Comment on the 2021 Draft Policy Statement (DPS) on Standards-Essential Patents (SEPs). Submitted to the U.S. Department of Justice in Response to: DPS on Licensing Negotiations and Remedies for SEPs Subject To Voluntary F/RAND Commitments

34 Pages Posted: 7 Mar 2022

See all articles by David Teece

David Teece

Institute for Business Innovation

Date Written: February 4, 2022

Abstract

The US government, in reviewing competition policy issues that might impact standards, needs to be aware that the issues at hand have tremendous geopolitical consequences and cannot be looked at in isolation. The best way to ensure leadership is to incent business enterprises operating in the US and in allied nations in Europe and Asia to invest heavily in research and development (R&D). Success in this regard will promote competition and is our best chance to maintain technological leadership—and, along with it, long-term economic growth and consumer welfare and national security. It is especially important that the research-intensive sector of our economy remain viable and robust, as it is the stage of the value chain that has anchored US competitive advantage in recent decades.

There is a common failure to understand that the weakening of intellectual property (IP) rights results in less innovation, thereby favoring vertical integration. The SEP licensing model enables open innovation and new entry into existing ecosystems. Standards development, at least for mobile wireless, is an expensive undertaking that requires spending billions of R&D dollars to create new technologies, which get folded into technological ensembles that become next-generation standards technologies available for licensing to industry.

The DOJ's draft policy statement does not link the need for a robust patent system with the generation of the very technological innovation that powers competition. Markets for technology do not function well without strong IP rights. Competition policy needs to favor the future and embrace innovation and business models that support innovation in the key enabling technologies. They must support innovation both upstream and downstream. Avoiding the temptation to resurrect patent hold-up arguments is the most concrete step that can be taken to help innovation and competition.

Keywords: SEP, FRAND, R&D, licensing, patenting, 5G, standards, antitrust

JEL Classification: K21, O31, O32, O33, O34, O38

Suggested Citation

Teece, David J., Comment on the 2021 Draft Policy Statement (DPS) on Standards-Essential Patents (SEPs). Submitted to the U.S. Department of Justice in Response to: DPS on Licensing Negotiations and Remedies for SEPs Subject To Voluntary F/RAND Commitments (February 4, 2022). Available at SSRN: https://ssrn.com/abstract=4037772 or http://dx.doi.org/10.2139/ssrn.4037772

David J. Teece (Contact Author)

Institute for Business Innovation ( email )

F402 Haas School of Business, #1930
Berkeley, CA 94720-1930
United States
(510) 642-4041 (Phone)

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