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Ex Ante Agreements in Standard Setting and Patent-Pool Formation

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  • Gastón Llanes
  • Joaquín Poblete

Abstract

type="main"> We present a model of standard setting and patent-pool formation. We study the effects of alternative standard-setting and pool-formation rules on technology choice, prices, and welfare. We find three main results. First, we show that allowing patent pools may reduce welfare when standards are negotiated and patent pools need to be ex post incentive compatible. Second, we show that ranking combinations of standard-setting and pool-formation rules in welfare terms when patent pools need to be ex post incentive compatible is not possible. Third, we show that allowing firms to sign ex ante agreements regarding pool participation dominates—in terms of welfare—any other policy rule. This policy does not require the standard-setting organization to have information on patent ownership, the terms of license agreements, or the value added of patents.

Suggested Citation

  • Gastón Llanes & Joaquín Poblete, 2014. "Ex Ante Agreements in Standard Setting and Patent-Pool Formation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 50-67, March.
  • Handle: RePEc:bla:jemstr:v:23:y:2014:i:1:p:50-67
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    File URL: http://hdl.handle.net/10.1111/jems.12045
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    References listed on IDEAS

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    1. Klaus M. Schmidt, 2014. "Complementary Patents and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 68-88, March.
    2. Anne Layne-Farrar & Gerard Llobet & Jorge Padilla, 2014. "Payments and Participation: The Incentives to Join Cooperative Standard Setting Efforts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 24-49, March.
    3. Aoki, Reiko & Schiff, Aaron, 2010. "Intellectual property clearinghouses: The effects of reduced transaction costs in licensing," Information Economics and Policy, Elsevier, vol. 22(3), pages 218-227, July.
    4. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
    5. Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, vol. 76, pages 316-316.
    6. Timothy Simcoe, 2012. "Standard Setting Committees: Consensus Governance for Shared Technology Platforms," American Economic Review, American Economic Association, vol. 102(1), pages 305-336, February.
    7. Benjamin Chiao & Josh Lerner & Jean Tirole, 2007. "The rules of standard-setting organizations: an empirical analysis," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 905-930, December.
    8. Spulber,Daniel F., 2009. "The Theory of the Firm," Cambridge Books, Cambridge University Press, number 9780521736602, April.
    9. Gastón Llanes & Stefano Trento, 2012. "Patent policy, patent pools, and the accumulation of claims in sequential innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(3), pages 703-725, August.
    10. Lévêque, François & Ménière, Yann, 2011. "Patent pool formation: Timing matters," Information Economics and Policy, Elsevier, vol. 23(3), pages 243-251.
    11. Josh Lerner & Jean Tirole, 2006. "A Model of Forum Shopping," American Economic Review, American Economic Association, vol. 96(4), pages 1091-1113, September.
    12. Jay Pil Choi, 2010. "Patent Pools And Cross-Licensing In The Shadow Of Patent Litigation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 441-460, May.
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    Citations

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    Cited by:

    1. Dehez Pierre & Poukens Sophie, 2014. "The Shapley Value as a Guide to FRAND Licensing Agreements," Review of Law & Economics, De Gruyter, vol. 10(3), pages 1-20, November.
    2. Larouche, Pierre & Schütt, Florian, 2016. "Repeated Interaction in Standard Setting," Discussion Paper 2016-010, Tilburg University, Tilburg Law and Economic Center.
    3. Spulber, Daniel F., 2016. "Patent licensing and bargaining with innovative complements and substitutes," Research in Economics, Elsevier, vol. 70(4), pages 693-713.
    4. Josh Lerner & Jean Tirole, 2015. "Standard-Essential Patents," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 547-586.
    5. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, April.
    6. Reisinger, Markus & Tarantino, Emanuele, 2016. "Patent Pools in Input Markets," CEPR Discussion Papers 11512, C.E.P.R. Discussion Papers.

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