Moving beyond simple examples: Assessing the incremental value rule within standards

June 2012


This paper presents a model of patent licensing in a standard setting context when patented technologies must be evaluated on multiple dimensions of value or quality. The model allows us to assess a policy proposal put forth in the literature: that an incremental value pricing rule should define Fair, Reasonable, and NonDiscriminatory (FRAND) patent licensing within standard setting organizations. We find that when patented technologies must be weighed on numerous factors, and not simply one-dimensional cost-savings, there is unlikely to be a single incremental value that can be agreed upon by all relevant parties. As a result, an incremental value pricing rule does not offer a precise benchmark for FRAND, although it can inform individual ex post assessments of standard essential patent licensing.

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