDOs when misunderstandings around IP arose as proxies. At a normative level, this Article further discusses the effect that such changes may have on the nature and structure of a given industry and offers a novel classification of reactions to tipping points in the standards development realm. In doing so, this Article contributes to the currently underdeveloped body of research on strategic behavior, institutional dynamics, and crisis management in technological standardization.

Keywords: standards development organizations (SDOs); patent policy; IEEE; strategic behavior; technical standards; organizational distress; intellectual property rights; exit and voice strategies

JEL Classification: D23, K21, K22, L14, L15, L22, O32, O34