27 Jan 2020 Articles

Expert Opinion: Setting straight some common misconceptions about the economics of patents, licensing and technical standards

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In this Expert Opinion, Jorge Padilla (Compass Lexecon) and Koren Wong-Ervin (Qualcomm Inc.) discuss the competitive effects of patents and some behavior of patent-holders.

Offering different licensing terms, including both price and non-price elements, to ‘similarly situated’ licensees is sometimes viewed as discriminatory and anti-competitive. However, it can be pro-competitive, for example through improved efficiency, growing markets, intensified competition, and enhanced consumer welfare.

Grant backs and cross-licensing are generally pro-competitive because they may facilitate the integration of complementary technologies, promote the dissemination of a technology, reduce transaction costs, clear blocking positions, and avoid costly patent infringement litigation. They should nonetheless be analyzed case by case under an effects-based approach, as they can occasionally have anti-competitive effects.

No-challenge clauses prevent patent licensees from challenging the validity of a patent they have taken a license for, but only after they have executed a license agreement. No-challenge clauses can improve the IP holder’s incentives to innovate. If licensees can challenge the validity of individual patents, consumers could lose out and IP holders could lose out through delay and costly litigation.

Patent thickets are overlapping sets of patent rights required by those seeking to commercialize new technologies. They can raise concerns about inefficient underuse of assets, cumulative royalties, and blocked innovation. However, these concerns don’t appear to be borne out in the real world in the context of licensing of Standard Essential Patents (SEPs) for several reasons, which we discuss in this Expert Opinion.

The Expert Opinion is a summary of an article published in Concurrences Review, which has been nominated in the Antitrust Writing Awards: voting now open.

Read the briefing to find out more.

A new version of Compass Lexecon is available.