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Payments and Participation: The Incentives to Join Cooperative Standard Setting Efforts

Anne Layne-Farrar () and Gerard Llobet
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Anne Layne-Farrar: Compass Lexecon, http://www.compasslexecon.com

Working Papers from CEMFI

Abstract: 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.

Keywords: Intellectual property; standard setting organizations; licensing; incremental value. (search for similar items in EconPapers)
JEL-codes: L15 L24 O31 O34 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr, nep-pr~ and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Journal Article: Payments and Participation: The Incentives to Join Cooperative Standard Setting Efforts (2014) Downloads
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