Standard-Essential Patents and the Role of Standard-Setting Organizations

In rapidly developing markets characterized by digital technologies, standards play a critical role. By establishing a common standard, interoperability of complementary or competing products becomes technically feasible and economically attractive. Standards reduce transaction costs, facilitate market entry, and contribute to the dissemination of new technologies. The success of a standard, however, depends significantly on the quality of the technologies it encompasses. If a standard is to be based on the technologies most suited for solving a given problem, the use of a patented technology may be indispensable for manufacturers to enter the market. The inclusion of patented inventions in a standard, however, entails risks for its widespread implementation, since the standard can no longer be used without making use of the protected teaching. Thus the proprietor of a so-called standard-essential patent (SEP) can in principle, on the basis of the exclusive right, prohibit the use of the technology or make it contingent upon licensing conditions that are favorable to him. This provides him with a powerful instrument to influence competition in standard-based markets. On the other hand, excessively restricting the rights of SEP holders may expose them to opportunistic behavior on the part of standard implementers, such as long-term refusal to pay reasonable royalties. In both cases, costly legal disputes could jeopardize the positive effects associated with standardization.

This interdisciplinary project investigates how these risks can be controlled and under which conditions standard-setting organizations (SSOs) can contribute to solving SEP-related problems.