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Licensing standard essential patents with costly enforcement

Author

Listed:
  • Marc Bourreau
  • R. Ferraz
  • Y. Ménière

    (CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

We study the interaction between the holder of a standard‐essential patent (SEP) and two downstream firms using the patented technology to design standard‐compliant products. The SEP holder approaches the downstream firms simultaneously in the shadow of patent litigation and is subject to fair, reasonable, and non‐discriminatory licensing requirements. We show that the patent holder faces a litigation credibility constraint and a license acceptability constraint when setting its licensing terms. For patents of intermediate strength, there is no royalty that allows the patent holder to reconcile these constraints. Consequently, it cannot license its technology and must go to court against infringers. We show that the availability of an injunction improves the patent holder's ability to license its technology, but it tends to inflate the royalty rate for implementers.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Marc Bourreau & R. Ferraz & Y. Ménière, 2015. "Licensing standard essential patents with costly enforcement," Working Papers hal-01261022, HAL.
    • Handle: RePEc:hal:wpaper:hal-01261022
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    Keywords

    License; Patent;

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