An Empirical Examination of Patent Hold-up
A large literature asserts that standard essential patents (SEPs) allow their owners to “hold up” innovation by charging fees that exceed their incremental contribution to a final product. We evaluate two central, interrelated predictions of this SEP hold-up hypothesis: (1) SEP-reliant industries should experience more stagnant quality-adjusted prices than similar non-SEP-reliant industries; and (2) court decisions that reduce the excessive power of SEP holders should accelerate innovation in SEP-reliant industries. We find no empirical support for either prediction. Indeed, SEP-reliant industries have the fastest quality-adjusted price declines in the U.S. economy.
We thank Joanna Tsai and Victor Menaldo for comments and Ian Claras, Adriane Fresh, and Benjamin Levine for their excellent research assistance. Research support was provided by the Working Group on Intellectual Property, Innovation, and Prosperity (IP2) of the Hoover Institution at Stanford University. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Alexander Galetovic & Stephen Haber & Ross Levine, 2015. "An Empirical Examination Of Patent Holdup," Journal of Competition Law and Economics, Oxford University Press, vol. 11(3), pages 549-578. citation courtesy of