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An Economic Take On Patent Licensing: Understanding The Implications Of The “First Sale Patent Exhaustion” Doctrine, Anne S. Layne-Farrar
An Economic Take On Patent Licensing: Understanding The Implications Of The “First Sale Patent Exhaustion” Doctrine, Anne S. Layne-Farrar
Anne S. Layne-Farrar
Under the legal doctrine of first sale, or patent exhaustion, a patent holder’s ability to license multiple parties along a production chain is restricted. How and when such restrictions should be applied is a controversial issue, as evidenced by the Supreme Court’s granting certiorari in the Quanta case. The issue is important, as it has significant implications for how firms can license in vertically disaggregated industries. We explore this issue from an economic viewpoint and find that under ideal circumstances how royalty rates are split along the production chain has no real consequence for social welfare. Even when we depart …
Licensing Complementary Patents: ‘Patent Trolls’, Market Structure, And ‘Excessive’ Royalties, Anne S. Layne-Farrar, Klaus Schmidt
Licensing Complementary Patents: ‘Patent Trolls’, Market Structure, And ‘Excessive’ Royalties, Anne S. Layne-Farrar, Klaus Schmidt
Anne S. Layne-Farrar
The infamous Blackberry case brought new attention to so-called “patent trolls” and began the general association of trolls with “non-practicing” patent holders. This has had important legal consequences: Namely, patent holders have been denied injunctive relief because they did not practice the patents themselves. In this paper we analyze how patent holders –– both non-practicing and vertically integrated –– choose their royalties depending on the structure of the upstream and downstream markets and the types of licensing agreements available. We show that a vertically integrated firm has an incentive to raise its rivals’ costs and to restrict entry on the …
Standard Setting, Rand Licensing And Ex Ante Auctions: The Policy Implications Of Asymmetry, Anne S. Layne-Farrar
Standard Setting, Rand Licensing And Ex Ante Auctions: The Policy Implications Of Asymmetry, Anne S. Layne-Farrar
Anne S. Layne-Farrar
Standard setting organizations may in some circumstances confer market power on participants whose patented technologies are included in standards. Promises to license on reasonable and non-discriminatory (RAND) terms play a key role in mitigating any such market power, but the usefulness of those commitments has recently been questioned. The problem allegedly lies in the absence of a generally agreed test to determine whether a particular license satisfies a RAND commitment. Swanson and Baumol (2005) have suggested that “the concept of a ‘reasonable’ royalty for purposes of RAND licensing must be defined and implemented by reference to ex ante competition.” In …
Revisiting Injunctive Relief: Interpreting Ebay In High-Tech Industries With Non-Practicing Patent Holders, Anne S. Layne-Farrar
Revisiting Injunctive Relief: Interpreting Ebay In High-Tech Industries With Non-Practicing Patent Holders, Anne S. Layne-Farrar
Anne S. Layne-Farrar
The Supreme Court’s 2006 eBay ruling marked a turning point in injunctive relief policy. Unfortunately, there seems to be considerable confusion about the implications of the decision. Some authors, concerned over patent holdup and excessive royalty rates, interpret the eBay decision as giving a green light to district courts to deny injunctive relief to “non-manufacturing patent owners”. Using an error cost framework, we examine the theory and evidence behind patent holdup concerns as they relate to injunctive relief policy. We find that the holdup theory justifying categorical limitations on injunctive relief rests upon overly narrow assumptions. As a result, categorical …