Payments and Participation: The Incentives to Join Cooperative Standard Setting Efforts
This paper studies the effects of a Standard Setting Organization (SSO) imposing a licensing cap for patents incorporated into a standard. In particular, we evaluate the \Incremental Value" rule as a way to reward firms that contribute technology to a standard. This rule has been proposed as a means of avoiding patent hold-up of licensing firms by granting patent holders compensation equal to the value that their technology contributes to the standard on an ex-ante basis, as compared to the next best alternative. Our analysis shows that even in contexts where this rule is efficient from an ex-post point of view, it induces important distortions in the decisions of firms to innovate and participate in the SSO. Specifically, firms being rewarded according to this rule will inefficiently decide not to join the SSO, under the expectation that their technology becomes ex-post essential at which point they may negotiate larger payments from the SSO.
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- Chiao, Benjamin & Lerner, Josh & Tirole, Jean, 2006.
"The Rules of Standard Setting Organizations: an Empirical Analysis,"
IDEI Working Papers
388, Institut d'Économie Industrielle (IDEI), Toulouse.
- 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.
- Chiao, Benjamin & Lerner, Josh & Tirole, Jean, 2007. "The Rules of Standard Setting Organizations: An Empirical Analysis," CEPR Discussion Papers 6141, C.E.P.R. Discussion Papers.
- Benjamin Chiao & Josh Lerner & Jean Tirole, 2005. "The Rules of Standard Setting Organizations: An Empirical Analysis," NBER Working Papers 11156, National Bureau of Economic Research, Inc.
- Bernhard Ganglmair & Luke M. Froeb & Gregory J. Werden, 2012. "Patent Hold-Up and Antitrust: How A Well-Intentioned Rule Could Retard Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 60(2), pages 249-273, 06.
- Timothy S. Simcoe & Stuart J.H. Graham & Maryann Feldman, 2007. "Competing on Standards? Entrepreneurship, Intellectual Property and the Platform Paradox," NBER Working Papers 13632, National Bureau of Economic Research, Inc.
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