Innovators, Implementers, and Two-sided Hold-up

Antitrust Source

In February of 2015, the U.S. Department of Justice issued a Business Review Letter regarding proposed revisions to the Institute of Electrical and Electronics Engineers (IEEE) Patent Policy. This policy focuses on commitments by firms contributing patented technology to standards promulgated by the IEEE to license their technology on reasonable and non-discriminatory terms. Two main proposals seem designed to shift bargaining rents toward implementers and away from the developers of technology: (1) curtailing injunctive relief and (2) basing adjudicated royalties on the "smallest salable Compliant Implementation." While purportedly designed to solve the "hold-up problem" faced by implementers of patented technologies, we are concerned that such proposals are likely instead to reduce innovation.