Collective Bargaining of Patent Licences

43 Pages Posted: 23 May 2024 Last revised: 24 May 2024

Date Written: May 23, 2024

Abstract

Patent holdup and patent holdout are viewed as fundamental problems in the licensing of standard-essential patents (SEPs). Patent holdup asserts that an SEP owner can leverage its position, and an injunctive relief (or the threat of an injunctive relief) to demand excess royalties from an implementer. Patent holdout, on the other hand, claims that an implementer can refuse to take a licence or engage in bad faith negotiations, thereby causing the patentee to lose royalties. This article argues that patent holdup and patent holdout arise due to an imbalance in bargaining power between patentees and implementers during licensing negotiations. Based on U.S. law, policies and practices pertaining to SEP licensing, this article contends that allowing implementers to collectively bargain for SEP licences can realign parties’ bargaining power, and consequently, reduce patent holdup and patent holdout. Under the proposed collective bargaining scheme, implementers would be allowed to establish special purpose vehicles, known as licence purchasing associations, and mandate the said associations to negotiate and conclude licences on behalf of their members. Although this framework can resolve patent holdout and patent holdout, it can threaten competition and innovation. Consequently, the article lays down several safeguards which the envisaged associations should adhere to in order to remain innocuous outfits.

Keywords: collective bargaining, licensing negotiations, standards, SEPs, FRAND, LPAs.

JEL Classification: K

Suggested Citation

Opany, Fidelice, Collective Bargaining of Patent Licences (May 23, 2024). Available at SSRN: https://ssrn.com/abstract=4839094 or http://dx.doi.org/10.2139/ssrn.4839094

Fidelice Opany (Contact Author)

Maseno University ( email )

Kisumu, Nyanza 3275-40100
Kenya

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