Innovative or Indefensible? An Empirical Assessment of Patenting within Standard Setting

Abstract

Much has been written - especially in recent years - regarding the perceived problem of within cooperative standard setting. Because standards are thought to frequently convey market power to those firms whose patented technologies are included in the standard, the concern is that strategic patenting, driven not by innovation but by rent seeking, will enable some firms to license their patents in an anticompetitive fashion. In particular, concerns have been raised over patenting that takes place after the first versions of a standard are published, as these patents may be opportunistic and aimed at the unwarranted acquisition or enhancement of market power. While this is a reasonable concern, another possibility may be likely as well: that at least some portion of ex post patenting is driven by genuine innovation. The question then becomes, which is more prevalent? To test the opportunistic patenting theory, I empirically assess the patenting that occurs within a standard setting organization. On the basis of this analysis, I reject the hypothesis that all patenting that takes place after a standard has been published must be opportunistic. Some may be, but an assessment of the available data suggests that much is not. This analysis is necessarily preliminary, but on the basis of the empirical assessments developed here, I conclude that ex post patenting is most likely a mixed bag of truly (albeit incremental) innovative contributions along with some highly skeptical ones. The bottom line, then, is that any policy prescriptions should proceed with much caution so that the good is not eliminated with the bad.