An empirical study on the determinants of essential patent claims in compatibility standards

Rudi Bekkers, Eindhoven Centre for Innovation Studies (ECIS), School of Innovation Sciences, Eindhoven University of Technology, Rene Bongard, Department of Business Statistics, Statistics Netherlands, and Alessandro Nuvolari, Laboratory of Economics and Management, Sant'Anna School of Advanced Studies

9/09/2015
(Original Publish Date: 2011)

n the field of compatibility standards, an increasing number of companies claim to own so-called essential patents (i.e. those patents that are indispensable for designing and manufacturing products conforming to the standard). It is widely believed that the ownership of such patents is a very valuable bargaining tool in cross-license negotiations, while for non-producing firms such patents may result in a substantial stream of licensing revenues. In this paper we study the determinants of essential patent claims in compatibility standards. In particular, we assess the role of two main factors: the significance of the technological solution contained in the patent and the involvement of the applicant of the patent in the standardisation process. We examine the case of W-CDMA, one of the most successful standards in mobile telecommunications. We compare the patents claimed essential for this standard with a control group of randomly selected, unclaimed patents covering the same time period and technology classes. We find empirical evidence that both factors have significant impact on the probability that a patent is claimed as essential, but the involvement in the standardisation process is a stronger determinant than the technical value (‘merit’) of the patent. On the basis of our findings, we offer policy recommendations.