Standard-Essential Patents and Market Power

Standard-Essential Patents and Market Power

Anne Layne-Farrar (Charles River Associates) & Koren W. Wong-Ervin (Global Antitrust Institute)

Abstract:      While most agencies that have addressed the issue recognize that intellectual property rights (IPRs), including standard-essential patents (SEPs), do not necessarily confer market power, there remains much confusion over how to determine the proper relevant market and the issue of whether a particular SEP owner has market power. For example, some agency officials have contended that, while not always the case, SEPs will “generally” or “typically” confer market power absent the existence of substitutes such as competing standards. As an initial matter, empirical research suggests that standardization does not automatically confer market power, but rather frequently “crowns winners,” i.e., more important technologies are natural candidates for inclusion in standards. This is particularly important in jurisdictions such as the United States, in which antitrust laws do not punish extraction of monopoly profits, but reach only exclusionary or predatory conduct. Also flowing from this finding is that the issue of whether a particular SEP holder has market power requires a case-by-case fact-specific inquiry into whether a single SEP (or portfolio of SEPs) constitutes a well-defined relevant market, whether there are potential substitutes, and the degree to which any market power is mitigated by complementarities among technologies used for the same product.

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