Friday, February 3, 2017

Siebrasse on Holdup, Holdout, and Royalty Stacking

Norman Siebrasse has posted a paper on ssrn titled Holdup, Holdout, and Royalty Stacking:  A Review of the LiteratureHere is a link to the paper, and here is the abstract:
This article provides a critical review of the theoretical and empirical literature on holdup, holdout, and royalty stacking, as they relate to remedies for patent infringement.
To give readers a little better sense of what the article is about, I'll also quote the introduction:
This article provides a critical review of the literature relating to remedies for patent infringement in the context of complex products, with a focus on the underlying theoretical issues of holdup, holdout, and royalty stacking.
A royalty can only be considered excessive when measured against some benchmark. Section 2 of this article considers the conceptually appropriate benchmark for a fair return to a patentee. Section 3 reviews the theory relating to “holdup,” which is used generically to mean any mechanism by which a patentee, bargaining with the expectation of being able to enjoin any unlicensed use, might be able to extract a royalty that exceeds the benchmark. Section 4 reviews mechanisms by which holdup can be mitigated. Section 5 attempts to place this debate relating to holdup into the context of the general literature on property rules versus liability rules. Section 6 considers “holdout” mechanisms, which may allow implementers to force a patentee to accept a royalty that is lower than the fair benchmark. Royalty stacking refers generally to any mechanism by which the total royalty burden is unduly increased by the presence of multiple patentees. It is the focus on Section 7, while Section 8 considers empirical evidence relating to holdup and royalty stacking.
I first read a draft of this article last summer, and in my view it provides a fair, thoughtful, and very thorough assessment of the law, economics, and literature relevant to the three topics.  Highly recommended.

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