Patents and standards : a modern framework for IPR-based standardization : final report

Efficient licensing of intellectual property rights (IPR) is crucial for achieving broad and rapid diffusion of innovation. To ensure that Europe is well positioned in today's global competitive environment, unnecessary barriers in the market for IPR licensing need thus to be removed. This requires a successful balancing of the incentives to invest in innovation against the benefits for the economy at large of a wide diffusion of knowledge. Of special interest in this context is the licensing of patents on technologies that are included in standards as an efficient licensing of these patents is key to the success of the standard. The licensing of such standard essential patents (SEPs) is however prone to market failures such as externalities (positive and negative), information problems, market power and free-riding. The various forms of market failure can result in barriers obstructing the efficient licensing of SEPs and can thus hinder the realization of the economic and societal benefits of the affected standards. The principle objective of this study is to collect quantitative and qualitative data on IPR-based standardization, with a focus on identifying barriers for efficient licensing of SEPs and on possible solutions to these barriers. The analysis is based on a review of the IPR and standardization framework in four industries: communication technology, consumer electronics, automotive and smart grids. The study identifies a range of options to lower barriers to SEP licensing and assesses these in terms of costs, benefits, and effectiveness. This report should aid the European Commission in its attempts to improve the European governance of SEP licensing arrangements. It can also be useful in the (ongoing) work of standard setting organizations on their IPR policies and rules.