The Strategic Use of Licensing Commitments in a Standardization Context

Abstract

Purpose

This paper focuses on the strategic inclusion of reciprocity clauses in the licensing commitments disclosed by firms claiming standard essential patents (SEPs) in the telecom industry. We highlight the main cost and benefit of using these clauses for SEPs holders, namely, a possible deterrence effect for potential standard users on the one hand, and a legal instrument to prevent holdup and negotiate cross-licenses with other SEPs owners on the other hand.

Methodology/approach

We formulate general hypotheses explaining firms’ disclosure strategies with respect to reciprocity clauses, and use an original dataset of 19,601 patent disclosures in 12 different ETSI (European Telecommunications Standard Institute) projects (including UMTS, GSM, 3GPP, or GPRS) to test them empirically.

Findings

Our econometric results first confirm our predictions that reciprocity clauses are used as an insurance mechanism in technologically complex environments. They are more frequently included in patent disclosures when the ownership of SEPs at the project level is more fragmented. We also find that firms do not claim reciprocity clauses before having already declared a significant number of non-reciprocal SEPs in the same project, which suggests a deterrence effect on standard users that must be balanced by a strong patent position.

Practical implications/originality

Our findings highlight a trade-off for the SEPs holder to insert a reciprocity clause. There is both a cost and a benefit of adding this clause to the patent licensing commitment. Contrary to the usual literature on the subject, we do not analyze the general patenting strategies but the conducts on the licensing terms.

Citation

Delcamp, H. and Ménière, Y. (2015), "The Strategic Use of Licensing Commitments in a Standardization Context", Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children (Research in Law and Economics, Vol. 27), Emerald Group Publishing Limited, Leeds, pp. 161-179. https://doi.org/10.1108/S0193-589520150000027006