Private and Public Approaches to Patent Hold-up in Industry Standard Setting

Abstract

Many standard setting organizations (SSOs) promote coordinated industry-wide investments in technologies that may be patented. If these investments are sunk before implementers become aware of the patents, or obtain some assurance of a reasonably priced license, the patentee will have a very strong bargaining position. The resulting hold-up problem may lead to higher prices and reluctance to implement new standards. This article describes steps that many SSOs take (or might take) to mitigate patent hold-up and discusses public policies that can strengthen or weaken the private initiatives of SSOs to deal with the problem of potential hold-up.