Invention, Industry Standards, and Intellectual Property

Abstract

When an industry standard incorporates a patented invention, the demand for products that comply with the standard has two components. Some of the demand may be for the inherent technical advantages of the invention; the patentee is generally entitled to revenues attributable to this demand. But some of the demand is for the benefits of standardization, such as interoperability, and the patentee is not entitled to revenues attributable to this demand. From this point, the article draws two conclusions. First, the amounts to which a patentee is entitled, either in litigation or in licensing negotiations, should be calculated by determining the portion of demand that is attributable to its invention. In some cases, there will be evidence from which one can make this determination directly; in others, there may be no such direct evidence, but it may still be possible to draw inferences regarding the contributions of the patentee. Second, because the contributions of the standard itself, like interoperability, are economically distinct, the "owner" of a standard - typically a standard-setting organization - should be allowed to negotiate license fees with the patentee of an invention incorporated in the standard.