Essential Patents and Standard Dynamics

Justus Baron, Cerna, Centre d'économie industrielle. MINES ParisTech, Knut Blind, Berlin University of Technology, and Tim Pohlmann, Berlin University of Technology

6/07/2012
(Original Publish Date: 12/1/2011)

This paper examines the impact of essential patents on standardization. In particular, we analyze the influence of patents on the rate of standard replacement. We investigate whether essential patents contribute to a "lock in" of outdated standards, or rather encourage investment and increase the pace of standardization. Building upon a comprehensive dataset of over 6.000 different standards and nearly 20.000 standard versions in the field of ICT, we evidence essential patents to reduce the likelihood of standard replacement. This effect takes place in the first years after the standard is issued. On the other hand, declarations of essential patents increase the likelihood of version replacement. We argue that these version upgrades do not entail replacement of standard components. The effect on versions reflects an increase in the firms' investment in standardization, while the reduced rate of standard replacement in early years reflects a stabilizing effect of patents on standardization.