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Technology standards, patents and Antirust

May 2008

Competition and Regulation in Network Industries

Article written with Yann Ménière.

From the perspective of antitrust authorities, the multiplication of patents embodied in technology standards is a source of concerns. Certainly it is necessary and efficient that patents owners derive a revenue from the use of the standard. Yet by their function – ensuring compatibility between different products by promoting a common technology platform in a particular industry – standards generate potential for market power far beyond the legal protection conferred by patents. Patent holders may thus be tempted to leverage their position to make illegal profits. Such concerns arise in two different cases that have fuelled antitrust debates and economic research during the last decade. On the one hand, patent owners may be tempted to collude by coordinating their licensing policies. The difficulty here is that some coordination between them within a patent pool may actually be pro-competitive.

After a brief introduction, the author explain in the first part why, and on what conditions, patent pools should be accepted by antitrust authorities. On the other hand, patent owners may be tempted to manipulate the standard setting process by waiting for the wide adoption of the standard before charging excessive royalties to its users. The authors present this hold-up problem in the second part, and show how appropriate rules for standard setting processes can help mitigate it.

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