Tuesday, December 18, 2007
Posted by D. Daniel Sokol
Standard setting and antitrust remains a hot topic. Indeed, today there is an ABA Antitrust Section brownbag on Standard-Setting in the US: What's at Stake in the Rambus Case? Adding to the academic literature on this topic are François Lévêque (professor of law and economics at the Ecole des mines de Paris) and Yann Ménière (research fellow at Cerna, Ecole Nationale des mines de Paris) with their paper Licensing Commitments in Standard Setting Organizations.
ABSTRACT: This paper compares three possible procedures for the licensing of patents reading on a technology standard. In the first scenario the licensor fixes its royalties once manufacturers have entered the market for standard compliant products. In two alternative scenarios the licensor commits on a royalty level or on a royalty cap before manufacturers enter that market. The licensor's choice between the three procedures depends on a trade-off between the uncertainty it faces on the expected demand for standard compliant products, and a hold-up effect that deters the entry of manufacturers when royalties are set ex post. We show that the first scenario is always dominated by the royalty cap and can be dominated by the commitment on a royalty level. We derive several policy implications for standard setting policies and their antitrust treatment.