Exit, Voice and Loyalty: Strategic Behavior in Standards Development Organizations

Abstract

The protection of intellectual property rights and its limits has spurred controversy in the standardization ecosystem in recent times. While conflicting interests in standard-setting abound over a wide range of pertinent aspects, considerations regarding the inclusion and subsequent treatment of proprietary elements in a technical standard hold the lion’s share of concerns that Standards Development Organizations (SDOs) have to deal with. These concerns revolve around the balance between the interests of innovators and implementers of new technologies. In this respect, SDOs adopt patent policies, which members have to observe in order to participate in SDOs’ activities. Similarly to other rules governing the work of SDOs, patent policies may be modified following the prescribed procedures. However, any subsequent changes to an organization’s operational framework, including its intellectual property rules, may distort prior expectations and lock in members to rules that they never intended to abide by. Against this backdrop, this Article seeks to explore how SDOs’ members respond to the amendments of intellectual property rules by offering a taxonomy of strategies that may be adopted by members opposing modifications based on the exit and voice theory by Hirschman (1970). Drawing upon the example of the Institute of Electrical and Electronics Engineers (IEEE) revised Patent Policy, which took effect in 2015, the Article explores how SDO members respond to instances of organizational distress such as an update of intellectual property policies within an SDO, using as proxies stakeholders’ willingness to commit to the new licensing rules and previous examples of strategies when misunderstandings around intellectual property arose. At a normative level, this Article further studies the effect that such changes may have on the nature and structure of a given industry and offers a novel classification of reactions to turning points in the standards development realm, thereby contributing to the currently underdeveloped body of literature on strategic behavior in technological standardization.