Standard-Essential Patents

A major policy issue in standard setting is that patents that are ex-ante not that important may, by being included into a standard, become standard-essential patents (SEPs). In an attempt to curb the monopoly power that they create, most standard-setting organizations require the owners of patents covered by the standard to make a loose commitment to grant licenses on reasonable terms. Such commitments unsurprisingly are conducive to intense litigation activity. This paper builds a framework for the analysis of SEPs, identi…es several types of ine¢ ciencies attached to the lack of price commitment, shows how structured price commitments restore competition, and analyzes whether price commitments are likely to emerge in the marketplace.