IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/6025.html
   My bibliography  Save this paper

Pricing Patents for Licensing in Standard Setting Organisations: Making Sense of FRAND Commitments

Author

Listed:
  • Layne-Farrar, Anna
  • Padilla, Atilano Jorge
  • Schmalensee, Richard

Abstract

We explore potential methods for assessing whether licensing terms for intellectual property declared essential within a standard setting organization can be considered fair, reasonable, and non-discriminatory (FRAND). We first consider extending Georgia-Pacific to a standard setting context. We then evaluate numeric proportionality, which is modelled after certain patent pool arrangements and which has been proposed in a pending FRAND antitrust suit. We then turn to two economic models with potential. The first—the efficient component-pricing rule (ECPR)—is based on the economic concept of market competition. The second—the Shapley value method—is based on cooperative game theory models and social concepts for a fair division of rents. Interestingly, these two distinct methods suggest a similar benchmark for evaluating FRAND licenses, but ones which might appeal differently to the courts and competition authorities in the US as compared to Europe. We find that under any approach, patents covering “essential” technologies with a greater contribution to the value of the standard and without close substitutes before the standard gets adopted should receive higher royalty payments after the adoption of the standard.

Suggested Citation

  • Layne-Farrar, Anna & Padilla, Atilano Jorge & Schmalensee, Richard, 2007. "Pricing Patents for Licensing in Standard Setting Organisations: Making Sense of FRAND Commitments," CEPR Discussion Papers 6025, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6025
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=6025
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. Christian Ahlborn & Carsten Grave, 2006. "Walter Eucken and Ordoliberalism: An Introduction from a Consumer Welfare Perspective," CPI Journal, Competition Policy International, vol. 2.
    3. Dietmar Harhoff & Francis Narin & F. M. Scherer & Katrin Vopel, 1999. "Citation Frequency And The Value Of Patented Inventions," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 511-515, August.
    4. Bekkers, Rudi & Verspagen, Bart & Smits, Jan, 0. "Intellectual property rights and standardization: the case of GSM," Telecommunications Policy, Elsevier, vol. 26(3-4), pages 171-188, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mathias Dewatripont & Patrick Legros, 2013. "‘Essential’ Patents, FRAND Royalties and Technological Standards," Journal of Industrial Economics, Wiley Blackwell, vol. 61(4), pages 913-937, December.
    2. Bernhard Ganglmair & Emanuele Tarantino, 2014. "Conversation with secrets," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 273-302, June.
    3. Chryssoula Pentheroudakis & Justus A. Baron, 2016. "Licensing Terms of Standard Essential Patents: A Comprehensive Analysis of Cases," JRC Working Papers JRC104068, Joint Research Centre (Seville site).
    4. Rey, Patrick & Salant, David, 2012. "Abuse of dominance and licensing of intellectual property," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 518-527.
    5. Miao, Chun-Hui, 2016. "Licensing a technology standard," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 33-61.
    6. Annalisa Biagi & Vincenzo Denicolò, 2014. "Timing of Discovery and the Division of Profit With Complementary Innovations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 89-102, March.
    7. Jacob Seifert, 2015. "Welfare effects of compulsory licensing," Journal of Regulatory Economics, Springer, vol. 48(3), pages 317-350, December.
    8. Alexandrov, Alexei & Pittman, Russell & Ukhaneva, Olga, 2017. "Royalty stacking in the U.S. freight railroads: Cournot vs. Coase," MPRA Paper 78249, University Library of Munich, Germany.
    9. Richard Schmalensee, 2009. "STANDARD-SETTING, INNOVATION SPECIALISTS AND COMPETITION POLICY -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 526-552, September.
    10. Tim POHLMANN, 2014. "The Evolution of ICT Standards Consortia," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(95), pages 17-40, 3rd quart.

    More about this item

    Keywords

    Efficiency; Fairness; Licensing; Patents; Standard Setting Organizations;

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6025. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.