1. Youping Li and Jie Shuai have posted a paper on ssrn titled Licensing Essential Patents: The Non-Discriminatory Commitment and Hold-Up, Journal of Industrial Economics (forthcoming). Here is a link to the paper, and here is the abstract:
Licensors of patents essential to a standard are often required to license on reasonable and non-discriminatory (RAND) terms. Using a model with owners of essential patents and licensees who invest into standard-conforming technologies, this paper demonstrates that the non-discriminatory commitment alleviates the hold-up problem. Moreover, it improves consumer and social welfare, and promotes upstream innovation as licensing revenue is increased. In an extended model with each licensor independently choosing whether to make the commitment, all licensors voluntarily commit in the unique equilibrium.
2. Jonathan Putnam has published a paper titled Economic Determinations in FRAND Rate Setting: A Guide for the Perplexed, 41 Fordham Int'l L.J. 953 (2018). Here is a link to the paper, and here is the abstract:
Owners of standard-essential patents commit to be prepared to license their technology on “fair, reasonable and nondiscriminatory” terms and conditions. When negotiations over such terms break down, arbitrators and courts may be tasked with determining them. Such determinations face unusual obstacles, such as the frequent inapplicability of patent damages law to pricing large, standardized patent portfolios. The absence of good legal guidance is compounded by an economic narrative--the “standard FRAND paradigm”--which systematically misstates the circumstances, objectives and requirements of a proper FRAND determination, systematically favoring implementers of the standard. I contrast this static paradigm with the proper, economically consistent, dynamic paradigm. I then explain why a “FRAND rate determination” is usually difficult-- starting with the threshold error of confining the determination to a “FRAND rate.” I also identify related economic errors that pervade both expert economic testimony and legal characterizations of the evidence in a typical proceeding. Because of the non-discrimination requirement, the consequences of such errors can persist indefinitely in later proceedings. In addition to highlighting these errors for prospective fact-finders, I close with a test for the legitimacy of a proposed FRAND determination.In the body of the paper, Putnam argues that :
Because both innovators and implementers make relationship-specific investments, and because neither group can specific ex ante the terms of the contract on which they will eventually agree, the standard-setting process inherently contains the potential for bilateral hold-up. As with hold-up by innovators, hold-up by implementers takes the form of exploiting the innovators' prior (R&D) investment to extract opportunistic gains from the relationship. Just as innovators can hold up implementers by demanding a price that is “too high” ex post, implementers can hold up innovators by demanding a price that is “too low” ex post. The “hold-up problem” is therefore symmetric.I don't agree with that perspective--in my view, the patent system is not designed to ensure inventors that they will recover their R&D costs, only to provide them with an opportunity for trying to do so--but it's an interesting twist on the standard holdup definition.