Logic and Limits of Ex Ante Competition in a Standard-Setting Environment, The

Interoperability, Competition Policy and Antitrust and Standards

Article Snapshot

Author(s)

Damien Geradin and Anne Layne-Farrar

Source

Working Paper, January 2006

Summary

This paper looks at whether ex ante (pre-standard) actions effectively prevent opportunistic firm behaviors.

Policy Relevance

When standards include patented technology, asking the patent holder to license it on fair terms works reasonably well, and no one has a better idea.

Main Points

  • Firms contributing technology often agree with the standard-setting organizations (SSOs) to license it on fair, reasonable, and nondiscriminatory terms (“RAND” or “FRAND”).

 

  • Some assert problems with FRAND after the standard is set (“ex post”):
    • Patent holders can charge more than expected.
    • If each patent holder charges a bit, it can add up to a lot of expense for consumers in the price of the final product (“royalty stacking”).

 

  • The data shows that these problems are not serious in practice.

 

  • Instead of RAND, critics propose auctions, collective negotiation, or insisting patent holders disclose terms up front. But each “solution” invites anticompetitive behavior and inappropriate “one-size-fits-all” terms.

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