Thanks to Stefan Bechtold, Joshua Gans, Gerard Hertig, Bruce Kobayashi, Fabio Manca, Nick Netzer, Antonio Nicita, Klaus M. Schmidt, Patrick Schmitz, Armin Schmutzler, Emanuele Tarantino, Otto Toivanen, John Vickers, Quan Wen, Joshua Wright, several anonymous referees, the Editor, and conference and seminar participants at IIOC 2009 (Boston), Swiss IO Day 2009 (Bern), EEA-ESEM 2009 (Barcelona), EARIE 2009 (Ljubljana), Intertic 2009 (Milan), EALE 2009 (Rome), Bonn, Cologne, DG Competition, DOJ, FTC, OFT, Vanderbilt, and Zurich for helpful comments on earlier versions. The views expressed herein are not purported to represent those of the U.S. Department of Justice.
Patent Hold-Up and Antitrust: How A Well-Intentioned Rule Could Retard Innovation†
Version of Record online: 18 JUN 2012
© 2012 Blackwell Publishing Ltd and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 60, Issue 2, pages 249–273, June 2012
How to Cite
Ganglmair, B., Froeb, L. M. and Werden, G. J. (2012), Patent Hold-Up and Antitrust: How A Well-Intentioned Rule Could Retard Innovation. The Journal of Industrial Economics, 60: 249–273. doi: 10.1111/j.1467-6451.2012.00480.x
- Issue online: 18 JUN 2012
- Version of Record online: 18 JUN 2012
Licensing technology essential to a standard can present a hold-up problem. After designing new products incorporating a standard, a manufacturer could be confronted by an innovator asserting patent rights to essential technology. This hold-up problem can be solved with a damages remedy provided by antitrust or some other body of law, but a damages remedy can reduce the innovator's licensing revenue and thereby retard innovation. The availability of an ex post damages remedy also alters the licensing terms in ex ante bargaining with the result that fewer socially beneficial R&D projects are undertaken.