| Abstract: |
As part of the standard-setting process, certain patents become essential.
This may allow the owners of these standard-essential patents to hold up
implementers of the standard, who can no longer turn to substitute
technologies. However, many real-world standards evolve over time, with
several generations of standards succeeding each other. Thus, standard setting
is a repeated game in which participants can condition future behavior on
whether or not hold-up has occurred in the past. In the presence of
complementarity between the different patents included in the standard,
technology contributors have an incentive to discipline each other and keep
royalties low, which can be achieved by threatening to exclude contributors
who have engaged in hold-up from future rounds of the process. We show that
repeated standard setting can sustain FRAND royalties provided the probability
that another round of standard setting will occur is sufficiently high. We
also examine how the decision-making rules of standard-setting organizations
affect the sustainability of FRAND royalties. |